author: HAYES, District Judge.

text:
    R. J. REYNOLDS EMPLOYEES ASS’N, Inc. v. NATIONAL LABOR RELATIONS BOARD et al.
    District Court, M. D. North Carolina.
    Nov. 16, 1943.

      Ingle, Rucker & Ingle, of Winston-Salem, N. C., for plaintiff.
    Charles F. McErlean, of Chicago, Ill., for defendant National Labor Relations Board.
    W. P. Sandridge, of Winston-Salem, N. C., for defendant R. J. Reynolds Tobacco Co.
   HAYES, District Judge.

On the motion of the defendant, National Labor Relations Board, to quash the summons and to dismiss the bill, the motion is denied and the defendant excepts.

The reasons for the denial of the motion are as follows:

The bill of complaint alleges that the National Labor Relations Board has ordered an election to be held by the employees of R. J. Reynolds Tobacco Company at Winston-Salem, North Carolina, on November 11th and 12th for the purpose of determining a duly elected bargaining agency for the employees of said company; that the plaintiff herein is a labor organization which petitioned said National Labor Relations Board to print its name on the ballot to be used at said election, but the Board, it is alleged, capriciously and arbitrarily and illegally refused to print the plaintiff’s name on said ballot; that notices of the election were posted in the buildings of the R. J. Reynolds Tobacco Company and that the defendant, National Labor Relations Board, had designated, authorized and directed Albert Lohm to conduct the election; that this suit was instituted on November 4, 1943, by the filing of the bill and procuring a temporary restraining order restraining the election because of the action of the National Labor Relations Board in refusing to print the name of plaintiff on the ballot. After the process had been served on part of the defendants on November 4th and on Albert Lohm on November Sth, the National Labor Relations Board caused the name of the plaintiff to be printed on the ballot, but no new notices of such ballot were published or posted for the purpose of giving notice to the employees. On the contrary, the notices that had theretofore been published and posted in the buildings of the Reynolds Tobacco Company were taken down when the restraining order was served and no notices of any kind have since been posted for the purpose of affording the employees reasonable notice concerning the election.

From the complaint and the amendment thereto, both of which are sworn to and which the Court must presume to be true until a contrary showing is made, it appears that the plaintiff will be deprived of the privilege of being voted for if the election is held on November 11th and 12th as originally ordered, and that the insertion of the plaintiff’s name at this hour, without an accompanying notice posted where the employees will have an opportunity to see it, deprives the plaintiff of a valid election.

It further appears that unless this Court does restrain the officers and agents of the National Labor Relations Board they will proceed to hold the election on November 11th and 12th, which will result in irreparable injury and damage to the plaintiff for which it has no adequate remedy at law and will result in the destruction of a substantial property right which the plaintiff has, and the act which is threatened to be committed is to take place within the Middle District of North Carolina and within the jurisdiction of this Court.

While it is well recognized that a Federal District Court has no jurisdiction of persons who are nonresidents of the district in actions or suits which are purely in personam, there are well-recognized exceptions to this rule when a nonresident is destroying, or threatens to destroy, within the jurisdiction of the court a vested property right, which damage will be irreparably committed unless restrained by order of the court.

This suit is not an action between a labor union and an employer, nor is it one relating to the administrative functions of the National Labor Relations Board exclusively, because it involves a controversy between labor organizations with respect to the rights of said parties to have their respective claims presented to the employees of the Reynolds Tobacco Company to determine, after notice and an opportunity to make a decision as to which, if either, of said labor organizations the employees desire to become their bargaining agent.

The Court is of the opinion that the action of the National Labor Relations Board in placing the name of the plaintiff on the ballot after this suit was filed and the restraining order issued, coupled with the fact that no notice of the election has been published or posted on the premises of the Reynolds Tobacco Company of said change, constitutes a denial of a substantial right which the plaintiff has and for which it has no remedy at law or otherwise unless enjoined by this Court.

No relief is sought in this bill against the National Labor Relations Board other than that this election on November 11th and 12th be not held on account of the fact that the plaintiff was refused its right to have its name printed on the ballot when the election was called and notices published. This Court does not undertake to direct when, where or how the National Labor Relations Board shall conduct an election and confines its ruling solely to the question of whether the defendants herein should be enjoined from holding the election on November 11th and 12th under its previous order of election in which it had denied the plaintiff a place on the ballot until after this restraining order had been served on its representatives.

The Court’s attention is called to the fact that the name of the plaintiff was printed on the ballots; that ballots and new notices of election were printed on Saturday (November 6th) and arrived at Winston-Salem on Monday morning, November 8th, to be posted by the defendant, Reynolds Tobacco Company, and that the plaintiff herein and the other defendants had notice thereof, but the Reynolds Tobacco Company declined to post said notices until the Court ruled on the temporary restraining order and, as a result, said notices have not been posted up to this time, towit, 4:30 p. m., November 9th.

However, under the above facts, the Court is of the opinion that this action does not afford the plaintiff a reasonable or fair opportunity to be voted on by November 11th and 12th, the dates originally fixed for the election. This Court, however, is not advised, that is, it has no copy of any order entered by the National Labor Relations Board showing that it has made any orders in respect thereto, or what such orders are, although the Court has no reason to doubt that it has caused the name of the plaintiff to be printed on the ballot and the notices to be published.

This cause coming on to be heard before the Court on an order to show cause why the temporary injunction should not be granted pending the final hearing on the • merits, and being heard, and the defendant, National Labor Relations Board, having entered a special appearance and moved to quash the summons for the reasons set forth in the motion to quash, which appears of record, and no other evidence having been adduced before the Court other than the verified complaint and amendment to the complaint, which is also duly verified, the Court makes the following findings of fact and conclusions of law:

Findings of Fact

1. That R. J. Reynolds Employees Association, Inc., is a labor organization duly organized and existing under and by virtue of the laws of the State of North Carolina, with its principal office and place of business situated in the city of Winston-Salem, North Carolina, which corporation was organized for the purposes, among others, of (a) securing to its members the right to self-organization and the right to bargain collectively through delegates of their own choosing, and (b) to designate and select for the purpose of collective bargaining delegates who shall be the bargaining agents of the employees of the R. J. Reynolds Tobacco Company.

2. That the National Labor Relations Board is a legal entity, created and existing under and by virtue of an act of the Congress of the United States enacted on the 5th day of July, 1935, 29 U.S.C.A. § 151 et seq., and that Harry A. Millis, Gerard D. Reilly and John M. Houston are members of said National Labor Relations Board and are residents of the District of Columbia; that Albert Lohm is the duly authorized agent and representative of the Board and of its members; that he has been authorized and empowered by the Board, through its duly authorized representative, the Board’s Regional Director, to supervise the election of the employees of the R. J. Reynolds Tobacco Company, for the purpose of determining their bargaining agent; that all of the above parties are necessary parties to this action.

3. That the defendant, Tobacco Workers Organizing Committee, United Cannery, Agricultural, Packing and Allied Workers of America, CIO, is an unincorporated labor organization.

4. That the R. J. Reynolds Tobacco Company is a corporation, duly organized and existing under and by virtue of the laws of New Jersey, with its principal office and place of business situated in the city of Winston-Salem, North Carolina.

5. That on the 13th day of October, 1943, the defendant, National Labor Relations Board, acting within the scope and execution of its authority, entered a decision and direction of election in a proceeding before it wherein the defendants, R. J. Reynolds Tobacco Company and Tobacco Workers Organizing Committee, United Cannery, Packing, Agricultural and Allied Workers of America, CIO, were parties, by the terms of which an election of the employees of the R. J. Reynolds Tobacco Company for the purpose of determining the collective bargaining representative with the company was directed to be held within thirty days from the date of the direction.

In compliance with this direction, the duly authorized representative of the Board designated November 11 and 12, 1943, as the dates on which the election should be held, and the Board directed that the sole issue raised by the election should be confined to a determination of whether or not the employees desired to be represented by the Tobacco Workers of America, CIO, for the purpose of collective bargaining, which precluded plaintiff from participating in the election as a candidate for bargaining agent of said employees.

6. That on the 18th day of October, 1943, the plaintiff, through its counsel, Ingle, Rucker & Ingle, communicated by letter with W. M. Aicher, Regional Director of the defendant, National Labor Relations Board, in charge of the directed election, advising him of the establishment of the plaintiff as a labor organization and requesting that the R. J. Reynolds Employees’ Association, Incorporated, be placed on the ballot in the coming election. A copy of the letter is attached to the complaint, marked Exhibit A, to which reference is made.

7. That on the 19th day of October, 1943, W. M. Aicher, Esq., acknowledged the receipt of the letter and advised counsel for plaintiff that he had referred the request to the National Labor Relations Board.

On the 25th day of October, 1943, plaintiff served a duly verified motion to intervene and petition, which is attached to the complaint and marked Exhibit C, to which reference is made, together with four copies, upon the National Labor Relations Board, in the proceeding pending before the Board, designated as Case No. 5-R-1356, and served copies thereof on the CIO and the Regional Director of the Board and the R. J. Reynolds Tobacco Company, in substantial compliance with the statutory provisions of the National Labor Relations Act and the rules of the Board promulgated pursuant thereto.

8. That on the 25th day of October, 1943, the plaintiff received from the National Labor Relations Board a copy of an order denying its request by letter that its name appear upon the ballot in the directed election.

On the-lst day of November, 1943, plaintiff received from the National Labor Relations Board a copy of a final order denying its motion to intervene and refusing to permit its name to appear on the ballot in the coming election.

9. That the action of the National Labor Relations Board, so far as appears before this Court at this time, was arbitrary and capricious and to the detriment of the vested personal and property rights of the plaintiff, and was without authority in law; that the right of the plaintiff to be voted on as the bargaining agent of the employees of the Reynolds Tobacco Company is a substantial right, and the refusal to allow it the enjoyment of such right deprives the plaintiff and its members of vested property and personal rights, in violation of the Fifth Amendment to the Constitution of the United States, and the plaintiff and its members will suffer immediate and irreparable injury, loss and damage unless the defendants herein, their officers and agents, be restrained and enjoined from carrying out the direction of an election on the 11th and 12th days of November, 1943, and without placing the name of the plaintiff on the ballot when the election is held.

10. That the defendant, National Labor Relations Board, through its officers and agents, caused to be posted in the plant of the R. J. Reynolds Tobacco Company and elsewhere 350 notices of the election, which was to be held on the 11th and 12th days of November, 1943, for the selection of a bargaining agent, and said notices contained only the name of CIO as the only candidate for bargaining agent, thereby depriving the plaintiff and its members of their right to be a candidate and to have published notice of their candidacy as bargaining agent.

11. That after the temporary restraining order which -was granted in this cause on November 4, 1943, was served on Albert Lohm on November the 5th, the National Labor Relations Board printed the name of plaintiff on the ballots and caused new notices to be sent to R. J. Reynolds Tobacco Company to be posted, concerning said election, but the R. J. Reynolds Tobacco Company did not post any of said notices because, under its interpretation of the temporary restraining order, it could not do so without being in contempt of court— and this decision is being dictated at 5:30 p. m. on November the 9th. Therefore, the employees can not have reasonable time to have notice of the election or of.the persons to be voted for on November 11 and 12, 1943. That plaintiff received notice of this action on the morning of November 8th.

Conclusions of Law

L That the holding of the contemplated election on November 11th and 12th, under the circumstances above stated, is in violation of the provisions of the National Labor Relations Act, 29 U.S.C.A. § 151 et seq.

2. That the election, under the circumstances stated, would deprive the plaintiff of a substantial property right, depriving it and its members of the privilege of voting for the plaintiff, and would constitute a denial of due process.

3. That the refusal of the National Labor Relations Board to permit plaintiff’s name to be printed on the ballot when it filed its petition therefor appears to be arbitrary and illegal.

4. That this Court, in the exercise of its general equity powers, has jurisdiction of this proceeding and has power to issue a temporary injunction, as prayed.

5. That the plaintiff has no adequate and complete remedy at law.

6. That the agents of the above-named Board undertaking to conduct such an election in the Middle District of North Carolina are amenable to the processes of this Court, and an injunction in accordance with the prayer of the bill of complaint should be issued against Albert Lohm or any other agent or representative of the National Labor Relations Board who does, or undertakes to do, any of the acts concerning the election to be held on November 11 and 12, 1943, within the Middle District of North Carolina.

Judgment

It appearing to the satisfaction of the Judge of the District Court of the United States for the Middle District of North Carolina that the plaintiff in the above-entitled cause desires to take a voluntary nonsuit, IT IS, THEREFORE, ORDERED that plaintiff’s action be dismissed and that the plaintiff pay the costs of the action, to be taxed by the Clerk.


source: Caselaw Access Project

author: STRUM, District Judge.

license: Public Domain

text:
    DAWES v. ALLEN, Collector of Internal Revenue.
    Civ. No. 281.
    District Court, M. D. Georgia, Macon Division.
    April 9, 1945.

      Howard Camp & Tiller, of Atlanta, Ga., for plaintiff.
    T. Hoyt Davis, Dist. Atty., and Charles W. Walker, Asst. Dist. Atty., both of Macon, Ga., for defendant.
   STRUM, District Judge.

Plaintiff, E. A. Dawes, sues to recover an additional income tax payment of $11,-200.75, with interest, which he alleges was illegally assessed against him for the taxpayers’ fiscal year ending October 31, 1940, refund of which has been demanded and refused.

The controversy turns upon whether or not plaintiff’s business, known as Dawes Silica Mining Company, was individually owned by him, or was a partnership owned by himself and his father, W. A. Dawes, during the tax period in question. If a partnership, as plaintiff contends, the additional taxes are excessive. If individually owned, as defendant Collector contends, the taxes exacted are correct in amount.

In 1919, plaintiff organized a sand mining business in Thomas County, Georgia, under the name of Standard Sales Company. In 1923, the name was changed to Dawes Construction and Supply Company. In 1933, the name was again changed to Dawes Silica Mining Company, by which name it is still known. It has been the same business all along, only the name being changed.

As of November 1, 1939, plaintiff, E. A. Dawes and his father, W. A. Dawes, executed an agreement in writing, which purported to create, as of that date, a 50/50 partnership between them in the business in question, in consideration of the payment by each of $75,000 into the business. The instrument acknowledges that plaintiff, E. A. Dawes, had paid his share, but the share of W. A. Dawes was to be wholly paid from his share of the profits, and was a charge thereon. The undisputed testimony is that as of November 1, 1939, the net worth of the entire business was only $69,000.

At the trial, plaintiff, E. A. Dawes, frankly admitted, and the Court finds the fact to be, that this instrument was a mere pretense and sham, not regarded by either party thereto as a bona fide agreement to form a partnership. The instrument was conceived and executed solely in an effort to safeguard E. A. Dawes, the son, against the apprehended consequences of an ill-advised marriage, then in prospect between his father W. A. Dawes, who was then about 79 years old, and a lady of about 40, which marriage plaintiff viewed with disapproval. In order to defeat any claim that might be asserted by the widow of this marriage to a share in the profits of the business, after the father’s death, this instrument was executed so that E. A. Dawes could claim that the father owed the business $75,000, payable out of the profits. Happily for all, the wedding never occurred, and there was no occasion to use the instrument for the purpose for which it was admittedly designed and executed.

It was immediately after execution of this instrument, however, that plaintiff began submitting partnership income tax returns, instead of individual returns, as he had done for many years previously. For the year 1940, plaintiff paid income taxes based upon a partnership status in said business. The Commissioner of Internal Revenue rejected this status and assessed additional taxes on the basis of individual ownership by E. A. Dawes, which additional taxes were paid under protest, and are here sued for. However, when plaintiff lodged his protest with defendant Collector, dated March 5, 1942, this purported partnership agreement was made the basis of the protest, plaintiff contending that the partnership was a new one formed on November 1, 1939, as stated in said written instrument.

Notwithstanding these former contentions asserting the validity and effectiveness of this agreement, plaintiff now readily concedes that it was a pretense only, executed for the purpose above stated, and that none of its provisions were ever regarded as valid or binding upon the parties. Plaintiff now takes the position that the partnership came into existence in 1919 when the business was originally organized, and that the business has ever since continued to be a partnership.

Shortly after E. A. Dawes established the business in 1919, his father, W. A. Dawes, moved from Charleston, South Carolina, to Thomasville, Georgia, and thereafter devoted his time and attention to the production end of the business, while plaintiff concentrated his efforts on the sales end. In addition to the cash withdrawals hereinafter mentioned, each of them drew a stated salary of $100 per month from the business, which was charged to expense. The father also did some individual trading in sand lands, on which he received royalty payments from the business for mining rights, as hereinafter stated.

W. A. Dawes also advanced funds from time to time for use in the business, distributed, as follows:

February 24, 1919Liberty Bond $ 50.00
1919 or 1920 New York Exchange $ 300.00
December 2, 1922 Cash $2250.47
August 21, 1923 Cash $1500.00
October 27, 1932 Cash $1000.00
Total - $5100.47.

These advances of funds were not charged to capital on the books of the business. They were simply credited to the account of W. A. Dawes, except the $300 item, which does not appear on the books at all, plaintiff testifying that this advance was for the purpose of purchasing an automobile to be used by him in the business, and that he simply endorsed the original New York Exchange over to the vendor of the automobile.

Because of the above-mentioned advances of cash, which plaintiff now contends were contributions to capital, and because of the fact that his father devoted his services to the business as his principal occupation, plaintiff contends that the father, W. A. Dawes, became a 50/50 partner in the business in 1919, and has ever since been such a partner.

This contention, however, is convincingly repelled by many circumstances and statements made by the plaintiff, which long antedated this controversy, and which occurred before it became to plaintiff’s financial advantage to claim that the business was a partnership.

From 1919 to 1925, the books of the business were rather loosely and inefficiently kept, first by plaintiff, E. A. Dawes, himself, and later by a bookkeeper whom plaintiff says was inexperienced. It is difficult to form any definite judgment as to the character of the business from the manner in which the books were kept during this period, but they lean toward individual ownership by E. A. Dawes.

In 1925, however, an experienced and-competent auditor took over the books. With the knowledge and approval of at least the plaintiff, if not also of W. A. Dawes, this auditor kept the books on an individual ownership basis until November 1, 1939, when the pseudo-partnership agreement was executed, at which time the books were changed to a partnership. basis, and income tax returns thereafter made on that basis.

About 1936, E. A. Dawes had been seriously ill. After his recovery this auditor discussed with him the advisability of protecting his father in the event of E. A. Dawes’ death, by giving the father an interest in the business. The plaintiff told the accountant on that occasion: “I don’t think it makes any difference. What is mine, is his; and what is his, is mine. We will just go along like we are.” This same auditor, who is a certified public accountant, conceived and drew the above-mentioned agreement, and knew the purpose of it. Nevertheless, he made it the basis of the new bookkeeping set-up in 1939, as well as of the partnership income tax returns, and the protest of the additional tax assessment, dated March 5, 1942. It is significant also that this alleged partnership agreement was executed at the beginning of the taxpayer’s fiscal year, and at a time when profits were mounting rapidly, so as to render income taxes of increasing importance. It is significant also that it was suggested and prepared, not by plaintiff’s legal adviser, but by his auditor and tax consultant.

From 1925 to 1939, plaintiff’s income tax returns showed the income from the business as the individual income of E. A. Dawes, no claim being' made that it was a partnership, although during a part of this period partnership returns were submitted for Georgia Materials Company, a partnership composed of E. A. Dawes, J. A. Gíozier, and J. Monághan, which was engaged in selling slag and building material in connection with the products of Dawes Silica Mining Company. On the income tax return of Dawes Silica Mining Company for the fiscal year ending October 31, 1940, " executed by plaintiff, in answer to the question: “If you submitted a return last year, state where it was filed,” plaintiff answered: “New partnership, first re: turn.”

During the years 1925 to 1940, tax returns of the business properties were submitted for State taxation on an individual basis by E. A. Dawes, — no partnership being claimed. W. A. Dawes included none of the business properties in his returns.

As real property was purchased or leased for use in the sand mining business, it was taken in the name of E. A. Dawes. W. A. Dawes also individually purchased or leased lands, but on these lands he received royalty payments from the business for the mining rights.

A statement of financial worth, dated February 24, 1940, made to Fulton National Bank, showed E. A. Dawes as sole owner. This was after the execution of the above-mentioned partnership agreement.

Intangible tax returns made to the State of Georgia for the years 1938, 1939, and 1940, executed under oath by E. A. Dawes, showed E. A. Dawes to be the sole owner of Dawes Silica Mining Company. The first such return showing W. A. Dawes as a partner, was for 1941.

On July 28, 1936, E. A. Dawes filed with the Clerk of the Superior Court, of Thomas County, Georgia, a sworn certificate required by the Georgia “fictional name” law, that E. A. Dawes was trading as Dawes Silica Mining Company. There was no mention of W. A. Dawes as a partner.

During the period from 1938 to 1944, E. A. Dawes deposited in the Fulton National Bank, Atlanta, Georgia, funds of Dawes Silica Mining Company in the aggregate sum of $163,932.08. These funds were subject to check by E. A. Dawes only. Although W. A. Dawes had authority to sign checks against the local bank account in Thomasville, — a privilege rarely exercised by him, — he had no authority to draw checks against these funds in Fulton National Bank. During the period aforesaid, 1938 to 1944, W. A. Dawes deposited in other banks, $14,123.81, although plaintiff contends that W. A. Dawes was an equal partner in the business.

From 1920 to 1940, E. A. Dawes individually drew from the business, in addition to salary, an aggregate sum of $55,656.82. During the same period, W. A. Dawes, who is asserted to be an equal partner, received from the business the sum of $13,749.99. These payments to W. A. Dawes were variously designated on the books of the business as “salary,” “bonus,” “compensation,” “advance to employees,” and “bonus to employees.” These, and various items of personal expense of W. A. Dawes, were simply charged to his personal account. During the same period, W. A. Dawes received from the business the additional sum of $7,306.25, as sand royalties on lands personally owned by him, aggregating altogether $21,056.24. In addition, plaintiff E. A. Dawes, in 1923 withdrew from the business the sum of $12,000, with which he constructed a residence. During the same year, the father, W. A. Dawes, withdrew about $2200 for the purpose of purchasing a residence. These disparities in amount are obvious, and there is nothing in the books to reconcile or explain them. There are no credits to W. A. Dawes in the books to represent the difference in the sums drawn by himself and E. A. Dawes.

Except for one instance, on December 24, 1920, very early in the history of the business, when a check in amount of $1500, designated as “dividend,” was written to E. A. Dawes, and a like check to W. A. Dawes, there is no uniformity as to either time or amount in the funds drawn from the business by the two Messrs. Dawes. On the contrary, there is a great and unexplained disparity in amounts, although plaintiff now contends that W. A. Dawes was an equal partner from the inception of the business.

When the alleged partnership agreement, dated November 1, 1939, was drawn, it did not purport to evidence a pre-existing partnership theretofore resting in parol and then reduced to writing, but purported to evidence a new partnership originating on that date, in which W. A. Dawes was purchasing a one-half interest for $75,000, to be paid out of future profits.

In 1942, when a representative of the Internal Revenue Department was investigating the bona fides of the formation of the alleged partnership in 1939, he interviewed plaintiff, E. A. Dawes. This representative asked plaintiff to state the real reason for forming the partnership, whose idea it was, and when it was formed. In substance, the answer of plaintiff was that the business (not the partnership) was started in 1919; W. A. Dawes was always on a salary, but could draw what he wanted, and it was charged to his account; that W. A. Dawes could write checks, and draw out profits; that the partnership was formed in 1939 to insure W. A. Dawes of income; that E. A. Dawes’ sickness brought on the partnership agreement; that in case of sale of business, none of gain or loss would go to W. A. Dawes, and that W. A. Dawes had no liability for debts, but that it was the intention of E. A. Dawes that one-half of the profits should go to W. A. Dawes, and be considered as an account payable of the firm out of the profits. In answer to the question: “Why wasn’t the partnership registered (in July, 1936) with the Clerk of the Superior Court,” plaintiff answered: “Because he (plaintiff) was not holding out to the public as a partnership. E. A. Dawes was to assume all liabilities, and the only way in which W. A. Dawes was interested, was to get one-half of the profits.” This conversation, which occurred as late as 1942, was not contradicted by the plaintiff.

The Commissioner’s finding of ■“no partnership,” and his assessment of the additional tax for 1940, are presumptively correct. The burden is upon plaintiff to •overcome these findings. Plaintiff’s evidence does not meet that burden.

W. A. Dawes appears to have advanced funds to the business during its formative and precarious years, and has drawn out of the business much more than he advanced, but the manner in which E. A. Dawes dealt with the funds and other assets of the business, and his many and varied assertions, many of them under oath, made in the normal and ordinary course of business, when there was no incentive of financial gain therefrom, that he alone owned and was carrying on the business of Dawes Silica Mining Company convincingly outweighs his present assertion that the business has all along been a partnership.

While W. A. Dawes was very active in the business, and was consulted by his son as to its conduct, and although he occupied a position superior to that of an ordinary employee, being treated largely as an equal with his son in the operating end of the business, W. A. Dawes never owned any definite, identifiable interest in the business, in a sense in which the law would recognize him as a partner.

The Court concurs in the Commissioner’s finding of no partnership.

To hold otherwise would require the Court to ignore plaintiff’s many prior declarations that he was the sole owner of the business, as well as the many facts which corroborate these assertions. This the Court is unwilling to do.

Judgment for defendant.


author: COXE, District Judge.

text:
    BOWLES, Price Administrator, v. ADELSON et al.
    District Court, S. D. New York.
    May 23, 1944.
    John D. Masterton, Acting Chief Enforcement Atty., of New York City (Montague S. Mendelsohn, of New York City, of counsel), for plaintiff.
    Cullen & Dykman, of Brooklyn, N. Y., for defendants.
   COXE, District Judge.

This is a suit for an injunction restraining the defendants from selling candies and confections until they prepare and keep available for examination a base period statement as required by Section 1499.11 of the General Maximum Price Regulation.

The plaintiff previously moved for an injunction pendente lite, and, when this motion was denied, the case was referred to a master to hear and report. A hearing was thereafter had before the master, and he has rendered a report recommending that no injunction be granted and that judgment be entered for the defendants denying relief to the plaintiff.

There was little conflict in the testimony before the master, and his findings of the essential facts may be briefly summarized.

The defendants are manufacturers of candy, which they sell at wholesale; they are the successors to Charles R. Adelson Co., Inc., which, in March 1942, conducted the business. The defendant Charles R. Adelson is the active head of the concern.

In 1942, the Adelson Company and the defendants together did a business of $309,-000, of which, in March 1942, 97.15% was with chain stores, and the remaining 2.85%, amounting to $909.23, was at prices higher than the prices paid by the chain stores. The defendant Charles R. Adelson was thoroughly familiar with Section 1499.11 of the Regulation requiring preparation of a base period statement, and he considered that the price lists of the two principal chain stores making purchases during March 1942 constituted a proper base period statement under the Regulation. These price lists, together with invoices showing prices at which the miscellaneous sales of $909.23 were made, were placed in a folder in an office safe where they were kept for preservation.

On January 21, 1944, an investigator from the Office of Price Administration visited the place of business of the defendants, and asked to see the base period statement. After some conversation with the investigator, the defendant Charles R. Adelson signed a written survey form, in which he admitted that no base period statement had been prepared showing the highest prices charged in March 1942, or the other information required by the Regulation.

On February 24, 1944, the complaint in the present action was filed, and some time later, and prior to the hearing before the master, the defendants prepared a base period statement, which the plaintiff concedes contains “substantially all the details required of a base period statement”. A copy of this statement has been conspicuously posted in the defendants’ place of business.

Section 1499.11 of the General Maximum Price Regulation provides that every person selling commodities or services for which maximum prices are established shall “prepare, on or before July 1, 1942, * * * and thereafter keep for examination by any person during ordinary business hours, a statement showing: (1) The highest prices which he charged for such of those commodities or services as he delivered or supplied during March 1942 * * * together with an appropriate description or identification of each such commodity or service; and (2) All his customary allowances, discounts, and other price differentials.”

I think it is perfectly clear that the chain store price lists and other invoices preserved by the defendants were in no way a compliance with this Regulation; they were merely evidentiary matter to assist the defendants in the preparation of the base period statement and to support the statement when it was prepared. It is apparent, also, from the findings made by the master that the defendant Charles R. Adelson was thoroughly familiar with the Regulation and what it required. I do not think, either, that it is a sufficient answer that the chain store price lists and the miscellaneous invoices furnished “substantially all information required to be furnished in a base period statement”, for obviously the administrative authority should not be required in each case to search through a multitude of supporting records to ascertain the base period prices called for by the Regulation. I cannot escape the conclusion, therefore, that during a period of a year and a half the defendants violated the Regulation in failing to prepare and keep for examination a base period statement.

The question remains whether the master was right in recommending that no injunction should issue. Ordinarily, the right to an injunction is not defeated by the defendant’s discontinuance of his illegal conduct if the likelihood of its resumption is found to exist. Securities and Exchange Commission v. Okin, 2 Cir., 139 F.2d 87, 88. But in the present case the injunction is sought only until the defendants shall prepare a base period statement containing the information required by the Regulation. This base period statement has now been prepared, and the plaintiff concedes that it is satisfactory. There is, therefore, nothing more for the defendants to do except to keep the statement “for examination by any person during ordinary business hours”; and it is unlikely that the defendants will fail to meet that requirement. I think, therefore, that the reason for the injunction no longer exists. Northwestern Light & Power Co. v. Town of Milford, 8 Cir., 82 F.2d 45, 47; Femmer v. City of Juneau, 9 Cir., 97 F.2d 649, 654; Mills v. Green, 159 U.S. 651, 16 S.Ct. 132, 40 L.Ed. 293; Wingert v. First National Bank, 223 U.S. 670, 32 S.Ct. 391, 56 L.Ed. 605; Brownlow v. Schwartz, 261 U.S. 216, 43 S.Ct. 263, 67 L.Ed. 620.

There may be a decree denying the injunction and dismissing the complaint.