author: THOMAS, District Judge.

text:
    NERNEY v. NEW YORK, N. H. & H. R. CO.
    No. 2061.
    District Court, D. Connecticut.
    April 5, 1934.
    Robert S. Blair, of New York City, for plaintiff.
    Pereival H. Truman, of Chicago, 111., for defendant.
   THOMAS, District Judge.

This is a suit in equity for an injunction, and accounting based upon alleged infringement of patent No. 1,665,868, granted April 10, 1938, to Royal Railway Improvements Corporation, as assignee of the inventor, W. H. Sauvage. The suit is brought against the New York, New Haven & Hartford Railroad Company, but' the Ajax Hand Brake Company, manufacturer of the brakes on which the charge of infringement is based, has openly controlled and conducted the defense as shown by the record.

The patent in suit is entitled “Hand Brake,” and its invention appears to deal principally with the hand-operated apparatus for controlling the brakes of railway cars. Its construction shows that it is provided with a rigid iron casing which not only houses and protects the working parts, but, by its connection with' these parts, resists the severe stresses of use and performs other functions as well. Within this casing are the drum or sheave for hauling np the brake chain, gearing having hearings in the easing and driving the drum from a shaft, and a pawl eoaeting to hold the chain while the brake is applied and after it is set. Outside the casing are the hand wheel to operate the shaft and a swinging weighted lever adapted, as it is swung over in one direction or the other, to throw the pawl in one or the other direction and hold it in the position into which it is moved.

Claims 3 and 4 are in suit and deal with the above construction in more or less detail. They read:

“3. In an apparatus of the character described, in combination, a housing having an opening in its under side thru which an, actuating chain is adapted to pass, means adapted to seeure said housing to the vertical end wall of a car or the like, a horizontally disposed shaft mounted in bearings in the side walls of said housing, a chain sheave on said shaft within said housing, a chain having a non-slip eoaetive relation with said sheave and extending thru said opening in the bottom of said housing, a gear on said shaft parallel to said sheave, a second shaft mounted in said housing, a gear mounted on said shaft and meshing with said first gear, an actuating member mounted on said second shaft outside of said housing, whereby said shaft may be rotated to drive the first shaft and the sheave mounted thereon, a pawl mounted in said housing and coaeting to hold one of said gears against rotation, and a counter-weighted arm outside of said housing and cooperating with said pawl adapted to hold said pawl in the desired position according to which way said lever is moved.

“4. In an apparatus of the character described, in combination, a housing of general inverted U-shaped construction having substantially closed top and side walls and provided with an opening in its under side thru which a chain is adapted to pass, means for securing said housing in substantially vertical position, a shaft mounted in bearings in the front and rear walls of said housing, a chain sheave on said shaft, a chain having a non-slip eoaetive relation, with said sheave and extending thru the opening in the bottom of said housing, a relatively large gear associated with said sheave and rotatable therewith, a smaller gear meshing with the first gear, a shaft upon which said smaller gear is mounted, bearings in the walls of said housing for said second shaft, a hand wheel for turning said second shaft mounted on the outside of said housing, a pivoted pawl in said housing and coacting to hold one of said gears against rotation, and a counter-weighted arm outside of said housing for moving said pawl on its pivot relative to said gear thereby to hold the said pawl in the position to which it is moved.”

Claim 4 shows the feature of a casing of the general form of an inverted U through the open bottom of which the brake chain passes freely without perforating the walls, and so preventing the entry and accumulations of snow, ice, sleet, rain, and other foreign matter.

Nothing particularly noteworthy occurred during the prosecution of the application of the patent in suit. The claims here involved were inserted by amendment, but seem to be amply warranted by the original disclosure and the search of the Examiner appears to have been unusually painstaking as will be noted later.

Those earlier working under the Sauvage patent put the invention into use on railroads such as the Norfolk & Western and Southern Pacific, and although this exploitation was on a modest scale the brake worked well.

Defendant uses the so-called Ajax brake. It is unnecessary to detail its construction. Undeniably it has much in common with the Sauvage brake. In fact, to the extent that the Sauvage construction and operation have been described, the description fits Ajax.

As to the remarkable success of the Ajax brake the parties are in complete agreement. So rapid and widespread was the displacement of the old-fashioned staff brake, that one faces the question: To what was this striking success due? Defendant ascribes it, not to advertising or other commercial factors, but to genuine merit inherent in and distinctive of this brake and points to its two patents in evidence — one No. 1,879,973 issued to Burnett on September 27, 1932, and the other, No. 1,911,056, issued to Burnett on May 23, 1933. Patent No. 1,911,056 deals with a bellerank lever placed at the end sill of the car in the chain leading from the hand brake to the brake rigging under the car. Usually a pulley is used at this point. Defendant claims that the weight of this lever and a rod above it aid in releasing the brakes. But, with a tension on the chain of some thousands of pounds it is hard to believe that the weight of these parts would be a real factor — and even so, they could not exert a thrust through the chain to the brake. Defendant’s other patent, No. 1,879,973, concerns a particular release lever mechanism for forcing the pawl out of locking position to give the sudden release of the gears. But the record shows that the simple weighted lever used by those formerly working under the Sauvage patent was ample to force out the pawl and give the sudden release necessary. Accordingly, defendant’s attempt to find in its patents something which would account for the sweeping adoption of its brake is far from convincing.

The questions we here face seem, as is usually the ease in patent suits, to narrow down to validity and infringement. The claims in suit, of course, mark out the domain the patentee seeks to appropriate. If this field justly belongs to him, and if it be invaded, his complaint is. justified. Furtherinore there is rarely any short ent available. Defendant suggests that labor could be saved by determining that no claim could be drawn which would be readable upon the patent in suit and Ajax which would not also be readable upon the prior art. Such a research, however, with the number of common elements and characteristics, would require the drafting and testing of a large number of claims, and even then possible claims might be overlooked. It is far more simple to use the claims which the patent itself provides. It is usually the more logical course to consider first the question of validity, and if the claims are held invalid the inquiry ends, as infringement then becomes a moot question. Furthermore, a study of validity aids in appraising the scope of the claims if they are found to be valid.

Defendant’s contention that Sauvage is a paper patent is chiefly of interest in connection with validity. The undisputed fact, that those working under the patent placed these brakes in substantial commercial use on ears of the Norfolk & Western and Southern Pacific Railroads negatives the eharge of paper patents. These uses, although of limited extent, were of appliances which appear to embody the substance of i the claims in suit and were successful. Fur- ■ thermore, the rapid adoption on a huge scale of the Ajax brake, taken in view of its undeniable similarity to the Sauvage invention, coupled with the unconvincing attempt of defendant to ascribe that success to two minor details, all give a strong impression of genuine intrinsic merit in the patent to Sauvage.

This bears also on defendant’s attacks on validity based upon an alleged inoperativeness and lack of utility of Sauvage. As for ambiguity, the claims in suit, although not ideal as selections in English composition, are nevertheless definite and understandable. Furthermore, the elements are so closely knit together in construction and action as to refute the eharge of aggregation.

Defendant’s defense of invalidity rests principally upon the prior patents to Rochambeau, No. 1,052,857, issued February 11, 1913, and to MeWhirter, No. 1,163,675> issued December 14, 1915, and the prior use of the Peacock brake. Comparing Roehambeau with the Sauvage invention, it would seem that there is a general similarity of arrangement, but upon even cursory study of the structure important differences stand out. The device for moving the pawl is inside, not outside the casing, and is intended to work by the weight of a small part which the brakeman is supposed to slide by the use of a “finger piece.” Due to its inaccessibility, there is no control over or possibility of increasing the force if the parts stick. Nowhere is there a weighted swinging lever to be thrown over and thus insure release. Under the severe conditions of practical uso —and as to this the parties are in full accord —it seems reasonable to conclude and find that this precarious control would be inoperative. Certainly it is not what the claims in suit call for. Besides, the. casing of Roehambeau lacks certain characteristics of Sauvage particularly as set forth in claim 4 of the patent in suit. No actual use of Roehambeau is claimed.

The Peacock brake appears to include all that is pertinent in the Brewster patent, No. 1,487,531, issued March IS, 1924. Both lack a central feature of Sauvage, namely, a rugged easing or housing which not only performs the function of protecting the parts against necessarily severe weather conditions, but also coaets with the brake mechanism in performing its functions and resisting the heavy and sudden stresses to which it is subjected. Not only is this important feature absent, but there is nothing in its place which is even approximately an equivalent. The thin sheet metal cover bent into shape and affixed to the outside of the brake was apparently suggested by the railroad to protect its men from the gears. It was a mere accessory. The lack of this feature appears to have been an important contributing cause of the practical failure of this brake. The frame and other parts, lacking this stiff support, repeatedly broke in use. The initial order of twenty-five brakes taken ten years ago was the last, and I deem this insufficient to meet the test of use. There are other differences, but the above is sufficient to negative any charge that Sauvage is anticipated in the Peacock brake.

The MeWhirter patent, No. 1,163,675, shows a brake of the familiar street car type. The pertinence which defendant’s expert finds in this patent seems to be largely a matter of terms, for its whole principle of construction and action is different from that of Sauvage. The Sauvage eashig with its functions and the Sauvage control are both absent.

Defendant’s expert, who is doubtless familiar with the prior art upon which defendant relies, testified that the MeWhirter patent is as pertinent as any of this art. Perhaps, in view of this, the above separate discussion of other prior brakes was unnecessary, but they have been given careful consideration. It is significant that this Mc-Whirter patent is practically the same as the Ackley patent cited by the Examiner against the Sauvage application. 'In the first place, this evidences the thorough character of the search by the Patent Office, and strengthens the presumption of validity due to the grant of the patent. Secondly, it is always significant when a defendant, after exhaustively searching for material with which to attack the validity of a patent, can point to nothing more pertinent than what the Examiner cited in the proceedings which led to the grant of the patent in suit. The defense of invalidity cannot prevail.

On the question of infringement, defendant argues that the Sauvage patent is limited to an apparatus which, first, can set the brakes by turning in either direction, and, second, has gear teeth acting as ratchet teeth engaged directly by the pawl. Neither of these features is new. Both are found in the patents cited by defendant. Neither of the claims in suit have these limitations. One, if not both, of these features is found in the Sauvage claims not in suit, with the implication that where they were intended they were expressed.

As before noted, the claims in suit, reasonably interpreted, are the best measure of the scope of the patent. These claims axe clearly readable on the Ajax brake as shown in plaintiff’s drawing, Exhibit 5. This requires no straining of the language. In fact, if, as defendant intimates, these claims were deliberately drawn to read on the Ajax brake, it would not be surprising .that their terms fitted that structure.

But the defendant contends that the substance of the Sauvage invention is not found in its brake and that infringement, if it exists, is a matter of terms only. Although such eases occur, they are not common. Usually when a claim is valid and reads clearly and freely upon a construction, that claim is infringed.

In furtherance of this argument defendant urges that the Ajax brake has no chain sheave and that its gear teeth are shaped differently from those of the Sauvage patent drawings. As for the first point, both parties used the terms “drum” and “sheave” interchangeably and the witnesses of both parties referred to the “sheave” of the Ajax brake. As this sheave is used for a chain, there is no question but that it is a “chain sheave” and that is what the claims call for. As for the distinction that Ajax attains a nonslipping relation between the chain and sheave by a pin instead of by the interlock of Sauvage, even defendant’s expert admitted that it was chiefly psychological.

There remains the matter of the shape of the gear teeth. Ordinarily this would be trivial, because it is elementary that a patentee is not limited to the shapes and proportions of parts shown in his drawings. Defendant points, however, to a sentence in the Sauvage specification describing the gears as having teeth substantially as shown in the drawings. But the specification states that the gist of the invention could be embodied in various forms and the claims in suit neither express nor imply any particular shape of the gear teeth. It appears likely that Sauvage believed that gear teeth of the sort shown would be well suited for a double acting pawl — a feature of the claims not here in suit.

Accordingly, it must be held that the claims in suit are infringed in substance as well as in terms, and as defendant has pointed to nothing substantial.aside from the Sauvage ^invention to account for the great success of the Ajax brake, it is fair to assume that that success may properly be ascribed to the Sauvage invention.

Erom the above and foregoing conclusions, it follows that claims 3 and 4 of the Sauvage patent are held to be valid and infringed.

Submit a decree, properly consented to as to form, providing for injunctive relief as well as directing a reference to a master for an accounting, together with a separate order making the above and foregoing the findings of fact and conclusions of law. Costs to be taxed in favor of the plaintiff.


source: Caselaw Access Project

author: BREWSTER, District Judge.

license: Public Domain

text:
    THIBERT et al. v. BEACON BURNER MFG. CORPORATION.
    No. 3799.
    District Court, D. Massachusetts.
    April 5, 1934.
    Southgate, Fay & Hawley and Albert E. Fay, all of Worcester, for plaintiff.
    James R. Hodder and Harrison J. Barrett, both of Boston, Mass., for defendant.
   BREWSTER, District Judge.

This is a suit alleging infringement of letters patent of the United States Nos. 1,888,-019 and 1,890,593. The defenses are anticipation and noninfringement.

Statement of Facts.

(1) On November 15, 1932, letters patent of the United States No. 1,888,019 were issued to the complainant Thibert on his application, filed September 13,1930. This patent related to a liquid fuel burner adapted to be set in domestic stoves and ranges.

(2) On December 13, 1932, letters patent of the United States No. 1,890,593 were issued to Thibert upon his application, filed December 8, 1930. This patent related to an improvement upon the device disclosed in the earlier patent.

(3) The complainants rely upon claims 8 to 13, inclusive, of No. 1,888,019 and claim 1 of No. 1,890,593. Claims 8 and 9 adequately illustrate the claimed novelty of the device, and are as follows:

“8. In a device of the character described, a base member having a fuel groove therein, a combustion chamber above said groove and in communication therewith comprising a plurality of upstanding perforated tubes forming extensions of the walls of said groove, a relatively high vaporizing chamber, independent of, and adjacent a wall of the combustion chamber and positioned to he heated by the heat from said combustion chamber, said vaporizing chamber having a relatively small opening adjacent its upper end for the admission of air into said vaporizing chamber, a fuel conduit below said groove and communicating therewith and with said vaporizing chamber, means for introducing liquid fuel into said conduit whereby, the heated vapors in said vaporizing chamber will contact with the surface of the fuel, and will aid in vaporizing the same.

“9. In a device of the character described, a base member having a fuel groove therein, a combustion chamber in communication with said groove, comprising upstanding perforated sheet members mounted above said groove, a fuel conduit means to supply liquid fuel thereto, said conduit having a relatively deep, channel portion below and communicating with said fuel groove and said combustion chamber, and forming a vaporizing chamber, the level of the bottom of the channel being below the level of the bottom of the fuel groove and the top of said channel being above the bottom of said fuel groove.”

(4) Cláim 1 of the later patent (1,890,-593) only covers an improvement in the central stack, or chimney, by providing a vaporizing sleeve composed of material having higher heat resistance than cast iron.

(5) The claims, as I read them, comprise the'following essential elements:

(a) A base member with one or more annular fuel grooves.

(b) Combustion chamber for each fuel groove comprising upstanding perforated tubes mounted above the fuel groove.

(e) Fuel conduits having relatively deep channel portion below and communicating with the fuel groove and combustion chambers forming a vaporizing chamber; the bottom of the channel being below and the top being above the bottom of the fuel groove, said conduits extending transversely across the fuel grooves on the under side thereof. They will be referred to hereinafter as the “radial conduits.”

(d) The relatively high central chimney or stack heated by the adjacent combustion chambers with a small opening at the upper end for the admission of air. This element will be hereinafter referred to as the “central stack.”

(e) Means for introducing liquid fuel into the radial conduits whereby the heated vapors in the vaporizing chamber will contact with the surface of the fuel and aid in vaporization.

(6) When Thibert entered the art, there were many different types of oil burners being manufactured and sold. In 1929 the Merrimae Company had sold in substantial quantities a burner which embodied all the elements of the patent in suit except that it had no central staek or chimney and the top of the radial conduit was on a level with the bottom of the fuel grooves.

(7) Of the cited prior patents, it is only necessary to consider Johnson reissue No. 18,464 (1928). This patent was not considered by the Patent Office. It related to a burner for use in domestic stoves and ranges. It shows all the elements of the claims of the patent in suit including a central vaporizing chamber not unlike that in complainant’s device, and upon this is superimposed a stack which, according to the specifications, may be carried to the top of the burner. This member is constructed of heat-conducting material, and its principal function is to conduct heat from the adjacent combustion chambers downward to the liquid fuel and to cause vaporization in the vaporizing chamber which is positioned beneath the staek. The only difference between Johnson and Thibert is that in the former the radial conduits are not utilized as vaporizing chambers. Liquid fuel is not ordinarily introduced into these radial conduits. The vaporization takes place in the central vaporizing chamber, and only the resultant gas is fed into the conduits.

(8) The complainants contend that Thibert advanced the art by combining his central staek with specially arranged radial conduits, thereby providing auxiliary chambers in the radial conduits for the vaporization of the liquid fuel. According to the patent, the claim is made that the central stack not only operates as a conductor of heat to the vaporizing chamber directly beneath the stack but that it also causes a current of heated air to pass down through the stack and across through the radial conduits, thereby stimulating therein the process of vaporizing the liquid. Stress is laid upon the peculiar construction of the radial conduit which places the level of the bottom of the channel below and the top above the bottom of the fuel groove. According to the drawings, specifications, and claims of the patent, it is apparent that the invention contemplated that the liquid fuel would be present at all times in the radial conduits. The advantage claimed for this arrangement is that it provides a generous space above the level of the liquid fuel for the circulation of heated air.

(9) From the evidence I am unable to find that the complainants’ burner, as manufactured and sold, meets the requirements of the patent in respect to these claims of novelty. After it is in operation there is no level of liquid fuel in the radial conduits, and they are' not used for vaporizing chambers. When the burner is in full operation, vaporizing takes place in the central chamber and before any liquid fuel reaches the radial conduit; consequently, only gas or vapors enter the alleged auxiliary chamber. Nor was it proved to my satisfaction that, in defiance of the laws of physics, a current of heated air descended through a small opening in the central staek instead of being drawn out through the perforated wall into the adjacent combustion chamber. While it may be true that the central staek acts as a heat conductor and that heat is conveyed to the radial conduits in the complainants’ burner, it is equally true that, in so far as the staek or chimney is utilized as a heat conductor, Thibert was merely copying Johnson. I can find nothing in complainants’ commercial product which is not shown in the prior art.

(10) The complainants had, up to the eve of trial, assured the respondent’s solicitor that it was not relying on any claim of letters patent No. 1,890,593, and it might be urged that they were estopped from pressing any daim for infringement based upon claim No. 1 of that patent. This patent covered merely an improvement upon the earlier patent, and the claim related only to material and form of the structure of the central stack. There was nothing new in view of Johnson in the form of the staek. The respondent does not use the same material, but possibly it might be charged with using an equivalent. However, in view of my findings and conclusions respecting the patentable features of the earlier Thibert patent, this claim of the second patent has little or no significance. If respondent copied Thibert’s staek, it was merely taking something out of the prior art and was not using it for the purpose which the complainants assert was new in the Thibert device.

(11) The respondent’s alleged infringing oil burner is manufactured under United States letters patent No. 1,932,597, issued October 31, 1933, to Parker, whose application was pending in the Patent Office when complainants’ patent was being considered. No interference was declared. This burner has all the elements of the Johnson patent and of the patent in suit except that it does not claim any downward current of heated air to aid vaporization in the radial conduits; it does not utilize the conduits as vaporizing chambers, and the top of the channel does not reach above the fuel grooves. In other words, respondent’s device does not embrace those features of the complainants’ patent upon which it was necessary wholly to rely in order to establish patentable novelty. The respondent’s central stack is used only as a conductor of heat to a central vaporizing chamber, the same as is shown in the Johnson patent. The effectiveness of this central stack as a heat conductor is increased by the material out of whieh it is constructed and also by setting upon the vaporizing chamber a vented cap and an elongated shank projecting from the cap into the vaporizing chamber. This elongated shank extending down into the vaporizing chamber is an improvement over Johnson’s or Thibert’s patents.

(12) It was shown at the hearing that before Parker applied for his patent, and, before the respondent began to manufacture burners, they had investigated and experimented with the various burners on the market, including the complainants’, and it is quite apparent that the burner whieh they elected to copy was the complainants’ burner.

Conclusions of Law.

The facts of this cause warrant the conclusion that the prior art severely limited the patent in suit. All the basic elements were old, and a combination of these elements was not new. The patent can be upheld, if at all, only because it introduced into the combination novel features whieh produce new and useful results. These alleged novelties are (1) a central stack from which a current of heated air passes into the radial conduits, thereby (2) utilizing the conduits as auxiliary vaporizing chambers, and (3) the peculiar construction of the channels in the radial conduits.

Respondent suggests that the patent must be held invalid for inoperativeness. If the complainants’ burner in evidence is all that the patent teaches, it was wholly anticipated by earlier patents. I cannot assume, however, that it is impossible to build a burner according to the teachings of the patent that would fulfill the claims of novelty made for it. So far as the novel features are functional, they are not found in the earlier art. They obviously were the justification for the patent whieh carries a presumption of validity.

It appears, however, that respondent’s device, although in form closely resembling the Thibert burner, embodied none of these novel features. This is adequately shown in my statement of facts, and repetition is not necessary.

My conclusion is therefore that the complainants’ patent in suit is valid but not infringed.

The bill of complaint is to be dismissed, and a decree may be entered accordingly.


author: MOSCOWITZ, District Judge.

text:
    SALVATORE v. LOCKE, Deputy Com’r, et al.
    No. 7006.
    District Court, E. D. New York.
    Jan. 18, 1934.
    Sidney L. Masone, of Brooklyn, N. Y., for complainant.
    Alexander, Ash & Jones, of New York City, for defendants.
   MOSCOWITZ, District Judge.

This is an action brought under title 33 USCA § 921, to vacate and set aside an order issued by the defendant herein and reinstating the full force and effect of the former order of the defendant of July 25, 1932.

On August 5, 1931, the petitioner herein sustained injuries while employed as a longshoreman by the stevedoring firm of John T. Clark & Son. The petitioner, Patsy Salvatore, was a longshoreman working in the hold of the steamer American Legion, moored at Pier 15, Brooklyn, jST. Y., and claimed that while so working his left hand was caught between two barrels, bruising the second and third fingers. Thereafter the petitioner duly filed an employee’s claim for compensation against John T. Clark & Son, his employer, under the provisions of the Longshoremen’s and Harbor Workers’ Compensation Act (33 USCA §§ 901-950).

On or about the 25th of July, 1932, the defendant filed a formal compensation order in favor of the petitioner providing for the payment to the petitioner in the sum of $2,-331.45 in addition to compensation already paid by or on behalf of the said employer to the said petitioner in the sum of $986.

On or about the 29th day of May, 1933, the defendant permitted an ex parte hearing in the absence of petitioner and without notice to him, at which hearing an investigator named Joseph Tozzi, employed by the carriers, and a longshoreman identified as Mr. Z, described to the commissioner a method by which paralysis of the fingers was obtained through the application of Milan fly.

On June 1, 1933, after said hearing, the defendant made and filed in his office another formal order rejecting the said claim for compensation, vacating and setting aside the former order of July 25, 1932, on the grounds that said order of July 25, 1932, was procured by the claimant as a result of misrepresentation and fraud.

The petitioner contends that the deputy commissioner’s order of June 1, 1933, rescinding the award of compensation to the petitioner, was invalid, and alleges that the order of July 25, 1932, providing for a lump sum payment to the petitioner upon his refusal to undergo treatment, was final.

The petitioner further claims that the deputy commissioner, in listening to Mr. Z and Mr. Tozzi, was improper, and by so doing he deprived the petitioner of his right of cross-examination.

The petitioner further contends that there was no proof of fraud and self-inflicted injury before the commissioner, and that the making of the order of June 1, 1933, rescinding compensation was the taking away of the property rights of the plaintiff without due process of law and contrary to the provisions of the Longshoremen’s and Harbor Workers’ Compensation Act.

Title 33 USCA § 922 provides:

“§ 922. Modification of awards. Upon his own initiative, or upon application of any party in interest, on the ground of a change in conditions, the deputy commissioner may at any time during the term of an award and after the compensation order in respect of such award has become final, review sueh order in accordance with the procedure prescribed in respect of claims in section 919 of this chapter, and in accordance with sueh section issue a new compensation order which may terminate, continue, increase, or decrease sueh compensation. Such new order shall not affect any compensation paid under authority of the prior order.”

If the defendant found that the injuries of the petitioner were self-inflicted, that would be a change in condition permitting him to review his previous order providing sueh review was had in conformity with the procedure prescribed in respect of claims in section 919, title 33 USCA.

Title 33 USCA § 919 (e) is as follows:

“The deputy commissioner shall make or cause to be made such investigations as he considers necessary in respect to the claim, and upon application of any interested party shall order a hearing thereon. If a hearing on such claim is ordered the deputy commissioner shall give the claimant and other interested parties at least ten days’ notice of sueh hearing served personally upon the claimant and other interested parties or sent to such claimant and other interested parties by registered mail, and shall within twenty days after sueh hearing is had, by order, reject the claim or make an award in respect of the claim. If no hearing is ordered within twenty days after notice is given as provided in subdivision (b), the deputy commissioner shall, by order, reject the claim or make an award in respect of the claim.”

The award of June 1,1933, was predicated upon an ex parte hearing had before the deputy commissioner which was not in conformity with section 919 because no notice of such hearing was served upon the petitioner herein.

While it is true that title 33 USCA § 923 permits, “In making an investigation or inquiry or conducting a hearing the deputy commissioner shall not he bound by common law or statutory rules of evidence or by technical or formal rules of procedure, except as provided by this chapter; but may make such investigation or inquiry or conduct such hearing in such manner as to best ascertain the rights of the parties.” This section, however, while it grants the deputy commissioner wide latitude in the course' of a hearing, does not permit a hearing without the statutory requirement of notice. Such notice not having been given in the instant case, the order of June 1, 1933, will be vacated and set aside and the matter referred to the defendant for further hearing.

Settle decree on notice.


author: BYEES, District Judge.

text:
    COLLINS v. ERIE R. CO.
    No. 6171.
    District Court, E. D. New York.
    April 11, 1934.
    Louis N. Jaffe, of Brooklyn, N. Y., for plaintiff.
    •Davis, Polk, Wardwell, Gardiner & Eeed, of New York City, for defendant.
   BYEES, District Judge.

This is a motion for an order setting aside the attempted service of summons and complaint in this action, on the ground that the court has not acquired jurisdiction of the defendant.

The complaint alleges that the defendant is a New York corporation, operating a railroad as a common carrier, and doing business within the jurisdiction of this court; and that the plaintiff is the administrator of Mary G. Bouille, and was so appointed by the County Court of the County of Susquehanna in the State of Pennsylvania, where the intestate resided; that the intestate became a passenger on one of the defendant’s trains in the City of Binghampton, in the State of New York, in September of 1933, and while near there, a collision occurred which resulted in her death.

The defendant has appeared specially, and objects to the jurisdiction of the court, principally on the ground that the defendant has not been served in the Eastern District.

According to the affidavits of service, the summons and complaint were served upon one Joseph Stanley, who is described as a Managing Agent of the said corporation, and upon William A. Morrison, described in the same' way.

As to the latter service, the defendant’s affidavits, which are not contradicted, make it quite clear that Mr. Morrison is not even in the defendant’s employ, but is a representative of the Trunk Line Association of New York, and in its employ, and is not on the payroll of the defendant. Mr. Morrison is said to be the agent in charge of a Consolidated Ticket Offiee at 155 Pierrepont Street, in the Borough of Brooklyn.

Manifestly jurisdiction over the defendant was not acquired by service upon him.

Rakauskas v. Erie R. Co. (D. C.) 237 F. 495, is not to the contrary.

As to the service upon the defendant’s subordinate in charge of its freight terminal at Wallabout in this district, there is a conflict in the affidavits as to the name of the person served, which it is impossible to reconcile.

The affidavit of service of one Barnett Shapiro, verified March 7, 1934, states that service was made by delivering a copy of the summons and complaint to and leaving the same with Joseph Stanley, Managing Agent of said corporation, and this is reasserted in an affidavit by the same process server, verified April 3, 1934, in which the averment is that the deponent went to the freight office in question on Metz Street, and that it bore a wooden sign reading “Erie Freight Station,” and that the building extended to the waterfront; that inside of the dock which bordered on the waterfront side of the building a scow was anchored, labeled “2102 Erie 2102,” on which were freight ears, and that there were freight trains “along the sidings of the dock”; that, after making neighborhood inquiries, he learned that shipments were made to and from different places at this building for handling by the defendant railroad company; that he went inside and found three men and asked who was in charge; the affidavit continues: “A Mr. Stanley told me that he was,- and, after inquiring if he was the Managing Agent in charge and after receiving an affirmative reply, I asked for this gentleman’s full name, which he told me was ‘Joseph Stanley.’ I then served a copy of the summons and complaint in this action upon said Joseph Stanley.”

The defendant’s affidavits aver that service was attempted in this action upon Mr. M. A. Rafferty at the freight station, and Mr. W. A. Morrison at the ticket office.

So far as Mr. Morrison is concerned, the matter requires no further discussion.

The affidavit of Raymond C. Randall, Superintendent of defendant’s New York Terminal Division, describing Mr. M. A. Rafferty’s status, sets forth that he is an ordinary freight agent in charge of the Wallabout station, performing his duties under the supervision of the said Superintendent, and is in charge of receiving and delivering freight at that station, and at times solicits "freight traffic for the defendant; that he prepares and receipts bills of lading for freight, using the defendant’s standard form; that he has nothing to do with the application of rates on freight shipments, although he is necessarily familiar with the tariffs prevailing. That the defendant employs a foreman who is in charge of the actual loading and unloading of freight at the said station, a chief clerk, a clerk who receives and delivers freight, and a clerk who cheeks freight from and to ears of the defendant', to assist Rafferty in his duties; that the latter has no authority to hire or discharge any of the other employees without the express permission of the said Superintendent. That service was attempted upon the defendant by delivery of a copy of each upon the said Rafferty.

For the purpose of this motion, it will be assumed either that the affidavit of service is mistaken in giving the name of Stanley instead of Rafferty, or that Stanley was actually served and that he is one of the subordinates to Rafferty.

It will be assumed, for the purpose of this motion, that the Erie Railroad is operating its lines within this district, although, if the decision of this motion were to depend upon that question, the subject would require careful consideration.

The applicable statute is title 28 of the U. S. Code, § 113 (28 USCA § 113), which provides in part: “When a State contains more than one district, every suit not of a local nature, in the . district court thereof, against a single defendant, inhabitant of such State, must be brought in the district where he resides * *

The principal office of the defendant is in the Southern District, where its officers can be found, and jurisdiction over the defendant can be obtained beyond any question.

The defendant is a domestic corporation and personal service upon it must be made in accordance with the provisions of section 228 of the Civil Practice Act of the state of New York, subdivision 3 of which reads as follows:

“3. In any other case, to the president or other head of the corporation, the vice-president of the corporation, the secretary or assistant secretary, or clerk to the corporation, the cashier, the treasurer or assistant treasurer or a director or managing agent.” As amended by Laws 1926, c. 200, in effect September 1 (formerly Code Civ. Proc. § 431).

Neither upon reason nor authority can it be said that Rafferty was a Managing Agent of the defendant company. The decisions of the New York courts, construing the foregoing section of the Civil Practice Act and its predecessor, make this clear.

As was said by Judge Coxe in Atlas Glass Co. v. Ball Bros. Glass Mfg. Co. (C. C.) 87 F. 418, 420, Rafferty “manages nothing. He is invested with no power requiring the exercise of judgment or discretion.” That case presents more difficult facts than this, for it involved a New York corporation that had removed to another state. Here the New York corporation can be served at its principal office in the Southern District without difficulty.

The mere fact that Rafferty, or whoever received the papers, sent them to some one in authority over him, does not alter the situation. Cf. Goetz v. Interlake S. S. Co. (D. C.) 47 F.(2d) 753, at page 757.

Motion granted. Settle order on notice.


author: WOOLSEY, District Judge.

text:
    MANNHEIMER v. NEDERLANDSCHE AMERIKAANSCHE STOOMVAART MAATSCHAPPIJ.
    District Court, S. D. New York.
    April 10, 1934.
    William L. Cohn, of New York City, for plaintiff.
    Burlingham, Yeeder, Fearey, Clark & Hupper, of New York City (John L. Galey and Burton H. White, both of New York City, of counsel), for defendant.
   WOOLSEY, District Judge.

This motion is in all respects granted, no further leave to amend is granted, and a judgment may be entered dismissing the alleged second cause of action on the -merits with costs.

I. This motion should have asked as the first relief desired the dismissal of the alleged second cause of action for, if that were granted, the other relief sought would follow.

II. I will not deal with the question of the plaintiff’s locus standi to maintain this action' under the provisions of the trust indenture, for the theory of the eomplaint as shown by the fifteenth paragraph thereof is that -the trust indenture has been abrogated. Assuming this to have been the result of the proceedings had in Holland which eventuated in the so-called reorganization agreement of October 5, 1933, the plaintiff now has three bonds payable to bearer by which the defendant undertakes to pay him a certain sum in guilders on May 1, 1947, with interest at 6 per cent, on said principal sum semiannually on May 1st and November 1st of each year to and including May 1, 1947.

It is not alleged, and none of the papers show any provision in the bond or the indenture, that there is any provision for the acceleration of the due date of the debt by reason of such default as occurred here.

The plaintiff, however, claims an anticipatory breach by defendant’s default in payment of coupon interest, and as damages asks judgment for (1) the principal of the bond, and (2) the interest thereon as evidenced by coupons thereof between this date and May 1,1947.

The doctrine of anticipatory breach of contract does not apply to a contract sueh as we have here, wholly performed by the promisee and without any acceleration provision for repayment of a sum of money loaned with interest thereon till it is repaid. Roehm v. Horst, 178 U. S. 1, 17, 18, 20 S. Ct. 780, 44 L. Ed. 953; Washington County v. Williams, 111 F. 801, 810-811 (C. C. A. 8); cf. Moore v. Security Trust & Life Insurance Company, 168 F. 496, 503, 504 (C. C. A. 8).

But whether what I have said above is right or wrong, it is perfectly obvious that even on his own theory of having a right presently to recover his principal, the plaintiff cannot recover the interest due on future coupons. Otherwise he would be getting interest after his principal was repaid — surely a result never yet reached on sea or land.

It becomes, therefore, unnecessary to consider the question of whether the complaint is deficient as not adequately dealing with Dutch law as required by the decisions.

III. With the second cause of action dismissed on the merits, there is left only the cause of action which is for $288.44, much less than the jurisdictional requirement as to amount, but, as this is a removed ease, I do not have to consider any question of good faith in the joining of the two causes of action for the mere purpose of securing jurisdiction in the federal court (cf. Washington County v. Williams [C. C. A.] m P. 801, 811), and the action may remain on the docket of this court for trial.

Settle order on notice.


author: KNIGHT, District Judge.

text:
    HOAD v. NEW YORK CENT. R. CO. et al.
    No. 1074.
    District Court, W. D. New York.
    March 26, 1934.
    Searl & McElroy, of Syracuse, N. Y., for plaintiff.
    Rann, Vaughan, Brown & Sturtevant and Harold J. Adams, all of Buffalo, N. Y., for defendants.
   KNIGHT, District Judge.

The answer herein sets up a release as a bar to the alleged cause of action for personal injuries. The plaintiff replies that the release is invalid because of fraud in its procurement. Plaintiff moves that the question of the validity of the release be tried by a jury rather than by a court. The court heretofore ordered trial separately of the issues of the validity of the release and negligence. (D. C.) 3 F. Supp. 1020.

Examination of numerous authorities reveals that the decisions of the courts are not entirely in harmony. However, the weight may well be said to be rather evenly divided. The rule in this circuit is that, where there is fraud “touching the execution of the instrument such as misreading, the surreptitious substitution of one paper for another, or obtaining by some other trick or device an instrument which the party did not intend to give,” Pringle v. Storrow (D. C.) 9 F.(2d) 464, 465, the trial may be had in a court of law; and, where “the fraud is of such a nature as to make an instrument voidable rather than void,” Pennsylvania R. R. Co. v. Hammond (C. C. A.) 7 F.(2d) 1010, 1016, where the attack is supported “not by fraud in the execution of the instrument, but by fraudulent representations which induced the plaintiff to sign it,” Pringle v. Storrow, supra, the trial should be had in a court of equity, Merwin v. New York, N. H. & H. R. Co. (C. C. A.) 62 F.(2d) 803; S. A. Lynch Enterprise Finance Cdrp. v. Dulion (C. C. A.) 45 F.(2d) 6. The distinction herein pointed out will be noted in a number of the cases cited by the plaintiff. Union Pacific Ry. Co. v. Harris, 158 U. S. 320, 15 S. Ct. 843, 39 L. Ed. 1003 ; Whitney Co. v. Johnson (C. C. A.) 14 F.(2d) 24; Capital Traction Co. v. Sneed, 58 App. D. C. 141, 26 F.(2d) 296.

Section 274b of the Judicial Code (28 USCA § 398), provides for the interposition of equitable defenses in actions at law. It was said in Union Pacific Ry. Co. v. Syas (C. C. A.) 246 F. 561, 566: “We are clearly of the opinion that, when equitable relief is asked in an action at law, * * * the ease for equitable relief should be tried as a ease in equity, and that the great weight of authority is in favor of the practice of trying the ease in equity first, for this practice serves to keep the equitable matter distinct, and to prevent what must otherwise frequently ensue — confusion and embarrassment in the progress of the action.” Many authorities are there cited. In further support of the position that the issue should be tried by the court, these citations may be made: Manchester Street Ry. v. Barrett (C. C. A.) 265 F. 557; Pacific Mutual Life Ins. Co. of Cal. v. Webb (C. C. A.) 157 F. 155, 13 Ann. Cas. 752; Cook v. Fidelity & Deposit Co. (C. C. A.) 167 F. 95; Hill et al. v. Northern Pacific Ry. Co. (C. C.) 104 F. 754. In numerous cases reported in the courts, it will be seen that the trials at law have proceeded without the raising of the question, of the forum. In the recent ease of Patterson v. Cincinnati, N. O. & T. P. Ry. Co., 5 F. Supp. 595, in which the issue is comparable to the one at bar, it is held that the issue is triable by a jury, and numerous authorities are cited. Among these attention may be called to the following: Kansas City Southern Ry. Co. v. Martin (C. C. A.) 262 F. 241; Wagner v. National Life Ins. Co. (C. C. A.) 90 F. 395; Union Pacific R. Co. v. Whitney (C. C. A.) 198 F. 784. Many of the eases pointed out in Patterson v. Cincinnati rely upon the authority of Wagner v. National Life Ins. Co. This decision was rendered prior to the adoption of section 274b of the Judicial Code. Careful reading of the opinion compels the .conclusion that it is not an authority on the question of the proper method of trial.

I am of the opinion that the issue on the validity of the release should be tried by the court preceding any trial on the question of negligence. I also feel that the decisions in this circuit are in accord.with this view and are controlling.

Motion granted.


author: PATTEBSON, District Judge.

text:
    In re REICHERT et al.
    District Court, S. D. New York.
    Jan. 5, 1934.
    Saul S. Myers and Joseph K. Guerin, both of New York City, for petitioning creditor.
    Goldman & Frier, of New York City, forassignee, Elmer Levenson.
   PATTEBSON, District Judge.

Objections are raised to the granting of allowances to the assignee and the assignee’s attorneys. Prior to the filing of the involuntary petition, the bankrupts had made an assignment for the benefit of creditors. The assignee employed as his attorneys a firm that represented certain creditors of the bankrupts. The referee has recommended that allowances be paid to the assignee and his attorneys. The record shows that the assignee and his lawyers did a great deal of work and performed services of considerable value to the estate. In my opinion the amounts recommended are not excessive.

The argument in opposition is that since the attorneys were acting for some of theereditors, to the knowledge of the assignee,, his retention of them to act in his behalf was improper and should result in a denial of compensation to him and to them. It is true that abuses may occur where the attorneys for a particular creditor become the attorneys also for an insolvent estate. There may be a conflict of interest in such eases. But it is quite another thing to say that the representative of an estate, whether assignee, receiver, or trustee, always acts improperly in retaining as his attorney one who already represents some of the creditors. There is no such general rule. The case is different where there is a statute or rule of court that disqualifies such an attorney from acting as attorney for the estate; but so far as I know, there is no statute or rule of court in the state of New York which prohibits an assignee for the benefit of creditors from selecting as his attorney a lawyer who has acted for creditors in the same matter. The retention in this ease was therefore a lawful and proper one.

Until recent years it was a common practice in this district for the receiver or trustee of a bankrupt estate to choose as his attorney the attorney for some of the creditors. Even under the rules that prevail now, it is recognized as a proper practice in some instances and under certain restrictions. It is manifest that the question is one on which a great deal can be said on both sides. But for present purposes it suffices to say that the assignee for the benefit of creditors violated no rule of law, no statute, and no rule of court prevalent in New York when he took as his attorneys the attorneys for certain of the creditors. He seems to have obeyed the New York law in every particular. The choice may have been an excellent one. It certainly is not shown that the interests of the estate or of any of the creditors were prejudiced.

The objections will be overruled and the amounts recommended allowed.


author: GIBSON, District Judge.

text:
    In re BROMEIER’S, Inc.
    No. 16619.
    District Court, W. D. Pennsylvania.
    Jan. 10, 1934.
    Bernard Goodman, of Pittsburgh, Pa., for trustee.
    Humes & Prather, of Pittsburgh, Pa., for receiver.
    Watson B. Adair, of Pittsburgh, Pa., referee.
   GIBSON, District Judge.

The referee, upon distribution, decided that the gross amount realized by the trustee from the bankrupt estate should be applied, after the payment of liens, to the payment of the expenses incurred by the receiver in preference to the payment of anything on account of general administration expenses, viz., the expenses incurred by the trustee in liquidating the estate and otherwise, the compensation of the trustee, the expenses incurred by the referee, the compensation of the referee, and the fees of the attorney for the trustee, attorney for the bankrupt, and attorneys for the petitioning creditors, respectively, regardless of whether or not the receiver’s expenses were incurred with respect to the particular portions of the bankrupt estate which were liquidated by the trustee. This decision has been certified to this court for review.

The facts presented disclose an unfortunate situation. After a long and loosely conducted receivership, the receiver filed his account, which was confirmed in due course without exception on the part of any creditor. It showed debts of the receiver in excess of the funds which came into his hands. The trustee accepted his appointment as such with no knowledge of the fact that the remaining assets of the estate were insufficient to pay the debts incurred by the receiver. He proceeded to administer the estate and obtained a certain sum by the sale of property of the bankrupt, and in doing so incurred certain expenses. He now contends, in disagreement with the referee, that such sum should be devoted to his administration expenses and not to the payment of expenses incurred by the receiver, as no expense had been incurred by the receiver in the preservation of the particular asset sold by the trustee. Despite our sympathy for the trustee under the peculiar circumstances of the matter, we are compelled to agree with the referee in his decision. It is beyond question that expenses of a receiver in bankruptcy are debts entitled to have priority of all administration expenses. That sueh receivership debts may have been incurred improvidently in the instant ease is not a matter which may be considered by this court in the present state of the record.

The order of the referee must be sustained.


text:
    GAZAN v. VADSCO SALES CORPORATION et al.
    No. 6992.
    District Court, E. D. New York.
    Jan. 15, 1934.
    Hayes & Sullivan, of New York City, for plaintiff.
    David L. Podell, of New York City, for defendant Vadsco Sales Corporation.
   MOSCOWITZ, District Judge.

This is a motion made by the defendant Vadsco Sales Corporation for an additional allowance of costs toward the payment of counsel fees incurred by it.

This is an action in equity by a stockholder, holding 200 shares of common stock out of 1,017,375 shares outstanding, charging fraud and mismanagement of the Vadsco Sales Corporation.

The plaintiff requests an injunction and the appointment of a receiver, and the usual relief asked for by stockholders in such actions.

The plaintiff testified that he had never read the complaint, did not know what it contained, and was unaware of the charges made over his name in the complaint against the defendant corporation; that he had not contributed to the expenses of the litigation; that he did not know any of the information that was contained in the complaint, nor did he give sueh information to the plaintiff’s attorney, nor did he know in what manner his counsel obtained the information for the purposes of preparing the complaint.

Apparently the plaintiff gave the use of his name to others for the purpose of instituting this action. This action was brought without any basis, and was vexatious and oppressive. It was brought solely for the purpose of annoying and harassing the defendant corporation and its business.

This court in an equity action has inherent power to grant an additional allowance of costs as between client and solicitor. Such costs may be awarded where fraud and misconduct have been charged, and not sustained when the suit was brought without any basis and was vexatious and oppressive. Guardian Trust Company v. Kansas City Southern Ry. Co. (C. C. A.) 28 F.(2d) 233, and eases therein cited.

Plaintiff in bringing this action has been engaged in a fishing expedition in waters in which he was not familiar as he testified he had not even read the complaint, did not know its contents, or anything about the facts alleged. Every fisherman, including novices, realizes that any one who contemplates a fishing trip must be prepared to pay the expenses. While the expenses of the defendant largely exceed the sum of $5,000 paid for its counsel in defending this unfounded action, the plaintiff will not be charged with that sum, but he should at least pay for the bait, which is fixed at $-2,000.

Settle order on notice.


text:
    FRANKENSTEIN v. ANACONDA COPPER MINING CO. et al.
    District Court, S. D. New York.
    April 10, 1934.
    Guggenheimer, Strasser & Meyer, of New York City (Charles H. Meyer and Ira D. Wallach, both of New York City, of counsel), for plaintiff.
    Johnson & Shores, of New York City (Charles Dickerman Williams, of New York City, of counsel), for defendant Nettie G. Ryan.
   WOOLSEY, District Judge.

The motion to remand is denied.

I. The controversy between the plaintiff and Mrs. Nettie G. Ryan, the removing defendant (and her eoexecutor John C. Ryan), is in my opinion a controversy which is separable from the controversy between the plaintiff and the other defendants. Indeed, taking as I must the real gravamen of action as a test, Genuine Panama Hat Works, Inc. v. Webb (D. C.) 36 F.(2d) 265, 267; Hough v. Societe Electrique Westinghouse de Russie (D. C.) 232 F. 635, 636, Mrs. Ryan is not charged in the complaint with original liability as a joint tort-feasor but with derivative liability, under section 120- of New York Decedent Estate Law, for a joint tortfeasor, a liability limited in any event to the estate received by her as executrix. Cf. Hough v. Societe Electrique Westinghouse de Russie (D. C.) 232 F. 635, 636; Seaman v. Slater (C. C.) 18 F. 485; German American Coffee Company v. O’Neil, 102 Misc. 165, 167, 169-170, 169 N. Y. S. 421.

II. The gravamen of the complaint here is a somewhat complicated conspiracy in which the removing defendants’ decedent, John D. Ryan, an officer of the Anaconda Company, is alleged to have participated in breach of his fiduciary relationship to the company, with resultant profits to' himself and his fellow conspirators and damage to the company.

The complaint prays for an accounting of profits and for damages as well. '

In the case of Del Fungo Giera v. Rockland Light & Power Co. (D. C.) 46 F.(2d) 552, relied on by the plaintiff here, there was alleged a continuing conspiracy of which the removing defendant himself was a part and against which, as a joint tort, injunctive relief was sought.

The situation in Wile v. Burns Brothers et al. (D. C.) 2 F. Supp. 950, was similar.

I do not think either of these eases apply here.

Admittedly a very nice question is involved in the instant ease, but I think the removing defendant has successfully shown the right to remain in this jurisdiction which she undoubtedly has in a proper ease.

Settle order on notice.


author: PATTERSON, District Judge.

text:
    In re ESTEY.
    District Court, S. D. New York.
    Jan. 6, 1934.
    Ward & Palzer, of New York City, for trustee.
    Gilbert & Brandeis, of New York City, for claimant.
   PATTERSON, District Judge.

The bankrupt ran a business school. The claimant filed a priority wage claim for $179, the amount owed to her for services as a teacher in the school. The trustee in bankruptcy objected to the allowance of the claim as a prior one. The referee Sustained the trustee’s objection and disallowed the claim as one entitled to priority. He allowed it as a general claim.

The Bankruptcy Act, § 64b (5), 11 USCA § 104 (b) (5), gives priority to wages earned within three months by “workmen, clerks, traveling or city salesmen, or servants,” up to the sum of $600. Originally (11 USCA § 104 note) the priority was only in favor of “workmen, clerks, or servants”; an amendment in 1906 added “traveling or city salesmen.” The intention of Congress was plainly to give special protection to a class of wage-earners who generally have no substantial savings or other reserves to fall back on in case of adversity and therefore cannot afford to lose. Like reasons prompted the mechanic’s lien laws. But the words used by the Legislature cannot be extended by the courts to cover cases not comprehended by the statute, merely because the ease ini hand may be thought equally meritorious with those that are given a special status. The act does not provide that all who work for a wage of less than so much a week shall have priority. In any case where priority is asserted, the claimant must bring himself • within one of the four classes specified by Congress, “workmen, clerks, traveling or city salesmen, or servants.” In re Quaekenbush (D. C.) 269 P. 599.

A teacher is a professional worker. She is certainly not a workman, clerk, or salesman in the popular meaning of those words. The argument here is that she is a servant. That may be true in the sense that there prevailed between the bankrupt and her a legal relationship formerly known in the law as that of master and servant. The relationship is to some extent still referred to by that expression, though employer and employee will be more intelligible to laymen. But the word “servant” in this part of the Bankruptcy Act was obviously not put there as the equivalent of employee; if that were its meaning, there was no point in the specific mention of workmen, clerks, and salesmen. In re A. O. Brown & Co. (D. C.) 171 F. 254; Blessing v. Blanchard (C. C. A.) 223 F. 35, Ann. Cas. 1916B, 341. It has a more restricted meaning, covering house servants or personal servants, and does not include the ease of a teacher. There is another consideration. The priority is for “wages.” The remuneration earned by a teacher is generally thought of as salary rather than as wages.

The referee’s disposition of the matter was right, and his order disallowing the daim as a prior one and relegating it to the, rank of a general claim will be affirmed.


author: SCHOONMAKER, District Judge.

text:
    In re LOOKER.
    No. 18462.
    District Court, W. D. Pennsylvania.
    Dec. 5, 1933.
    F. M. Nash, of Bradford, Pa., for custodian.
    Gallup & Potter, of Bradford, Pa., for execution creditors.
    H. M. Wick, of Bradford, Pa., referee.
   SCHOONMAKER, District Judge.

The debtor, John C. Looker, filed an application in this court under the provisions of section 74 of the Bankruptcy Act (31 USCA § 292) for an extension of time in which to pay his debts. On his application, the Downs Furniture Company and Robert E. Murrin, both of whom then held judgments against the debtor over four montas old, were restrained from proceeding with writs of execution and attachment executions on said judgments, which had been issued within four months preceding the debt- or’s application.

The debtor’s proposal to his creditors was accepted by the majority, and was confirmed on the 2d day of November, 1933, by the referee in bankruptcy to whom the case was referred.

The custodian now comes into court with an' application to release the personal property from the levy of executions of the Downs Furniture Company and Robert E. Murrin; to release the rents due from the Emery Hotel Corporation from the attachment execution, and also to direct the same to be paid to the custodian.

As we view the situation, the debtor’s extension proposal is binding upon the Downs Furniture Company and Robert E. Murrin, whether they occupy the position of secured or unsecured creditors; hut it does not reduce or impair their lien, if they occupy the position of secured creditors, and in such ease affects only the time and methods of liquidation. See section 74 (i) of the amendment to the Bankruptcy Act, approved March 3, 1933 (11 USCA § 292 (i). This section 74 of the Bankruptcy Act subjects the debtor’s property to the exclusive jurisdiction of this court. See section 74 (m) of the Act (11 USCA § 202 (m).

We therefore cannot permit the Downs Furniture Company and Robert E. Murrin to proceed with their executions against debtor’s personal property and the attachments against the rents of the Hotel Holley. These, pending the carrying out of the terms of the extension proposal, should be turned over to the custodian and held by him for the purpose of carrying out the terms of the extension proposal. We will retain jurisdiction of debtor and his property during the period of the extension, in order to protect the estate and enforce the terms of the proposal extension. This is authorized by section 74 (j) of the amendment to the Bankruptcy Act of March 3, 1933 (11 USCA § 292 (j).

Downs and Murrin have petitioned’ for a review of the referee’s order confirming debtor’s extension proposal. This, however, will not change the status of this personal property levied upon, or the rents attached. These should come into the hands of the custodian to be dealt with later, as the court shall direct.

If the court, on review of the referee’s order confirming the composition, should reverse it and refuse confirmation of debtor’s proposal, then the court will adjudge the debtor a bankrupt and proceed with the liquidation of the estate under the general bankruptcy law. In this event, the personal property and rents attached would come into the hands of the trustee for liquidation, subject to the claims of Down and Murrin as preferred creditors, if they should be held to be entitled to that position under the Bankruptcy Act.

Therefore Downs and Murrin will be permanently enjoined from proceeding with their executions and attachments. The rents attached will be paid to the custodian. Let an order be submitted accordingly.


text:
    In re FEDERAL DISTRICT TRUST.
    District Court, D. Massachusetts.
    Feb. 6, 1934.
    Gaston, Snow, Saltonstall & Hunt, of Boston, Mass., for petitioning creditors.
    Barker, Davison & Shattuck, of Boston, Mass., for Atlantic Nat. Bank.
    Choate, Hall & Stewart, of Boston, Mass., for Russell S. Tucker et al., Bondholders’ Protective Committee.
    David Stoneman, of Boston, Mass., for alleged bankrupt.
   BREWSTER, District Judge.

This involuntary petition was brought by the National Shawmut Bank of Boston, as it is trustee under a certain deed of trust securing an issue of bonds. The petition is opposed by the Atlantic National Bank of Boston which, within the four months’ period, received a conveyance of certain property of the alleged bankrupt in satisfaction of a judgment.

The matter was referred to Referee Ryan to report on the question of adjudication. He has filed an original and supplemental report recommending adjudication. During the pendency of the proceeding, two creditors with claims aggregating considerably over $500 intervened and joined as petitioning creditors.

The petition was originally filed by one creditor which alleged on information and belief that the total number of creditors of the alleged bankrupt was less than twelve in number. In this petition it was also alleged that the nature and amount of the petitioner’s claim was the principal of all bonds outstanding and secured by said mortgage in the sum of $645,000, and also the sum of $285 due it for services and expenses. The act of bankruptcy alleged was the conveyanee to the Atlantic National Bank, above referred to.

In his report, the referee has set forth at some length the provisions of the deed of trust above referred to, and therefore I will not repeat them in this memorandum. The referee found that ¿he amount of the bonds exceeded the value of the security; that, according to the terms of the instrument, the alleged bankrupt was under contractual obligations to pay to the petitioner around $21,000, accrued interest, for which a demand had been 'made; and that the alleged bankrupt owed the petitioner $285 for services and expenses, as alleged.

I agree with the referee that the original petitioner was a creditor with a provable claim. The amount of its claim may be debatable, but it is not now necessary to inquire into the extent of it, because the referee has found that the interveners were creditors with claims aggregating much in excess of $500.

The original petition upon its face was valid, and therefore the defects whieh later developed during the course of the proceedings were cured by the addition of the two intervening creditors. I do not agree that upon the allegations of the original petition, if proved, an adjudication could not possibly follow. The referee haring found that the act of bankruptcy had been committed, and that three creditors with provable claims in excess of $500 had joined in the petition, it follows that an adjudication may be entered upon the petition.

I affirm the referee’s report and order that the Federal District Trust be adjudicated a bankrupt.


text:
    BETTER PACKAGES, Inc., v. NASHUA PACKAGE SEALING CO., Inc., et al.
    District Court, S. D. New York.
    April 11, 1934.
    Emery, Booth, Varney & Whittemore, of Boston, Mass. (L. G. Miller, of Boston, Mass., of counsel), for the motion.
    Hammond & Littell, of New York City, opposed.
   WOOLSEY, District Judge.

The motion is in all respects granted.

I. The plaintiff did not avail itself of its right to appeal on or before November 2, 1932, from such part of the interlocutory decree of October 3, 1932, entered in the ease decided by Judge Coleman of Better Packages, Inc., v. L. Link & Co., et al. (D. C.) 1 F. Supp. 132, as held invalid certain claims of patents No. 1,194,752 and No. 1,782,123.

I think that under the principles taught in the opinion of the Supreme Court in Ensten v. Simon, Ascher & Co., 282 U. S. 445, 455, 51 S. Ct. 207, 75 L. Ed. 453, illustrated by such decisions as R. Hoe & Co., Inc., et al. v. Goss Printing Press Company, 31 F.(2d) 565, 566 (C. C. A. 2), Radio Condenser Company v. General Instrument Company, 65 F.(2d) 458, 450 (C. C. A. 2), and Otis Elevator Company v. Pacific Finance Corporation, 68 F.(2d) 664, 670 (C. C. A. 9), in order to maintain its right thereafter to sue for infringement of the claims of said patents which were held valid, the plaintiff should have filed its disclaimers in the circumstances here, shown on or before December 2, 1932, that is, within thirty days at least after its time to appeal from the interlocutory decree of October 3, 1932, had expired, as it did on November 2, 1932. Title 28 United States Code, §§ 227 and 22, 7a (28 USCA §§ 227, 227a).

The plaintiff either should have justified its position as to these patents by securing, on appeal if it could, a reversal of Judge Coleman’s ruling holding certain claims invalid, or by disclaimer it should have acquiesced in said ruling as the statute prescribes. For the ambit of a patent right must not be left vague, but must be kept clearly defined that the public may know its rights in the face of the patentee’s monopoly-

The plaintiff filed its disclaimer in respect of patent No. 1,194,752 on January 24, 1933. This was eighty-three days after the time to appeal from the interlocutory decree above mentioned had expired. In respect of patent No. 1,782,123, it has not filed any disclaimer. Consequently, in view of the provisions of the Patent Law of the United States, title 35 United States Code, §§ 65 and 71 (35 USCA §§ 65 and 71), the instant suit cannot” be maintained in so far as it is founded on the patents mentioned, and to that extent must be dismissed.

Settle order on notice.


author: GREEN, Judge.

text:
    PRATT & WHITNEY CO. v. UNITED STATES.
    No. K-169.
    Court of Claims.
    April 9, 1934.

      Karl D. Loos, of Washington, D. C. (Preston B. Kavanagh, of Washington, D. C., on the brief), for plaintiff.
    J. H. Sheppard, of Washington, D. C., and Prank J. Wideman, Asst. Atty. Gen., for the United States.
    Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.
   GREEN, Judge.

The plaintiff in this case seeks to recover $316,701.25 with interest (altogether about a half million dollars) overpaid on the taxes of 1918 and applied by the Commissioner on a deficiency in its taxes for 1917, the collection of which at the time of the application was barred by the statute of limitations. A claim for refund on the taxes of 1918 was filed on June 24, 1921, and thereafter the Commissioner made an audit and review of plaintiff’s taxes for the years 1915 to 1919, inclusive, and as a result, among other things, determined a deficiency for the calendar year 1917 in the sum of $316,701.25, an overassessment for the year 1918 in the sum of $495,833.12, and advised the plaintiff thereof by letter on November 4, 1922. The deficiency for 1917 was assessed in January, 1923.

The Commissioner thereafter proceeded in the usual manner to make a certificate showing this overassessment, which was sent to the collector with directions to ascertain the condition of the account against the plaintiff for taxes, apply the overassessment upon any taxes found to be due for other years, complete the schedule and return it. This the collector did, and his certificate showed the amount of $177,041.92 refundable. In accordance with the collector’s certificate and about June 1,1923, the Commissioner mailed to the plaintiff a certificate of overassessment for the year 1918 in the sum of $495,833.12 which also showed that the overassessment was applied on three different items totaling $318,791.20 as credits upon taxes due for other years, leaving $177,041.92 refundable. A cheek on the Treasury was inclosed with the certificate in payment of the amount refundable together with interest in the sum of $36,638.21. This cheek was received by plaintiff and cashed.

We have here the same situation which has appeared in many cases recently before us. The certificate mailed to plaintiff was not made up in the ordinary form of an account, but it was in fact nothing more or less than a statement of the account between plaintiff and defendant with reference to plaintiff’s taxes for certain years. It showed the amount of the overassessment for 1918 and by appropriate reference that a large part of it had been applied and credited upon taxes for other years in three separate items, one of which was $316,701.25 taxes of 1917, and that the balance which the government claimed was due the plaintiff was $177,041.92 which, together with interest thereon in the amount of $36,638.21, or a total of $213,680.13, was paid in settlement. The plaintiff made no complaint about the transaction until more than five years afterwards, when through its attorneys it made a demand upon defendant for the amount which had been credited on the 1917 taxes and nearly six years expired before suit was begun to recover the amount thereof.

Notwithstanding the recent decisions of the court, which,-in our opinion, fully cover the case now before us, the plaintiff insists that the recital of the overassessment contained in the certificate constituted an account stated in its behalf for the amount of the overassessment. We have held many times that, when an account is presented, a party thereto cannot select one or more items stated in his favor therein and ignore charges made against him even though those charges be not well founded, and that an account stated must be taken as a whole or not at all. In this particular ease, the account showed a balance of a certain amount in favor of plaintiff for which it received a cheek issued in settlement. No complaint having been made with reference thereto for over five years, it must be considered an account settled. Cf. R. H. Stearns Co. v. United States, 291 U. S. 54, 54 S. Ct. 325, 78 L. Ed. -.

The plaintiff, however, seeks to recover on another and novel ground which, in our opinion, is equally unfounded. It is insisted that, if it does not have the right to recover on an account stated the cause of action was still in time for the reason that plaintiff’s claim for refund filed June 24, 1921, was not rejected until the Commissioner of Internal Revenue declined to comply with the demand for the return of the amount credited on the 1917 taxes made by its attorneys through a letter dated August 23, 1928, and that the statute of limitations on claims for refund did not begin to run until that date. Nevertheless, it is said in argument that the claim for refund was at first allowed. It is thus conceded, as it must be, that action was taken upon the claim for refund. It is not necessary that any particular form should be used by the Commissioner in allowing or rejecting a claim for refund. In, the instant case, after the claim for refund had been filed, the Commissioner made an audit and review of plaintiff’s taxes in order to determine whether in fact they had been overpaid as was alleged in the claim for refund. He found and deter- . mined that the taxes for 1918 had been over- ' paid, or, as stated in the language of the Bureau, there had been an “overassessment” thereof. Having also determined a deficiency in the 1917 taxes, he applied part of the overpayment thereon and refunded the balance. All this was shown by the certificate of overassessment in the manner above stated. When the Commissioner computed the amount of refund to be made the plaintiff and paid it, he allowed the claim for refund to that extent. When, instead of refunding the remainder of the overpayment to plaintiff, he credited it upon the taxes of other years, he rejected the claim for refund to the extent of these credits. Section 3226 of the Revised Statutes, as amended by section 1113 (a) of the Revenue Act of 1926 (26 USCA § 156), requires that a suit to recover a tax collected shall not be begun after the expiration of five years from the date of the payment of such tax, “unless such suit or proceeding is begun within two years after the disallowance of the part of such claim to which such suit or proceeding relates.” The claim for refund alleged that there had been an overpayment of the 1918 taxes. If, after the filing of this claim, the Commissioner had announced that he had considered the matter and determined that there was no overpayment, we do not think any one would claim that suit could not then be begun. In the ease at bar, after consideration and having found that there was an overpayment, he-announeed that part of this overpayment would be credited on taxes for other years. This was in effect a disallowance of the part of the claim to which the suit relates and the provisions of section 3226 became applicable.

The plaintiff contends that no cause of action accrued until the enactment of the Revenue Act of 1928 which declared that a credit made after the expiration of the statute of limitations was void and might be refunded in the same manner as any other overpayment. But we have already shown that plaintiff’s claim for refund was disallowed in part on June 1, 1923, when the certificate was issued and that a cause of action then arose which under section 3226 must be begun within two years, and this leaves no foundation for plaintiff’s position. The 1928 act did not repeal section 3226, nor did it in any manner limit its provisions with reference to the time in which suit must be begun.'

Counsel for plaintiff also contend that the fact that the Commissioner found the over-assessment constituted an allowance of the claim and a promise to pay the amount thereof and that the suit is based on the promise. This is merely a statement in another form that the determination of the overassessment constituted an account stated in favor of plaintiff to the amount of the over-assessment. There is no basis for this contention. The action of the Commissioner in allowing the overassessment, crediting part of it on the taxes of other years and refunding the balance, was all one transaction and cannot be separated. The Commissioner did not merely allow the overassessment; he determined it, and by the same determination announced that a part of it would not be refunded. Moreover, we have found as an ultimate fact that there is no evidence showing or tending to show any promise or agreement to pay the plaintiff any other sum than the amount which was refunded.

For the reasons above set forth, we hold that the separate item of the overassessment contained in the certificate did not constitute an account stated upon which plaintiff could bring a suit within six years, and that plaintiff having failed to bring its suit within two years after the certificate of overassessment and statement of account was issued, its action is barred under section 3226 of the Revised Statutes.

In support of the conclusions above stated with reference to an account stated, see R. H. Stearns Co. v. United States, supra, Leisenring v. United States, 3 F. Supp. 853, 78 Ct. Cl. - (certiorari denied 54 S. Ct. 558, 78 L. Ed. -), and Samuel Daube v. United States (Ct. Cl.) 5 F. Supp. 769 (decided February 5, 1934).

It is clear that plaintiff’s petition should be dismissed and it is so ordered.

BOOTH, Chief Justice, and WHALEY, WILLIAMS, and LITTLETON, Judges, concur.


author: FRANKLIN E. KENNAMER, District Judge.

text:
    TAPP et al. v. STUART.
    No. 897.
    District Court, N. D. Oklahoma.
    April 25, 1934.
    Goldesberry & Klein, of Tulsa, Okl., for complainant.
    Robert Stuart and Ralph A. Barney, both of Pawbuska, Okl., for respondent.
   FRANKLIN E. KENNAMER, District Judge.

Mary Belle Tapp, an Osage allottee, with a certificate of competency and of less than one-half Indian blood, died a resident of Osage county on June 20, 1927. She left a will, approved by the Secretary of Interior, pursuant to the provisions of an Act of Congress of April 18, 1912. This will was admitted to probate in the county court of Osage county, and the respondent, Charles F. Stuart, is the duly appointed and qualified administrator with the will annexed. Complainants are heirs of the said Mary Belle Tapp, and devisees under the will; Milford E. Tapp being a son of decedent, and Charles H. Tapp her surviving husband. Mary Belle Tapp died seized of her individual “head-right” as an enrolled member of the Osage Tribe, and an inherited interest in the Osage “headright” of Adeline Kennedy Lockwood. Since the death of Mary Belle Tapp, a stated amount of income accruing to said “head-rights” and collected by the Department of Interior, through the Osage Indian Agency, has been disbursed to respondent as administrator aforesaid. Complainants bring this action against the respondent as sneh administrator to recover said funds, contending such funds are not subject to administration in the probate cause, and that the departmental disbursements to the respondent were made under a mistaken conception of the law.

The respondent has moved to dismiss, and this motion is now for decision.

I think the only question meriting consideration is: Are the funds above described subject to administration in the county court of Osage county as assets of the estate of Mary Belle Tapp? If this question is answered in the affirmative, the motion to dismiss should he sustained; otherwise it should be overruled. A determination of the question turns upon the construction of the various acts of Congress applicable to the Osage Tribe. Respondent relies upon section 3 of the Act of April 18, 1912 (37 Stat. 86), which in part is as follows: “That the property of deceased * * allottees of the Osage Tribe * * * shall, in probate matters, be subject to the jurisdiction of the county courts of the State of Oklahoma.

And also upon the following provision of section 4 of the act of March 2, 1929 (45 Stat. 1480), which is: “Upon the death of any Osage Indian of less than one-half of Osage Indian blood or upon the death of an Osage Indian who has a certificate of competency, his moneys and funds and other property accrued and accruing to his credit shall be paid and delivered to the administrator or executor of his estate to he administered upon according to the laws of the State of Oklahoma.”

Respondent further urges the construe- - tiou placed upon the various pertinent acts of Congress by the Department of Interior in its past practice to pay over to the executors and administrators of deceased Osages, situated similarly to Mary Belle Tapp, funds of the character disbursed to respondent.

I am unable to sanction the position of respondent. The Acts of Congress of June 28, 1906 (34 Stat. 539), April 18, 1912 (37 Stat. 86), March 3, 1921 (41 Stat. 1249), February 27, 1925 (43 Stat. 1008, 25 USCA § 331 note), and March 2, 1929 (45 Stat. 1478), clearly evidence a general congressional intent to preserve to the Osages all “headright” income, free and exempt from claims for debt, except that certain debts of restricted Indians might be paid under approval of the Department of Interior, and also provide that such funds should be disbursed directly to the members of the tribe, or their heirs. The provision of the Act of March 2, 1929 (45 Stat. 1479), with reference to such funds, reading as follows : “ * * * And all royalties and bonuses arising therefrom shall belong to the Osage Tribe of Indians, and shall be disbursed to members of the Osage Tribe or their heirs or assigns as now provided by law, after reserving such amounts as are now or may hereafter be authorized by Congress for specific purposes” (section 1), is illustrative of the general design of these acts.

In the case of Taylor v. Tayrien (C. C. A.) 51 F.(2d) 884, it was held that the “headright” of an Osage Indian of less than one-half blood, with a certificate of competency, did not pass to his trustee in bankruptcy.

In a well-reasoned opinion by Justice McNeill, in the case of DeNoya v. Arrington, 163 Okl. 44, 20 P.(2d) 563, 567, the Supreme Court of Oklahoma reached the conclusion that the income accruing to the “headright” of a deceased Osage allottee, subsequent to the death of such allottee, is not an asset of the estate of such decedent which can be appropriated for the payment of the claims of creditors. Justice McNeill construed the above-quoted provision of section 4 of the Act of March 2, 1929, relied on here by respondent, as follows: “Defendants in error stress the contention by reason of the words, ‘accrued and accruing,’ under said section 4 of the Act of March 2,1929, that this would be sufficient to justify the estate to be held open for the purpose of receiving the income from decedent’s headright to pay the claims of the creditors of said deceased allottee. Under the provisions of said act of 1906, and the acts amendatory and supplemental thereof, it is observed that the minerals are reserved as a communal interest to the Osage Tribe. A review of the various enactments of Congress in dealing with the oil, gas, and minerals reveal that no provision has been made whereby authority was given to the Indian to dispose of such head-right or mineral interest, except by will which in all cases must be approved by the Secretary of the Interior. The aforesaid section 4 of said Act of March 2, 1929, specifically designates ‘his moneys and funds and other property accrued and accruing to his credit.’ We are of the opinion that these words ‘accrued and accruing’ were fitly and advisedly used by Congress, and as applied to an Osage headright do not extend beyond the fiscal quarter as provided in said section 4.”

This reasoning of Judge McNeill appears to be sound and in accord with the spirit of the applicable congressional acts.

In 23 C. J. pp. 1125, 1126, verbo “Executors and Administrators,” it is said: “The word ’ ‘assets’' is used to designate such property belonging to the estate of a deceased person as may rightfully be charged with the obligations which his executor or administrator is bound to discharge.”

In the case of Mutual Life Ins. Co. v. Farmers’ & Mechanics’ Nat. Bank (C. C.) 173 F. 390, 397, this rule is recognized by the following statement: “Whatever may have been the definition affixed to the term ‘assets’ in the earlier history of the law, it means, in modern usage, as applied to decedents’ estates, property, real or personal, tangible or intangible, legal or equitable, which can be made available for, or may be appropriated to, the payment of debts.”

The Oklahoma Supreme Court, in the case of Barnard v. Bilby, 68 Okl. 63, 171 P. 444, held that the homestead allotment of a minor Creek Freedman, who died April 22, 1908, is not subject to the payment of the debts of the decedent, and is therefore not assets of the decedent’s estate, and at page 67 of 68 Okl., 171 P. 444, 447, this language was used in the opinion in said case:

“It is well settled that probate courts do not have jurisdiction to authorize an administrator to sell lands that are not assets of the decedent’s estate for the payment of the decedent’s debts, or for any other purpose. Was the land sold assets of the deceased’s estate? In Mutual Life Insurance Company of New York v. Farmers’ & Mechanics’ Nat. Bank of Cadiz, Ohio (C. C.) 173 F. 390-397, it is held that the term ‘assets,’ as applied to decedents’ estates, means property, real or personal, tangible or intangible, legal or equitable, which can be made available for or may be appropriated to the payment of debts. See, also, 3 Cyc. 1111.

“Since under the acts of Congress above cited, which control in these matters, the land was not subject to the payment of the debts of the deceased, it did not become assets of the estate in the hands of the administrator, and therefore the county court of Wagoner county did not obtain jurisdiction to hear and determine whether or not said land was subject to sale for the payment of the debts of the deceased, or the expenses of administration. Since under the federal law the land was not subject to sale for payment of the debts of the deceased, upon the death of the allottee the title to the allotment of this minor Creek freedman passed immediately to his heirs, and the administrator was not entitled to the possession thereof and was not authorized to administer thereon.”

See Cowokochee v. Chapman et al., 90 Okl. 121, 215 P. 759.

Therefore I conclude, under the provisions of the applicable acts of Congress herein referred to, that the funds in controversy are not assets of the estate of Mary Belle Tapp, which are subject to the jurisdiction of the county court of Osage county, for the purpose of administration, and the motion to dismiss should be overruled.