text:
    In re SLUTZKIN.
    No. 38799.
    District Court, E. D. New York.
    April 25, 1945.

      See also 40 F.Supp. 244.
    Myers & Guerin, of New York City (Joseph K. Guerin, of New York City, of counsel), for trustee.
    Furst, Schwartz, Schwager & Landau, of Brooklyn, N. Y. (H. Sidney Landau and Samuel J. Penn, both of Brooklyn, N. Y., of counsel), for bankrupt.
   MOSCOWITZ, District Judge.

This is another no-asset case with liabilities of $18,564.39. A hearing has been had upon the petition of the trustee in bankruptcy to review the order of the Referee in bankruptcy dated February 23, 1945, and filed in this court on March 7, 1945, dismissing the specifications of objection filed by the trustee and granting a discharge to the bankrupt.

This proceeding has had a long history —much too long — and the delay has not been in the interest of justice. On February 5, 1941, Referee Frey, the former Referee, according to the report of the present Referee, filed his decision dealing with the specifications. The present Referee states: “He disposed of the second and third specifications in said decision, showing that the bankrupt had come forward and satisfactorily explained away these specifications. He found that the first specification had' been amply supported by proof and he denied the bankrupt’s discharge on that ground.”

The first specification charged the bankrupt with the failure to keep and preserve books or records. It stated:

“1. The bankrupt has destroyed, mutilated, falsified, concealed, or failed to keep or preserve books of accounts or records, from which his financial condition and business transactions might be ascertained, in that the bankrupt has destroyed and failed to keep or preserve any books or records of whatsoever nature pertaining to his business and business transactions, with the result that it has been and is impossible to ascertain or verify the bankrupt’s financial condition and business transactions for purposes of this proceeding or otherwise for the protection and benefit of the bankrupt’s creditors herein.”

A motion was thereafter made by the attorney for the bankrupt seeking permission to submit further testimony relating to the specifications of objection. On March 13, 1941, the former Referee made an order which recited that:

“The bankrupt’s application for a discharge has been denied and he has procured new counsel who desire to re-try the case on the theory of cooperating with the court and the creditors. * * *

“The bankrupt’s chief difficulty has been a lack of books and records. * * * The objecting creditor rightfully objects to the trouble and expense of two trials. There is no requirement that he go through two trials. In the interest of justice an opportunity will he given the bankrupt to present additional material evidence, but the expense of making the record for same will have to be paid by the bankrupt as he has had the day in court which is allowed him by law. This proof will be taken on March 19th, at 2 P.M.”

Such order was affirmed by this Court in an order of one of the judges of this court made on August 15, 1941. According to the present Referee’s report, further hearings were had on the specifications on October 23, November 5, November 18, November 25, December 3, 1941, and January 15, 1942, and apparently no decision was made by the former Referee.

This matter was referred to the present Referee on August 18, 1942. Hereinafter he will be referred to as the Referee. No decision was rendered by the Referee until February 2, 1945. In this the Referee failed to comply with Rule 17(a) of the Bankruptcy Rules of this court, which states that the Referee shall make his decision within two months unless the time is enlarged by a judge of this court. That was not done here.

The Referee in his decision dated February 2, 1945, states, among other things:

“At the conclusion of these hearings nothing further seemed to have been done in the matter until September, 1943, when this Referee contacted the attorney for the trustee for the purpose of obtaining the trustee’s exhibits. A conference was arranged between the attorney for the trustee and the attorney for the bankrupt in this referee’s office. Thereafter on September 24th, 1943, these attorneys stipulated that this referee may decide the issues raised by the application for a discharge filed by the bankrupt herein and the specifications of objection thereto filed by the trustee herein.

“Thereafter, on or about November 15th, 1943, the attorney for the bankrupt requested this referee to make no decision for the reason that the testimony adduced by the bankrupt may have convinced the trustee that the bankrupt’s failure to keep or preserve books of account or records as alleged in the first specification, may have been satisfactorily explained and justified so that no decision in the matter would be necessary if the trustee would consent to withdraw the specifications. He stated that he would drop the referee a line, but this referee has received no communication from the bankrupt’s attorney, nor has this referee been informed that either the attorney for the bankrupt or the attorney for the trustee, or the bankrupt, or the trustee, has contacted this office concerning a decision herein, although more than a year has elapsed since the making of the stipulation of September 24th, 1943.

“I am frank to state that if the parties did not require a decision in this matter, I did not intend to make one. It seems best, however, to dispose of this matter without further delay.

“For the reason that all of the hearings were before the former Referee, I have not had the opportunity to note the characteristics or demeanor of the several witnesses. I have carefully read all of the testimony and the exhibits.

“The additional evidence which the bankrupt presented pursuant to the order of March 13th, 1941, is concerned mainly with the first specification of objection, that is, the failure to keep or preserve books or records. There was some testimony concerning the debt owing to the bankrupt by Naimark, but this testimony does not afford a basis for changing the conclusion reached by the former Referee in connection with this alleged asset set forth in the fourth specification.”

The Referee states “that if the parties did not require a decision in this matter, I did not intend to make one”. It was his duty to decide the matter and certainly upon the evidence a decision was required denying the discharge. This Court had occasion to briefly discuss Rule 17(a) in Re Eck, 58 F.Supp. 598, and what was said there applies here with greater force because of the longer delay in making the decision. Mr. Guerin, one of the attorneys for the trustee, and Mr. Landau, one of the attorneys for the bankrupt, have made sworn statements to the effect that they know of no reason why the Referee withheld decision from January 1, 1944, up to February 2, 1945, when the decision was made.

The former Referee, in sustaining the first specification of objection, decided:

“The bankrupt has listed upwards of $16,-000 in debts and has disclosed a number of purchases of real estate and securities. His occupation has been selling yarn on commission and handling it in job lots. In connection with none of this business did the bankrupt keep any records. Where he sold for others he would receive some record setting forth the amount of the sale. He has kept or preserved none of these records. He was unable to give any definite account of his earnings for any year for the ten years previous to this proceeding.

“This conduct is not a sufficient compliance with the Bankruptcy Law. In re Northridge, D.C., 53 F.2d 858; In re Low, D.C., 4 F.Supp. 766; Karger v. Sandler, 2 Cir., 62 F.2d 80.”

When the motion was made before the former Referee to reopen the discharge the bankrupt was represented by new counsel, his present attorneys herein. In his petition in bankruptcy he stated that he had been engaged in the business of buying and selling yarn and in the statement of affairs he stated that he was a commission merchant of yarns and that he did business in his own name. At the time the hearing was reopened by the former Referee and for the first time the bankrupt claimed that he was a salesman working on a commission basis.

There cannot be the slightest question that this bankrupt was engaged in business and was required to keep proper books of account. This he failed to do.

The Referee did not hear the witnesses — he bases his opinion upon the testimony taken before the former Referee. Ordinarily, the Court would not disturb the findings of fact of a Referee who has heard the witnesses and observed their demeanor and manner of testifying unless they are clearly erroneous. However, the Referee is in no better position than the Court to decide the issues of fact as he did not hear the witnesses.

The bankrupt testified prior to the reopened hearings — and he testified to it repeatedly — that he kept no books. The bankrupt in his statement of affairs stated that he had no books of account or records. In his statement of affairs he set forth the following:

“2. Books and records.

“a. By whom, or under whose supervision, have your books of account and records been kept during the two years immediately preceding the filing of the original petition herein? No books of account.

“b. By whom have your books of account and records been audited during the two years immediately preceding the filing of the original petition herein? No books.

“c. In whose possession are your books of account and records ? None.”

At one of the reopened hearings and as a clear afterthought, he intimates, while he does not so testify, that he did keep some books. His testimony is as follows:

“Q. All I want to know is, where did you get the figure? A. I suppose I knew I owed this money.

“Q. You carried it in your head? A. Oh, yes, it was a simple transaction.

“Q. Did you have a book? A. I might have had a notebook where I issued the note.

"Q. You think you might have had it? A. Yes, of course.

“Q. If you did have, what has become of the book? A. What became of what records I did have, was at the time I was dispossessed — unfortunately if I had those records these questions you would not have to answer.

“Q. There is another item accounts payable, $5469.79 ? A. That is right.

“Q. Will you tell his Honor where you got that figure ? A. I suppose it is from my records I had of the invoice I had issued.

“Q. You did issue invoices? A. Of course I did.

“Q. Did you not testify here the other day that you did not issue your own invoices?

“Mr. Lieb: Mr. Guerin is plainly wrong, and the record will indicate. He did say he issued invoices.

“Q. Did you issue invoices ? A. I did.

“Q. Did you have an invoice book? A. No, just an ordinary invoice.

“Q. Out of what did you issue your invoices? A. From the invoices I would get.

“Q. Where are they? A. The same answer I can give you is the answer I have given you.

“Q. They are destroyed, to? A. That is correct.

“Q. There was a time you did keep some books and records? A. Yes, those are the records I kept.

“Q. Although you kept those records you still say you were in the employ of somebody else? A. That is right.

“Q. Where are the checkbooks you refer to? A. They are in the same place where all of the rest of the things are.

“Q. You mean they are destroyed? A. I suppose so.

“Q. Where are your canceled vouchers? A. My office was thrown out on the street and you can imagine where these things might have been.

“Q. How long did you keep these invoices? A. I would keep them probably from month to month, or whenever it was necessary. If I would get — as soon as I would get my check for the commissions from wherever it was, I probably would check back and that was all. Maybe I kept them for a month or two after that, maybe I did not.

“Q. Then they were not thrown out when you were dispossessed from your office? A. The last ones — what I did have was thrown out.

“Q. The others you had previously destroyed? A. I would not say I had destroyed all of them. I had kept them.

"Q. Then the others you had destroyed? A. If, you want to say I destroyed them, go ahead.

“Q. If you ’ had destroyed them each month — A. I did not say each month.

“Q. Will you tell me once and for all how often you destroyed them? A. I can’t tell you how often.

“Q. You did destroy them? A. I suppose I did, after a time.

******

“Q. All of the invoices of the Lyon Yarn Company sent to you and you in turn sent to somebody else, you have no record of that? A. No, I do not.

“Q. They were all destroyed at the time you were dispossessed or at the time you were paid? A. It was when I was dispossessed. It was in 1932 or 1931 or something like that when I was) dispossessed. If there was any records it would have been there.”

Certainly this testimony did not justify the Referee in concluding that this bankrupt kept books and records from which his financial condition could be ascertained. Furthermore it appears from the bankrupt’s own testimony that he was dispossessed in 1931 or 1932 and that he had business transactions during each year from 1933 to 1940 inclusive. According to the Referee’s report the bankrupt had the following income:

1930

Warner J. Steele — $5,067.74 (Oct. 23, pp.* 5-6)

1931

Warner J. Steele — $4,054.45 (Oct. 23, pp. 5-6)

1932

Warner J. Steele — $1,449.50 (Oct. 23, pp. 5-6)

Slutzkin Yarn Co. Inc. $1,060.94 (Nov. 5, p. 6)

(In above three years bankrupt also had an income from the Lyon Yarn Co. but there are no records thereof. According to his own testimony, he earned $7000 to $8000 in the Lyon Yarn Co. in 1929, but this became gradually less until 1932 when it was very little) (Nov. 18, p. 7)

1933

Slutzkin Yam Co. Inc. — $646.88 (Nov. 5, p. 6)

1934

Highland Worsted Mills — $400.00 (Nov. 18, p. 11) (unpaid)

1935

Frank Associates — $2290. • (Exhibit A, Dec. 3)

1936

Frank Associates — $60.00 (Ex. A Dec. 3)

Job lot — James Talcott-Rudolph — $525.13 (Oct. 23, pp. 28, 32. Oct. 23, Exhibits D-l to D-3. Nov. 5, pp. 26-29 and Ex. G-l, G-2 and H. Nov. 18, pp. 32-33)

1937

Tru-Fit Knitwear — $2500.00 (Oct. 23,. pp. 36-37; Exhibits F-l to F-4-)

1938

Tru-Fit Knitwear — $155.00 (October 23, pp.-36 — 37; Exhibits F-5; F-6)

Irving Worsted — $2946.00 (Nov. 5, pp. 10-11)

1939

Irving Worsted — $2407.17 (Nov. 5, Ex. B)

1940

Worsted Yarns Corp. — $22.50 (Oct. 23, pp. 14-15 — Exhibit A)

Admittedly the bankrupt kept no books or records between 1933 and 1940. He seeks to justify the position that he did not keep books on the ground that he was merely employed as. a salesman. The evidence indicates very clearly that he was engaged in- business. He so swore in his petition .and in his statement of affairs. The bankrupt in his schedules states that he owes for unsecured claims $16,814.39 and for accommodation paper $1,750, that is total liabilities of $18,564.39 and no assets. Where is the $16,814.39 ? This among other things the bankrupt has failed to disclose.

The Referee has made the following statement at page. 11 of his opinion: “There has been no evidence to contradict the bankrupt’s testimony that he was dispossessed and that his office furniture was placed ‘in the back street1, that his personal records were thereby lost, and that all of this happened while he was out of town. * * *

“The only purpose for maintaining books and records is to enable the creditors to ascertain the financial condition and business transactions of the bankrupt. When this information can be determined with reasonable accuracy from admissible records other than the bankrupt’s, the requirement of the Act has been satisfied when the information which the bankrupt has to furnish his creditors has been obtained.”

The Referee would relieve a bankrupt of keeping books if his creditors and those with whom he engaged in business kept books which show the financial transactions with the bankrupt. There is no such rule of law. A bankrupt cannot be absolved from keeping books because his creditors and those with whom he had business transactions keep books. See Benjamin v. Jaspan, 2 Cir. 1944, 144 F.2d 58, cert. denied 65 S.Ct. 134; In re Low, D.C., N.Y.1933, 4 F.Supp. 766; Karger v. Sandler, 2 Cir., 1932, 62 F.2d 80; Rosenberg v. Bloom, 9 Cir. 1938, 99 F.2d 249. Furthermore, here the bankrupt’s financial condition cannot be fully ascertained as there is no showing by him of what disposition was made of his assets. Section 14, sub. c(2), of the Bankruptcy Act, 11 U.S.C.A. § 32, sub. c(2), provides that a bankrupt is not entitled to his discharge if he has—

“(2) Destroyed, mutilated, falsified, concealed, or failed to keep or preserve books of account or records, from which his financial condition and business transactions might be ascertained, unless the court deems such acts or failure to have been justified under all the circumstances of the case.”

The bankrupt failed to keep books of account or records from which his financial condition might be ascertained and did this wilfully and with intent to defraud his creditors and to conceal his financial condition. The evidence is ample to sustain specification number 1. The bankrupt is not entitled to his discharge.

Settle order on notice.

       “The petition of Jacob H. Slutzkin, residing at lll-39-76th Road, Forest Hills, County of Queens, State of New York by occupation a commission merchant and engaged in the business of buying and selling yarns, at 1270 Broadway, New York City, N. Y. who states that he has not been known by any other name or trade name, for the past six years, other than Jacob H. Slutzkin. Respectfully represents: 1. Your petitioner has had his principal place of business at 1270 Broadway, in the Borough of Manhattan, City of New York, and has resided at lll-39-76th Road, Forest Hills, Borough of Queens, City of New York, N. Y. within the above judicial district, for a longer portion of the six months immediately preceding the filing of this petition than in any other judicial district.”

       “Statement of Affairs (For bankrupt or Debtor Engaged in Business.)
      “1. Nature, location and name of business.
      “a. What business are you engaged in? .Commission merchant of yarns.
      “b. Where, and under what name, do you carry on such business? 1270 Broadway, New York City, under the name of Jacob H. Slutzkin.
      “c. When did you commence such business? 1917
      “d. Where else, and under what other names, have you carried on business within the six years immediately preceding the filing of the original petition herein? 1270 Broadway, N. Y. C. — 1937 -1940
      “300 Fourth Ave., N. Y. C. — 1927-1934.”

       This change in position on the part of the bankrupt is not intended as a reflection on his attorneys.


source: Caselaw Access Project

author: LEAHY, District Judge.

license: Public Domain

text:
    SUPERIOR TUBE CO. v. DELAWARE AIRCRAFT INDUSTRIES, Inc.
    Civil Action No. 415.
    District Court, D. Delaware.
    May 18, 1945.
    See also 4 F.R.D. 139.
    C. R. Layton, 3rd, of Wilmington, Del. (of Hastings, Stockly and Layton, of Wilmington, Del.), for plaintiff.
    Ivan Culbertson, of Wilmington, Del., and Michael F. Donnelly, of Philadelphia, Pa., for defendant.
   LEAHY, District Judge.

1. Plaintiff, a Pennsylvania corporation, had 9575 pounds of beryllium copper in the form of billets which were to be manufactured into bourdon tubes. Certain preliminary machining and polishing work had to be performed upon the billets before they could be subjected to further processes of manufacture in plaintiff’s plant. As plaintiff was operating at capacity, it was unable to do the preliminary machining and polishing work upon all the billets. It, therefore, subcontracted 219 billets (3591 pounds) to defendant for machining and polishing in accordance with plaintiff’s specifications.

2. In order to ascertain whether defendant was capable of performing the subcontract, plaintiff supplied it with two samples of beryllium copper billets. Defendant proceeded to machine in accordance with specifications. One met specifications. One failed to meet specifications. As to the billet which failed to meet specifications, defendant explained that this was due to the setting up of its machinery for the job but that after adjustments were made it would be able to undertake the contract. Plaintiff then shipped to defendant the 219 billets.

3. Defendant undertook the machining and polishing of the 219 beryllium copper billets. When they were returned to plaintiff’s plant, they were measured and otherwise checked. It was found that none of the billets came within plaintiff’s specifications.

4. Subsequent efforts of defendant to machine the billets within specifications completely failed. The billets machined by defendant came so far from meeting plaintiff’s specifications that they were rendered practically valueless.

5. The billets when sent to defendant’s plant were identical in form, texture and composition With the two sample billets which had previously been machined by defendant.

6. The cost of the billets to plaintiff was $1.50 per pound, which for 3591 pounds amounted to $5386.50. In addition to this cost, plaintiff also performed certain preliminary labor upon the billets by way of cutting them in two which increased the expense of said billets to plaintiff by per pound. The only purpose for which said billets could be used as a result of the improper machining work done upon them by defendant was for- scrap. The scrap value of the billets was 12^5 per pound. Damage to plaintiff as a result of the improper machining work done by plaintiff was the value of said billets at $1.50 per pound, plus 2‡ per pound for additional preparatory work done by plaintiff minus the scrap value of 12<¡i per pound. The net damage to plaintiff as a result of defendant’s inability to perform its contract was $5027.40.

As shown by the findings of fact, this is an action for breach of contract. The issue is simple.

Defendant tried twice to machine the billets. In each instance it failed to machine and polish in accordance with specifications. The defense is that the 219 billets were of unequal metallurgical composition and it was impossible to machine and polish within the specifications. This defense must be rejected in the light of plaintiff’s own successful processing of about two-thirds of the billets making up this particular order. The billets came from the same stock pile. Plaintiff successfully processed 5984 pounds of the material. Defendant failed with the 3591 pounds which had been subcontracted to it. It is clear defendant was incapable and lacked proper facilities and skilled workmen to do the job it had agreed .to do.

There is one circumstance in the case at bar which has high significance. When defendant returned the billets to plaintiff, certain of them were measured at the ends .and found to be within specifications. But when these billets were sectioned or cut in pieces and then measured, it was discovered that the wall thicknesses at the newly cut ■ends did not meet specifications. There was evidence which indicates that special work was done on the ends of the billets alone. It is a fair inference to draw that defendant, aware of its inability to machine the billets within specifications and realizing that the accepted test for determination of whether specifications had been met was to caliper only the ends of the billets by a micrometer, set about to disguise its inability to perform its contract.

Plaintiff asks as part of its damages interest on the sum of $5027.40 from April 10, 1944.

Under Delaware law interest is a part of damages to which a plaintiff is entitled as of right in order that he may be made whole — that is to say, in order to give him that full compensation to which the law says he is entitled for a wrong suffered by him. In this matter, the Delaware cases speak too clearly to admit of mistake. They show that the award of interest is not left to the election or discretion of the jury, but that it follows as a matter of law as an incident to the award of the principal sum.

We so state after examination of every published volume of the Delaware reports. In case after case, down, to and including the most recently reported ones, the Delaware courts have given the jury binding instructions that if the plaintiff was entitled to recover damages, he was also entitled to have interest thereon included in the verdict; and in none of those cases was the allowance of interest left in the discretion of the jury. The cases to which we refer include suits in contract and quasi-contract, tort cases, and property actions. In all of them, the interest involved was moratory interest. In some of theni the damages claimed were liquidated, in others they were unliquidated. In each of them the Delaware Court gave binding instructions to the jury that if the plaintiff was entitled to recover a principal amount, then he was equally entitled, as a matter of law, to recover interest thereon — from the date of breach in the contract cases, from the date of wrong in the tort cases, and from the date of unlawful taking in the property cases. The juries had no more discretion in these cases in respect of allowing or refusing interest, than they had in respect of allowing or refusing the principal amounts sued for, or any part thereof.

All these cases — there are 41 of them— but exemplify the recognition in Delaware of the fundamental rule of compensation that the allowance of interest is in the nature of damages and as much of an injured plaintiff’s substantive right as the right to the damages themselves. The earliest of them goes back to 1849; the latest of them was decided in 1939. As lately as 1936 the present Chief Justice of Delaware recognized the substantive right to interest and applied it in the case of Drew & Co. v. Southern Groceries Stores, Inc., 7 W.W.Harr. 355, 183 A. 511, which was tried before him without a jury.

The conclusions in plaintiff’s favor are:

1. There is diversity of citizenship and the amount involved exceeds the jurisdictional amount.

2. Defendant entered into a valid contract with plaintiff whereby it undertook to machine 219 beryllium copper billets for plaintiff in accordance with certain specifications laid down by plaintiff.

3. Defendant’s failure to machine the 219 beryllium copper billets in accordance with plaintiff’s specifications constituted a breach of contract for which defendant is liable to plaintiff in damages.

4. The measure of damages is the value of the beryllium copper billets immediately before and immediately after they were machined by defendant.

5. Plaintiff’s damages consist of the cost of said beryllium copper billets together with the cost of additional labor performed on said billets by plaintiff less the scrap value of said billets, together with interest at six per cent from April 10, 1944, the date of breach.

       The ease at bar was tried to the court without a jury. As the court must make the award, it is bound by the Delaware law the same as a jury would be in ascertaining damages.

       Lattomus v. F. M. F. I. Co., 1867, 3 Houst. 404, insurance; Carman et al. v. Scribner, 1867, 3 Houst. 554, sale; McKenney v. Diamond State Loan Ass’n, 1889, 8 Houst. 557, 18 A. 905, building association contract; Levy v. Gillis, 1897, 1 Pennewill, 119, 39 A. 785, quasi-contract; Fraser v. Ross, 1898, 1 Pennewill 348, 41 A. 204, sale; Leonard v. Johnson Forge Co., 1900, 3 Pennewill 104, 50 A. 541, sale; Love v. Barnesville Mfg. Co., 1901, 3 Pennewill 152, 50 A. 536, sale; Mauck v. M. & M. Fire Ins. Co., 1903, 4 Pennewill 325, 54 A. 952, insurance; Schilansky v. M. & M. Fire Ins. Co., 1903, 4 Pennewill 293, 55 A. 1014, insurance; Jester & McDaniel v. Knotts, 1904, 7 Boyce 350, 57 A. 1094, sale; Lodge v. Fraim, 1905, 5 Pennewill 352, 63 A. 233, services; Collins v. Tigner, 1905, 5 Pennewill 345, 60 A. 978, sale; Reed v. Continental Ins. Co., 1906, 6 Pennewill 204, 65 A. 569, insurance; Adkins & Co. v. Campbell, 1906, 6 Pennewill 96, 64 A. 628, sale; Coverdale v. Rickards & Watson, 1907, 6 Pennewill 467, 69 A. 1065, sale; Joseph v. Johnson’s Executors, 1908, 7 Pennewill 468, 82 A. 30, services; Moline Jewelry Co. v. Otwell, Lowe & Tull, 1910, 2 Boyce 129, 78 A. 300, sale; Morrow v. Frankish, 1913, 4 Boyce 534, 89 A. 740, loan; Keatley v. Grand Fraternity, 1911, 2 Boyce 511, 82 A. 294, insurance; Weishut v. Layton, 1915, 5 Boyce 364, 93 A. 1057, rescission of sale; Morgan Millwork Co. v. Dover Garage Co., 1919, 7 Boyce 383, 108 A. 62, bailment; State of Delaware v. Stidham, 1920, 1 W.W. Harr. 8, 110 A. 680, sheriff bond; Graham v. Nat’l Bank of Smyrna, 1923, 2 W.W.Harr. 264, 265, 122 A. 85, money had and received; May v. Howell, 1923, 2 W.W.Harr. 221, 121 A. 650, services; Brooks Transportation Co. v. Merchants’ Mutual Casualty Co., 1933, 6 W.W.Harr. 40, 171 A. 207, insurance; State of Delaware v. Massachusetts Bonding & Ins. Co., 1939, 1 Terry 274, 9 A.2d 77, balance due on sale of goods.

       Vaughan v. Webster, 1849, 5 Har. 256, trover; Hargadine v. Ford, 1877, 5 Houst. 380, trover; Russell v. Stoeckol, 1879, 5 Houst. 464, trover; Kirkley v. Lacey, 1885, 7 Houst. 213, 30 A. 994, conversion; Boulden v. Gough, 1902, 4 Pennewill 48, 54 A. 693, trover; Williams v. Armour Car Lines, 1906, 7 Pennewill 275, 79 A. 919, damages to goods in transit; Klair & Hollingsworth v. P., B. & W. R. R. Co., 1910, 2 Boyce 274, 78 A. 1085, negligence; Keith Co. v. Booth Fisheries Co., 1913, 4 Boyce 218, 87 A. 715, negligence; Dickerson v. Brittingham, 1913, 4 Boyce 93, 86 A. 106, negligence; Union Stone Co. v. Wilmington Transfer Co., 1914, 5 Boyce 59, 90 A. 407, negligence. The rule in these tort cases naturally applies to those torts where to use the language of Mr. Justice Holmes in Jones v. United States, 258 U.S. 40, 49, 42 S.Ct. 218, 220, 66 L.Ed. 453, “the wrong consists of depriving the owner of property having a definite or ascertainable value,” because in those cases “there would seem to be the same reason for allowing interest as if there had been a misappropriation of money.” It does not apply, of course, to that class of torts which comes within the wholly different category of personal injuries, defamation, alienation of affections, etc., where it is readily seen that a different problem is presented.

       Staunton v. Smith, 1906, 6 Pennewill 193, 65 A. 593; Hitch v. Riggin, 1911, 3 Boyce 84, 80 A. 975, replevin; Reynolds v. Donaway, 1919, 7 Boyce 461, 108-A. 139, replevin.

       If in any of these cases the jury had found for the plaintiff, but had refused to include interest in their verdict, it would have been a violation of their instructions, correctable by the Court upon appropriate motion for an additur.


author: ST. SURE, District Judge.

text:
    UNITED STATES v. 412.715 ACRES OF LAND IN CONTRA COSTA COUNTY et al.
    No. 22215-S.
    District Court, N. D. California, S. D.
    May 7, 1945.
    See also, D.C., 53 F.Supp. 143.
    M. Mitchell Bourquin, Sp. Asst, to Atty. Gen., for plaintiff.
    Lyman Henry and Arthur B. Dunne, both of San Francisco, Cal., for defendant Santa Cruz Oil Corporation.
    Heller, Ehrman, White & McAuliffe and Brobeck, Phleger & Harrison, all of San Francisco, Cal., for North Bay Realty & Development Co. and Wells Fargo Bank & Union Trust Co.
    Chickering & Gregory, of San Francisco, Cal., for Central Bank and Blake Brothers Co.
    .James R. Agee, of Oakland, Cal., for Wells Fargo Bank & Union Trust Company, as trustee for A. S. MacDonald and Royal P. MacDonald.
   ST. SURE, District Judge.

Plaintiff condemned 412.715 acres of land in Contra Costa county, California, for the purpose of establishing an oil base for the Pacific fleet. The land was held in four separate ownerships as follows: Tract 1 by Santa Cruz Oil Corporation, tract 2 by North Bay Realty and Development Company, tract 3 by Wells Fargo Bank and Union Trust Co., and tract 4 by Blake Brothers Company. The single issue of market value ■was submitted for decision to a jury, which found as to tract 1 a value of $361,330; as to tract 2, $86,625; as to tract 3, $10,000; and as to tract 4, $30,000.

Defendants have filed objections to the form of plaintiff’s proposed judgment. The two principal questions raised by the objections are (1) whether the plaintiff should assume liability for taxes which became delinquent after it took exclusive possession of defendants’ lands; and (2) whether defendants are entitled to interest at the rate of six percent, as proposed by the judgment, or seven percent, the rate prescribed by California law, from-the date of taking to the date of filing the declaration of taking.

On June 25, 1942, plaintiff under an order for immediate possession commenced construction of a naval oil supply base. On March 15, 1945, it filed its declaration of taking under section 258a of 40 U.S.C.A. Defendants contend that the entry into possession of the land by the plaintiff, with the intent to acquire a fee simple interest therein, fixed its obligations and burdens as of the date of entry, and that they should not be required to pay taxes which became delinquent thereafter.

While there is no question that there was a taking on June 25, 1942, the law appears to be settled that legal title passes to the Government when the declararadon of taking is filed and not when it takes possession. Catlin v. United States, 65 S.Ct. 631; Dade County, Fla. v. United States, 5 Cir., 142 F.2d 230; United States v. 12,918.28 Acres, D. C., 51 F.Supp. 755; 40 U.S.C.A. § 258a. Until the passage of legal title, taxes continue to be assessed and become liens against the land. Upon the payment into court of a fund to cover the market value of the land, the United States acquires title free and clear of encumbrances, and all existing liens attach to the fund. Upon passage of title to the United States, of course, no further taxes may be assessed, for one sovereign may not tax another. To require the plaintiff to assume the taxes which became due prior to passage of title would be to do indirectly what cannot be done directly, and no authorities are cited by defendants, nor can any be found, requiring the United States to pay taxes which were a lien against the land at the time of the passage of title. There is no evidence showing that there has been any increase in taxes due to the taking over by the United States or the improvements placed upon the property by it.

Defendants rely on the last sentence of section 258a, which provides that “The court shall have power to make such orders in respect of encumbrances, liens, rents, taxes, assessments, insurance, and other charges, if any, as shall be just and equitable”, stating that it would be inequitable to require them to pay taxes accruing after they were deprived of possession of the land. The quoted provision has been interpreted as empowering the court' to distribute the fund deposited in court to the persons entitled thereto, and to determine what is “just and equitable” between lienors and lienees. The United States is not a party to the claims against the fund nor does it have any interest in the manner of distribution of the fund. Washington Water Power Co. v. United States, 9 Cir., 135 F.2d 541; United States v. Certain Lands in Brooklyn, 2 Cir., 129 F.2d 577. The provision has not been interpreted as permitting the court to order that a fund representing just compensation be increased by the amount of the tax liens on the lands prior to the passage of title, or that the land be taken subject to such liens, and I can find no authority for such procedure. Defendants cite United States v. 25,936 Acres of Land, More or Less, in Edgewater, Bergen County, N. J., D.C., 57 F.Supp. 383, from which case an appeal by the United States is now pending, wherein the New Jersey Court refused to deduct from the fund taxes which were due but had not become a lien against the land at the time of payment. Under the New Jersey statute taxes assessed during the year did not become a lien against the land until December 31 of that year. The court held that the Government took the land subject to an “inchoate lien” for taxes. In California taxes become a lien at the time of their assessment. The present case would fall within the express exception stated in Empress Mfg. Co. v. City of Newark, 109 N.J. Law 131, 160 A. 388, 389, cited by the New Jersey District Court: “We may assume, for the purpose of this discussion, that the tax lien, if it existed at the time of the payment of the award, was deductible.” No question of time of passage of title was involved in that case.

In United States v. 125.71 Acres, D.C.Pa., 54 F.Supp. 193, condemnation proceedings were commenced and possession taken of the land in August of 1939. In December of 1943, the amount of the verdict was paid into the registry of the court. The court held that title did not vest in the United States until the latter date, and that taxes accruing in the interim were liens payable out of the fund deposited by the United States. It appears that no declaration of taking was filed. In United States v. 12,918.28 Acres, D.C., 51 F.Supp. 755, the United States took possession of land on July 3, 1941, and filed its declaration of taking on January 2, 1942. Taxes became a lien on the property on December 20, 1941. The court held that since title remained in the owners until the declaration of talcing was filed, the tax lien attached to the proceeds.

I conclude that the fund is subject to liens for taxes assessed prior to the filing of the declaration of taking.

The proposed judgment provides for interest at the rate of six percent per annum from July 25, 1942, the date the United States took possession, to March 15, 1945, the date of filing the declaration of taking, on the entire amount of the award, and, following the provisions of section 258a, for interest from March 15, 1945, of six percent per annum on the amount of the award, less the amount deposited with the declaration of taking. Defendants contend that they should have interest at the rate of seven percent from July 25, 1942, to March 15, 1945.

Ordinarily this court would feel bound to follow the Federal statute as to the rate of interest constituting just compensation, indicated by the provision ‘for six percent interest after the declaration of taking is filed. However, there is authority permitting the court to use as a measure of interest in condemnation cases the legal rate of interest in the state where the land is situated, although this is not required by conformity statutes. United States v. Rogers, 255 U.S. 163, 41 S.Ct. 281, 65 L.Ed. 566; Seaboard Air Line R. Co. v. United States, 261 U.S. 299, 43 S.Ct. 354, 67 L.Ed. 664; United States v. A Certain Parcel, D.C., 47 F.Supp. 30. Plaintiff admits that it is discretionary with the judge what rate of. interest will be proper under the circumstances of the individual case, and argues that there appears no reason why a greater rate of interest than that prescribed by Congress should be allowed in this case. I think there is such a reason. The owners were excluded from possession of their property on June 25, 1942, and yet must be held liable for taxes assessed thereafter because of the failure o'f plaintiff to file its declaration of taking. A hardship is worked upon defendants through no fault of theirs, which will be in some measure compensated by the allowance of an' additional one percent of interest. I shall therefore allow interest at the rate of seven percent per annum from June 25, 1942, to March 15, 1945.

The proposed judgment may be amended accordingly.


author: SCHWELLENBACH, District Judge.

text:
    CENTRAL LIFE ASSUR. SOC. v. McGREGOR et al.
    Civ. No. 469.
    District Court, E. D. Washington, N. D.
    May 9, 1945.

      Tustin & Chandler, of Spokane, Wash., for plaintiff.
    H. Earl Davis, of Spokane, Wash., for defendant Gertrude McGregor.
    Richard S. Munter, of Spokane, Wash., for defendant Gladys Jacqueline McGregor.
   SCHWELLENBACH, District Judge.

This is an interpleader action in which plaintiff has deposited $5,108.07, being the proceeds of a policy of insurance upon the life of Alexander T. McGregor, who died in January, 1945. The complaint alleges that the policy was issued at a time when deceased was the husband of defendant Gertrude McGregor and that she originally was named as beneficiary. It is alleged that deceased and Gertrude McGregor were divorced in 1939 and that, in 1940, the original policy having been destroyed by fire, a new policy was issued in which defendant Gladys Jacqueline McGregor, deceased’s second wife, was named as beneficiary. The complaint alleges that on the death of McGregor, it issued a check for $5,108.07 to the defendant Gladys McGregor but that prior to the deposit of the check by Gladys McGregor the defendant Gertrude Mc-Gregor asserted her claim to the proceeds of the policy and payment on the check was stopped. The plaintiff alleges its disinterestedness in the controversy between the two defendants and prays that the Court settle that controversy without further cost or expense to it and further prays that defendant Gladys McGregor be compelled to surrender to this Court for delivery to the plaintiff the check heretofore issued to her. The defendant Gladys McGregor has moved to dismiss the action on the ground that the Court is without jurisdiction.

Jurisdiction in this case is not conferred by the Interpleader Act of January 20, 1936, 28 U.S.C.A. § 41(26). These two defendants are both citizens of Washington. The controversy' is between them. The Federal Interpleader Act gives jurisdiction of suits in equity by bills of inter-pleader only where two or more adverse claimants, citizens of different states, are claiming the fund or property deposited in the Registry of the Court. However, in Security Trust & Savings Bank of San Diego v. Walsh, 9 Cir., 91 F.2d 481, 483, the Ninth Circuit Court of Appeals, in considering precisely the same situation as is here involved, held that the Interpleader Act of 1936 was not intended to be exclusive and did not deprive the court of jurisdiction to entertain an equity interpleader proceeding under the diversity of citizenship statute, 28 U.S.C.A. § 41(1), provided the amount in controversy exceeded $3,000. Doubt has been cast upon the controlling nature of this decision by a note in Treinies v. Sunshine Mining Co., 308 U.S. 66, 73, 60 S.Ct. 44, 48, 84 L.Ed. 85. In that case the Supreme Court discussed the applicability of the Interpleader Act and inserted the following footnote: “We do not determine whether the ruling here is inconsistent with the conclusion in those cases where jurisdiction was rested on diversity of citizenship between the applicant and cocitizens who are claimants. Mallers v. Equitable Life Assur. Soc., 7 Cir., 87 F.2d 233, certiorari denied, 301 U.S. 685, 57 S.Ct. 786, 81 L.Ed. 1343. (New York corporation impleads Illinois claimants); Security Trust & Savings Bank v. Walsh, 9 Cir., 91 F.2d 481 (English corporation impleads California claimants); Penn Mut. Life Ins. Co. v. Meguire, [D.C.W.D.Ky.], 13 F.Supp. 967, 971 (Pennsylvania corporation impleads Kentucky claimants); Turman Oil Co. v. Lathrop, [D.C.N.D.Okl.], 8 F.Supp. 870, 872 (Delaware corporation impleads Oklahoma claimants).” In view of the fact that the Security Trust & Savings Bank case was decided by the Circuit Court of Appeals for this Circuit and the Supreme Court did not see fit expressly to overrule it, I would be extremely reluctant to decline to follow it. However, it is not necessary to reach this point in deciding this case. The plaintiff, a citizen of Iowa, does have a controversy with the defendant Gladys McGregor, a citizen of Washington, over the check which it issued to, her. The defendant Gertrude McGregor is a proper party to be joined in the action to determine that controversy. Therefore, we find in this case the necessary diversity of citizenship, regardless of the interpleader aspects involved in the action.

The defendant Gladys McGregor protests, however, that, if the action is viewed in this posture, it ceases to be an interpleader action and she urges she is entitled to dismissal on that ground, citing Klaber v. Maryland Casualty Co., 8 Cir., 69 F.2d 934, 106 A.L.R. 617. There is nothing in plaintiff’s complaint which negatives the idea of disinterestedness on its part so far as the proceeds of the policy or the money deposited with the Court are concerned. What plaintiff claims is that, in error, it issued this check and it seeks in this action to force the surrender of it. The joinder of this claim with the inter-pleader proceedings is now permissible under Rule 18, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c; Freeman v. Bee Machine Co., Inc., 319 U.S. 448, 458, 63 S.Ct. 1146, 87 L.Ed. 1509; Harlan v. Sparks, 10 Cir., 125 F.2d 502; Armour & Co. v. Bailey, Inc., 5 Cir., 132 F.2d 386.

The motion to dismiss is denied.


author: FORD, District Judge.

text:
    CHICAGO, B. & Q. R. CO. et al. v. UNITED STATES et al.
    No. 353.
    District Court, E. D. Kentucky, Lexington.
    May 21, 1945.

      Richard C. Stoll and Wallace Muir, both of Lexington, Ky., Eldon Martin, G A. Conway, Larry H. Dugan, and Charles W. Stadell, all of Chicago, 111., Howard W. Vesey, of Washington, D. G, Richard F. Wood, of St. Louis, Mo., and E. B. Wilkinson and J. A. Moran, both of Chicago, 111., for plaintiffs and intervenors on behalf of plaintiffs.
    Edward Dumbauld and David O. Mathews, Sp.Assts. to the Atty. Gen., Daniel W. Knowlton and Nelson Thomas, Interstate Commerce Commission, both of Washington, D. G, Claude P. Stephens, U. S. Atty., of Lexington, Ky., Elden S. Dummit, Atty. Gen. of Kentucky, and M. B. Holifield, Asst. Atty. Gen. of Kentucky, J. E. Marks and C. S. Landrum, both of Lexington, Ky., and W. A. Northcutt, of Louisville, Ky., for defendants and intervenors on behalf of defendants.
    Before HAMILTON, Circuit Judge, and FORD and MILLER, District Judges.
   FORD, District Judge.

The plaintiffs and numerous interested parties who have been permitted to intervene as plaintiffs seek a decree declaring null and void an order of the Interstate Commerce Commission entered December 11, 1944, and a permanent injunction restraining, enjoining and suspending the execution and enforcement thereof. 38 Stat. 208, 219, 220, 28 U.S.C.A. §§ 41(8), 41(28), 43 and 48.

The relief sought by the plaintiffs is opposed by the defendant, United States, and by the intervening defendants, Interstate Commerce Commission, Railroad Commission of Kentucky, Kentucky Coal Agency and Louisville & Nashville Railroad Company.

The provisions of the challenged order, as subsequently amended in respect to its effective date, require that the plaintiffs cease and desist, on or before June 30, 1945, and thereafter, from publishing, demanding or collecting for the transportation of bituminous coal, in car loads, from points in what is known and referred to in the record as the “western Kentucky field”, to Chicago, Illinois, and intermediate destinations in Illinois and Indiana taking the same rates, a rate exceeding $2.30 per net ton and requiring that, on or before that date, upon not less than ten days’ notice to the Commission and the general public, they establish and thereafter maintain and apply to such traffic a rate which shall not exceed $2,30 per net ton.

In compliance with chapter 32 of the Act of October 22, 1913, 38 Stat. 220, 28 U.S.C.A. § 47, a District Court of three judges was duly convened for the final hearing of the case. The plaintiffs introduced in evidence a certified copy of the testimony and other proceedings before the Commission. The case is now submitted for judgment upon that record.

The order here involved was made by the Commission in a proceeding originated by a complaint filed by the Commonwealth of Kentucky and the Railroad Commission of Kentucky on March 10, 1941, in which it was alleged that the rate then in effect on bituminous coal in car loads from the Western Kentucky field to Chicago and intermediate points taking the same rates was $2.40 per ton, and the rate in effect on bituminous coal in car loads from the Southern Illinois coal field to the same destination was $2.05 per ton; that such rate from the Western Kentucky field to the destinations named was unjust and unreasonable and in violation of section 1 of the Interstate Commerce Act, 49 U.S.C.A. § 1, and was unduly prejudicial to the producers in Western Kentucky and unduly preferential of the producers in Southern Illinois “to the extent that the rates from Western Kentucky exceed those from Southern Illinois by more than 25 cents per net ton”, in violation of sections 3 and 13 of the Act, 49 U.S.C.A. §§ 3, 13. The complainants sought an order of the Commission requiring the railroads participating in the transportation to establish, in lieu of the prevailing rates, such other rates as the Commission might deem to be just and reasonable, and non-prejudicial to the operators in Western Kentucky and non-preferential to the operators in Southern Illinois. The plaintiffs and their associate intervenors were parties to the proceedings before the Commission and vigorously opposed the action.

A proceeding by the Illinois Coal Traffic Bureau attacking certain existing rates from Southern Illinois to destinations in the Northwest as unduly prejudicial to Southern Illinois and unduly preferential of Western Kentucky was filed with the Commission on July 2, 1941, and was consolidated with the Kentucky case for hearing and disposition but, since the action of the Commission in dismissing the complaint of the Illinois Coal Traffic Bureau is not involved in this case, no further reference need be made to it.

After extensive hearings, the Commission made its report on December 22, 1942, finding that the rate of $2.40 from Western Kentucky was and for the future would be unreasonable to the extent that it exceeded $2.30 per net ton, and an order was entered accordingly. Thereafter, upon petitions filed by plaintiffs (then defendants) the case was reopened for rehearing, reargument and reconsideration and a rehearing was held in November and December 1943 which resulted in the Commission filing a second report on December 11, 1944, affirming the original finding. Pursuant thereto the Commission entered the order now in issue.

Bearing in mind that we may not disturb the finding of the Commission upon the factual issue of reasonableness, except upon a showing that it was made without a hearing, is unsupported by evidence, is without rational basis, exceeds constitutional limits, rests on an erroneous construction of the statute or, for some other reason, amounts to an abuse of power, Manufacturers’ Ry. Co. v. United States, 246 U.S. 457, 481, 38 S.Ct. 383, 62 L.Ed. 831; Virginian Ry. Co. v. United States, 272 U. S. 658, 665,47 S.Ct. 222, 71 L.Ed. 463, we proceed to the consideration of the questions presented, without reviewing the prolonged controversy which has prevailed for many years over the same rates except to say that the history of the controversy is another of many demonstrations of the wisdom of the narrow scope within which Congress has confined judicial participation in the rate making process for, “The process of rate making is essentially empiric. The stuff of the process is fluid and changing — the resultant of factors that must be valued as well as weighed. Congress has therefore delegated the enforcement of transportation policy to a permanent expert body and has charged it with the duty of being responsive to the dynamic character of transportation problems.” Board of Trade v. United States, 314 U.S. 534, 546, 62 S.Ct. 366, 372, 86 L.Ed. 432.

Section 14(1) of the Interstate Commerce Act, 49 U.S.C.A. § 14(1), provides “Whenever an investigation shall be made by said commission, it shall be its duty to make a report in writing in respect thereto, which shall state the conclusions of the commission, together with its decision, order, or requirement in the premises; * * Section 17(1), (3), of the Act, 49 U.S.C.A. § 17(1), (3), makes it clear that “a majority of the commission shall constitute a quorum for the transaction of business” with power and authority by a majority thereof to exercise all the jurisdiction and powers conferred by law upon the Commission.

It appears from the record that the hearings in this proceeding in 1942 and in 1944 were held before nine of the eleven members of the Commission. The reports of 1942 and 1944 were made by four of the nine members who heard the case and in each instance one member “concurred in the result” of the report and four members dissented. The question is raised as to whether a report by four of nine members of the Commission sitting at a hearing, with a fifth member concurring in the result, constitutes a “report by the Commission” within the meaning of the Statute. We interpret the statement by the fifth Commissioner that he “concurs in the result” of both reports filed in this case to mean that, while he does not assent to all the comments or observations made therein, he is, nevertheless, sufficiently in accord with the rationale of them to enable him to agree that Western Kentucky’s rate to Chicago and intermediate destinations taking the same rates is unreasonable to the extent stated and that an order for the future should be entered accordingly. In our opinion, as will be later pointed out, this is the only finding indispensable to the validity of the Commission’s order and concurrence in both reports as to this essential finding by five of the nine participating members of the Commission is sufficient to constitute them “reports by the Commission” within the meaning of the Statute.

Attacks upon the order of the Commission upon the ground that it indirectly reverses prior orders of the Commission and also that it constitutes determination of an issue not tried in the case and not tendered by the pleadings, are without merit.

The issue as to whether the rate from Western Kentucky was unreasonable was squarely made by the pleadings. It is well settled that orders of the Commission are not res adjudicata for “no extensive rate structure can be made perfect nor can any rate structure be made permanent in any real sense in a changing world”, Board of Trade v. United States, 314 U.S. 534, 544, 62 S.Ct. 366, 371, 86 L.Ed. 432 and therefore “this court has no concern * * * with the alleged inconsistency with findings made in other proceedings * * Virginian Ry. Co. v. United States, 272 U.S. 658, 665, 47 S.Ct. 222, 225, 71 L.Ed. 463.

Following the first report of the Commission in 1942, holding the rate of $2.40 per ton unreasonable, the plaintiffs and intervenors (then defendants) sought a rehearing upon the ground, among others, that “the Western Kentucky complainants abandoned the allegation contained in their complaint that the rate of $2.40 per ton * * * is unjust and unreasonable * * and asserted that “this fact was admitted at the original hearing by counsel for the Western Kentucky complainant, (R. 34).” The implication was that the petitioners for rehearing, by reason of the admission of the complainants’ attorneys, had been misled into assuming that the issue of reasonableness of the rate was abandoned and consequently they did not have a fair hearing or fair opportunity to present evidence upon that issue. By granting the rehearing and affording the petitioners additional opportunity to introduce such evidence upon the issue as they desired, the case is stripped of any element of surprise or possible prejudice by reason of complainant’s admissions as to the issue to be tried. The power as well as the duty of the Commission to investigate and determine whether a rate will in the future be unjust or unreasonable, conferred by section 15(1) of the Act, 49 U.S.C.A. § 15(1), may in no wise be curtailed or circumscribed by admissions of the parties in argument or pleadings. Cincinnati, etc., R. Co. v. Interstate Commerce Commission, 206 U.S. 142, 149, 150, 27 S.Ct. 648, 51 L.Ed. 995.

The principal problems with which we are confronted are whether the order of the Commission is supported by an adequate finding in respect to the basic or quasi-jurisdictional fact upon which the exercise of its statutory power depends and, if so, whether or not such essential finding rests upon a rational basis and is supported by substantial evidence of record.

In United States v. B. & O. R. Co., 293 U.S. 454, 464, 55 S.Ct. 268, 79 L.Ed. 587, after pointing out the single primary question of fact upon which a finding by the Commission was essential to the exercise of its statutory power, the Court commented upon the distinction between findings of fact which are indispensable and others .which are not essential and after referring to State of Florida v. United States, 282 U.S. 194, 51 S.Ct. 119, 75 L.Ed. 291, said: “In the Florida case the legal distinction was pointed out between what may be termed quasi jurisdictional findings, there held to be indispensable, and the ‘complete statement of the grounds of the Commission’s determination’ which was declared in Beaumont, S. L. & W. Ry. Co. v. United States, 282 U.S. 74, 86, 51 S.Ct. 1, 75 L.Ed. 221, to be desirable for a proper consideration of the case in the courts. The lack of such a complete statement, while always regrettable, because unnecessarily increasing the labor of the reviewing court (compare Virginian Ry. v. United States, 272 U.S. 658, 675, 47 S.Ct. 222, 71 L.Ed. 463), is not fatal to the validity of the order. It is true that formal and precise findings are not required, under section 14(1) of the Interstate Commerce Act * * *, which declares that the report ‘shall state the conclusions of the Commission together with its decision.’ Compare Manufacturers’ Ry. Co. v. United States, 246 U.S. 457, 487, 38 S.Ct. 383, 62 L.Ed. 831; Meeker [& Co.] v. Lehigh Valley R. Co., 236 U.S. 412, 428, 35 S.Ct. 328, 59 L.Ed. 644, Ann.Cas.1916B, 691, P.U.R. 1915D 1072. That provision relieves the Commission from making comprehensive findings of fact similar to those required by Equity Rule 70% * * *. But section 14(1) does not remove necessity of making, where orders are subject to judicial review, quasi jurisdictional findings essential to their constitutional or statutory validity.” [293 U.S. 454, 55 S.Ct. 273.]

In the light of this authority, it appears that a finding of the ultimate basic fact is all that is indispensable to the Commission’s exercise of the statutory power invoked in this proceeding. As a prerequisite to the validity of its orders, the Commission is not compelled to report special findings as to underlying or subordinate facts such as were formerly required by Equity Rule 70%, 28 U.S.C.A. § 723 appendix, and now required by Rule 52, Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. The only basic or quasi-jurisdictional fact, a finding in respect to which is essential to the exercise of the statutory power of the Commission to reduce the established rate involved in this case and prescribe a lower one for the future, is the fact that the subsisting rate “is or will be unjust or unreasonable.” Sec. 15(1) of the Act, 49 U.S. C.A. § 15(1).

At the conclusion of the first report of the Commission of December 22, 1942, it is said: “We find that, under the circumstances here presented, the assailed rate to Chicago and intermediate destinations, for the future will be unreasonable to the extent that it may exceed $2.30 plus the increase as authorized on March 2, 1942, *' *

This finding was restated in the final report of December 11, 1944, in these words: “It is clear * * * that Western Kentucky’s rates to Chicago and intermediate destinations taking the same rates is unreasonable to the extent that it is based upon a differential of more than 25 cents over Southern Illinois.”

We are of the opinion that the reports of the Commission fully comply with the reqtrirements of the Act in respect to quasi-jurisdictional finding.

We turn to the consideration of the question as to whether the finding so made is supported by substantial evidence of record.

The Commission indicated its approach to the problem with which it was confronted by the statement:

“The Western Kentucky and Southern Illinois groups are geologically and commercially a part of the so-called midwestern field, embracing 13 other major groups, namely, the Northern Illinois, Danville, Peoria, Fulton, Central Illinois, Centraba, Belleville, and Du Quoin groups in Illinois and the Brazil-Clinton, Linton-Sullivan, Princeton, Boonville, and Evansville groups in Indiana, Western Kentucky being the southernmost group in the entire field. * * *

“The rates from the points in the mid-western field, particularly to Chicago, have long been based on a group and differential adjustment.”

It is therefore not unexpected that in testing the reasonableness of the rates for transportation of bituminous coal in car loads from the Western Kentucky field to Chicago, the Commission should turn to a comparison of the rates on the same commodity from other points in the midwestern field to Chicago as well as the rate adjustments reflected in the differentials between the various groups. There is evidence of record showing the various rates and distances from points in the midwestern field to Chicago and the existing differentials. The evidence is sufficient to support the Commission’s conclusion, in respect to the rate from Western Kentucky to Chicago, that “its differentials over the other groups are higher, distance considered, than those existing between such other groups.” The Commission, however, did not rest its determination of the issue upon this factor alone but merely considered it along with other pertinent factors. There was evidence before the Commission relative to transportation conditions in that field, the nature and extent of the transportation service rendered by the carriers and as to the effect of the subsisting rates on the movement of traffic from Western Kentucky and Southern Illinois to Chicago. The reports show that the Commission gave due consideration to all of these factors in reaching its determination.

Section 15a(2) of the Act, 49 U.S. C.A. § 15a (2), provides that “in the exercise of its power to prescribe just and reasonable rates the Commission shall give due consideration, among other factors, to the effect of rates on the movement of traffic by the carrier or carriers for which the rates are prescribed; * * Congress has not prescribed the “other factors” to be considered by the Commission in the exercise of its pow er to fix just and reasonable rates. The determination of the issue of fact in respect to reasonableness as well as the choice of the standard upon which the determination is to be made in each particular case, is left to the informed judgment of the Commission, a body “experienced in such matters and familiar with the complexities, intricacies, and history of rate-making in each section of the country.” Louisville & Nashville R. Co. v. United States, 238 U.S. 1, 16, 35 S.Ct. 696, 700, 59 L.Ed. 1177; Virginian Ry. Co. v. United States, 272 U.S. 658, 665, 666, 47 S.Ct. 222, 71 L.Ed. 463; Youngstown Sheet & Tube Co. v. United States, 295 U.S. 476, 480, 55 S.Ct. 822, 79 L.Ed. 1553.

We think the essential basic or quasi-jurisdictional finding made by the Commission in this case rests upon a rational basis and is supported by substantial evidence of record.

The plaintiffs also challenge numerous other statements, comments and conclusions, found in the final report, on the ground that they are not supported by substantial evidence and are contrary to substantial and uncontradicted evidence introduced by the plaintiffs (then defendants) in the proceeding. (See sub-paragraphs 1 to 17, inclusive, of Paragraph X of the Petition). We regard the expressions to which, the plaintiffs’ attacks are thus directed as merely subsidiary or incidental, expository statements of the grounds of the Commission’s determination. None of them are basic or quasi-jurisdictional under the requirements of the Act and the lack of them would not be fatal to the validity of the order, as pointed out in United States v. B. & O. R. Co., supra.

Having reached the conclusion that the essential finding of the Commission rests upon a rational basis and is supported by substantial evidence of record, in the absence of a showing that the Commission acted without a fair hearing, in excess of constitutional limitations or under an erroneous construction of controlling statutes, the task of judicial review is at an end. It is not within the province of the court to scrutinize the record for supporting evidence as to the correctness or accuracy of subsidiary or incidental findings stated in the Commission’s report which merely serve to reflect and elucidate the reasoning by which the ultimate determination was reached.

We find no support in the record for the plaintiffs’ contentions that the Commission failed to consider material evidence pertinent to the issue or that it disregarded uncontradicted evidence of record or otherwise acted arbitrarily or capriciously. It does not appear that in the exercise of its powers and duties it proceeded upon an erroneous interpretation or construction of any provision of the Statute. The order of the Commission was made after full and fair hearings. It exceeds no constitutional limits. It resulted from no abuse of power.

For the reasons stated, the relief sought should be denied and the petition dismissed.

Findings of Fact.

1. The reports in this case were made by four of nine members of the Interstate Commerce Commission who heard the case, one member concurred in the result of the reports and the four other participating members dissented.

2. The question whether the rate from Western Kentucky to Chicago and intermediate points taking the same rates was unreasonable was an issue of fact presented before and duly tried by the Commission.

3. The finding of fact made by the Commission that, under the circumstances here presented, “Western Kentucky’s rates to Chicago and intermediate destinations taking the same rates is unreasonable to the extent that it is based upon a differential of more than 25 cents over Southern Illinois”, rests upon a rational basis and is supported by substantial evidence of record.

4. Plaintiffs’ contentions that the Commission failed to consider material evidence pertinent to the issue, that it disregarded uncontradicted evidence of record or otherwise acted arbitrarily or capriciously are without merit.

5. The order of the Commission was made after full and fair hearings.

Conclusions of Law.

1. The Court has jurisdiction of the parties and the subject matter of this action.

■ 2. A majority of the eleven members of the Interstate Commerce Commission constitutes a quorum for the transaction of business with power and authority, by a majority thereof, to exercise all the jurisdiction and powers conferred by law upon the Commission.

3. The report made herein by four of the nine members of the Commission who heard the proceeding, with a fifth member concurring in the result, constitutes a “report by the Commission”, within the meaning of section 14(1) of the Interstate Commerce Act.

4. Orders of the Interstate Commerce Commission are not res adjudicata and therefore attacks upon the order of the Commission in this case, on the ground that it indirectly reverses prior orders, are without merit.

5. The power and duty of the Commission to investigate and determine whether a rate is or in the future will be unjust or unreasonable, conferred by section 15(1) of the Act, may in no wise be curtailed or circumscribed by admission of the parties to a rate. adjustment proceeding.

6. The finding of the Commission in this case as to the essential basic or quasi-jurisdictional fact is adequate.

7. Except as provided in section 15a(2) of the Act, the factors to be considered by the Commission in the determination of the issue as to the reasonableness of rates, as well as the choice of the standard upon which the determination is to be made in a particular case, has been left by Congress to the informed judgment of the Commission.

8. The Court may not disturb the finding of the Commission upon the factual issue of reasonableness except upon a showing that it was made without a hearing, is unsupported by evidence, is without rational basis, exceeds constitutional limits, rests upon an erroneous construction of the Interstate Commerce Act or for some other reason amounts to an abuse of power.

9. As a prerequisite to the validity of its orders, in this type of case, the Commission is not compelled to report special findings as to underlying or subordinate facts such as were formerly required by Rule 70% and now required by Rule 52, Federal Rules of Civil Procedure.

10. It is not within the province of the Court to scrutinize the record for supporting evidence as to the correctness or accuracy of subsidiary or incidental findings stated in the Commission’s report which merely serve to reflect and elucidate the reasoning by which the ultimate determination was reached.

11. It does not appear from the record that in the exercise of its powers and duties in this case the Commission proceeded upon any erroneous interpretation or construction of the Interstate Commerce Act or any other applicable law.

12. The order of the Commission in this case does not exceed constitutional limits and so far as appears from the record resulted from no abuse of power.

13. The injunction herein sought should be denied and the petition is dismissed.

Attorneys for the defendants will prepare, serve and submit for entry a form of judgment in conformity herewith.

HAMILTON, Circuit Judge, and MILLER, District Judge, concur.