author: KNIGHT, District Judge.

text:
    In re BATTANI et al. ECKHOUT v. GUARDIAN NAT. BANK OF COMMERCE OF DETROIT et al.
    Nos. 15,070, 13,762, 9,863, 14,629, 14,056.
    District Court, E. D. Michigan, S. D.
    Feb. 20, 1934.

      McLeod, Fixel, Abbott & Pixel, Frederick B. Darden, and William W. Brashear, all of Detroit, Mich., for petitioners.
    Frank E. Wood and Harry Kasfir, both of Cincinnati, Ohio, and William C. Allee, of Detroit, Mich., for B. C. Sehram, receiver of Guardian Nat. Bank of Commerce.
   KNIGHT, District Judge.

The Union Guardian Trust Company, as receiver of Andrew Battani and Julius Battani, doing business as Battani Brothers, bankrupt, on February 11,1933, filed a petition with the referee in bankruptcy for an order compelling the Guardian National Bank of Commerce, Detroit, to surrender the moneys in the bankrupts’ estate deposited with the Guardian National Bank of Commerce, Detroit. Such petition also asked the consolidation of all proceedings commenced by various receivers and trustees for the recovery of moneys similarly deposited in various banks. An order was thereafter made consolidating all the proceedings in the eases mentioned. The various proceedings are of a like nature and relate to the same questions. Subsequent to the bringing of the action, Sehram, as conservator, was joined as a defendant. He was appointed receiver subsequent to the taking of the proofs herein but prior to final submission. On April 12, 1933, issue was joined upon the petition by the service of an answer denying the material allegations of such petition. On February 27, 1933, an order was made by the District Court of the Eastern District of Michigan canceling the designation of the Guardian National Bank of Commerce of Detroit as a depository for bankruptcy funds and directing the last-mentioned bank to surrender all such funds held by it to the Union Guardian Trust Company. On May 18, 1933, the referee made an order requiring the respondents immediately to surrender and pay to Union Guardian Trust Company $335.16 on account of the bankruptcy funds deposited with it in the ease of Battani and one, bankrupts. At the time of the filing of the petition, such deposit amounted to $558.-50. This amount was later reduced to $335.-16 by tbe payment .of dividends by the receiver. Sneh dividends were accepted without waiver of petitioners’ right to recover the balance of the deposit. The referee further ordered that on failure of the respondent receiver to pay the aforesaid balance within ten days from the date of the service of such order the United States marshal be authorized to seize assets of said Guardian National Bank of Commerce of Detroit in sufficient amount to pay to the Union Guardian Trust Company the said sum of $335.16.

Certain findings of fact and conclusions of law made by the referee are the basis for such order. The questions for review broadly are: (1) Whether the referee was disqualified to act in this proceeding by reason of an interest in the outcome thereof? (2) Whether funds deposited by a receiver or trustee in bankruptcy in a depository designated pursuant to the Bankruptcy Act are in custodia legis, in effect held in trust, and are to be paid in full by respondent receiver? (3) Whether the bond of the depository was valid, and, if not, did these deposits by operation of law become deposits in custodia legis?

1. Was the referee disqualified to act because he was interested in an increase in his fees by reason of an increase in the amount payable from the depository. Upon reason and authority, the basis for this contention is without foundation. Such a reason for disqualification would to a large extent prevent referees functioning in office. In every proceeding involving accumulations to an estate they would be disqualified. The statute prohibiting referees from acting in cases in which they are directly or indirectly interested (section 39 of the Bankruptcy Act [11 USCA § 67]) was not intended to apply to cases like the instant one. The rule is well stated in Black on Bankruptcy, § 39: “The statutory restriction as to referees acting in eases in which they are interested does not apply to the interest of a referee by way of commission on sums paid to creditors as dividends. This is a necessary interpretation of the law.” Other pertinent authorities are Remington on Bankruptcy, § 595 (3d Ed.); In re Abbey Press (C. C. A.) 134 F. 51; Bray v. Cobb (D. C.) 91 F. 102; Anchor Grain Co. v. Smith (C. C. A.) 297 F. 204; In re Gardner (D. C.) 103 F. 922; Meyers v. Shields (C. C.) 61 F. 713, 726; and Turney v. State of Ohio, 273 U. S. 510, 47 S. Ct. 437, 71 L. Ed. 749, 50 A. L. R. 1243, cited by respondents, are not comparable cases. In each case a direct financial benefit would have resulted to the official from his act. Turney v. State of Ohio also is a criminal ease. Here referees’ fees may or may not be increased. There are other points distinguishing the eases mentioned. I find that the referee was not disqualified to act.

2. Are the funds deposited by the receivers or trustees in bankruptcy in the several cases in a depository designated pursuant to the Bankruptcy Act held in custodia legis and as such entitled to preference in payment?

It is my opinion that the deposits of the receivers and trustees in these bankruptcy estates are general deposits and axe not held in custodia legis.

There is no question that a reeéiver or trustee in bankruptcy is an officer of the court, that a bankrupt’s title to property passes to the receiver or trustee as of the date of the filing of the petition, and that the receiver or trustee is vested with all the rights “of a creditor holding a lien by legal and equitable proceedings.”

Respondent bank was designated a depository pursuant to section 61 of the Bankruptcy Act (11 USCA § 101), and the deposits made in the bankrupt’s estate were subject to withdrawal only on cheeks countersigned by the Judge or the Referee. General Order 29 (11 USCA § 53). Rule 18 of the Eastern District of Michigan also specifies certain particulars to be observed by the depository with reference to keeping of accounts, reports, and withdrawals. It is undisputed that the deposits in question were kept in commercial cheeking accounts upon which interest was paid the estates under agreement with the court. The account was handled as were all other general accounts of the bank, save the cheeks were required to be countersigned as heretofore stated, and periodical reports to the court required. John Bridge, Receiver, v. First National Bank-Detroit (D. C.) 5 F. Supp. 442, involved the question as to whether funds deposited by an equity receiver constituted general or special deposits. It seems to me the reasons therein given and the authorities cited axe applicable here, and that deposits made by the receivers or trustees in bankruptcy herein are general and not special deposits. It is uniformly the holding of the courts that to constitute a special deposit an express agreement must be shown, and such agreement must clearly be implied from the conditions surrounding the deposit. No express agreement is shown nor does the evidence sustain the claim that there was an implied agreement that this would -be a special deposit. Proof of a claim as preferred must be clear and convincing. The idea of a special deposit is one held for a particular purpose in identical or equivalent form as when deposited, subject to return at any time and not commingled by the depository with the other funds. Neither the fact that the deposit was made by one as receiver or trustee, nor the fact that the depository knew the fiduciary character of the depositor is sufficient to impress the deposit as a trust fund. In Gardner v. Chicago Title & Trust Co., 261 U. S. 453, 43 S. Ct. 424, 67 L. Ed. 741, 29 A. L. It. 622, Justice Holmes, delivering the opinion, said: "We assume that when money is deposited in a designated bank under section 61 of the Bankruptcy Law, * * * it is deposited as other money is, and becomes the property of the bank, leaving the bank a debtor for the amount.” While this statement may be considered dictum, nevertheless it is entitled to great weight and is in harmony with a great majority of the decisions on the point involved here. In re Bologh (D. C.) 185 F. 825; Minard et al. v. Watts (C. C.) 186 F. 245; In re Potell (D. C.) 53 F.(2d) 877. In Florida Bank & Trust Co. v. Union Indemnity Co. (C. C. A.) 55 F.(2d) 640, 611, 83 A. L. R. 1102, referring to deposits made by receivers and trustees in bankruptcy, the court said: “The deposits now in question created debts owing by the depository bank to the representatives of the several bankrupt estates. * * * ” National Bank of the Republic v. Millard, 10 Wall. (77 U. S.) 152, 19 L. Ed. 897; Keyes v. Paducah & I. R. Co. (C. C. A.) 61 F.(2d) 611. 86 A. L. R. 203; Northern Sugar Corp. v. Thompson (C. C. A.) 13 F.(2d) 829; American Surety Co. v. Akron Savings Bank, 212 U. S. 557, 29 S. Ct. 686, 53 L. Ed. 651; Michie on Banks & Banking, vol. 5, § 328, c. 9.

The court’s attention is called to the recent decision In the Matter of The Standard Company of Raleigh, Inc., In Bankruptcy No. 2182, decided by District Judge Meekins, United States District Judge for the Eastern District of North Carolina, January 22,1934. The record in that case indicates facts comparable with those at bar as regards the type of deposits. With the conclusion that the funds there were held in custodia legis, this court cannot agree.

The respondent bank closed February 11, 1933, pursuant to a bank holiday declared by the Governor of the state of Michigan. It continued closed upon renewal of such holiday until a national banking holiday was proclaimed by the President on March 5, 1933. Respondent conservator was appointed on March 11,1933, and continued to act as such until May 11, 1933, at which time respondent bank was declared insolvent and the conservator appointed a receiver. On February 27, 1933, an order was made by the District Court of the United States for the Eastern District of Michigan directing the Guardian National Bank of Commerce, as depository of bankruptcy funds for said District Court, to deliver over all bankruptcy funds in its possession. The referee has found that the respondent bank was solvent on February 11, 1933, when its doors were closed. This finding cannot be sustained, nor is any order against the receiver enforceable. The determination of the Comptroller of Currency on the appointment of the receiver on May 11, 1933, that the bank was insolvent, cannot be attacked in this proceeding. Section 192, tit. 12, USCA; Liberty Nat. Bank of S. C. v. McIntosh (C. C. A.) 16 F.(2d) 906; United States Nat. Bank of La Grande v. Pole (D. C.) 2 F. Supp. 153; Crawford v. Gamble (C. C, A.) 57 F.(2d) 15. The lights of the parties are fixed as of the time of the closing of the bank rather than as of the time of the appointment of the receiver. Steele, County Treasurer, v. Randall, Receiver (C. C. A.) 19 F.(2d) 40. The receiver is simply the representative of the Comptroller, and the assets of the bank are not in his possession, but that of the Comptroller. Hulse v. Argetsinger (C. C. A.) 18 F.(2d) 944; Lehman, Sheriff, v. Spurway (C. C. A.) 58 F.(2d) 227. The order of the District Court could not change the character of the deposit when made. The District Court had the right to change the designated depository. It had the light to order and direct the Comptroller to pay over the estates’ deposits ratably with other depositors. Section 194, 12 USCA. However, the court did not have the right to make an order directing the payment forthwith of any deposits to the credit of any of these bankrupt estates. The orderly and proper administration of the banking laws as regards insolvent banks requires that debts should be paid on a ratable basis and when and as the funds of the bank justify distribution. The statute requires that the distribution be so made that each creditor and depositor receive the share to which he is legally entitled. Necessarily a determination in respect to distribution must be made by the Comptroller of the Treasury. Such determination, however, is subject to the order of the proper court in ease of untoward delay or proposed illegal distribution. So, with regard to any ratable proportion to which these bankruptcy estates are entitled, the distribution should be made by the Comptroller as hereinbefore indicated. The finding that a summary order issue directing the payment of all deposits made in these several estates cannot be sustained.

3. Was the depository bond valid, and, if not, what was the effect of the failure to give the required bond? Section 61 of the Bankruptcy Act (11 USCA § 191) requires that a bond be given by a depository for bankrupt’s estates. The order designating the respondent bank a depository required it to furnish a bond in the amount of $1,250,000, with sufficient surety. The proposed depository did submit a bond with the Guardian Detroit Union Group, Inc., as surety. This bond was given and approved by the District Judge prior to the making of the deposits in question. The Guardian Detroit Union Group, Inc., was a holding company owning substantially all of the stoek of respondent depository, together with the stoek of other banks. This corporation was organized under the Domestic Corporation Law of the state of Michigan, known as Act No. 84 of the Public Acts of Michigan of 1921. The Insurance Code of the state of Michigan, Act No. 256, Public Acts of 1917, as amended, provides for the organization of corporations “to guarantee the fidelity of persons in positions of trust, private or public, and to act as surety on official bonds,” Compiled Laws of 1929, § 12389, c. 1, pt. 3, subd. 1, § 2, and also /provides that no corporate body shall be incorporated for the purpose of transacting any form of insurance or surety bonding business, without complying with the provisions of the insurance law, Compiled Laws of 1929, § 12287, c. 1, pt. 2, § 1. It is not claimed that the holding company had authority to act as a surety under the provisions of the Insurance Code. It is not claimed that it is authorized under any law to engage in the business of acting as a surety. It is claimed that such authority is implied in so far as it relates to this suretyship in question; that acting as such surety for its own subsidiary was legal, because it was done as an incident to and in furtherance of its own business. It is also claimed that under the provisions of Act No. 327, § 10, par. i, Public Acts 1931 of Michigan, the holding corporation was authorized to act as such surety.

Questions relative to the effect of the failure to give a depository bond have been frequently decided by the courts. Various states of facts are shown. Variety is illustrated in these eases: In Hancock County et al. v. Hancock National Bank of Sparta et al. (C. C. A.) 67 F.(2d) 421, in which no bond was given, and in which it was held that, since the officer was not required to make the deposit in the particular depository, the bank acquired title and was not a trustee ex maleficio; in the case of In re Potell (D. C.) 53 F.(2d) 877, in which deposits made in an undesignated depository were held to be trust deposits; in Re Weiss (D. C.) 2 F. Supp. 767, 17 A. B. R. (N. S.) 647, in which no bond was given by the depository and the court held the funds on deposit in custodia legis (in that case the officer of the bank represented that the depository bond had been given); in Board of Commissioners of Crawford County v. Strawn (C. C. A.) 157 F. 49, 15 L. R. A. (N. S.) 1100; and in numerous other eases in which it has been held that where deposits were prohibited by law to be made, when made they became funds in trust for the depository. In the instant case the receivers and trustees were required by law to deposit all bankrupt estate funds in a designated depository. Section 47a (3) of the Bankruptcy Act (11 USCA § 75 (a) (3). While it does not appear that there were depositories other than the respondent bank, it seems to me the effect is the same as though respondent bank were the sole depository and that the deposits in these bankrupt estates became trust funds by operation of law in case the depository bond was invalid.

It is my opinion that the bond in question was a valid bond. The authority to act as surety is not within the specific charter powers of the holding corporation. Its corporate powers are such only as are conferred by statute. Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co., 118 U. S. 290, 6 S. Ct. 1094, 30 L. Ed. 83. There is no express statute giving the holding company the, authority to act as a surety unless it is found in Act No. 327, § 10, par. i, Public Acts 1931 of Michigan. Nevertheless a corporation has power to do certain acts which fire incidental to the general authority of the corporation and which are done in furtherance of such general business. The question regarding the rights of corporations in this respect have been the subject of adjudication many times by the courts. It is apparent that the facts must be much diversified. However, there are numerous eases in which the courts have held that the corporation is authorized to act as a surety or guarantor although the statutes' under which organized did not so specifically authorize. In Timm v. Grand Rapids Brewing Co., 160 Mich. 371, 125 N. W. 357, 27 L. E. A. (N. S.) 186; Munoz v. Brassel (Tex. Civ. App.) 108 S. W. 417; McBroom v. Cheboygan Brewing & Malting Co., 162 Mich. 323, 127 N. W. 361. In numerous cases it has been held that a corporation might guarantee an indebtedness of its subsidiary. Lumbermen’s Trust Co. v. Title Ins. & Investment Co. of Tacoma (C. C. A.) 248 F. 212; In re New York Car Wheel Works (D. C.) 141 F. 430; General Investment Co. v. Bethlehem Steel Corp. (D. C.) 248 F. 303. The rule for guidance clearly is stated in Green Bay, etc., R. Co. v. Union Steam-Boat Co., 107 U. S. 100, 2 S. Ct. 221, 223, 27 L. Ed. 413, in which the court said: “But whatever, under the charter and other general laws, reasonably construed, may fairly be regarded as incidental to the objects for which the corporation is created, is not to be taken as prohibited.” Henderson Tire & Rubber Co. v. Gregory (C. C. A.) 16 F.(2d) 589, 49 A. L. R. 1503; Hummel v. Warren Steel Casting Co. (C. C. A.) 5 F.(2d) 451; In re John B. Rose Co. (C. C. A.) 275 F. 416; the opinion of the Attorney General of the state of Michigan under date of January 27,1931, in which he held that “a holding company organized to own the stock of other corporations, including stock of banks and trust companies, * * * may become a surety on bonds securing the deposits of the public funds in the subsidiaries.” Among the authorities cited in such opinion is State Bank of Fairfax v. Pacific Elevator Co., 159 Minn. 94,198 N. W. 304, 305, in which an action was brought against a corporation practically owning through interlocking directorates and stock holdings the company executing the notes in question. The guarantor was held liable. The court there said: “While a corporation cannot become a surety on obligations in which it has no interest, it may guarantee the obligations of its subsidiary companies.”

The Guardian Detroit Union Group, Ine., was interested in the deposits made in bankruptcy estates in the Guardian National Bank of Commerce of Detroit and the analogy between this condition and that of parties in these and other eases in this respect seems clear. Increased deposits in the subsidiary bank were beneficial to the holding company. The subsidiaries’ business in its entirety was carried on for the benefit of the other company. See, also, 7 R. C. L. 603, and cases cited. Aet No. 327, Public Acts of 1931, which is an amendment to the Corporation Law under which the Guardian Detroit Union Group, Ine., was incorporated, was enacted to extend the powers of corporations such as this holding company. It provides that such a company may guarantee “evidence of indebtedness created by, any other corporation or corporations.” Section 10, subd. i. Having in mind the statutes hereinbefore mentioned which provide for the incorporation of surety companies, it seems to me that the aet of 1931* was directed particularly to holding companies. The exceptions in the act, including the authority to become a surety “upon any bond or other undertaking securing the deposit of public moneys” (section 10, subd. i), supports the view that the act intended that a company such as the' Detroit Union Group, Inc., should have power to guarantee other bonds or undertakings. The funds in question were not public moneys.

The views hereinbefore expressed obviate the necessity of the discussion of any other questions raised upon this proceeding to review the findings of the referee.

Concluding, I find: (1) That the referee herein was not disqualified to aet in these proceedings; (2) that the deposits with referees and trustees in bankruptcy herein in the Union Guardian Trust Company as made are not in custodia legis and are not entitled to preference in payment over other general depositors in the Guardian National Bank of Commerce of Detroit; (3) that the depository bond herein given by the Guardian Detroit Union Group, Ine., was a valid depository bond.

       No opinion filed.


source: Caselaw Access Project

author: BREWSTER, District Judge.

license: Public Domain

text:
    YUBA CONSOLIDATED GOLD FIELDS v. UNITED STATES.
    No. 5019.
    District Court, D. Massachusetts.
    Feb. 19, 1934.

      O. W. Taylor and Israel Gorovitz, both of Boston, Mass., for plaintiff.
    Frederick H. Tarr, U. S. Atty., by J. Duke Smith, Sp. Asst, to U. S. Atty., both of Boston, Mass.
   BREWSTER, District Judge.

This is a suit to recover interest on an overpayment of income taxes for earlier years credited to the petitioner’s income tax for the fiscal year 1922.

Judge Lowell heard the ease upon an agreed statement of facts, and held that the petitioner was entitled to recover. After the hearing, he allowed the petitioner to amend by the substitution of a new petition. Respondent moved for a new trial, which motion was allowed. Thereafter the petitioner waived its substituted petition and asked to amend certain allegations in the original petition. It was allowed to do so.

The case is now before me for a new trial. Respondent has moved to strike out from the agreed statement of facts a certain portion of paragraph 20, wherein it was agreed that the Commissioner, on February 6, 1926, approved the Schedule of Refunds and Credits, as prepared by the collector. This motion I allow.

Over the objection of the petitioner, I received evidence tending to show the mode of procedure in the Bureau of Internal Revenue which obtained in 1919 and up to the time when the enactment of the first statute, giving interest on refunds and credits, required the adoption of a new procedure. In the view I have taken of the questions hereafter considered, this evidence becomes immaterial.

The parties have filed requests for findings of fact and rulings of law. So far as these requests are granted, they will appear in the following statement of facts, to which I have added certain findings not requested but which, to me, seem to be material.

Special Findings of Fact.

1. The petitioner is now, and at all times hereinafter mentioned was, a corporation organized and existing under the laws of the state of Maine, having a place of business in Boston, Mass., within the jurisdiction of this court-.

2. On- the below named dates and for the amount also shown for the years 1909, 1913, the two-month period ending February 28, 1914, and the fiscal year ending February 28, 1916, the petitioner filed returns and paid the taxes shown thereon as follows:

3. On October 18, 1919, the Commissioner approved a schedule of allowance of claims for refund, known as Schedule IT: 108 (old procedure), showing the allowance of the following amounts as refunds:

The amount allowed for the fiscal year ended February 29, 1916, $3,109.64, was reduced by the amount credited to the additional tax for 1915, resulting in a refundable balance of $2,824.15, shown above.

4. On February 14, 1920, the petitioner filed a claim with the collector requesting that the above allowances be credited against a then outstanding tax due for the fiscal year ended February 28,1919.

5. On March 7, 1920, the Treasurer of the United States issued “settlement warrant” No. 45317 for the amount of $4,941.11 in favor of the petitioner which was transmitted to the collector for delivery to the petitioner in full payment of the aforesaid over-payments allowed for the years 1909, 1910, two-month period ended February 28, 1914, and fiscal year ended February 29,1916. Upon receipt thereof, tbe said warrant was returned by the petitioner to tbe Treasury Department, for the reason that it had taken credit for said amount, $4,941.11, against its taxes outstanding for the fiscal year ended February 28, 1919.

6. On May 6, 1920, the Auditor of the Treasury Department addressed a letter to the Commissioner advising him that the said warrant had been returned, inasmuch as the petitioner had already taken credit as set forth in the preceding finding.

7. On June 7,1920, the collector addressed a letter to the petitioner in which it was advised that the full amount due for the said fiscal year 1919 had been fully paid, and that therefore it was entitled to have the settlement warrant of $4,941.11 returned.

8. On May 13, 1920, the petitioner paid an installment of taxes for the fiscal year ending February 28, 1920, and deducted the $4,941.11, inclosing by way of explanation a claim for a credit upon the 1920 tax of this amount.

9. On June 11, 1920, replying to the letter of June 7, 1920, the petitioner advised that it had erroneously paid the. taxes for 1919 and advised that it now desired credit against the current year tax (1920).

10. On July 27, 1920, in accordance with the practice, the settlement warrant was canceled and the proceeds covered into the Treasury.

11. On October 26,1922, after an audit of the petitioner’s return for the fiscal year 1920, the Commissioner determined an overassessment of $16,604.89, and a certificate of over-assessment on Schedule IT :2292 was issued disclosing $4,941.11, the unpaid balance as abated, and $11,663.78, the balance to be refundable.

12. On November 17, 1922, the collector advised the petitioner, based upon request for the status of its account for the fiscal year ended February 28,192-2, that, inasmuch as the amount of $4,941.11, previously requested as a credit against 1920 tax, had been abated, “tbe tentative credit” bad “been transferred to your fiscal 1922 account.”

13. On June 22, 1925, the collector of internal revenue wrote tbe Commissioner advising him that, according to the records of the collector, there, was an outstanding tax liability against the petitioner for the fiscal year ending February 28, 1922, and adding that, since it did not appear that the corporation had ever been given credit for the allowance of $4,941.11, it was requested that the ease he investigated and the collector advised relative thereto.

' 14. On December 10, 1925, tbe Commissioner of Internal Revenue signed and forwarded to the collector of internal revenue at Boston, Mass., a Schedule of Overassessment IT :A — 17563, Treasury Department Form 7805, which stated: “The amounts listed in Column 4 as overassessments (or Reduction of tax liability) are hereby approved, and the related claims, if any, allowed in the respective amounts indicated by the ‘Certificates .of Overassessment’ or ‘Notices of Adjustment of Refund’ attached thereto”'; the taxable years and the amounts of the overassessments being as follows:

15. On January 18,1926, pursuant to the printed instructions on the said Schedule of Overassessment, the collector of internal revenue at Boston, Mass., made the following entries in columns 9 and 11 of the said schedule:

16. On January 18,1926, pursuant to the instructions of the Commissioner, the collector of internal revenue at Boston, Mass., prepared the Schedule of Refunds and Credits IT — R—17565, Treasury Department Form 7805 — A, which showed in columns 5 and 8 thereof (1) the amounts credited and (2) the dates that the said sums had been paid as follows:

17. The Schedule of Refunds and Cre3its referred to in the next preceding paragraph was received in the Bureau of Internal Rev- . enne, and on February 6, 1826, the assistant to the Commissioner approved the schedule, but neglected to sign the authorization to the disbursing clerk. Inasmuch, however, as the items in question were credits rather than refunds, I do not regard this omission as important, and I find as a fact that the Schedule of Refunds and Credits was approved by the collector of internal revenue on that date; and thereupon the collector of internal revenue forwarded to the petitioner four certificates of overassessment showing the overpayments and the allowances of the credits therefor on account of the petitioner’s taxes for the fiscal year ending February 28, 1922. . Each of the said certificates contained the following statement:

“This certificate is being issued expressly for the purpose of authorizing the Collector to credit the overassessment to the taxes now outstanding on his accounts.

“This allowance is made under the provisions of Section 281 — C of the Revenue Act of 1924.”

18. The issuance of the Schedule of Over-assessments and the Schedule of Refunds and Credits' by the Commissioner and collector was for the purpose of advising the collector to make the necessary adjustments to his accounts with reference to the 1922 unpaid taxes from petitioner.

19. The petitioner has duly requested the Commissioner of Internal Revenue to compute, allow, and pay interest on the said “credits” as shown on the aforesaid schedules, as provided in section 1019 of the Revenue Act of 1924 (26 USCA § 153 note), and the Commissioner of Internal Revenue has refused to. allow or pay any interest thereon whatsoever.

20. The interest on the aforesaid sums (at the rate of 6 per cent, per annum) from the respective dates of payments as shown in . column 8 of the Schedule of Refunds and Credits, Exhibit K, to the due date of the 1922 overassessment against which the credits were taken, as shown in column 11 of Exhibit J, amounts to $2,433.85 as alleged in paragraph 8 of the amended petition.

21. The petitioner has in all respects fully and sufficiently complied with the statutes and regulations in regard to all of the matters material to this suit; has not filed any waiver or made any transfer or assignment of said claim or of any part thereof or interest therein; has at all times borne true allegiance to the government of the United States; and has not in any way voluntarily aided, abetted, or given encouragement to rebellion against the said government in violation of section 159 of the Judicial Code, 28 USCA § 265.

Conclusions of Law.

Two questions are presented on the foregoing faets: First, Is the petitioner entitled to interest on the overpayments applied to the 1922 tax? and, second, if so, are petitioner’s rights to recover barred by the statute ' of limitations (Rev. St. § 1060, now Jud. Code § 156, 28 USCA § 262) ?

It appears that the government attempted to refund the overpayments in 1010, but it accepted a return of the amount refunded and consented to apply the amount as a credit against taxes for other years. For reasons not necessary to repeat, the attempted applications against the taxes for 1919 and 1920 failed until finally the taxpayer took the credit against the taxes falling due February 15, 1923. At this time Congress had enacted section 1324 (a) of the Revenue Act of 1921 (42 Stat. 316), authorizing the payment of interest on refunds and credits. If the due date of the tax upon which the credit was applied eoiitrolled the petitioner’s right to interest, then this right would he governed by the Revenue Act of 1921, but it has been definitely decided that there is no “allowance” of a credit within the meaning of the statute authorizing interest until there had been official and final action by the Commissioner of Internal Revenue, and that such official act consists of the approval by the Commissioner of Internal Revenue of the certificate of refunds and credits. Girard Trust Company et al. v. United States, 270 U. S. 163, 46 S. Ct. 229, 70 L. Éd. 524; United States v. Boston Buiek Co., 282 U. S. 476, 51 S. Ct. 206, 75 L. Ed. 470.

It is equally well settled that the law in force at the time of this official act determines the amount of interest to which the taxpayer is entitled. United States v. Magnolia Petroleum Co., 276 U. S. 160, 48 S. Ct. 236, 72 L. Ed. 509; Blair, Com’r, v. United States, 271 U. S. 348, 46 S. Ct. 506, 70 L. Ed. 983; United States v. Boston Buick Co., supra.

In the case at bar, it is apparent that on the books of the collector the taxpayer’s liability for the balance of the 1922 tax was not extinguished until the certificate of refunds and credits, submitted by the collector, had been approved by the Commissioner. Conceding that the sole purpose of the proceedings in December, 1925, and January, 1926, was to enable the collector to record a proper entry on his books, it is nevertheless the law and the fact that the credit was not allowed until February 9,1926. The petitioner is entitled to interest to be computed according to the provisions of section 1019 of the Revenue Act of 1924 (43 Stat. 253 [26 USCA § 153 note]).

This petition was brought December 9, 1931. Did its cause of action arise within six years prior to that date ? From the standpoint of the taxpayer, it might be said that its claim for the overpayments was satisfied when it applied them toward the payment of its 1922 tax on February 15 of that year; but, if so treated, the application would not satisfy the government’s obligation to pay interest which can be made the subject-matter of a suit. Girard Trust Co. et al. v. United States, supra.

If the cause of fiction arose then, this suit is too late, but I am convinced that it did not then arise. Apart from the statute, the petitioner is not entitled to interest. United States v. Magnolia Petroleum Co., supra. The statute providing for interest clearly authorized the payment of interest only upon the allowance of a refund or credit. Until such refund or credit is allowed, within the meaning of the statute, no cause of action accrues to the taxpayer. Leisenring et al. v. United States (Ct. Cl.) 3 F. Supp. 853. Compare United States v. Swift & Co., 282 U. S. 468, 51 S. Ct. 202, 75 L. Ed. 464; Bonwit Teller & Co. v. United States, 283 U. S. 258, 51 S. Ct. 395, 75 L. Ed. 1018.

It was said in United States v. Swift & Co., supra, at page 476 of 282 U. S., 51 S. Ct. 202, 205, that the payment of the tax upon which the credit was applied “must be taken to have occurred on the date of the allowance of the credit by the Commissioner’s signature approving the schedule of refunds and credits.” That this is so is further evidenced by the eases holding that the act in force at the time of the allowance is the law that fixes the government’s liability for interest.

While the signature of the Commissioner of Internal Revenue does not appear on the certificate of refunds and credits, I have no hesitation in finding and ruling that the schedule was approved on behalf of the Conn missioner sufficiently to effectuate an allowance of the credit. Compare R. H. Stearns Co. v. United States, 54 S. Ct. 325, 78 L. Ed. - (decided Januaiy 8, 1934).

The claim of the government that it is entitled to interest on the delayed payment of the 1922 tax while it had in its possession the amount of it is entirely without merit, and hardly warrants consideration.

Judgment may be entered for the plaintiff for the sum of $2,433.85.

The requests of the petitioner and of the respondent for findings of fact and rulings of law, so far as inconsistent with the foregoing, are denied.

I continued the trial of this ease until to-day in order to give counsel an opportunity, in the course of the trial, to preserve their rights in connection with my findings and rulings.

       No opinion filed.


author: PER CURIAM.

text:
    STATE OF OHIO et al. v. UNITED STATES et al. WHEELING & LAKE ERIE RY. CO. v. SAME.
    Nos. 1039, 1040.
    District Court, S. D. Ohio, E. D.
    Jan. 6, 1934.
    See, also, 54 S. Ct. 452, 78 L. Ed. -.
    John W. Bricker, Atty. Gen., for the state of Ohio.
    Donald C. Power, of Columbus, Ohio, for Public Utilities Commission of Ohio.
    Clare Clan Crawford, of Cleveland, Ohio, for Wheeling & Lake Erie Ry. Co.
    E. S. Ballard, of Chicago, Ill., for intervening plaintiffs.
    Elmer B. Collins, Sp. Asst, to Atty. Gen., for the United States.
    J. Stanley Payne, of Washington, D. C., for Interstate Commerce Commission.
    Guernsey Orcutt, of Pittsburgh, Pa., for Baltimore & O. R. Co. and others.
    John Eox Weiss, of Harrisburg, Pa., for Public Service Commission of Pennsylvania.

      H. C. Hall and Alex M. Bull, both of Washington, D. C., for Robert C. Hill and others.
    August Gutheim, of Washington, D. C., for Western Pennsylvania Coal Traffic Bureau and others.
    Before HICKENLOOPER, Circuit Judge, and HOUGH and NEVIN, District Judges.
   PER CURIAM.

Each of the present suits is brought to enjoin two orders of the Interstate Commerce Commission, and is, of course, filed under the Urgent Deficiencies Act of October 22, 1913, 38 Stat. 219, 28 USCA §§41 (28) to 48. The first of these orders, issued May 2,1933, under section 13 of the Interstate Commerce Act, as amended February 28, 1920 (e. 91, § 416, 41 Stat. 484 [49 USCA § 13]), required the increase of Ohio intrastate rates on bituminous coal from certain mining districts in eastern and southern Ohio to points of destination in Northeastern Ohio. The second order, issued May 9, 1933, required the increase in all Ohio intrastate rates on bituminous coal in the amount of the increase (known as the surcharge) authorized in interstate rates on bituminous coal by the Fifteen Per Cent Case, 178 I. C. C. 539, 179 I. C. C. 215, and 1911. C. C. 361. The authorization of this surcharge expired, according to its terms, on September 30, 1933, and was not then renewed, and the surcharge has therefore been discontinued since that date. The validity of this second order has, we think, been conclusively established by the decisions of the United States Supreme Court since the present ease was submitted; that is, the decisions on November 6, and 13, 1933, in United States et al. v. State of Louisiana et al., 290 U. S. 70, 54 S. Ct. 28, 78 L. Ed. 181, and State of Montana v. United States et al., 290 U. S. 593, 54 S. Ct. 125, 78 L. Ed. -. See, also, Commonwealth of Kentucky v. United States (D. C.) 3 F. Supp. 778. Both because of this fact, and because of the discontinuance of-the surcharge, we may limit our discussion and consideration here to the question of the validity of the first order above stated.

Through the years there has been established a finely balanced and nicely adjusted schedule of interstate and intrastate rates on bituminous coal from the Western Pennsylvania, Northern West Virginia, and Ohio coal mining districts, to Northeastern Ohio, with fixed differentials which have been regarded as essentially reasonable, in view of all the elements which must be considered in rate making. This rate structure with which we are here concerned was last considered by the Interstate Commerce Commission (prior to the investigations here involved) in OhioMiehigan Coal Cases, 80 I. C. C. 663, decided June 8,1923, and the readjustment then made existed in force until August 1,1932, when the Ohio Public Utilities Commission reduced various intrastate rates to Northeastern Ohio, the reductions ranging from 4 to 29 cents per ton. This threw the entire rate structure out of balance,‘operated to create a competitive advantage in behalf of the Ohio mines and operators, and, by the same token, discriminated against interstate shippers, who had theretofore been in active competition for the business of the several destinations by placing them at a competitive disadvantage.

The Commission not only found that the Ohio intrastate rates were unduly preferential of Ohio shippers and localities and unduly prejudicial to interstate localities and shippers of bituminous coal, but also that the assailed rates “result and will result in undue, unreasonable, and unjust discrimination against interstate commerce in violation of section 13 of the act,” in that the “Ohio intrastate traffic under these assailed rates is not contributing its just proportion to the revenues of the carriers, and by reason of that fact respondents are suffering substantial losses in their revenues to which they are justly entitled.” Thus the decision of the case was placed by the Commission both upon the ground that the intrastate rates in question caused unreasonable advantage, preference, and prejudice as between persons and localities in intrastate commerce on the one hand, and interstate commerce on the other hand, and upon the ground that such rates caused undue and unreasonable discrimination against interstate commerce, as such. Both types of discrimination are forbidden by section 13.

In a ease of this sort we are, of course, concerned only with the sufficiency of the evidence to support the fact finding of the Commission and the sufficiency of the facts found to support the conclusion of the order entered. While the Commission must act upon evidence and not arbitrarily, and must properly apply the law, the courts are not concerned with “the soundness of the reasoning by which its conclusions are reached, or whether the findings are consistent with those made by it in other cases.” Nor are we concerned with the “wisdom” of the regulation which is prescribed. These are matters left by Congress exclusively to the administrative branch of the government. Among the great number of decisions to this effect, see Illinois Central R. Co. v. Interstate Commerce Commission, 206 U. S. 441-446, 27 S. Ct. 700, 51 L. Ed. 1128; Baltimore & O. R. Co. v. United States ex rel. Pitcairn Coal Co., 215 U. S. 481, 30 S. Ct. 164, 54 L. Ed. 292; Interstate Commerce Commission v. Delaware, L. & W. R. Co., 220 U. S. 235, 31 S. Ct. 392, 55 L. Ed. 448; Interstate Commerce Commission v. Union Pacific R. Co., 222 U. S. 541, 547, 32 S. Ct. 108, 56 L. Ed. 308; United States v. Louisville & Nashville R. Co., 235 U. S. 314, 320, 35 S. Ct. 113, 59 L. Ed. 245; Manufacturers’ Ry. Co. v. United States, 246 U. S. 457, 38 S. Ct. 383, 62 L. Ed. 831; Virginian Ry. Co. v. United States, 272 U. S. 658, 665, 666, 47 S. Ct. 222, 71 L. Ed. 463; Georgia Commission v. United States, 283 U. S. 765, 775, 51 S. Ct. 619, 75 L. Ed. 1397.

Viewed in this light, there is no question, we think, that the order of the Interstate Commerce Commission must stand. It may possibly be that the evidence before, and the subordinate fact findings of, the Commission are insufficient to sustain the ultimate conclusion of discrimination against interstate commerce as a whole. Elorida v. United States, 282 U. S. 194, 51 S. Ct. 119, 124, 75 L. Ed. 291. It is true that there are findings here of the loss to interstate carriers if there were to be a continuance of the diversion of traffic from interstate carriers to Ohio intrastate carriers, which diversion had already occurred to a large degree, and findings of the loss of income to interstate carriers if the reductions made in Ohio intrastate rates were also to be reflected in or applied to interstate rates, and this may be enough even under the ease just cited. Cf. Railroad Commission of Wisconsin v. Chicago, B. & Q. R. Co., 257 U. S. 563, 42 S. Ct. 232, 66 L. Ed. 371, 22 A. L. R. 1086; New York v. United States, 257 U. S. 591, 42 S. Ct. 239, 66 L. Ed. 385. It is also true that we have here what we did not have in the Elorida Case — substantial evidence to support the charge of unreasonable preference and prejudice as between persons and localities in intrastate commerce on the one hand, and interstate commerce on the other hand— and that this discrimination as between persons and localities is in itself a discrimination against the persons and localities carrying on that commerce; yet, in view of the holding of the Elorida Case, that where the Commission .undertakes to sustain an order as to intrastate rates on the «ground that they impose an undue burden upon the. revenues of the carrier, “it must appear that there are findings, supported by evidence, of the essential facts as to the particular traffic and revenue, and the effect of the intrastate rates, both as existing and as prescribed, upon the income of the carrier, which would justify that conclusion,” it is possible that the findings in the present ease are not full enough or specific enough.

The Florida Case also seems to imply that the “discrimination against interstate commerce” mentioned in section 13 is to be limited solely to that discrimination which imposes an undue burden upon the revenues of the interstate carrier by requiring intrastate service at less than cost, or at well below the interstate level of compensation. We doubt whether these words should be thus limited in their meaning; and while there may be even greater doubt as to the application of this doctrine, even when so limited, to a case where the loss of revenue is to carriers other than those rendering the intrastate service, on the whole we prefer to place our decision on the single ground of the existence, or nonexistence, under the intrastate rates, of preference and prejudice as between persons and localities.. We do not believe that it is necessary to decide any other question, for the right of the Interstate Commerce Commission to remove such preference and prejudice, if it exists, is no longer open to dispute. Louisiana Public Service Commission v. Texas & N. O. R. Co., 284 U. S. 125, 131, 52 S. Ct. 74, 76 L. Ed. 201; Florida v. United States, supra, 282 U. S. 210, 51 S. Ct. 119, 75 L. Ed. 291.

Nor do we think that it can be disputed, upon the present record, that there is substantial evidence to support the finding of discrimination against persons and localities, if not, in fact, a demonstration of the correctness of that finding. It is urged that the Commission erred in placing the burden of proof upon the plaintiffs to show that the intrastate rates were not unduly preferential to Ohio persons and localities, and unduly prejudicial to persons and localities in other states. We cannot concur. A question of where lies the burden of proof can be of serious moment only when the evidence is in a state of equipoise. Here, with all the evidence before it, the Commission found that the intrastate rates were unduly preferential of Ohio shippers and localities and unduly prejudicial against interstate localities and shippers in Pennsylvania and West Virginia. There was no question of the burden of proof presented, for, as we have said, this was practically the only conclusion at which the Commission could have arrived.

The Commission also found that the interstate rates from the Pittsburgh, Freeport, Connellsville, and Fairmount districts to destinations in Northeastern Ohio were reasonable. It is contended that the order is .void because the Commission did not also examine into and make findings upon all other rates from the Inner and Outer Crescents to Northeastern Ohio. This contention is likewise without merit. It is enough if discrimination in respect of the Pittsburgh, Freeport, Connellsville, and Fairmount districts, and the coal operators of these districts, be found. There was no obligation upon the Commission to find specifically that each individual rate was reasonable, or that rates from all localities into Northeastern Ohio were reasonable. Cf. United States v. State of Louisiana, supra, decided Nov. 6,1933. If it be contended that any rate from some other locality is unreasonable, and it is desired in good faith to test this question, the one so contending is afforded a remedy by application to the Interstate Commerce Commission.

It is also contended that under evidence introduced or tendered by the plaintiffs, involving a comparison with the rates and operating conditions in the Indiana and Illinois coal mining districts, the Ohio intrastate rates were shown to be maximum reasonable rates, •and the Commission was without power to raise such rates above that reasonable maximum. But the Commission had the power to prescribe intrastate rates in place of those found unduly to discriminate against persons and localities, and when it ordered the resumption of the rates in force prior to August 1, 1932, it necessarily placed its stamp of approval upon those rates as, upon the whole, reasonable. State Corporation Commission of Virginia v. Aberdeen & Rockfish R. Co., 136 I. C. C. 173, 180. But apart from this, “proceedings to remove unjust discrimination are aimed direetly only at the relation of rates.” “If the interstate rates are maintained, the discrimination can be removed only by raising the intrastate rates.” American Express Co. v. State of South Dakota ex rel. Caldwell, 244 U. S. 617, 624, 37 S. Ct. 656, 666, 61 L. Ed. 1352. To ask the court to review the decision of the Commission as to whether the disparity should be removed by lowering the interstate rate, or by raising the intrastate rate, or by both, or as to whether, in view of the evidence in regard to the Indiana-Ulinois coal rates and operating conditions, the Ohio rates must be regarded as reasonable maximum rates, is asking the court to substitute its judgment for that of the Commission, and to pass upon the soundness-of the reasoning of the Commission, the wisdom of its conclusion, and the consistency of the present order with those made in other cases. All of these decisions involve the exercise of powers which, under the authorities already cited, the court does not possess.

Lastly, it is urged, but with less vigor, that the intrastate carriers are justified in lowering intrastate rates for competitive reasons, and that only by the lowering of such rates could the Ohio carrier increase its tonnage, in competition with interstate carriers for this identical type of freight elsewhere produced. Compare Texas & Pac. Ry. Co. v. United States, 289 U. S. 627, 636, 53 S. Ct. 768, 77 L. Ed. 1410. The avoidance of such destructive competition, and the establishment of a general policy regarding the national transportation system as a whole, rather than as a number of separate units, were referred to in the case of United States v. Louisiana, supra, decided November 6, 1933, as among the purposes of Congress in passing the Transportation Act of 1926. This,, we think, is as it should be. Very broad powers have been given the Commission, under section 15a of the Interstate Commerce Act, as added by Transportation Act, § 423 (49 USCA § 15a) to fix rates so that the carriers “as a whole” may earn “an aggregate annual net railway operating income equal, as nearly as may be, to a fair return upon the aggregate value of the railway property.” It has been said to be impossible “to escape the dovetail relation” between sections 13 (4) and 15 a, as added by Transportation Act 1926, §§ 416, 422, 49 USCA §§ 13 (4) and 15a (Railroad Commission of Wisconsin v. Chicago, B. & Q. R. Co., 257 U. S. 563, 586, 42 S. Ct. 232, 237, 66 L. Ed. 371, 22 A. L. R. 1086; Florida v. United States, supra, 282 U. S. at page 211, 51 S. Ct. 119, 75 L. Ed. 291), and we are inclined to the opinion that competition alone is insufficient justification for the disruption of the entire rate structure which has been set up by the Interstate Commerce Commission with all the various elements introduced by the Transportation Act in view. But whether this position be sound or not, we are quite firmly convinced that competition cannot be urged as a justification for the practice of one of the worst evils which the Interstate Commerce Act and its amendment of 192.0, the Transportation Act (41 Stat. 456) were designed to end; the undue preference and prejudice of discrimination.

For the reasons above stated the bills in the present ease will be dismissed.' Am order may first be drawn granting the petitions to intervene upon which the court has not yet .acted, and then another order dismissing the bills. Decree may be prepared and filed Saturday, January 13, 1934.

Note. The above per curiam opinion was prepared by Judge SMITH HICKEN-LOOPER a short time prior to his death, pursuant to an arrangement had at a conference of the three-judge court at Cincinnati on December 2,1933.

Judge HICKENLOOPER’S death ensued, and the opinion was found among his files of the cases involved. It is now published as the opinion of the court, the Honorable ROBERT R. NEVIN and the undersigned having entered our concurrence on a copy thereof, filed in the United States District Court (chambers), Columbus, Ohio.

BENSON W. HOUGH, United States District Judge, Southern District of Ohio.

       Intrastate Rates on Bituminous Coal Within State of Ohio, 192 I. C. C. 413.


author: O’BRIEN, District Judge.

text:
    RASH v. ZURBRICK, District Director of Immigration, et al.
    No. 5498.
    District Court, E. D. Michigan, S. D.
    Jan. 22, 1934.
    Levin, Levin & Dill, of Detroit, Mich. (Theodore Levin and Nathan Milstein, both of Detroit, Mich., of counsel), for plaintiff.
    Louis M. Hopping, Asst. U. S. Atty., of Detroit, Mich., for defendants.
   O’BRIEN, District Judge.

The question at issue is whether an alien has access to the District Court by a bill in equity to enjoin the operation of an excluding order entered against him by the Secretary of Labor based upon a hearing by a board of special inquiry and upon a hearing by the board of review on appeal.

The bill was brought by an alien, Irwin Rash, who was excluded at the port of Detroit while attempting to return to the United States to what he contended was his unrelinquished domicile. There was no record of his prior entry. The order was based upon section 213 (a) of title 8, U. S. C., 8 USCA § 213 (a), section 13 (á) of Immigration Act of 1924, in that the alien was an immigrant not in possession of an unexpired consular immigration visa.

The bill of complaint seeks to overrule the Secretary of Labor upon a question of fact. If the board of special inquiry had found that the alien had previously been lawfully domiciled in the United States, as he contends he was, it might have admitted him without an immigration visa under section 213 (b) of title 8, U. S. C., 8 USCA § 213 (b), if he was found upon further examination to be otherwise admissible.

The plaintiff relies upon the authority of United States ex rel. Shore v. Day, 36 F.(2d) 264, in which the District Court held that the mere absence of a record of the alien’s prior admission to the United States is not evidence to support the Secretary of Labor’s finding that the alien is a member of an excluded class. Since this decision, however, the Circuit Court of Appeals for the Second Circuit, on November 7, 1932, reversed the District Court. United States ex rel. Shore v. Corsi, 61 F.(2d) 761, 762. The court said:

“The rules of law applicable to this case have long been clearly defined. Findings by the Board supported by some evidence are conclusive. U. S. ex rel. Vajtauer v. Com’r, 273 U. S. 103, 47 S.Ct. 302, 71 L. Ed. 560; Gegiow v. Uhl, 239 U. S. 3, 36 S. Ct. 2, 60 L. Ed. 114; U. S. ex rel. Mantler v. Com’r, 3 F.(2d) 234 (C. C. A. 2). The alien has the burden of proving his right to enter the United States. U. S. ex rel. Soy Sing v. Chinese Inspector, 47 F.(2d) 181 (C. C. A. 2); U. S. ex rel. Cateehes v. Day, 45 F.(2d) 142 (C. C. A. 2). This appellee sought to bear this burden by his own testimony and a joint affidavit of two others, saying that they had known the appellee as a resident of Canton, Ohio, for nine years. * * * All this may be consistent with his having previously spent some time in this country, but that is far from establishing that his entry was lawful at the time he claims he first entered. * * * Departmental exclusion based on rejection of conflicting testimony has support of authority. U. S. ex rel. Soy Sing v. Chinese Inspector in Charge at Port of New York (C. C. A.) 47 F.(2d) 181; U. S. ex rel. Fong Lung Sing v. Day, 37 F.(2d) 36 (C. C. A. 2).”

Plaintiff claims that the facts in the present case are similar. Before going into that, however, we note that the foregoing decision was made upon appeal from an order sustaining a writ of habeas corpus, and to that extent supports the defendant’s contention that a well-settled and adequate remedy at law exists whereby the plaintiff might, if he chose, obtain a judicial review to determine the legality of the excluding order made by the Secretary of Labor. No authority has been cited, nor is a single ease known to the court, in which the higher courts of the United States have sanctioned the use of a bill in equity by an alien to test the validity of an excluding order made by the Secretary of Labor. On the contrary, there is substantial authority for the proposition .that a bill in equity by an alien to obtain a declaration of his right to remain in the United States will not lie. Darabi v. Northrup, 54 F.(2d) 70 (C. C. A. Ohio 1931). In Fafalios v. Doak, 60 App. D. C. 215, 50 F.(2d) 640, certiorari denied by Supreme Court (1931) 284 U. S. 651, 52 S. Ct. 31, 76 L. Ed. 552, the court held that a bill in equity will not lie to cancel a deportation order; the remedy of review by habeas corpus being adequate. Jung See v. Nash (C. C. A.) 4 F.(2d) 639; holds that habeas corpus is the proper remedy to obtain a judicial review of the rights of one claiming to be a citizen.

In Poliszek v. Doak, 61 App. D. C. 64, 57 F.(2d) 430, 431, the court said: “Whether the Supreme Court of the District has jurisdiction in any ease to issue a writ of prohibition against an executive officer of the government, we need not decide, for, assuming the existence of the power, the court below rightfully refused to exercise it in the present ease. The Immigration Act of 1917 (39 Stat. 874) prescribes the procedure for the exclusion and deportation of aliens and makes the decision of the Secretary of Labor final. So long, therefore, as he keeps within his jurisdiction and his decisions are not arbitrary or capricious, they are beyond the control of the courts. That the Secretary has jurisdiction both of the subject-matter and of the person in the present case is too plain to admit of question. Moreover, the writ of prohibition will never issue where there is another adequate remedy. In re Macfarland, 30 App. D. C. 365; In re Rice, 155 U. S. 396, 15 S. Ct. 149, 39 L. Ed. 198; Alexander v. Crollott, 199 U. S. 580, 26 S. Ct. 161, 50 L. Ed. 317. In Fafalios v. Doak, 60 App. D. C. 215, 50 F.(2d) 640, we rule that habeas corpus is the proper remedy to review deportation proceedings."

In the course of the opinion in the case of Wong Sun v. Fluckey (D. C.) 283 F. 989, 994, the court said: “Congress has committed the power to hear and decide that status to the immigration authorities. The courts through necessity have used the writ of habeas corpus as the only available procedure to determine whether the immigration authorities have exceeded or abused their power." This case was affirmed in the Circuit Court of Appeals for the Sixth Circuit in 293 F. 273, and again in the Supreme Court in 265 U. S. 239, 44 S. Ct. 524, 68 L. Ed. 999. Thus it appears that the plaintiff’s only and proper remedy in this case is by a writ of habeas corpus; there being no authority in the law to sustain the bill in equity. The judgment is affirmed.

Plaintiff’s bill is dismissed, the restraining order is vacated, and the temporary injunction is denied. The plaintiff is remanded to the custody of the Immigration and Naturalization Service for deportation.


author: KIRKPATRICK, District Judge.

text:
    THE ALBISOLA.
    No. 73 of 1928.
    District Court, E. D. Pennsylvania.
    Oct. 24, 1933.
    Clark, Carr & Ellis (by Frederick H. Stokes), all of New York City, for plaintiff.
    Acker, Manning & Brown (by J. T. Manning, Jr.), all of Philadelphia, Pa., for claimant.
    Biddle, Paul, Dawson & Yocum, of Philadelphia, Pa., and Loomis & Ruebush (by Homer L. Loomis), of New York City, for defendant.
   KIRKPATRICK, District Judge.

This is a claim for additional compensation by a stevedoring company which discharged the respondent’s cargo under a written contract. The work has been done and the libelant has received payment according to the rate fixed on page 1 of the contract. It is conceded that the libelant has been paid in full, unless the fact that the cargo was damaged and some portion of it, not definitely ascertained, had to be handled under distress conditions, entitles it to additional compensation. The libelant claims that it does, first, because of the contract itself, and, second, because of the existence of an alleged custom of the port of New York.

The contract contained an agreed schedule of rates by means of which the amount to be paid for the work could be definitely ascertained. It contemplated that there might be a change in the agreed rate. A clause provided: “All rates quoted herein are based on and subject to the present wage scale and working conditions prevailing in the port of loading or discharging. In the event of increase or decrease in such wage scale or change in working conditions the rates will, as a consequence, be increased or decreased.”

This clause, however, is not applicable to the contingency of the cargo being damaged. Even though the libelant’s agreement with his longshoremen compelled him to pay them higher wages for work on damaged cargo,' there was no increase in “the present wage scale.” The same wage scale was in force at thé time the contract was made as when the work was done, and the provision for double pay for work on damaged cargo was then as now a part of it. The “change in working conditions” appears by the first sentence to refer to “working conditions prevailing in the port * * * of discharging.” This I suppose means place and conditions of unloading, docking, and berthing facilities. At any rate it clearly does not mean working conditions upon the vessel itself.

There is therefore nothing in the contract affecting the rate of payment in the event of damaged cargo.

The respondent offered evidence of a custom of the port of New York by which the stevedore received his additional cost plus 10 per cent, in case he had to work upon damaged cargo.

Assuming that the evidence was sufficiently definite to establish the existence of such custom, it cannot affect the contractual relations of these parties, for two reasons:

First. There is no evidence that the parties contracted with reference to it. Nor can this be presumed from the mere existence of the custom, since it is coneededly a local custom and one of the parties was a nonresident and there is nothing to show that he knew of it. The rule is that such knowledge cannot be presumed, without proof, except in the case of a custom prevailing generally in the trade or business in which both parties axe engaged. Chateaugay Ore & Iron Company v. Blake, 144 U. S. 476, 12 S. Ct. 731, 36 L. Ed. 510; Isaksson v. Williams (D. C.) 26 F. 642; The City of Atlanta (D. C.) 17 F.(2d) 311.

Second. The evidence of the custom, if accepted, would be in contravention of the terms of the written contract. The contract does not expressly refer to payment for discharging damaged cargo, but that does not mean that that point is not covered. Had the agreed rates been fixed for discharging sound cargo, there would, of course, have been a hiatus which might have been supplied. But the consideration is to be paid for “Discharging Corkwood,” and that includes damaged as well as sound corkwood. Evidence of a custom will not be received upon a matter as to which the contract has spoken. Barnard v. Kellogg, 10 Wall. 383, 19 L. Ed. 987; Dewitt v. Berry, 134 U. S. 306, 10 S. Ct. 536, 33 L. Ed. 896.

The claimant may therefore have a decree of dismissal, with costs.


text:
    SHIMADZU et al. v. ELECTRIC STORAGE BATTERY CO.
    No. 7727.
    District Court, E. D. Pennsylvania.
    Feb. 5, 1934.
    Joseph W. Henderson, of Philadelphia, Pa., James T. Newton, of Washington, D. C., E. B. Whitcomb, of Toledo, Ohio, and Geo. Whitefield Betts, Jr., of New York City, for plaintiffs.
    Augustus B. Stoughton and Edward S. W. Famum, Jr., both of Philadelphia, Pa., A. F. Kwis, of Cleveland, Ohio, and Hugh Morris, of Wilmington, Del., for defendant.
   KIRKPATRICK, District Judge.

In this patent infringement suit plaintiff has moved for an inspection of the defendant’s processes, methods, and products and of its apparatus in actual operation.

Although infrequently exercised, there is very little doubt or difficulty about the power ■of a court of equity to order the disclosure by physical inspection of evidence in the defendant’s possession. The following well-settled principles govern:

First. The power exists, although the plaintiff has no absolute right to invoke it.

Second. It should not be exercised unless the plaintiff makes a showing that the defendant is violating his right, supported by more than his own suspicion or belief. Obviously, this does not mean that he must decisively establish infringement. If he could do that, there would be no need for inspection and he would defeat his own motion. A prima facie ease will suffice. How much less than that will do it need not here be considered.

Third. It should not be exercised where the evidence can be satisfactorily obtained elsewhere. It necessarily involves an invasion of the defendant’s business privacy and should be avoided where reasonably possible.

Fourth. If exercised, it should be safeguarded so that information or secrets unconnected with the subject-matter of the suit will not be disclosed to competitors.

For the above principles reference may be had to Rowell v. William Koehl Company (D. C.) 194 F. 446; Colgate v. Compagnie Francaise (C. C.) 23 F. 82; Diamond Match Company v. Oshkosh Match Works (C. C.) 63 F. 984; Osram Lamp Works, Ltd. v. British Union Lamp Works, Ltd. (1914) 31 R. P. C. 309; and Germ Milling Company, Ltd. v. Robinson, 1 T. L. R. 38,1 R. P. C. 217 (1884).

To them may be added a general limitation which some courts have seen fit to apply, namely, that the case must be -an exceptional or extraordinary one. This amounts to little more than a general caution.

One of the patents here involved is for a process of manufacturing powder, composed •of lead suboxide mixed with powder of metallic lead, which forms the basis for the paste with which the plates or grids of electric storage batteries are coated.

The plaintiff offers, as a prima facie ease of infringement, the sworn testimony of one Hall, the defendant’s engineer in charge of these operations since 1921 given in an interference in the Patent Office in 1928 and 1929. The situation is a peculiar one. At that time Hall was endeavoring to establish the fact that he had been producing the powder in question at the defendant’s plant since 1921 by the process claimed in the plaintiff’s patent (the plaintiff’s 'application date being in 1923). His testimony was positive-and unequivocal to that effect. The law examiner accepted it. The Patent Office tribunals rejected it; that is, they held that it did not establish Hall’s contention. The Court of Custom and Patent Appeals affirmed the decision of the Board of Appeals of the Patent Office substantially holding that Hall was in error when he said that he produced the product of the patent in the defendant’s plant, reasoning from this that he could not have been using the process, and further holding that even if he had been, he was not sufficiently corroborated as to conception and reduction to practice prior to the Shimadzu filing date.

In the interference, the present plaintiff Shimadzu contended that Hall was not making the product of the patent. But he had not been permitted to see it or observe the process — only attempted to produce it by what he understood to be a similar machine. There was never any question that Hall was producing a. fine lead oxide powder.

I think it is a prima facie ease. The fact that the Patent Office tribunals rejected this testimony, or at least interpreted it as not meaning what Hall claimed for it, is not binding upon me, particularly since Hall’s affidavit in opposition to this motion contains no suggestion that he does not still stand by it. That issue is carefully avoided. To the plain questions, “Do you use the process of the Shimadzu patent and is your product the product of that patent?” which naturally arise in the mind of the court, the answer of the affidavit is that in 1924 he was of the opinion that some of the product he had made corresponded with Shimadzu’s sample, which he then considered his invention. And then, he says, it subsequently developed that the scope of his invention “was somewhat curtailed.” The one thing he does say with positiveness is that the defendant is now using the same process and making the same product about which he testified in the interference, and he nowhere says that it is not the product and process of the Shimadzu patent.

The necessity for an inspection rather than resorting to the ordinary means of obtaining evidence lies largely in the nature of the product. The patent discloses, and there is no real dispute, that the powder is chemically highly reactive — an 'extremely fine powder which is quickly affected by air, moisture, and heat. It is chemically changed by the addition of other substances to make a paste of it, and when it comes upon the market in the plates' of storage batteries it is still further metamorphosed. Even if it were ob-tamable in powder form, which it is not, it is likely to alter so rapidly under ordinary atmospheric conditions that, unless taken direct from the machine and preserved in some way, it will defy accurate analysis. The defendant has no way, unless permitted to so take samples, of finding out with the requisite exactness what the constituents of the plaintiff’s product are. Obviously these facts, together with the fact that the process at every step requires careful conditioning, supply the necessary element for the exercise of the court’s power.

I therefore conclude that an inspection should be allowed. This opinion is not to be taken as an order. It is suggested that, before any order is entered, the parties confer with me as to the terms upon which it should be made, and as to proper and reasonable safeguards.


author: FARIS, District Judge.

text:
    PARTRIDGE v. ST. LOUIS JOINT STOCK LAND BANK et al.
    No. 9993.
    District Court, E. D. Missouri, E. D.
    Nov. 28, 1933.
    Moore & Fitch, S. E. Boudreau, and Max O’Rell Truitt, all of St. Louis, Mo., for plaintiff.
    George W. Wilson, of Washington, D. C., and Jacob M. Lashly, of St. Louis, Mo., for defendant.
   FARIS, District Judge.

Plaintiff, a bondholder of defendant St. Louis Joint Stock Land Bank, sues in equity for himself and all others similarly situated, for an accounting touching certain assets alleged to constitute a trust fund held for the bondholders of defendant St. Louis Joint Stock Land Bank, and which defendant Cantley, as administrative receiver, or statutory receiver, unlawfully, it is alleged, now holds,, and, in effect, to oust Cantley, and also to have this court appoint a receiver in equity.

Defendant St. Louis Joint Stock Lana Bank (hereinafter called Land Bank, simply, for brevity) became and was, in June, 1932, declared by the Federal Farm Loan Board to be insolvent. Defendant Cantley was thereupon appointed by the Federal Farm Loam Board, receiver to take possession, and he now has possession, of all books, records,, property, and assets of whatsoever sort of said Land Bank, including mortgages and other property deposited with defendant, Campbell, as registrar of defendant Land Bank to secure the bonds held by plaintiff and divers others.

Plaintiff contends that defendant Cantley, as receiver appointed by the Farm Loam Board, has no authority to take possession of the mortgages and other assets deposited, it is alleged, as collateral, by the Land Bank, with Campbell, registrar, because such collateral is not an asset of the bank, but that power to liquidate and wind up the affairs of the' Land Bank inheres in a court of equity only,, and lawful possession of such pledged assets lies, therefore, only in a receiver appointed by such a court.

Defendants contend contra, and insist,, that not only does section 961, title 12, U. S, C. (12 USCA § 961), confer this power on a. receiver, such as is Cantley, appointed by the Farm Loan Board, but that the whole policy, tenor, and language of the Federal Farm Loan Act (12 USCA § 641. et seq.) indicate an intention of the Congress so to confer such power.

Obviously, the decision of but a single question will solve this case. That question is, Has Cantley the right of possession of the assets named, and the authority to liquidate them and wind up this insolvent Land Bank ?

Section 961, supra, after providing for the appointment by the Farm Loan Board of a receiver for national farm loan associations, proceeds to set out the authority and duties of such receiver, thus: “Such receiver, under the direction of the Federal Farm Loan Board, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to it, and, with the approval of the Federal Farm Loan Board, or upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubt— ful debts, and, on a like approval or order, may sell all the real and personal property of such association, on sueh terms as the Federal Farm Loan Board or said court shall direct.”

It will be observed that, while the above section does not specifically mention a joint-stock land bank, sueh as is here being dealt with, yet, by a subsequent statute (section 963, of title 12, U. S. C. [12 USCA § 963]), such banks are put in precisely the same category as are national farm loan associations, and the provisions of section 961, supra, are specifically made applicable to joint-stock land banks.

Section 656, title 12, U. S. C. (12 USCA § 656), provides for the appointment of a registrar who, by the provisions of this same section, is a public and not a private officer, and whose salary is paid by the Land Bank. Section 781, title 12, U. S. C. (12 USCA § 781), .provides that the mortgages taken by the Land Bank shall be deposited in trust by the Land Bank with the registrar to be used by .him as collateral security for farm loan • bonds, such as plaintiff and those for whom he sues now hold and own.

Arguing by analogy to the ruling of the Supreme Court of the United States, in the case of Merrill v. National Bank, 173 U. S. 131, 19 S. Ct. 360, 43 L. Ed. 640, wherein it was held that a receiver of a failed national bank has no more right to the collateral pledged by a bank to secure its debt than the bank itself would have [see, also, Schumacher v. Eastern Bank & Trust Co. (C. C. A.) 52 F.(2d) 925], and heartened, no doubt, by the decision by the Supreme Court of the United States in the ease of Wheeler v. Greene, 280 U. S. 49, 50 S. Ct. 21, 74 L. Ed. 160, it is upon the provisions of section 781, ...supra, that plaintiff bottoms his ease. In other words, the bald contention is that the mortgages and other collateral deposited by the ..Land Bank with the registrar are not assets of the Land Bank, within the terms of section 961, supra; therefore, these mortgages are to' be foreclosed for the benefit of bondholders only in a court of equity and by a receiver appointed by sueh court. And this, too, notwithstanding the statute which gives possession of all books and records to a receiver appointed, as defendant Cantley was, by the Federal Farm Loan Board.

This latter provision, above referred to, seems to me to throw much light on the intention of the Congress, touching the manner in which that legislative body intended insolvent land banks to be liquidated. I think it is clear that the term' “all books (and) records” includes those books and records which are in the hands of every officer of the bank. So, the term used embraces books and records in the hands of the registrar, because he is an officer of the Land Bank. If so much be conceded, as I think it must be, then the registrar’s possession was not adverse to either the bank or to the statutory receiver, defendant Cantley. In short, the registrar held this collateral as an officer of the Land Bank for all the uses and purposes of the act. Moreover, it must also, I think, be conceded that the boobs and records, pursuant to the statute above quoted, pass on insolvency into the absolute custody and possession of the statutory receiver, and it is thus rendered well-nigh impossible for a receiver appointed by a court in equity to get such data as would enable him to function in the performance of the powers and duties sought by plaintiff to be conferred on him.

I think no one can read the Federal Farm Loan Act without reaching the conclusion that the Congress intended to pass a self-contained and comprehensive act to govern the organization, powers, duties, and functions of, and to fully provide for, the winding up and liquidation of insolvent farm loan organization of all sorts, without the necessity of a resort to the courts, save in exceptional circumstances. Largely,-the Congress took for its model the long-existing laws governing like subjects in the case of national banks. If it fell short of complete analogy, the failure, to my mind, was one of inadvertence. True it is, that in the ease of Wheeler v. Greene, supra, 280 U. S. loc. cit. 51, 50 S. Ct. 21, 74 L. Ed. 160, the Supreme Court finds what to it is a convincing reason why power was given to the Comptroller of the Currency* to collect through a receiver the so-called double liability of stockholders in failed national banks and withheld such power from the Farm Loan Board in the other. Obviously, if sueh power is lawful and constitutionally valid in the ope ease, it ought to be valid and constitutional in the other. I assume, without deciding, that, if too much be assessed against and collected from the stockholders, in either the liquidation of a national bank or a farm loan organization, any sueh surplus exacted could be recaptured by the stockholders after all debts of the bank had been paid in full. It is clear, because the Wheeler Case, supra, so 'rules, that the power of the receiver, such as is defendant Cantley, to collect from stockholders of an insolvent land bank, was not by the act creating him specifically conferred. This, I think, was sufficient, whether it was ■withheld intentionally, or by mere inadvertence, by a slip of the scissors, so to speak, or not. By virtue of the ruling in the Wheeler Case, supra (with which, of course, I have no quarrel), we are already confronted with a situation where two receivers are necessary in liquidating a land bank, one to collect the double liability of stockholders, and one to take charge of all books, records, and assets of the insolvent land bank, and to collect all debts due to such banks. Surely the Congress never intended, even in this golden age of receivers, that there should be three receivers to liquidate one insolvent land bank. But to this situation the contentions of plaintiff would inevitably lead us.

As said, in effect, by Judge Wilkerson, the thing sought by plaintiff here does not so much involve reading into the aet things doubtfully implied, but it does involve reading out of the statute and the easting away of much language clearly and specifically used therein.

I wholly agree with what is said in Merrill v. National Bank, supra, as in duty bound, but to me there seems a vast difference in principle between the title and rights of a creditor of a bank, who is secured for his debt by collateral security pledged with him for that purpose, and an officer of the Land Bank who holds collateral, as here, to secure the bonds of plaintiff, and others, similarly situated. In the one ease the collateral is held by a stranger for his sole benefit, and in the other by a statutory officer of the Land Bank, who holds it as a convenient detail in the administration of the affairs of the Land Bank. In trust, of course, the statute says, but not in complete title.

A similar final conclusion was reached in this circuit, in the case of Krauthoff v. Kansas City Joint-Stock Land Bank (C. C. A.) 23 F.(2d) 71, as also in the later ease of Krauthoff v. Kansas City Joint-Stock Land Bank (C. C. A.) 31 F.(2d) 75. True it is, that some of the broad language used in both of the Krauthoff Cases, supra, has now been modified by the ruling in Wheeler v. Greene, supra, but not at all on the point here up for judgment.

As forecast by what has been said’already, the Wheeler Case rode off in the Supreme Court on two questions. One of these was whether the double liability was an asset of the Land Bank (loe. cit. page 52 of 280 U. S., 50 S. Ct. 21), and the other was what authority, if any, was given to the statutory receiver by the Land Bank Act, to collect assessments against the stockholders. It was held, first, that the aet gave no specific power to the statutory receiver to collect these assessments, and, second, that such liability is not among the assets of the Land Bank. Obviously, the court did not intend to say that, if statutory power had been specifically given to the statutory receiver to enforce the double liability of stockholders of the bank, the mere ' use of the term “assets of the bank” would of itself have destroyed this power. This, for the simple reason that the National Bank Aet uses similar language in setting out the powers of the receiver to take charge of the books, records, and assets of the bank, and it is well settled that a receiver of an insolvent national bank may sue for and collect assessments made against stockholders [Jones v. Jenkins (C. C. A.) 22 F.(2d) 642], and this, too, notwithstanding the provisions of section 65, title 12, U. S. C. (12 USCA § ' 65).

It follows, in my opinion, that the finding should be for defendants and against the plaintiff, dismissing his bill of complaint with costs, which accordingly is ordered.


author: CAFFEY, District Judge.

text:
    In re LIBERTY LUMBER CO., Inc.
    District Court, S. D. New York.
    Dec. 8, 1933.

      Louis H. Shereff, of New York City, for the motion.
    John D. Lyons, of Montieello, N. Y., opposed.
   CAFFEY, District Judge.

The judgment having been docketed in Sullivan county on November 25, 1932, pursuant to section 510 of the Civil Practice Aet, it became then and continues a lien upon the real property of the bankrupt in that county. That lien having come into existence more than four months prior to the filing of the bankruptcy petition, it remains good. If the judgment creditor by his motion seeks to vacate the injunction order of June 8, 1933, in so far as it prevents the levy on real estate, I think that in this respect he is entitled to prevail. It is not clear from the papers whether the judgment creditor seeks relief with respect to real property and as I read the papers, it is implied that he does not. I understand that there has not been a levy on real property. Nevertheless, if there has been, or the judgment creditor wishes, a levy on real estate of the bankrupt, he may have an appropriate modification accordingly of the injunction order. The parties have not argued this matter and may be heard on it by briefs (to be exchanged) if they desire.

The remainder of the discussion will be confined to personal property.

By force of section 679, the delivery of the execution to the sheriff of Sullivan county on November 26, 1932, effected a lien on personal property. If that were continuous, and were kept alive down to the filing of the bankruptcy petition, then plainly, because the lien had its inception more than four months preceding the filing of the petition, the injunction should be vacated. The sole question is whether or not the lien lapsed.

It was open to the creditor to issue an alias execution or pluries executions. The forms of the two executions put before me, one dated November 25, 1932 (Exhibit B to Shereff affidavit), and the other dated February 27, 1933 (Exhibit A to Flynn affidavit), seem to me to be sufficient to constitute an original execution and an alias execution. I do not think the issue turns, therefore, upon matter of form.

It is ineontrovertibly established that the original or November 25, 1932, execution remained in the hands of the sheriff until February 25, 1933. On that day it was mailed by the sheriff in Sullivan county, addressed to the clerk of New York county, where it was returnable. As February 25th was a Saturday, the document did not reach the New York county clerk until Monday, February 27,1933 (cf., Smith v. Geraty, 58 Misc. 556, 109 N. Y. S. 738). On that day a new execution was issued. This new execution reached the hands of the Sullivan county sheriff the next day (February 28th). On these facts, was there a lapse?

For the purpose of determining the question as to whether there was a lapse, it will be assumed (without being decided) that there was a lien, effected by the proceedings under the first execution, which remained in existence until it was returned to the clerk of New York county on February 27th. Nevertheless, in so far as I can discover from the authorities, the intervention of a single day before the new execution was received by the sheriff of Sullivan county was a fatal interruption to the continuity of the lien. Daniel v. Cochran’s Administrator, 7 Ky. (4 Bibb) 532; Hood v. Winsatt, 40 Ky. (1 B. Mon.) 208. If so, then, inasmuch as the fresh lien resulting from the delivery of the February 27th execution to the officer arose within four months of the institution of the bankruptcy proceeding, it is no longer good as a priority.

The record does not clearly show that the lien was kept good until the first execution during the period between November 26th and February 27th. By the terms of section 640 of the Civil Practice Aet, as well as by the terms of the writ itself, it was required that it be returned within sixty days after it was received by the sheriff. More than ninety days had elapsed after he received it before he returned it. There was a levy under it on December 15, 1932, and the creditor argues that, by reason of this fact, the lien was extended beyond the return date; but I think there is a grave doubt on that point.

In the next place, on December 17, 1932, the creditor himself instructed the sheriff to “remove the levy,” although the language employed is somewhat conditional or equivocal. On January 27th, the attorney for the creditor instructed the sheriff “to proceed with the levy of the property.” The return was nulla bona. It has been held that a lien is lost by return of nulla bona and is not revived by the delivery of an alias execution. Maul v. Scott, 2 Cranch, C. C. 367, 16 Fed. Cas. page 1164, No. 9,306.

In these circumstances it is not clearly shown that the levy was kept intact. On the contrary, the inference is very persuasive that the December 15th levy was released. I should not, however, be willing to dispose of the case on this phase without affording further opportunity for clarification of the facts.

As the lapse between the executions destroyed the lien, the motion must be denied.

Settle order on three days’ notice.


author: NETERER, District Judge.

text:
    GREENE PROCESS METAL CO. v. WASHINGTON IRON WORKS.
    No. 692.
    District Court, W. D. Washington, N. D.
    Dec. 4, 1933.
    B. S. Grosscup, of Seattle, Wash. (Merton W., Sage, of New York City, of counsel), for plaintiff.
    Battle, Hulbert & Helsell, of Seattle, Wash. (Merrell E. Clark, of New York City, and William L. Symons, of Washington, D. C., of counsel), for defendant.
   NETERER, District Judge.

The plaintiff, Greene Process Metal Company, is a Missouri corporation, not engaged in industrial enterprise, but merely a patent holding company of Albert E. Greene inventions, stated at bar to be 53 patents. ,

The suit comprised originally six patents for the smelting of ore, etc. Three of the patents were withdrawn during the taking of depositions, and at the opening of trial two more were dismissed, leaving the patent in issue No. 1,532,052, based on Greene’s 1909 application, which patent was issued in 1625. The idea must comprehend the process, and not the manner of operation or the volume of added ingredients known to the prior art for the reducing slag. The idea in this application is a one-slag process; a single slag to dephosphorize, deoxidize, and desulphurize the metal by a reducing gas. The only use of silica claimed in the application is confined to a dephosphorizing and desulphurizing slag. And the elaim now made is admittedly not a dephosphorizing slag, but is a deoxidizing and desulphurizing slag. In the prior art two slags were employed; one for oxidizing and dephosphorizing the metal, and the other for deoxidizing and desulphurizing the metal. Greene, in his application, says: “My invention on the contrary contemplates blowing the bath with a gaseous agent which will reduce the flux or other slag forming metallic compound, which gas will also incidentally reduee such oxides of the metal under treatment as may be present in the slag, thereby producing conditions more favorable for the taking up of phosphorus and sulphur, or either of them, by the reduced slag-forming metal.”

The first step of the prior art process dephosphorized the metal and the second desulphurized the metal by a slag conveniently fluid, made by lime and sand subjected to reducing conditions by the use of pulverized or crushed carbon or solid carbon. This is the process used by the defendant, but is not in Greene’s original application and is a material variance, and if within the amendment cannot be sustained. Chicago & N. W. Ry. Co. v. Sayles, 97 U. S. 554, 563, 24 L. Ed. 1053. Mr. Justice Bradley, in this case, said: “Courts should regard with jealousy and disfavor any attempts to enlarge the scope of an application once filed.”

Defendant operates a basic electric furnace in which it melts steel scrap and provides the resulting molten bath of steel with a fluid slag containing basic and acid oxides. The bath is provided with two slags; the first an oxidizing slag not subjected to the action of a reducing agent, but this slag is removed and discarded after it has served its purpose. The second, reducing slag, is provided, and this is subjected to the action of a reducing agent of crushed, charcoal or coke or of calcium carbide or other substance carrying similar characteristics, and further formation of protoxids is prevented.

It appears obvious that there is a clear distinction in the- two processes. The plaintiff’s one-slag process with a gaseous reducing agent; and the other, a two-slag process, with a reducing agent of solid carbon.

In a highly basic slag there is present iron ore or ferric oxide (Fe20s), and this is more difficult to reduce from the slag than ferrous oxide (EeO), and by increasing the silica content in the slag the ferric oxide is broken up, and more ferrous oxide is found, and the action progresses as the content of the silica in the slag increases; and the plaintiff contends that in the slag of the invention (amended application) with its apparently higher silica content, there is a larger proportion of iron present as ferrous oxide than is usual in the highly basic slag of the prior art, and reduction of iron oxide from the slag by increasing the silica content of the slag facilitates its refining action. The stated higher silica content, however, cannot have any material effect upon the plaintiff’s claim, as the use of silica content was known to the prior art. The claimed invention is not new, and attainment of greater excellence, if made, in that known in the prior art is not patentable. Smith v. Nichols, 21 Wall. (88 U. S.) 112, 22 L. Ed. 566. No new results are shown from the new proportions, or new characteristics of structure or performance. Bethlehem Steel Co. v. Churchward International Steel Co. (C. C. A.) 268 F. 361. And augmentation or diminution of silica for liquidity of the slag for desulphurization is not patentable.

Heroult, in his I960 application, has a slag consisting of lime liquified by silica and Eiehhoff, in 1904-05 used a slag of lime and sand, from which the oxides are reduced by the use of broken charcoal or coke or calcium carbide. And the many prior patents (75) pleaded and the various publications of the prior art pleaded (more than 100), and the . “Canadian Report of 1904,” and many others introduced in evidence, show that sand or silica was in use prior to the plaintiff’s application, and the only difference between Greene’s idea, as set forth in the patent, as amended, granting amendment is allowable, is in degree. The testimony from experts, not only in technical scientific knowledge with relation to operation and effect, but with such technical knowledge, together with the experience of expert heaters in operating a furnace, show that it is impracticable to operate the process, as claimed by the plaintiff, successfully by a fixed standard or rule, but that the quantity of silica to be applied for liquidity must be determined by the expert heater in the operation of the furnace at the time to determine the liquidity of the slag, and cannot be fixed by measured portions, as the quantity of silica necessary varies in different baths of steel. The per cent, of silica used by the defendant is less than the per cent, contended for by the plaintiff, and it obviously must be determined by the conditions present during the operation. The per cent, at the time of trial, when inspected by court and counsel, was about 17 to 19 per cent. In some of its operations the defendant has used as high as 2,0 per cent, to 24 per cent, of silica, perhaps sometimes higher, but the quantity of silica used in making up a slag for steel is immaterial, as it differs only in degree from that known to the prior art. Railroad Supply Co. v. Elyria Iron & Supply Co., 244 U. S. 285, 37 S. Ct. 502, 61 L. Ed. 1136; Willamette Iron & Steel Works v. Columbia Engineering Works (C. C. A.) 252 F. 594; Finley v. MacDougald Construction Co. (C. C. A.) 28 F.(2d) 674; David Belais, Inc., v. Goldsmith Bros., etc., Co. (C. C. A.) 10 F.(2d) 673; Bituminous Products Co. v. Headley Good Roads Co. (D. C.) 2 F.(2d) 83, affirmed (C. C. A.) 14 F.(2d) 667.

The testimony does not show that the plaintiff's patent has at any time been in operation, or the process applied to oxidation and dephosphorization and deoxidation and desulphurization in one slag in the presence of a reducing gas; and this is an inference against utility. Henry v. City of Los Angeles (C. C. A.) 255 F. 769, Cocks v. Rip Van Winkle, etc., Co. (C. C. A.) 28 F.(2d) 921. And it is obvious from all the testimony that such ah accomplishment is impossible.

To me it is obvious that the claims in suit are anticipated by prior patents, prior publications, and prior use, and, also, that the claims of 'the patent in suit were covered by patent No. 1,185,394, issued to Greene, the same patentee, in 1916, now expired. The patent in suit contains claims not substantially different from the claims comprehended in the 1916 patent, and the instant patent is therefore void. Miller v. Eagle Mfg. Co., 151 U. S. 188, 14 S. Ct. 310, 38 L. Ed. 121.

From what has been said it is obvious that this court does not think there is infringement as to any of the claims; and the several claims will not be separately discussed, and without extending this memorandum, the court, upon the state of facts, finds no infringement, and an order of dismissal may be on notice presented.