text:
    UNITED STATES v. ONE FAIRCHILD SEAPLANE et al. (NORTHWEST AIR SERVICE, Inc., Intervener).
    No. 13356.
    District Court, W. D. Washington, N. D.
    April 16, 1934.

      Anthony Savage, U. S. Atty., and Tom E. DeWolfe, Asst. U. S. Atty., both of Seattle, Wash., for libelant.
    John F. Evich and Dykeman, Monheimer & Griffin, all of Seattle, Wash., for Northwest Air Service, Inc., intervening libelant.
    George Olson and W. M. Whitney, both of Seattle, Wash., for Frank Dorbandt, claimant.
    Revelle, Simon & Coles, of Seattle, Wash., for Max Herskovits, claimant.
   CUSHMAN, District Judge (after stating the facts as above).

The controlling contention of the intervening libelant, as understood by the court, is that if the intervening libelant has a maritime lien for repairs, the value thereof is to be preferred to the penalties assessed by the Treasury Department and the resulting lien. The St. Jago de Cuba, 9 Wheat. 409, 6 L. Ed. 122; The Thomaston (D. C.) 26 F.(2d) 279.

The court has already held, upon the exceptions to the amended intervening libel, that the court has jurisdiction to entertain such intervening libel, whether repairs such as those described would give a maritime lien or not. United States v. One Fairchild Seaplane et al. (D. C.) 4 F. Supp. 249. The question, therefore, is whether, at the time the repairs were made in 1932, the law gave a maritime lien.

The conclusion follows from the scope of the ruling made in Reinhardt v. Newport Flying Service Corporation et al., 232 N. Y. 115, 133 N. E. 371, 18 A. L. R. 1324 (opinion by Judge Cardozo), that at the time of the occurrence of the matters involved in that decision the law gave such a lien. That cause was decided in 1921.

Subsequently, in 1926, Congress, by section 7 (a) of chapter 344, 44 Stat. 572 (title 49, USCA § 177 (a), in part, provided:

“The navigation and shipping laws of the United States, including any definition of ‘vessel’ or ‘vehicle’ found' therein and including the rules for the prevention of collisions, shall not be construed to apply to seaplanes or other aircraft or to the navigation of vessels in relation to seaplanes or other aircraft.”

Libelant contends that because of the foregoing provision there could be no maritime lien upon a seaplane whether such right had theretofore existed or not.

On account of the conclusion reached it is not necessary to determine the definition of “vessel” or “vehicle,” to which reference is made in the quoted provision, nor whether section 3 of the Revised Statutes (title 1 USCA § 3) is or is not a shipping law.

It may be assumed that section 30, subsection P, c. 250, 41 Stat. 1005 (title 46, USCA § 971), giving a maritime Hen for repairs to a vessel, is, as ordinarily understood, a shipping law, yet, it does not necessarily follow that Congress intended by the quoted provision to deny a maritime lien in such a ease as that here presented by such a general reference to “shipping laws” as that made in section 177 (a), supra. There are many laws and parts of laws that are ordinarily referred to as shipping laws, as shown by the two volumes of the United States Code Annotated, upon the subject of “shipping.” Title 46.

Under such circumstances, to arrive at the intent of Congress in the enactment of section 177 (a) of title 49, supra, a resort to other rules of construction may furnish a safer guide to the intent of Congress than the full reach or scope of the naked words used. It is proper therefore to quote the statute more at length. In doing so the court emphasizes that portion of the statute already quoted and other included words bearing upon the intent of Congress:

“§ 176. Foreign Aircraft.
“(a) (*Sovereignty of airspace declared; navigation of foreign military aircraft.) The Congress hereby declares that the Government of the United States has, to the exclusion of all foreign nations, complete sovereignty of the airspace over the lands and waters of the United States, including the Canal Zone. Aircraft a part of the armed forces of any foreign nation shall not be navigated in the United States, including the Canal Zone, except in accordance with an authorization granted by the Secretary of State.
“(b) (*Navigation of foreign civil aircraft; authorization; applicability of regulations.) Foreign aircraft not a part of the armed forces of the foreign nation shall be navigated in the United States only if authorized as hereinafter in this section provided, and if so authorized, such aircraft and airmen serving in connection therewith, shall be subject to the requirements of section 173 of this chapter, unless exempt under subdivision (e) of this section.
“(c) (*Navigation of foreign civil aircraft; condition of authorization; exemption from regulations; engagement in air commerce.) If a foreign nation grants a similar privilege in respect of aircraft of the United States, and/or airmen serving in connection therewith, the Secretary of Commerce may authorize aircraft registered under the law of the foreign nation and not a part of the armed forces thereof to be navigated in the United States, and may by regulation exempt such aircraft, and/or airmen serving in connection therewith, from the requirements of section 173 of this chapter, other than the air traffic rules; but no foreign aircraft shall engage in interstate or intrastate air commerce. (May 20, 1926, c. 344, § 6, 44 Stat. 572.)
“§ 177. Application of Existing Laws Relating to Foreign Commerce.
“(a) ^Application of navigation and shipping laws to aircraft.) The navigation and shipping laws of the United States, including any definition of ‘vessel’ or ‘vehicle’ found therein and including the rules for the prevention of collisions, shall not he construed to apply to seaplanes or other aircraft or to the navigation of vessels in relation to seaplanes or other aircraft.
“(b) ('^'Designation of ports of entry; detail of officers; application of customs and public health laws.) The Secretary of the Treasury is authorized to (1) designate places in the United States as ports of entry for civil aircraft arriving in the United States from any place outside thereof and for merchandise carried on such aircraft, (2) detail to ports of entry for civil aircraft such officers and employees of the customs service as he may deem necessary, and to confer or impose upon any officer or employee of the United States stationed at any such port of entry (with the consent of the head of the Government department or other independent establishment under whose jurisdiction the officer or employee is serving) any of the powers, privilegies, or duties conferred or imposed upon officers or employees of the customs service, 'and (3) by regulation to provide for the application to civil air navigation of the laws and regulations relating to the administration of the customs and public health laws to such extent and upon such conditions as he deems necessary.
“(e) (*Application of laws relating to entry and clearance of vessels.) The Secretary of Commerce is authorized by regulation to provide for the application to civil aircraft of the laws and regulations relating to the entry and clearance of vessels to such extent and upon such conditions as he deems necessary.
“(d) (*'Designation of ports of entry for aliens; detail of officers; application of laws relating to immigration.) The Secretary of Labor is authorized to (1) designate any of the ports of entry for civil aircraft as ports of entry for aliens arriving by aircraft, (2) detail to such ports of entry such officers and employees of the immigration service as' he may deem necessary, and to confer or impose upon any employee of the United States stationed at such port of entry (with the consent of the head of the Government department or other independent establishment under whose jurisdiction the officer or employee is serving) any of the powers, privileges, or duties conferred or imposed upon officers or employees of the immigration service, and (3) by regulation to provide for the application to civil air navigation of the laws and regulations relating to the administration of the immigration laws to such extent and upon such conditions as he deems necessary. (May 20, 1926, c. 344, § 7, 44 Stat. 572.)” (Italics by the court.) (The headings of the foregoing subsections which are included in parentheses and identified by a * are not used in the act hut appear in the United States Code Annotated.)

Giving due weight to the subject-matter particularly under consideration in the enactment of the foregoing sections, that is, foreign aircraft and foreign commerce, and to the associated words of the statute, in accordance with the maxim “noscitur a sociis” as well as the ejusdem generis rule of statutory construction — for in the statute, section 177 (a), the general words “shipping laws” follow the particular words of section 177 “foreign commerce,” and as the statute giving the maritime lien for repairs (title 46, USC A § 971) is not restricted to foreign commerce or foreign watercraft, it follows that section 177 (a) of title 49, USC A, does not deny a maritime lien to one who repairs a seaplane under the circumstances here' shown. Reinhardt v. Newport Flying Service Corp., 232 N. Y. 115, 133 N. E. 371, 18 A. L. R. 1324.

Decree will be for the forfeiture and sale of the respondent seaplane as prayed in the libel and amended intervening libel. The intervening libelant will be decreed a preference upon distribution, of the amount claimed for the repairs made.

Any findings, conclusions, and decree will he settled upon notice.

The clerk will notify the parties of this decision.


source: Caselaw Access Project

author: KIRKPATRICK, District Judge.

license: Public Domain

text:
    PENNSYLVANIA CO. FOR INSURANCES ON LIVES AND GRANTING ANNUITIES et al. v. BROWN, Late Acting Collector of Internal Revenue.
    No. 14882.
    District Court, E. D. Pennsylvania.
    July 12, 1933.

      Benjamin O. Frick, of Philadelphia, Pa., for plaintiffs.
    P. E. Miller, of Washington, D. C., and Thomas J. Curtin, Asst. U. S. Atty., and Charles D. McAvoy, U. S. Atty., both of Philadelphia, Pa., for defendant.
   KIRKPATRICK, District Judge.

In their return for inheritance tax, the executors of Theodore C. Birnbaum claimed the amount of $327,861.24 as a deduction from the gross estate, on the ground that this was the amount of a bequest to certain charities. The Commissioner of Internal Revenue disallowed the deduction and determined a deficiency in the tax which with interest was paid by the executors who brought this suit for its recovery. The ease was tried to the court with a jury. At the close of the testimony, each side submitted a general point for binding instructions in its favor, thus leaving it for the court to determine both law and facts.

The Commissioner’s reason for disallowing the deduction was that the residuary bequests to charities had no ascertainable value at the date of the decedent’s death.

By the will the entire residuary estate was given to the executors in trust, (I) to pay certain annuities to eight designated beneficiaries during their respective lives. (2) “If either of my nieces, Emma Hilgesen or Aurora Norberg, or my nephews, Carl Nor-berg or Alwill Norberg should leave daughters surviving them, I give to such surviving the sum of Five thousand dollars ($5,009) each.” (3) “Upon the termination of all of the foregoing trusts” to pay over the principal to certain designated charities.

It is apparent that the amount of the residuary estate which will go to charity will vary inversely with the number of daughters surviving the four named nephews and nieces, at the rate of $5,000 for each daughter. At the time of the decedent’s death, September 8, 1924, the four nephews and nieces were living, and there were also five living daughters. One niece was fifty-seven years old and married; the other fifty-six years old and unmarried. The nephews were respectively fifty-one and forty-five years old, both married. All four are still living.

The assessment and payment of the tax cannot be postponed until the termination of the trusts, and therefore whether or not any deduction is allowable and, if so, how much, must he determined as of the date of the decedent’s death. At that time the chances Were, of course, slender that any more daughters would come into the world to reduce the bequest to the charities, and by this time they are negligible. One or more of the daughters now living may die and so increase it.

Evidence was submitted consisting of birth statistics from the Bureau of the Census for the Birth Registration Area of the United States, for the year 1924, showing, I believe, that no children were horn to women over fifty-five years of ago and that the chance of a man over forty-five of having a daughter is about one to thirty-two. However, the plaintiff did not contend very seriously that the court could make any findings of fact by which the amount which the charities will ultimately take could he ascertained, and it would be ludicrous to attempt to do so. Of course, in this particular case any one could make a pretty good guess' at it, but, if there were twenty nephews and nieces, all young and all married, the situation would be very different. If that were the ease, the charitable bequest might easily be cut in half or more when the time for distribution arrived. I therefore find as a fact that it is impossible to ascertain the amount of the residuary bequest to charities as of the date of the decedent’s death.

The plaintiff’s real contention is that, since the interest of the charities is vested (subject only to be divested or reduced upon certain contingencies), it is incumbent upon the government to show to what extent it will be reduced, and, upon failure to make such showing, the whole deduction should be allowed. Parenthetically, the plaintiff has not been quite consistent in this because he has already diminished his claim for deduction by $25,000, allowing $5,000 for each of the living daughters. The government contends that the charities have a contingent interest only, and that under Humes v. United States, 276 U. S. 487, 48 S. Ct. 347, 348, 72 L. Ed. 667, no deduction can be allowed.

There is no possible doubt that interest of the charities was vested, subject to be divested in part at least on the happening of contingencies. See Wheaton Coal Company v. Harris, 288 Pa. 294, 135 A. 637; Marshall’s Estate, 262 Pa. 145, 105 A. 63; Neel’s Estate, 252 Pa. 394, 97 A. 502.

It does not follow, however, that the plaintiff can claim the deduction. Questions of vested or contingent may be of the greatest importance in determining the _ alien-ability of the remainder or its liability to be subjected to claims of creditors, but we are here construing a taxing statute and determining whether or not a deduction is allowable. The deduction is of “The amount of all bequests,” etc. As the court said in Humes v. United States, supra: “But the fundamental question in the ease at bar is * * * what construction shall be given to a statute. Did Congress, in providing for the determination of the net estate taxable, intend that a deduction should be made for a contingency the actual value of which cannot be determined from any known data?” It happened that, in the Humes Case, the remainder was a contingent one, but the point that the court emphasized is that the controlling question is the uncertainty and unaseertainability of the amount claimed, and there is just as much uncertainty of amount involved in a vested remainder subject to be divested as in one which is contingent.

The burden of proof is always upon the taxpayer claiming an exemption. Statutes allowing exemptions from taxation to charities are of course construed liberally in favor of the exemption, but that does not affect the rule that one claiming a deduction must be able to show, with reasonable certainty at least, the amount which he claims. In Ithaca Trust Company v. United States, 279 U. S. 151, 49 S. Ct. 291, 73 L. Ed. 647, while the amount by which the deduction might be diminished could not be ascertained with absolute certainty, it was possible to ascertain it with reasonable exactness.

If, as the plaintiffs contend, the vested character of the remainder controls, it can readily be seen where it would lead. Por example, it is well settled in Pennsylvania that a remainder, though subject to be wholly divested by the exercise of power of appointment given the life tenant, may, none the less, be a vested remainder. Again, under a will, the birth or survival of a single child may operate to wipe out an entire remainder interest and yet not affect its character as vested. These considerations make plain the necessity of adhering closely to the policy of Humes v. United States, supra; namely, that no deduction can be allowed the amount of which cannot be ascertained at the testator’s death with reasonable accuracy. This ease happens to be one in which, in view of the large amount of the residuary estate, the small size of the contingent bequests and the age of the parties, the percentage of error in any guess at the amount which will go to charity is likely to be small, but the fact that such cases will arise does not call for encroachment upon the plain poliey of the law.

I therefore conclude as matter of law that the deduction was properly disallowed, for the reason that the residuary bequests to charity have no ascertainable value as of the date of the decedent’s death.

I affirm the defendant’s points for charge that under all the law and evidence the verdict must be in favor of the defendant, and deny the plaintiff’s point, allowing exceptions to the plaintiff.

I find generally for the defendant.

Judgment may be entered accordingly.


author: THOMAS, District Judge.

text:
    SILENT GLOW OIL BURNER CORPORATION v. CROOKES.
    No. 2212.
    District Court, D. Connecticut.
    April 12, 1934.
    Thomas B. Booth, of Boston, Mass., for plaintiff.
    Arthur C. Eckert, of St. Louis, Mo., for defendant.
   THOMAS, District Judge.

This is a suit brought by the plaintiff to restrain an alleged infringement of two patents, No. 1,782,739 and No. 1,851,919. The bill as originally filed also charged infringement of patent No. 1,377,669, but before the trial plaintiff moved that its hill of complaint as to the last-mentioned patent be dismissed without prejudice and with costs to be taxed against the plaintiff, and the motion was granted.

Patent No. 1,782,739 was issued on November 25, 1939, to the plaintiff as assignee of Albert A. Lapointe for improvements in oil burners, on an application filed April 29, 1925. The other patent in suit, No. 1,851,919, was issued Mareh 29,1932, to the plaintiff as assignee of Frederick F. Neumann for improvements in liquid fuel burners, on an application filed April 24, 1931.

The corporate existence of plaintiff and its title to the patents in suit is admitted by the defendant.

Infringement is charged of claims 6, 7 and 8 of the Lapointe patent, and of claim 19 of the Neumann patent.

The hill charges the defendant with infringement as to certain oil burners sold by him which were manufactured by International Oil Heating Company of St. Louis, Mo., which company controlled and conducted the defense in this case. So far as appears in this record, the nominal defendant, Thomas A. Crookes, never did anything more than sell the oil burner, Plaintiff’s Exhibit 8, including two annular sheet metal plates marked Plaintiff’s Exhibit 8-A. The jurisdiction of this court is therefore invoked because of the facts just set forth, which show that the International Oil Heating Company of St. Louis, Mo., is the real defendant and Thomas A. Crookes is the nominal defendant selling the product of the real defendant. The bill of complaint seeks an injunction, accounting, and damages.

The inventions described in the two patents in suit relate to oil burners, and more particularly to those generally known as blue-flame combustion-tube burners. A burner of the type mentioned usually comprises a base, on which are mounted perforated, spaced combustion tubes or shells, preferably concentrically arranged one "within another, thus forming between them an annular combustion chamber, to which liquid hydrocarbon vapor is supplied commingling with air entering through the perforated walls of the tubes or shells. The mixture burns with a blue flame characteristic of vapor or gas when complete combustion occurs. The liquid hydrocarbon, such as oil, is fed into passages, such as grooves in the base below the combustion chamber. Inasmuch as the liquid hydrocarbon cannot be ignited, it must first be either vaporized or finely divided and burned in the presence of air. To start the burner, the oil in the base must initially be vaporized by some method, such as preheating. The burner may be primed with an easily ignitible volatile fuel, but the common method is to use a wick positioned near the bottom of the combustion chamber and adapted to be saturated with the liquid hydrocarbon in the base. When the wick is lit the burner heats up, and, as the temperature of the latter rises, heat is transmitted to the base, where, in the course of time, some of the free liquid hydrocarbon begins to vaporize, adding to the combustion and the heating effect. This gradually builds up the combustion and the temperature of the base, thus bringing the burner to full fire condition and to a point where the liquid hydrocarbon, independently of the wick or other preheating means employed, is vaporized in the base, so that the burner then becomes self-vaporizing. The vapor rises into the combustion chamber commingling with the air therein, and the mixture burns with a blue flame, and the products of combustion leave the burner at the annular top of the combustion chamber.

Oil burners of the general type referred to were known for many years prior to the applications which resulted in the patents in suit and were applicable for use in cooking ranges, heating stoves, and furnaces, but they all had, as.appears from the evidence adduced by the plaintiff, more or less serious inherent defects prior to Lapointe’s and Neumann’s entry into the field. These defects will be referred to infra.

In 1924 the plaintiff was engaged in developing the blue-flame combustion-tube burner for use in cooking ranges and heating stoves. These burners are known in the trade as range burners. They are designed to be installed in the fire box of a kitchen range or heating stove, after the removal- of the grate bars, and are used in substitution for the coal or wood fire which would otherwise be employed to heat the oven, lids, top, and walls •of the .stove. In 1924 no commercial use had been attempted of this type of burner as a range burner. Plaintiff was a pioneer in that field, and had no noticeable competition therein until 1927 or 1928.

The Lapointe Patent.

Lapointe’s patent discloses a blue-flame combustion-tube burner “that may be readily lighted and also that may be readily cleaned when occasion requires.” Lines 9 and 10, page 1 of the specifications. The structure described in this patent 'includes a base provided with a plurality of concentrically arranged annular fuel grooves or troughs. On the edges of these grooves are removably supported spaced vertically extending perforated combustion tubes or shells which form between them combustion chambers, in which vaporized fuel is adapted to be burned. The outermost groove communicates with an upright supply pipe connected to the base member. A cup is removably threaded to the bottom of the supply pipe and closes the lower end thereof. A lateral fuel supply branch pipe is connected to said upright pipe above said cup. The upright fuel supply pipe is also connected with the remaining grooves in the base.

The arrangement of the fuel supply system in relation to the vaporizing chamber is claimed by plaintiff to be the new element of the combination defined by the claims in suit, which obviates at least two of the serious difficulties encountered with oil burners prior to Lapointe’s invention.

From the testimony presented on behalf of the plaintiff, it appears that in the operation of the burner the liquid fuel is vaporized in the fuel groove, and thus carbonized fuel accumulates through long usage. This carbon tends to form a hard coating or crust in the vaporizing groove in the base, as well as in the fuel supply opening leading to the groove and, to some extent, within the fuel supply pipe. This carbon deposit must be removed from time to time, as otherwise it interferes with the proper operation of the burner.

Lapointe arranged his fuel supply pipe in relation to the vaporizing groove in the bottom of the burner so as to permit easy cleaning of the burner and removal of the carbon deposits therein without dismantling the fuel supply system. The carbon deposit is removed by first lifting the combustion chamber from the base and then using a scraping tool which is run through the groove a sufficient number of times to- loosen the carbon from the walls-of the groove. Prior to Lapointe’s invention, the loosened particles of carbon had to be carefully lifted from the groove to avoid their falling into the open oil supply port. The thickest and hardest crust tends to form on or about the oil supply port. With the utmost care in this cleaning operation substantial amounts of carbon could not be kept from dropping into the oil supply port, and thence into the supply pipe. The carbon could be removed only by dismantling the fuel supply system. With the development of Lapointe’s invention, the cleaning operation became quicker and easier because carbon particles passing through the fuel supply port fall to the bottom of the supply pipe, from which they can be removed by detaching the eup. The supply pipe can be easily cleaned by a cleaning rod whieh is furnished with each commercial burner that the plaintiff and also the International Oil Heating Company make.

There was another serious difficulty with the oil burner of the type herein described and made prior to Lapointe’s invention. Water in the liquid hydrocarbon caused an irregular and variable action in combustion. The fuel supply system, as discussed in Lapointe’s patent, remedied this defect so that the water in the liquid hydrocarbon settles in the lower portion of the supply pipe before it reaches the combustion chamber and can easily be removed without dismantling the burner and the feed lines. The water accumulating in the trap is removed just as carbon particles are removed, so that all trouble, prior to Lapointe, with both water and carbon are now avoided by the use of what is called, in the trade, the “carbon leg.”

The claims in suit herein read as follows:

“6. A burner of the class described having a base member provided with an open fuel groove therein, spaced, perforated, tubular wall members removably supported on said base member presenting between them a combustion chamber above the fuel groove, in which chamber the vaporized fuel is adapted to be burned, a fuel supply opening in the bottom of the groove, an upright supply pipe connected to the base member and said opening and in line with the latter, a eup constituting a trap removably threaded to the bottom of said pipe and closing the bottom thereof, and a lateral fuel supply branch pipe connected’ to said upright pipe above said cup, whereby, said pipe may be opened at its lower closed end and cleaned either through said trough end or lower end.

“7. A burner of the class described having a base member with an open fuel groove therein, spaced, perforated, tubular wall members removably supported on said base member presenting between them a combustion chamber above said fuel groove, in whieh chamber the vaporized fuel is adapted to be burned, a fuel supply opening in the bottom of the groove, an upright supply pipe connected to the base member and said opening; and in line with the latter, a removable closure for the bottom of said pipe, and a lateral fuel supply branch pipe connected to-said upright pipe above said closure to provide a trap at the bottom thereof, whereby said pipe may be opened at its closed end to be cleaned either through the trough connected end or the bottom end thereof.

“8. A burner of the class described having a base member provided with an open fuel groove therein, spaced, tubular wall members removably supported on said base member presenting between them a combustion chamber above said fuel groove in which the vaporized fuel is adapted to be burned, a fuel supply opening in the bottom of the groove, a supply pipe connected to the base member and said opening and in line with the latter, a removable closure for the opposite end of said pipe, and a lateral branch pipe connected to said supply pipe intermediate its ends, whereby said supply pipe may be opened and, together with said fuel supply opening, cleaned through the trough end of the pipe or opposite end thereof.”

It will be noted that in each of these claims the cup or removable closure in the bottom of the upright supply pipe is claimed in combination with the fuel groove and the combustion chambers above the latter. This seems to be necessary in order to bring out the relationship between the fuel supply pipe, fuel supply port, and the combustion chamber. Therefore these claims are, in my opinion, true “combination claims,” as this term is defined in the many decisions relating to this subject.

The defenses relied on are: (A) Invalidity of the claims in view of the prior art and the state of the art; (B) dedication of the claims to the public; (C) the claims form aggregations as distinguished from patentable combinations; (D) noninfringement.

(A) Prior Art. The defendant has pleaded in his answer an unduly and unnecessarily large number of alleged prior art patents against the simple structure defined by the three claims in suit, and has in his brief referred to all of these patents. These facts by themselves seem to indicate a lack of confidence in the anticipating character of the same. I cannot understand why, to meet a simple issue, it is necessary to rely on sixteen patents without pointing out which of the same is to be considered the nearest approach to the problem.

It is unnecessary to discuss the disclosure of the Sherman patent No. 1,676,223, Defendant’s Exhibit XX, the Newbery patent No. 1,780,273, Defendant’s Exhibit YY, and the Keenan patent No. 1,732,605, Defendant’s Exhibit JJJ, as each one was granted on an application having a filing date which is later than that of the appliesution which resulted in the Lapointe patent in suit. The date of Lapointe’s invention on the face of his patent, and without the necessity of further proof, was at least as early as April 20, 1925, which is the filing date of his application. On this point -the law is well settled. Anticipation being an affirmative defense, defendant can prevail only in case undisputed testimony carries the date of the invention of the reference patent relied on to a date earlier than either the date of the application of the patent in suit or any earlier invention date proven by the patentee. Defendant having failed to offer any testimony to overcome the application date of the patent in suit, it follows that the Sherman, Newbery, and -Keenan patents above referred to are ineffective for the purpose relied upon by the defendant.

In dealing with the remaining patents relied upon by the defendant,' it should be borne in mind that the claims in suit are not directed to the fuel supply system per se, but to a combination of elements. These claims each call for a combustion chamber, a pair of removable overhead combustion tubes, an open fuel groove below the combustion chamber, an upright pipe in line with the open oil inlet in the bottom of the groove which pipe has a removable closure, and a laterally projecting branch pipe above the closure. As pointed out above, not only is water which may be in the oil prevented from reaching the groove, but the latter can be readily cleaned of carbon without the removal of the burner from the range in which it is installed or taking the burner apart, thus permitting the burner to perform its function as a blue-flame combustion type burner, unaffected by either carbon or water. Even if it were found that a trap feature of the fuel line is old and known per se, its relationship to the remaining elements of the burner may be novel and patentable if a new, useful, and beneficial result, never attained before, is produced. I have patiently and carefully perused all of the patents relied on by the defendant, with the exception of the three patents above referred to as not constituting prior art, and conclude that the combination called for by claims 6, 7, and 8 of the Lapointe patent in suit is novel and not shown by the prior art patents, takén either singly or combined; that the combination produces a new and beneficial result never attained before; and that, consequently, these claims are valid. It would serve no useful purpose to analyze these patents, but it is sufficient to say that the inventions disclosed therein do not, solve Lapointe’s problem, and that the patents do not, even in a remote way, describe the same.

(B) Dedication of the Claimns in Suit to the Public. The defendant contends that, inasmuch as original claims 5 and 6, which refer to the supply pipe system only, were canceled in the application of Lapointe which resulted in the patent in suit, the claims now in suit are void by reason of the fact that the structures of original claims 5 and 6 were dedicated to the public.

A mere reading of the file wrapper and contents of the patent in suit convinces me that the claims in suit are limited in scope compared with canceled original claims 5 and 6; that the usual procedure was followed in this ease in the Patent Office; and that nothing was done contrary to the rules of practice of the Patent Office or to the laws pertaining to patents on inventions. The applicant Lapointe had the right to amend, and did amend, his application in reply to the Patent Office Examiner’s citation of references and reasons for rejection. While Lapointe may have dedicated to the publie the structures defined by original claims 5 and 6, I am constrained to hold that he did not dedicate the invention called for in the claims in suit.

(C) Aggregation Claims. This defense has been dealt with hereinabove. It is without merit because the claims contain only such elements as are necessary to properly define the invention sought to be protected thereby.

•(D) Noninfringement. Infringement is not seriously contested by the defendant. I find that Plaintiff’s Exhibit 8, which is defendant’s burner, has in its fuel supply pipe a removable pipe plug that is disposed below the lateral branch pipe, so that a trap is formed and operated for the purpose described and set forth in the claims in suit, the supply pipe being adapted to be opened at its closed end to be cleaned either through the vaporizing groove in the burner base or through the opposite end of the pipe. It follows, therefore, that Plaintiff’s Exhibit 8, defendant’s burner, infringes claims 6, 7, and 8 of the Lapointe patent in suit.

The Neumann Patent.

In the development of plaintiff’s burner, model W, (Plaintiff’s Exhibit No. 11) was the next step following its model R.

Inasmuch as Neumann’s invention was a further development of plaintiff’s model W, it seems to be advisable first to describe its construction.

Model W comprises a cast-iron base having upstanding walls forming spaced inner and outer annular fuel grooves which are connected by radial cross-duets. On the base are mounted four spaced concentrically arranged combustion tubes, forming inner and outer combustion chambers. Each chamber communicates with one of the fuel grooves. Within the inner combustion tube there is formed an inner air chamber, closed at the top by a top plate and receiving air through a central opening in the base. Between the combustion chambers there is also formed an intermediate air chamber closed at the top by a ring and receiving air through the opening in the base between the inner and outer fuel grooves. The inner fuel groove is relatively broad, and its inner part is covered by a removable east-iron cover plate, Plaintiff’s Exhibit 11-A. This cover plate fits over the inner upstanding wall of the groove, extends outwardly to partially cover the latter, and, at its outer edge, provides a shoulder supporting the inner combustion tube. Liquid hydrocarbon is supplied to an open port in the bottom in the covered part of the relatively broad fuel groove below the east-iron cover plate. During the starting of the burner liquid fuel passes from said port into the outer uncovered part in the fuel groove and through the cross-duets to the outer fuel groove in order to saturate wicks which are fitted into each groove beneath the overlying combustion chamber.

The patentee Neumann discarded the thick east-iron cover plate and made use of a thin sheet metal vaporizing cover plate, a specimen of which is in evidence as Plaintiff’s Exhibit 15. Several advantages are claimed by the substitution of thin metal cover plate for a thick east-iron plate, and the whole controversy seems to turn around this point.

It is claimed by plaintiff that Neumann, by substituting one plate for another, obtained results which were wholly unexpected and unobvious, and thereby removed his invention from the general rule, which is that a mere substitution of material does not amount to invention.

The single claim in suit reads as follows: “10. A burner having a pair of concentric, spaced, annular, combustion tubes forming between them a combustion chamber and having an inner air chamber enclosed by the inner combustion tube, a base having upstanding walls presenting between them a broad, annular fuel chamber, a removable thin sheet-metal, heat-conducting cover plate covering the inner part of said fuel chamber and underlying the inner air chamber and providing a fuel vaporizing space thereunder but leaving an uncovered opening adjacent the outer wall of the fuel chamber registering with the overhead combustion chamber, and means for delivering liquid fuel to the fuel chamber.”

The general combination of this claim was old and well known prior to Neumann’s invention. Neumann substituted for the removable east-iron plate, covering the inner part of the fuel chamber, a thin sheet metal heat-conducting cover plate, which is constructed in plaintiff’s burner of a specific material not defined in the claim in suit.

The defenses relied on are: (E) That the subject-matter of claim 10 was invented by one Otto Buder, and the Buder burner sold and in public use for more than two years prior to Neumann’s application date; (P) invalidity of the claim in view of the prior art and the state of the art; (G) dedication of the claim to the public; (H) noninfringement. '

.(E) The Buder Burner. Depositions were taken on behalf of the defendant, and it is eontended by defendant that these depositions and the exhibits offered therein prove that Buder conceived the invention defined by claim 10 of the Neumann patent on August 2, 1928; that Buder completed the invention by the construction and operation of a burner, Defendant’s Exhibit 2, on October 5, 1928, and that a similar burner, Defendant’s Exhibit 5, was sold and went into use in January, 1929, which is more than two years prior to Neumann’s application date.

It seems to be unnecessary to consider whether or not the proofs establish defendant’s contention as to the above dates of construction, operation, sale, and use of the Buder burner because these exhibits embody cast-iron plates covering the inner part of the wide fuel chamber supporting the inner combustion tubes. They do not employ the thin sheet metal plate of the Neumann patent. As a matter of faet, it appears from Buder’s testimony that the International Oil Heating' Company did not adopt the sheet metal plate in place of the cast-iron plate until the latter part of the summer of 1931. Depositions p. 59, XQs 413', 414. Consequently, this defense must fall.

(F) The Prior Art. Defendant has set up such a number of alleged prior art patents in his answer to meet the simple issue above defined that the remarks made in connection with Lapointe’s patent in suit on this point are emphasized and reiterated here.

The Sherman patent, No. 1,848,207, is not part of the prior art, because it appears from the testimony of Sherman that he is not the inventor of the sheet metal vaporizing .plate. On the contrary, he disclaimed it, testifying that the thin sheet metal plate was the invention of Neumann alone.

It appears from the testimony offered that the plaintiff’s first model W was an improvement over its model R. It was adopted only for use with good grades of oil, and its sale was limited to the territory east of the Hudson river, where uniformly good grades of oil were obtainable at that time. Furthermore, its heating capacity was inadequate to meet the requirements of a broad field, and its starting or heating up time precluded its use in areas accustomed to wood as fuel, and prevented any interest on the part of those using gas. Neumann, by constructing the cover plate of thin sheet metal, not only increased the heat capacity of the burner and reduced carbonization, but lessened the starting time. The heat capacity of the burner was increased by from 25 per cent, to 40 per cent., and the starting period was reduced from 30 per cent, to 50 per cent. Carbonization, which had always increased with any increase in heating capacity, was reduced. The trouble from nonuniform oil conditions ceased; the market for the burner consequently extended; and the service problem was. eliminated.

During the trial defendant’s counsel admitted that the sheet metal heat-conducting cover plates used by the plaintiff are better than the cast-iron plates and that they perform the function better than east iron. Consequently, the only question to be decided is whether any function of the sheet metal heat-conducting cover plate is unexpected and unobvious. That the invention seems simple after being made does not determine the question of invention, because the substitution of material may amount to invention if some useful result or increase of efficiency is clearly obtained. There is no question in my mind that characteristic changes in results did occur when Neumann substituted his sheet metal cover plate for the cast-iron cover plate, and that the result was not obvious. As a matter of faet, it was unexpected because increasing heat would naturally increase carbonization, which is not the case in plaintiff’s burner. Notwithstanding the faet that the heating effect of the Neumann burner is increased, carbonization is decreased. I conclude, therefore, that the case comes obviously under the doctrine laid down in many court decisions, such as United Shoe Machinery Corporation v. E. H. Ferree Co. et al. (C. C. A.) 64 F.(2d) 101, George Frost Co. et al. v. Cohn et al. (C. C. A.) 119 F. 505, 508, and others.

I reach this conclusion because I cannot find in the prior art, relied upon by the defendant, any burner that has the characteristics of plaintiff’s burner. The patents relied upon by the defendant do not disclose the combination defined by claim 10 in suit herein, as their specifications do not refer to sheet metal heat-conducting cover plates, and the disclosures of their drawings are not sufficient to prove that the use of such a plate was ever contemplated by the respective patentees. I find that, while the different thicknesses of the cover plates of the prior patents may be ascertained by careful measurements of the drawings, it is an accidental showing only, and does not anticipate, because there is nothing in the specifications which recites or alludes to this feature. In view of the foregoing, I hold that claim 10 of the Neumann patent in suit is valid.

(G) Dedication of the Claim, to the Public. The defense raised in connection with the Lapointe patent in suit with reference to the dedication of the claims therein in suit to the public is raised also in connection with the Neumann patent. Whatever has been said hereinabove with reference to the Lapointe patent applies equally to the Neumann patent.

(H) Noninfringement. Even a casual examination of defendant’s burner leaves no question in my mind as to infringement thereby of claim 10 in suit herein. Defendant raises the point that the sole function of its cover plate is an adaptor to form a support for the inner combustion tube, and that this adaptor plate does not provide a fuel vaporizing space beneath it as called for by' claim 10 of the patent in suit. I consider this mere quibbling, particularly in view of the fact that it appears from the record that the International Oil Heating Company followed step by step the development of plaintiff’s burner and made changes in its burner whenever plaintiff improved its burner. The International Oil Heating Company did so both as to the shape and the thickness of the sheet metal heat-conducting cover plate.

In view of the facts herein recited, I reach the conclusion that defendant’s burner infringes claim 10 of the Neumann patent in suit.

For the foregoing reasons and conclusions, I hold that the defendant’s burner infringes the claims relied upon by the plaintiff of the two patents in suit, and I do this without giving any weight to the commercial suece'ss of plaintiff’s burner, because I have ’ no doubt as to the validity of the patents and also the infringement. If I had any doubt on this score, I would resolve it in favor of the plaintiff because of the commercial success of its burner.

There may be a decree for the plaintiff in accordance with the prayer for relief, with costs to abide the event. Costs as to patent No. 1,377,669, to which the bill of complaint was dismissed, are awarded to the defendant.

Submit decree accordingly properly consented to as to form.


author: COSGRAVE, District Judge. WILBUR, Circuit Judge

text:
    BETTS v. RAILROAD COMMISSION OF STATE OF CALIFORNIA.
    No. Z-6-C.
    District Court, S. D. California, Central Division.
    Sept. 5, 1933.
    W. Frank Shelley and Kirtland I. Perky, both of Los Angeles, Cal., and Ralph W. Eckhardt, of San Bernardino, Cal., for plaintiff.
    Arthur T. George, Ira H. Rowell, and Roderick B. Cassidy, all of San Francisco, C'aL, for defendant.
    Before WILBUR, Circuit Judge, and McCORMICK and COSGRAVE, District Judges.
   COSGRAVE, District Judge.

Plaintiff filed his bill of complaint on January 25, 1933, to enjoin the Railroad Commission of the State of California and its officers from enforcing two certain orders heretofore made by the Commission directed against plaintiff and, pending the hearing of the ease, to grant an interlocutory injunction. Since plaintiff thus sought to restrain the execution of an order of an administrative board acting under the statutes of the state, the application for interlocutory injunction was heard by three judges. 28 USCA § 380. The motion of the Railroad Commission to dismiss the bill was heard at the same time.

Plaintiff, a truck operator, was cited before the Railroad Commission upon a complaint duly filed for operating trucks as a common carrier without a certificate of public convenience and necessity required by the Public Utilities Act of California. St. Cal. 1915, p. 115, as amended.

At the hearing before this court, at which plaintiff’s application for an interlocutory injunction was heard, it appeared from the allegations of the plaintiff’s bill and the return to the order to show cause issued by this court against the Railroad Commission, that on complaint filed with the Commission against plaintiff, and after a full hearing thereon, it was found by the Commission that plaintiff was operating as a common carrier, and by order entered on November 23, 1931, he was required to obtain the necessary certificate of public convenience and necessity or to cease operations. This order is Decision of the Railroad Commission No. 24255, being one of the two orders, enforcement of which plaintiff seeks to enjoin. No review of this decision was sought in the manner prescribed in the Public Utilities Act or otherwise.

On April 7, 1932, in appropriate proceedings before the Railroad Commission an order was issued against defendant requiring him to show cause why he should not be punished for contempt for failure to obey order No. 24255. Plaintiff appeared to this order, hearing was duly had, and on September 12, 1932, he was adjudged guilty of contempt and certain penalties were imposed upon' him. This decision of the Railroad Commission is No. 25177, and is the second order, enforcement of which plaintiff seeks to enjoin in this action. He thereupon filed a petition before the Commission for a review of this order, No. 25177, and after denial of the same by the Commission he filed a petition before the Supreme Court of the State of California praying for a review of both orders. This procedure is in accordance with the provisions of the Public Utilities Act mentioned. His petition was denied by the Supreme Court of California on December 15, 1932 (S. F. 14812)

On December 27, 1932, a further order was issued against the plaintiff by the Railroad Commission requiring him to show cause why he should not again be punished for contempt for failure to comply with the original order of the Commission, being that No. 24255, of November 23, 1931. This proceeding is still pending before the Commission.

On January 9, 1933, while petitioner was in custody under the contempt order of September 12, 1932, he filed a petition for writ of habeas corpus before the Supreme Court of California on the ground that his imprisonment under the order of the Railroad Commission was unlawful. This petition, involving as it did the same grounds theretofore presented to the Supreme Court of California in support of his petition for review of the order under which he was punished for contempt, was denied by the Supreme Court of California on January 12, 1933. In the meantime the penalty imposed by the Commission’s order of September 12, 1932, has been satisfied by plaintiff. In his bill of complaint before this court, after alleging illegality of the two several orders mentioned, he sets forth that the Railroad Commission intends again to impose oppressive orders and punishment upon him under its latest order to show cause which, as heretofore suggested, is still pending before the Commission.

It is plain therefore that plaintiff presents here the identical questions passed upon by the Supreme Court of California, and the decision of that court is now final, and the matters therein adjudged cannot again be presented to any court for determination. This is the conclusion of the United States Supreme Court in Napa Valley Electric Co. v. Railroad Commission, 251 U. S. 366, 40 S. Ct. 174, 64 L. Ed. 310, a case involving the precise question presented here. The same jurisdictional question is decided by the Circuit Court of Appeals of the Ninth Circuit in Wallace Ranch Water Co. v. Railroad Commission, 47 F.(2d) 8. We regard the question as settled by the two decisions named.

The application for interlocutory injunction is therefore denied, and defendant’s motion to dismiss the bill is granted.

MeCORMICK, District Judge, concurs.

WILBUR, Circuit Judge

(concurring).

I concur. Plaintiff’s contention throughout has been that he is acting as a private, and not as a public carrier. That matter was decided adversely to him in the litigation before the Railroad Commission and before the state Supreme Court. He correctly contends that the jurisdiction of the Railroad Commission is confined to public carriers and that it has no> jurisdiction over private carriers. It does, however, have jurisdiction to determine whether or not a carrier is public or private. Such determination is essential to the exercise of its jurisdiction. The Supreme Court of the state has power to review the matter of the jurisdiction of the Railroad Commission. The present attack upon the orders of the Railroad Commission and of the state Supreme Court are collateral, and in such a proceeding the determination of the' state court upon the question of jurisdiction is conclusive. In addition to the cases cited upon this point by Judge COS GRAVE, the recent decision of the Supreme Court in American Surety Company v. Baldwin (Baldwin v. American Surety Company), 287 U. S. 156, 53 S. Ct. 98, 77 L. Ed. 231, 86 A. L. R. 298, and Johnson v. Manhattan R. Co., 289 U. S. 479, 53 S. Ct. 721, 77 L. Ed. 1331, may be cited.

       No opinion filed.


author: NIELDS, District Judge.

text:
    REALTY ACCEPTANCE CORPORATION v. MONTGOMERY.
    No. 956.
    District Court, D. Delaware.
    April 9, 1934.
    Charles E. Curley, of Wilmington, Del., and R. Randolph Hicks, of New York City, for plaintiff.
    Aaron Finger (of Richards, Layton & Finger), of Wilmington, Del., and Thomas J. Crawford, of New York City, for defendant.
   NIELDS, District Judge.

Plaintiff brought this bill in equity to enjoin defendant from enforcing a judgment of $80,509, in any amount in excess of $14,918.13; in effect, to reduce the judgment to $14,918.13. The judgment had been recovered by defendant against plaintiff on May 1, 1929, in an action at law in this court for breach of a salary contract. The complete story of the action at law will be found in Realty Acceptance Corporation v. Montgomery (C. C. A.) 51 F.(2d) 636; Montgomery v. Realty Acceptance Corporation (C. C. A.) 51 F.(2d) 642; Realty Acceptance Corporation v. Montgomery, 284 U. S. 547, 52 S. Ct. 215, 76 L. Ed. 476. The ground for asking injunctive relief in the bill was the documentary proof, obtained by plaintiff after the expiration of the term of court when the judgment was recovered, of large additional earnings on the part of defendant diminishing damages arising from the breach of the salary contract and the incorrect testimony given by defendant respecting his earnings while under cross-examination in the action at law, with the result that the court entered judgment for an excessive amount relying upon defendant’s incorrect testimony. Judgment having been entered for an excessive amount, enforcement of the judgment is necessarily against conscience. Upon that broad ground plaintiff asks for the permanent injunction.

An understanding of the belated proof and of defendant’s incorreet testimony can only be gathered from a brief recital of the proceedings' at law. Defendant brought an action of covenant against plaintiff to recover damages arising from plaintiff’s breach of its contract to employ defendant as its president for the period from September 23, 1924, to December 31, 1929, at a salary of $25,000 a year and also to recover $10,000' due defendant on account of his first year’s salary under the contract. Plaintiff repudiated the contract of employment on December 31, 1926, when three years of the term of employment had yet to run. Ultimately a judgment of $80,500 was recovered against plaintiff, made up of $75,000 balance of defendant’s salary for the remainder of the contract term, less earnings of $4,500 in mitigation of the damages, plus $10,000, an unpaid portion of defendant’s first year’s salary. Defendant’s right to a judgment to the extent of the $10,000 is not seriously questioned.

From the testimony in the lawsuit it appears defendant led the court to believe that his only earnings from outside employment during the three-year period for which he claimed damages was $4,500‘, and consequently that $4,500 was the only amount deductible in mitigation of damages arising from the breach of contract. The sole evidence as to defendant’s activities, .after his relations with plaintiff were severed until the time of the trial, was the testimony of defendant himself. Montgomery testified as to outside employment in the course of an extended cross-examination :

“XQ. What arrangement, if any, did you have with Palmer & Company, prior to June 1st, of this year? * * * A. The arrangement that. I had with Palmer & Company was one I sought myself largely with the idea of rehabilitating myself in the business world. I had an office or desk with them for which I paid no rent, and I had no salary. I traded in securities on the stock exchange for awhile, and then we had an agreement that I should buy, employing my judgment, certain securities which would be resold and the profit or loss would be charged against our joint capital, all expenses first being deducted. The return, if the profit did result, was to be divided equally. It was the arrangement. It was all covered on a half sheet of typewriting.”

Montgomery further testified:

“XQ. Now, I ask you to tell me what was the total of that amount which was deducted from these joint profits and received by you prior to the distribution of the balance in equal shares between you and Palmer & Company.? A. It was equivalent to $1000 a month. * * *

“XQ. Prom September 1, 1927 to June 1, 1928 ? A. Yes. * * *

“XQ. Another question, Mr. Montgomery: In this joint account activity between you and Palmer & Company prior to June 1st, 1928, when stocks were purchased for this joint account, was the cost of that purchase borne equally by yourself and by Palmer & Co? * * * A. We had an equal risk of capital there.

“XQ. My question is not confined to equal risk of capital, Mr. Montgomery. My question was-who contributed the capital necessary for the acquisition of stocks when stocks were purchased for this joint account? A. Both of us.

“XQ. Each contributed in equal shares the capital necessary for the acquisition of those stocks? A. Yes.”

As the action at law was tried by the court without a jury, the court determined the quantum of damages. The court accepted the testimony of defendant, as it was bound to do, and stated in the opinion :

“The plaintiff [Montgomery] diligently endeavored 'to find like employment, but could not. About September 1, 1927, he and Palmer & Co., a New York brokerage house, invested equal sums of money in a speculative account to be managed by plaintiff.. Profits and losses were to be shared equally with the exception that plaintiff was to receive monthly, from profits before their distribution, the sum of $1,000. This arrangement continued for nine months, during which plaintiff received in that manner from profits an aggregate of $9,000 in excess of the distributive share of Palmer & Co. * * * But that the other one-half part of the sum of $9,000, or $4,500, was not a profit flowing immediately from plaintiff’s capital is equally clear. Plaintiff received it as compensation for his personal service in managing the half interest of Palmer & Co. in the joint speculative venture. Though it was not salary payable at all events, it was payment for personal services. I think it sufficiently related in character to plaintiff’s salary under the contract to enable defendant to obtain the benefit thereof in mitigation of its damages. * * *

“I find in favor of the plaintiff and against the defendant, and assess plaintiff’s damages at the sum of $80,500.”

On the basis that the capital investment of Montgomery and of Palmer & Co. were equal, the court held that one-half of the profits from the joint account received by plaintiff constituted a return on his capital and was not to be considered as earnings in reduction of damages for breach of his salary contract.

Montgomery’s testimony above recited was incorrect. The verdict of the court based upon that testimony is wrong. The damages awarded to Montgomery are excessive. All this became apparent long after the term of the judgment, when plaintiff obtained a copy of the speculative joint account agreement between Montgomery and Palmer & Co. and learned of the actual transactions incident to the joint account from the firm’s books and records.

January 22, 1980, a member of the firm of Palmer & Co. exhibited to one of plaintiff’s attorneys a copy of the joint account agreement, the significant parts of which .are as follows:

“Agreement — September 1, 1927

“Palmer & Co. (the Firm) and

“H. G. Montgomery (M).

“1. Firm and M form joint' trading account, Firm ' contributing $75,000' and M $25,000. Cash, or securities at market, deposited to protect trades shall not aggregate over $100,000, except when a' Firm member and M agree. M is to manage the trading account.

“2. * * *

“3. From net profits of joint account (both trading and arbitrating) remaining after deducting expenses under ‘2’ $1,000 is to be paid M monthly (accumulating when profits or reserve not available) and 25% of balance is to go into reserve account until unused reserve is $25,000, and the net profit then remaining is to be shared equally. * * *

“4. Net losses on trading account to be divided 75% to the Firm and 25% to M, but M is in no case responsible beyond his capital contribution of $25,000 or unused balance.

“5. This agreement is to be effective until October 1, 1930 * * *.

“[Signed] Palmer & Co.,

“[Signed] H. G. Montgomery.”

In fact, this contract was terminated May 31, 1928, when Montgomery became a general partner in the firm of Palmer & Co. One of the partners of the firm testified in this cause: “The proposition was from Mr. Montgomery and he wrote that memorandum [above agreement] in which so far as I know he made no change.”

Net profits of $271,327.49 were earned by the speculative joint account managed by Montgomery as shown by the corrected monthly balance sheets taken from the books of Palmer & Co. during the period of nine months from September 1, 1927, to June 1, 1928. From these net profits Montgomery received $9,000, plus $131,163.74, one-half of the balance of the profits, plus $959.50' interest on his capital investment of $25,000. According to the proof in this cause, Montgomery furnished 25 per cent, and not 50 per cent, of the capital. Having received $131)163.74, one-half the profits, it follows from the rule suggested by the trial court that one-half of that amount, or $65,581.87, was not return on capital, but was payment to Montgomery for his services and should have been applied with the $4,500' in diminution of the damages arising from the breach of the salary contract. Those damages were $75,000. The total earnings to be applied in diminution of damages were $70,081.87. The net damages were $4,918.13. Adding the $10,000 fixes the sum to be recovered at $14,918.13 instead of $80,500.

Can the equity side of the court right this particular wrong which the law side was powerless to redress after the expiration of the judgment term 1 The court is constrained by controlling authority to answer this question in the negative. Conditions under which a bill in equity will lie to enjoin the enforcement of a judgment are set out by Mr. Justice Miller in United States v. Throckmorton, 98 U. S. 61, at page 65, 25 L. Ed. 93: “Where the unsuccessful party has been prevented from exhibiting fully his ease, by fraud or deception practised on him by his. opponent, as by keeping him away from court, a false promise'of a compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a party and connives at his de^ feat; or where the attorney regularly employed corruptly sells out his client’s interest to the other side, — these, and similar eases which show that there has never been a real contest in the trial or hearing of the case,, are reasons for which a new suit may be sustained to set aside and annul the former judgment or decree, and open the ease for a new and a fair hearing. * * * Relief has been granted, on the ground that, by some fraud practised directly upon the party seeking relief against the judgment or decree, that party has been prevented from presenting all of his ease to the court.” In a very recent ease the basis of equitable relief is given' “Generally speaking, the facts which condition the granting of relief by a court of equity against the enforcement of a judgment are: First, that the party seeking the relief had a good defense against the cause of action on which the judgment was entered;, second, that he was prevented by fraud, concealment, accident, mistake, or the like from presenting such defense; and, third, that he-has been free from negligence in failing to avail himself of the defense.” Continental Nat. Bank v. Holland Banking Co. (C. C. A.) 66 F.(2d) 823, 829.

At the trial of the law ease the burden of proof rested upon plaintiff (there defendant) to offer evidence respecting mitigation of damages. “It seems to be the generally accepted rule that the burden of proof is upon the defendant to show that the plaintiff either found, or, by the exercise of proper industry in the search, could have procured other employment of some kind reasonably adapted to his abilities, and that in abseneeof such proof the plaintiff is entitled to recover the salary fixed by the contract.” 3 Williston on Contracts, § 1360; Mathesius v. Brooklyn Heights R. Co. (C. C.) 96 F. 792. The corollary of this rule is thus stated : “It is not infrequently said that it is the-'duty’ of the injured party to mitigate damages so far as that can be done by reasonable effort on .his part. Since his legal position is in no way affected by his failure to make this effort, however, it is not desirable to say •that he is under a 'duty.’ His remedy will be exactly the same, whether he makes the effort and avoids harm or not.” 1 Restatement of the Law of Contracts, § 336 d.

Having the burden of proof respecting mitigation of damages, plaintiff (there defendant) offered no proof on that subject at the trial of the action, but relied solely upon the cross-examination of Montgomery. With the exercise of diligence plaintiff could have ascertained before trial or before the expiration of the term of the judgment all that it subsequently ascertained. It could have found out where Montgomery was and what he was doing. There is some proof that a director of plaintiff knew before the trial that Montgomery was associated with Palmer & Co. At the trial defendant testified that the terms of his employment with Palmer & Co. respecting the speculative joint account were in an agreement on a half sheet of typewriting. It should be borne in mind that the trial was on December 18, 1928, and the judgment term expired June 10; 1929, a period of nearly six months. It was not until a year after the trial that plaintiff sought and obtained a copy of the agreement between Montgomery and Palmer & Co., although there was no attempt to conceal it. It is clear that plaintiff had a full and fair opportunity to offer proof in mitigation of damages at the trial or to obtain evidence thereof during the judgment term and that it was lacking in due diligence in failing to do so. In Pickford v. Talbott, 225 U. S. 651, 658, 32 S. Ct. 687, 689; 56 L. Ed. 1240, the law is thus stated: “As Chief Justice Marshall said: 'Without attempting to draw any precise line to which courts of equity will advance, and which they cannot pass, in restraining parties from availing themselves of judgments obtained at law, it may safely be said that any fact which clearly proves it to be against conscience to execute a judgment, and of which the injured party could not have availed himself in a court of law; or of which he might have availed himself at law, but was prevented by fraud or accident unmixed with any fault or negligence in himself or his agents, will justify an application to a court of chancery.’ Marine Ins. Co. v. Hodgson, 7 Cranch, 332, 336, 3 L. Ed. 362, 363. Or, as Mr. Justice Curtis expressed it, in Hendrickson v. Hinckley, 17 How. 443, 445, 15 L. Ed. 128, 124: ‘A court of equity does not interfere with judgments at law unless the complainant has an equitable defense, of which he could not avail himself at law, because it did not amount to a legal defense, or had a good defense at law, which he was prevented from availing himself of by fraud or accident, unmixed with negligence of himself or his agents.’ One who seeks relief in equity against a judgment at law on the ground that through accident or mistake alone, unmixed with fraud, he has lost the benefit of a defense that would have been available in the court of law, must show entire freedom from fault or neglect on the part of himself and his agents.” In Toledo Scale Co. v. Computing Scale Co., 261 U. S. 399, 425, 43. S. Ct. 458, 465, 67 L. Ed. 719, Chief Justice Taft recognized as “ * * * a mos(; salutary rule of law” the principle that “after parties have had a full and fair opportunity to prepare their case, refuses to permit them to drag out litigation by bringing in new evidence which with due diligence they ought to have discovered before the hearing. The apparent hardship of particular cases should not and cannot weigh against the application of this sound principle.”

Without considering the other grounds of defense urged by defendant, the bill of complaint must be dismissed.

This opinion contains a statement of the essential facts and of .the law applicable thereto in conformity with Equity Rule 70½ (28 USCA § 723).


author: BREWSTER, District Judge.

text:
    THE CITY OF BRUNSWICK. SAMUEL SANDAY & CO. et al. v. UNITED STATES, and seven other cases.
    Nos. 507, 497, 498, 500, 505, 506, 508, 510.
    District Court, D. Massachusetts.
    March 20, 1934.
    Bigham, Englar, Jones & Houston, of New York City, and Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., for Samuel Sanday and others.
    Bigham, Englar, Jones & Houston, of New York City, and Burnham, Bingham, Gould & Murphy, of Boston, Mass., for C. Russell Walton.
    Bigham, Englar, Jones & Houston, of New York City, Baker, Botts, Andrews & Wharton, of Kansas City, Mo., and Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., for T. J. Brodnax and others.
    Abbott, Fauntleroy, Cullen & Edwards, of St. Louis, Mo., Bigham, Englar, Jones & Houston, of New York City, and Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., for William T. Brooking and others.
    Bigham, Englar, Jones & Houston, of New York City, Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., and Rosen, Kammer, Woof & Farrar, of New Orleans, La., for H. Janssen Lumber Co.
    Bigham, Englar, Jones & Houston, of New York City, Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., and Spencer, Gidiere, Phelps & Dunbar, of New Orleans, La., for Standard Export Lumber Co.
    Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., Bigham, Englar, Jones & Houston, of New York City, and Burry, Johnstone, Peters & Dixon, of Chicago, Ill., for Mercantile Trading Co.
    Barbour, McDavid & Barbour and P. W. Barrett, all of Springfield, Mo., Bigham, Englar, Jones & Houston, of New York City, and Burnham, Bingham, Pillsbury, Dana & Gould, of Boston, Mass., for Herman J. Meyer and others.
    Frederick H. Tarr, U. S. Atty., of Boston, Mass, (by A. Chesley York, Asst. U. S. Atty., of Boston, Mass.), for the United States.
   BREWSTER, District Judge.

These eight suits in admiralty, together with two other libels brought against the United States Shipping Board Merchant Fleet Corporation (hereinafter called the Fleet Corporation), were first consolidated for the single purpose of determining the question of the liability of the United States for the loss of cargoes on the City of Brunswick which stranded in Halifax Harbor in 1921. These suits came before Judge Lowell for hearing upon the merits, and he found that the United States was liable, notwithstanding the Harter Act § 3 (46 U. S. C. § 192 [46 USCA § 192]), by reason of failure to exercise due diligence in providing a seaworthy vessel. He also found that the United States was liable because of unnecessary deviation.

Thereafter the cases were consolidated for all purposes, including final decrees, and by amendment the United States now seeks to avail itself of the statute limiting liability. Rev. St. §§ 4283-4286, 46 U. S. C. 183-186 (46 USCA §§ 183-186). The amount of the loss sustained by each libelant is not in dispute, parties having stipulated in this regard.

According to Judge Lowell’s opinion (4 F. Supp. 908, 909), it has been already adjudicated in this court that, notwithstanding error in navigation, the United States was liable because of a failure to exercise due diligence in making the City of Brunswick in all respects seaworthy; that the unseaworthiness was due to defective condensers, resulting in the disabling of two of her three boilers; that this want of due diligence was a contributing cause to the loss; that there was deviation which was not excused by any provisions of the bills of lading.

The controversy as it is now submitted presents two aspects, one involving the right of the several libelants to sue, and the other involving the right of the government to limit liability.

On the first aspect of the case it is necessary to refer to the 1932 amendment to section 5 of the Suits in Admiralty Act, which, as amended (46 USCA § 745), so far as material, reads as follows:

“ § 745. Causes of Action on Which Suits may be Brought; Limitations.

“Suits as authorized in this chapter shall be brought within two years after the cause of action arises: Provided further, That the limitations in this section contained for the commencement of suits hereunder shall not bar any suit against the United States or the United States Shipping Board Merchant Fleet Corporation, formerly known as the United States Shipping Board Emergency Fleet Corporation, brought hereunder on or before December 31, 1932, if such suit is based upon a cause of action whereon a pri- or suit in admiralty or an action at law or an action under subdivision (1) of section 250 of Title 28, was commenced prior to January 6, 1930, and was or may hereafter be dismissed because not commenced within the time or in the manner prescribed in this section, or otherwise not commenced or prosecuted in accordance with its provisions. * * »»

It is to be noted that Judge Lowell, in his opinion, further stated that it was admitted that all suits brought before him were “properly prosecuted under the terms of that act.” Notwithstanding this admission, the government attacks the right of these libelants to maintain suits under this remedial statute.

While the'government does not seem disposed to concede that any of the libels were properly brought under the Enabling Act, the objections raised to many of them do not call for separate consideration. In any event, what I will have to say about the cases which I am about to consider will effectually dispose of the less important objections made to the remaining cases.

J will take up first a group of cases which, for convenience, may be referred to as the “grain cases,” viz.: Nos. 498, T. J. Brodnax et al., Trustees, v. United States; 500, William T. Brooking et al., Trustees, v. United States; 508, Mercantile Trading Co. v. United States. The facts common to these three eases, briefly stated, are as follows: Cargoes of grain were loaded at New Orleans. The shippers were Missouri corporations, to which were issued bills of lading by duly authorized agents of the Fleet Corporation. This grain was sold to the Belgian government, prior to the loading, which paid loading charges, freight, and took out insuranee in the name of the Belgian government. After the loss, the Belgian government declared abandonment of its interest in the cargoes to underwriters, and received from the underwriters payments of their losses.

None of the libelants at the time of the loss had any interest in the cargoes. Each of the libelant corporations in 1926 filed in this court libels against the Fleet Corporation. Each of said suits was dismissed because of the decision of the United States Supreme Court in the ease of Johnson v. Fleet Corporation, 280 U. S. 320, 50 S. Ct. 118, 74 L. Ed. 451. In each instance the libel “now before the court is based upon the same cause of action as was the earlier suit, to which reference has been made. In each case amendments have been duly allowed by which it has been made to appear that prior to the loss the Belgian government was owner of the grain, and that each libel was filed on behalf of the Belgian government, which had requested and authorized the proceedings.

In No. 498, T. J. Brodnax et al., Trustees, v. United States, the bill of lading covering the shipment of grain involved ran to the Frisco Elevator Company, a Missouri corporation which had been dissolved by action of the state after forfeiture of its charter and prior to the filing of the original libel. In No. 500, William T. Brooking et al., Trustees, v. United States, the bill of lading covering the shipment of grain there involved had been issued to the Marshall Hall Grain Company, also a Missouri corporation, which, after the filing of the original proceeding and before the filing of the present libel, was dissolved by its own voluntary act. In 508, Mercantile Trading Co. v. United States, the bill of lading ran to the J. Rosenbaum Grain Company, a corporation organized under the laws of Illinois, the name of which corporation had been changed to the Mercantile Trading Company subsequent to the first proceeding. The'Statutes of Missouri (section 4561 and 4622 of the R. S. of 1929 [Mo. St. Ann. §§ 4561, 4622, pp. 2007, 2051]) provided as follows:

“See. 4561. Upon the dissolution of any corporation already created, or which may hereafter be created by the laws of this state, the president and directors or managers of the affairs of said corporation at the time of its dissolution, by whatever name they may be known in law, shall be trustees of such corporation, with full powers to settle the affairs, collect the outstanding debts and divide the moneys and other property among the stockholders, after paying the debts due and owing by such corporation at the time of its dissolution, as far as such money and property will enable them; to sue for and recover such debts and property by the name of the trustees of such corporation, describing it by its corporate name, and may be sued by the same; and such trustees shall be jointly and severally responsible to the creditors and stockholders of such corporation to the extent of its property and effects that shall have come into their hands. (R. S. 1919, § 9755.)

“See. 4622.- Trustees, in Case of Forfeiture. — When the forfeiture of the certificate, or license, of any corporation has been declared, the officers and directors or the manager, or managers, of the affairs of said corporation, at the time such forfeiture is declared, by whatever name they may be known in law, shall be trustees of such corporation with full power to settle its affairs and distribute its assets among its stockholders; after paying the debts due and owing by such corporation; and as such trustees to sue and recover debts and property due such corporation, and they shall be jointly and severally responsible to the creditors and stockholders of such corporations to the extent of its property and assets that may properly come into their hands. (R. S. 1919, § 9816.)”

In the ease of the Missouri corporations, the second libels were brought by the officers and directors or managers of the corporation in accordance with the provisions of the foregoing statutes.

The government bases its objection to these libels on several grounds: (1) That they do not come within the provisions of the remedial act, inasmuch as the original suit in admiralty was brought against the Fleet Corporation; (2) that each of the original libels was filed in the name of the corporation, and the right of recovery asserted therein was based upon the theory that they sustained the loss as the result of the disaster, while at the time neither the libelants nor the Belgian government had any interest in the cargo of grain and that the underwriters who had paid the Belgian government could assert no rights by subrogation through the three corporations who were shippers; (3) that the statutes of Missouri only authorized the officers to sue for and recover debts due to it, and gave them no authority to maintain a suit for the benefit of another.

Taking up these objections in order, the first objection is not presented to the federal courts for the first time. It has been raised and argued in at least two eases brought in other jurisdictions where the decisions have been adverse to the contention of the government. Phoenix Ins. Co. of Hartford v. United States (D. C.) 3 F. Supp. 112; Adders v. United States (D. C.) 5 F. Supp. 457. With the conclusions in these eases I am in accord, and they effectually dispose of the government’s first objection.

In regard to the second objection, it is to be noted in each ease that, in both the original libel and in the one filed in the present suit, it is alleged that the Corporation shipped the grain on the City of Brunswick; that the Pleet Corporation issued its bill of lading contracting to transport the grain to Antwerp and there deliver it to the order of the shipper. The Corporation was therefore both shipper and consignee. The authorities are agreed that the shipper who made the contracts of carriage has a right of action, even though title to the merchandise has passed before any liability has arisen. This right is based upon privity of contract between the shipper and the carrier. The Thames, 14 Wall. 98, 20 L. Ed. 804; Northern Commercial Company v. Lindblom (C. C. A.) 162 F. 250; National Interocean Corp. v. Emmons Coal Mining Corp. (D. C.) 270 F. 997; Blanchard et al. v. Page, 8 Gray (Mass.) 281.

There is no allegation in the original libel that the Corporation was the owner of the grain, and in the amendment, which was seasonably presented and allowed, it is set forth that the loss was sustained by the Belgian government on whose behalf the proceedings are being prosecuted. That recovery may be had in such a proceeding hardly admits of doubt in view of the authorities. Houseman v. The North Carolina, 15 Pet. 40, 10 L. Ed. 653; Souffront v. La Compagnie des Sucreries de Porto Rico, 217 U. S. 475, 487, 30 S. Ct. 608, 54 L. Ed. 846; United States v. United States Steel Products Co. (D. C.) 27 F.(2d) 547. The Vaughan and Telegraph, 14 Wall. 258, 266, 20 L. Ed. 807.

The fact that since the loss occurred the Belgian government has been reimbursed by the underwriters is a matter with which this court has no concern. The Potomac v. Cannon, 105 U. S. 630, 26 L. Ed. 1194; Phoenix Ins. Co. v. Erie & Western Transportation Co., 117 U. S. 312, 321, 6 S. Ct. 750, 29 L. Ed. 873; United States v. American Tobacco Co., 166 U. S. 468, 17 S. Ct. 619, 41 L. Ed. 1081; Phoenix Ins. Co. v. United States (D. C.) 3 F. Supp. 112.

The second objection, therefore, cannot be sustained.

The third objection is based upon the proposition that the Missouri statutes do not confer upon the officers of a Missouri corporation, whose charter has been forfeited or surrendered, any right to maintain any suit for the benefit of another. The federal court in the Eighth Circuit has had occasion to deal with a similar argument, advanced by the defendants in the ease of Illinois Power & Light Corporation v. Hurley et al. (C. C. A.) 49 F.(2d) 681. This was a ease brought by the officers and directors of a dissolved Missouri .corporation to recover damages on account of fire loss which was caused by the negligence of the appellant’s predecessor. It appeared that certain insurance companies had paid the loss. The trustees were allowed to recover notwithstanding. Although it was held in that case that the legal title to the cause of action remained in the corporation, I do not think that the case can be distinguished from those at bar because, as we have already seen, a cause of action still remained in the shippers upon the bills of lading. The Hurley Case is important, however, as establishing the rule that under the Missouri statutes the liquidating officers may, as trustees, sue to recover for a loss even though the corporation has been fully indemnified, so that by the rule of subrogation a third party would derive the benefits of the recovery.

I regard the court of the Eighth Circuit as the best judge of the effect and operation of the Missouri statutes, and am, therefore, contrained to adopt their views.

It is my opinion, therefore, that none of the objections to the capacity of these parties is well taken.

No. 510, Louis S. Meyer et al. v. United States of America, is another ease where the first proceedings were instituted by John P. Meyer & Sons Milling Company, a Missouri corporation, later dissolved, and the pending libel was brought by the officers as trustees under the Missouri statutes, already considered. In this ease, the title to the merchandise was in the corporation a.t the time of the loss. It has appeared that before dissolution the John P. Meyer Milling Company conveyed its assets to the Meyer Milling Company. The terms of the assignment are not before the court, but, proceeding upon the assumption that the rights to recover for the loss of cargo on the City of Brunswick were assigned, the government has interposed the same objections which have already been considered in connection with the “grain cases.” In this ease also the loss has been paid by underwriters who have filed a petition to intervene, which I have allowed. So far as the objections are based upon the fact that ihe libelants are not now the owners of the claim, this objection must be overruled in view of my disposition of the “grain cases.” It further appears, however, that the original suit, brought in 1926 in the Court of Claims, was brought in the name of the corporation, which had been dissolved some three years previously. This raises the question whether the ease comes within the amendment of 1932. While the original suit was before the Court of Claims, the government stipulated that the claimant was an existing Missouri corporation, and that suit was dismissed, not because the corporation had been previously dissolved, but solely on jurisdictional grounds following the decision in U. S. Shipping Board Emergency Fleet Corp’n v. Rosenberg Bros. & Co. (The West Aleta), 276 U. S. 202, 48 S. Ct. 256, 72 L. Ed. 531. The pending libel is based upon a cause of action whereon a prior action at law was brought in the Court of Claims and was “dismissed because not commenced within the time or in the manner prescribed in the Suits in Admiralty Act.” Had it not been for the decision in the ease of The West Aleta, and other decisions to the same effect, the original suit would have proceeded to final judgment. I am of the opinion, therefore, that the libel-ants had not lost their right to avail themselves of the provisions of the 1932 amendment to section 5 of the Suits in Admiralty Act.

The government has also complained that the libelants in all these eases have failed to establish their status by affirmative evidence. In view of Judge Lowell’s observation that it was admitted that all suits before him were properly prosecuted under the terms of the act, I have serious doubts whether this question is now open to the government but, if it is, an examination of the stipulations and exhibits satisfy me that, in the ease of each of the libels, all the allegations essential to their right to proceed in the prosecution of these cases to final decree have been proved.

I cannot refrain from remarking, in passing, that the numerous technical difficulties with which the government has confronted the libelants are wholly incompatible with the spirit and purpose of the enabling act which obviously was intended to give claimants, whose rights had been lost because of the limitation in the Suits in Admiralty Act, an opportunity to establish any just claim.

Coming now to the question as to the respondent’s right to limit liability: Rev. St. § 4283 (46 USCA § 183), limits the owner’s liability to his interest in the vessel and pending freight if the loss is occasioned or incurred without the privity or knowledge of the owner. The libelants contend that this right of limitation is defeated because the Fleet Corporation is chargeable with both knowledge and privity (1) of the negligent failure to provide a seaworthy vessel, and (2) of the unnecessary deviation.

It has already been determined by Judge Lowell that due diligence had not been exercised to make the City of Brunswick in all respects seaworthy, that the unseaworthiness was due to defective apparatus, and that the negligence contributed to the stranding. The owner is concluded by these findings. In re P. Sanford Ross, Inc. (C. C. A.) 204 F. 248.

On the question of the government’s right to limit its liability, additional evidence has been offered, much of which need not be considered, as obviously it is material only upon issues which have already been settled in this court. It might be material if I were reviewing the decision of Judge Lowell, Which, of course, I have no power to do. In so far as this new evidence bears upon the right of the United States to limit liability, I hare considered it. I consider first the knowledge or- privity of the Fleet Corporation in connection with the unseaworthiness of the City of Brunswick. The vessel had recently been built. On the way from the builder’s yard to New Orleans, where a part of the cargo was received, it was noticed that the condensers were leaking. Judge Lowell, in his opinion, has described in detail the construction of these condensers and the effect of leaks therein. I do not need now to repeat the description. The disclosure of the defects and the repairs upon the condenser were made at New Orleans, and it may be well here to refer to the set-up of the organization so far as it applied to this territory. The Flpet Corporation had two principal subdivisions, one known as “Division of Construction and Repairs”; the other as “Division of Operations.” It was provided that, if any defects appeared before the vessel was accepted, it came within the jurisdiction of the Department of Construction and Repairs. This department had a field organization divided into districts, one of which was the Gulf District, embracing the ports of New Orleans and Mobile, with headquarters at New Orleans. This district was in charge of D. T. Williams, district manager; F. E. Ames was assistant district manager. Mr. Beauvais was chief inspector. The local manager at Mobile, Ala., was G. K. Miller. It appeared that in each district the chief inspector had direct charge of all activities of the Construction and Repair Department. The leaks in the condenser were called to the attention of the assistant district manager, Mr. Ames, and Chief Inspector Beauvais. It was recommended that all tubes (about 1,800 in number) be repacked, but Beauvais, with Ames’ consent, decided to repack only those that were then leaking, some 300 to 400 in number. Judge Lowell has found that the repair work was inadequate and that this failure was responsible for what later developed on the two disabled boilers. I find that Beauvais and Ames both had knowledge of, and were privy to, this failure to exercise due diligence in making the vessel seaworthy. It also appeared in evidence that, after the work had been done on the condensers, it was subjected to tests which were satisfactory to the engineer on the vessel and to the chief engineer in charge of the repairs.

It is contended by the government that the owners cannot be charged with knowledge or privity if they left the repairs and extent thereof to competent surveyors or engineers. The decision as to what should be done was made by Beauvais and approved by the assistant district manager.' These officials, were invested by the owners with full authority to make a final decision in the premises.

As to the deviation, the Shipping Board had promulgated an order that before any vessel could be accepted from the builder it was necessary to give the vessel a loaded trial trip, to be conducted under the supervision of the Construction and Repair Department. In this ease the assistant district manager of the Gulf District, Mr. Ames, ordered a trial trip to be taken from Mobile after the vessel had been fully loaded with libelants’ cargoes. He appointed a trial board to go upon the trip. This board was made up of G. J. De Lacroix of Mobile, engineer inspector of Maintenance and Repair Department, as representing that department, and Guy A. Meyer, as senior engineer inspector, as representing the Bureau of Construction. In, compliance with this order, a trial trip was made from Mobile after the vessel had been loaded with the cargoes in question. This trial trip was made out into the Gulf of Mexico and back to Pensacola Buoy, and Judge Lowell has found that this trip was an unnecessary deviation. It appears, moreover, that not only was the trip ordered by the. assistant manager of the Gulf District and was participated in by representatives of other Bureaus of the Shipping Board, but it was also known to the inspector of Construction and Repair Department and to the local manager at Mobile of the Construction and Repair Department, namely, Mr. George K. Miller.

In respect to both the negligent repairs and the deviation, the representatives of the Fleet Corporation, who were empowered by that Corporation to finally determine the matters involved, had full knowledge of, and were privy to, the repairs and to the deviation, and their knowledge and privity is chargeable to the owners. The Fleet Corporation could only act through its duly authorized agents, and knowledge of those in authority to act with respect to the subject-matter is the knowledge of the owner. Spencer Kellogg & Sons, Inc., v. Hicks, Admx., 285 U. S. 502, 52 S. Ct. 450, 76 L. Ed. 803; In re P. Sanford Ross (C. C. A.) 204 F. 248; The Erie Lighter 108 (D. C.) 250 F. 490; Eastern S. S. Corp. v. Great Lakes Dredge & Dock Co. (C. C. A.) 256 F. 497, 502; Boston Towboat Co. v. Darrow-Mann Co. (C. C. A.) 276 F. 778; In re Pennsylvania R. Co. (C. C. A.) 48 F.(2d) 559; In re Liverpool, Brazil & River Plate Steam Nav. Co. Ltd. (D. C.) 60 F.(2d) 273; The Rambler (C. C. A.) 290 F. 791, 1923 A. M. C. 618.

The burden of proving lack of knowledge and privity rests upon the owner. Christopher v. Grueby (C. C. A.) 40 F.(2d) 8; In re Diamond Coal & Coke Co. v. Iron City Sand Co. (C. C. A.) 297 F. 246.

If the officials higher, up in the organization were ignorant of the repairs at New Orleans, or of the deviation, the government’s evidence fails to establish its burden of showing such want of knowledge or privity.

So far as it is a question of fact, I find on all the evidence that the failure to exercise due diligence in making the vessel seaworthy and the deviation were known to duly appointed officials or duly authorized agents of the Fleet Corporation, that they were privy to the acts or omissions which contributed to the losses involved, and that the owner is chargeable with such knowledge and privity.

There are cases to the effect that there can be no limitation of liability if there is an unreasonable deviation. The Pelotas (C. C. A.) 66 F.(2d) 75; The Frederick Luekenbach (D. C.) 15 F.(2d) 241.

In conclusion, I find and rule that in all eight eases the libelants are entitled to prevail in these proceedings and that the government is not entitled to take advantage of the statute limiting liability. It follows that final decrees may he entered for the libelants, as listed -below, for the amounts set opposite their respective names, with interest from dates as listed:

My findings of fact and rulings of law, as they appear in the foregoing opinion, may be deemed to be a statement of facts and conclusions of law within the meaning of the Admiralty Rule 46½ (28 USCA § 723).

I have not considered No. 512, T. J. Brodnax et al. v. United States Shipping Board Emergency Fleet Corporation, and No. 509, Mercantile Trading Co. v. United States Shipping Board Merchant Fleet Corporation, because these libels were brought for the same causes as those stated in Admiralty Nos. 498 and 500, and it was represented to me that, if the libelants prevailed in the suits against the United States, proper entries would be made dismissing the suits against the Meet Corporation.