author: KIRKPATRICK, District Judge.

text:
    BARRINGER v. PRUDENTIAL INS. CO. OF AMERICA.
    No. 3763.
    District Court, E. D. Pennsylvania.
    March 26, 1945.

      Wolf, Block, Schorr & Solis-Cohen and Abraham L. Freedman, both of Philadelphia, Pa., for plaintiff.
    Joseph W. Henderson, George M. Brod-head, Jr., and Kendall H. Shoyer, all of Philadelphia, Pa., for respondent.
   KIRKPATRICK, District Judge.

This is a civil action to recover the face amount of a life insurance policy issued by the defendant upon the life of the plaintiff’s husband.

The case was tried to the Court without a jury, the only evidence being admissions contained in the pleadings and certain statements of fact made by the defendant’s counsel which, by agreement, were received as evidence.

The evidence is sufficient to support a finding that the insured is dead, and I so find. The defendant’s answer denies the allegation of the insured’s death but it admits that the defendant “tendered to the plaintiff net reserve on said policy in full compliance with defendant’s obligations under said contract.” In an amended answer, the words “if any” were inserted after “obligations.”

An admission contained in an amended or superseded pleading, while it may not have the full binding force of a judicial admission, is evidence against the pleader of the fact admitted, Easton School District v. Continental Casualty Co., 304 Pa. 67, 155 A. 93; 20 American Jurisprudence, 543 — although, in the present case, I do not think it makes much difference whether the original or the amended answer be considered. Both admit that the defendant tendered the net reserve on the policy. An unqualified tender amounts to an acknowledgment that the money tendered is absolutely due. 52 American Jurisprudence, 242. Under the terms of the policy in suit the net reserve becomes due only upon the insured’s death. It is not alleged that the tender was made as an offer of settlement, without prejudice. Nor • is it a case like Union Marine Ins. Co. v. Charles D. Stone, 7 Cir., 15 F.2d 937, 940, where tender of an amount less than that sued for was held not an admission of liability for the full amount claimed. The Court pointed out that the evidence showed “an effort by defendant to buy its peace or to compromise the claim.” Upon one possible theory of this case, namely,, that the insured was dead and that he died as a result of riding in an airplane, the defendant would be liable for the reserve, which was exactly what it tendered. The tender was plainly an admission that the insured was dead.

The main issue in the case is whether the defendant is liable for the face amount of the policy in view of the limitation of liability contained in the aviation rider. That rider provides that if the insured’s death “shall have resulted from operating or riding in any kind of aircraft * * * (with exceptions not necessary to set forth) * * * the liability of the Company under this policy shall be limited to the net reserve * *

The facts surrounding the insured’s death are as follows:

At 12:30 p.m. on January 24, 1943, the insured, who was a major in the United States Army and a glider expert, boarded an Army C-47 airplane (a land plane) at Borinquen Field, Puerto Rico. The plane was piloted by an Army Lieutenant with a co-pilot and was under orders to fly direct to an airfield on the northeastern tip of Trinidad, A direct flight from Borinquen Field to Trinidad would be entirely over open sea with possibly one or two very small islands near the route. The plane left the field, and neither it nor any of its occupants have ever been seen or heard ,of since. I think this evidence is sufficient to support a finding that the insured’s death resulted from riding in an airplane, and I so find.

No decisions directly in point were cited, nor can I find any, but the situation is analogous to one in which a plaintiff seeks to recover accident benefits upon evidence that the insured has disappeared. The defendant has the burden of proof here just as the plaintiff has in the disappearance cases. In both cases the burden is to prove not only the fact, but also, within certain limits, the manner of death, and I do not see why the same rules should not apply to both.

In Continental Life Insurance Co. v. Searing, 3 Cir., 240 F. 653, 657, the plaintiff contended that the insured had died accidently by drowning, although there were no witnesses and his body was not found. The Court said: “This presumption of life can be met and overcome by proof of circumstances of specific peril to which the person disappearing was subjected, and we think there was evidence in this case which, if believed, tended to show such peril.” In Occidental Life Ins. Co. v. Thomas, 9 Cir., 107 F.2d 876, 879, the Court said: “It is not necessary that the proof go so far as to preclude all possible inferences except that of accidental drowning. * * * Thomas may be still alive, or if dead, it may be that he died from other than accidental causes; but the facts essential to a recovery need not be established to a moral certainty or beyond a reasonable doubt.”

If the present policy had been an accident policy and the issue accidental death, it could hardly be doubted that, under the rules stated, the evidence if offered by the plaintiff would be deemed sufficient to support a verdict. True, the plaintiff in the present case did not have to prove accident but needed only to prove death and consequently did not offer the evidence of peril, but the inferences which the evidence will support are the same whether offered by the plaintiff or by the defendant.

Now, I do not suggest that riding in an airplane always places a passenger in circumstances “of specific peril” in the popular understanding of those words, but certainly it is as perilous as bathing in the ocean on a cool evening (as in the Searing case, there being no evidence in that case that the surf was high or the sea rough) or going fishing on a lake in the late afternoon as in the Thomas case.

If the evidence would support the finding that the insured’s death was accidental, and I think there is no doubt that under the rule laid down by the decisions referred to it would, then it must also support the finding that the accident consisted in the plane’s falling into the ocean. That, it seems to me is not only a reasonable inference, but the only reasonable one. As the Court said in the Thomas case, supra: “This is a situation where * * * the same evidence not only supports the inference of death, but also points to the cause of it.” Various more or less fantastic explanations of disappearance of plane and passengers might be suggested but, with practically no land on the direct route to Trinidad, I do not see how there could be much doubt in the mind of any reasonable person that it came down in the sea. At any rate it is not necessary to preclude all other possibilities.

If the plane fell into the sea then, again, the reasonable, probable and almost necessary conclusion, - from the nature of the accident, is that the insured’s death resulted from riding in an airplane. Again, there are possible theories which might account for his death otherwise as, for example, gunfire from a German submarine, but they are remote. Certainly, if it be taken as established that, having been riding in an airplane which fell into the sea and was lost with all on board, the insured is dead, it seems to me that it is not only permissible but reasonable and logical to conclude that he met his death as a result of riding in the airplane.

I conclude as a matter of law that the plaintiff is not entitled to receive the face value of the policy but that she is entitled to recover the amount of the net reserve with interest.

The facts are so simple that separate findings are unnecessary. The statements of fact contained in the foregoing opinion may be taken as special findings. Conclusions of law are as above.


source: Caselaw Access Project

author: PRAY, District Judge.

license: Public Domain

text:
    BOWLES, Price Administrator, v. RUBY et al.
    No. 556.
    District Court, D. Montana.
    Aug. 10, 1945.
    Clarence E. Wohl, Dist. Enforcement Atty., and Edw. C. Alexander, Enforcement Atty., both of Helena, Mont., and Max D. Melville, Regional Litigation Attorney, of Denver, Colo., for plaintiff.
    D. W. Maddox, of Hardin, and Wellington D. Rankin and Arthur P. Acher, both of Helena, Mont., for defendants.
   PRAY, District Judge.

This is an action against the above named defendants for an alleged violation of Revised Maximum Price Regulation No. 471 (9 F.R. 8340, 10427) promulgated by the above named plaintiff as Administrator of the Office of Price Administration, and which became effective July 26th, 1944.

It is alleged in the complaint that “each and all of said defendants (except the defendant Rollo Hart) acting by and through the defendant, Harold O. Ruby, have been and now are in violation of said Revised Maximum Price Regulation No. 471 and said Emergency Price Control Act of 1942 as amended, 50 U.S.C.A.Appendix § 901 et seq., in that they have made and offered to make purchases within the State of Montana and within the jurisdiction of this Court of various quantities of thresher-run Northern Alfalfa seed, as defined in said regulation, from producers and have paid and offered to pay therefor prices in excess of the prices permitted and allowed to be paid under the provisions of said regulation in the following instances.”

Then appears a description of ten separate purchases of thresher-run Northern Alfalfa seed alleged to have been in excess of the Maximum Price established by said regulation. It is further alleged that the said defendants acting by and through the defendant Rollo Hart, as their agent and employee, violated said regulation in like purchases of the same kind of seed in four separate instances, as set forth in the complaint.

The defendants deny that they, “or any of them, have violated the provisions of said R.M.P.R. No. 471, or that they have made or offered to make purchases of thresher-run alfalfa seed as defined in said regulations from producers from which they have paid or offered to pay prices in excess of those permitted by said regulations.”

The defendants further allege that in twelve of the fourteen purchases above mentioned, “sales had not been completed, but defendants had offered to purchase alfalfa seeds, and advances had been made with the understanding in each case that ¿he seeds were to be quality-cleaned and that after quality cleaning, as defined by the regulation, the producers would be paid the price authorized for quality cleaned seeds, or if the producer was not satisfied with the offer of defendants after being advised of the amount taken from the gross weight by cleaning operations, the producers could take their seeds and screenings elsewhere, paying a cleaning charge for the services rendered and refunding the advance theretofore made by defendants.”

In the other two instances, that of Boyd Farley and Alex Uffalman, it is alleged that the seeds were quality cleaned before being purchased, and therefore the defendants were authorized to pay the price allowed for quality cleaned seeds. In offering to purchase seeds on a quality cleaned basis defendants claim they were following a custom and business practice that has existed in the alfalfa seed industry for many years, but that they have discontinued such practice since being advised by plaintiff that it is a violation of the regulation, and will not continue such practice in the future, unless the Court should construe the regulation as authorizing such practice, and to that end a cross-complaint appears in the answer seeking a declaratory judgment.

The plaintiff admits that the regulation “does not specifically prohibit the practice of selling thresher-run seed on a quality cleaned basis, without imposition of a cleaning charge where the cleaner is the purchaser,” but he contends “that the Administrator did not countenance such practice in the regulation, even though he did not specifically prohibit it,” and that he did fix a maximum price for thresher-run seed which is the subject of the sales here in question, and that in making such purchases the defendants have exceeded the maximum price established by the regulation.

In view of the general defense and counter-claim the controversy at this stage comes very close to the question of validity of the regulation which appears to be solely the province of another Court to determine.

Counsel for defendants have distinguished between the effect of an agreement to sell and an outright sale, and the plaintiff, as in other cases of a like nature now pending in the above Court, cites Section 4(a) of the Emergency Price Control Act and Section 2 of Revised Maximum Price Regulation 471, which makes it unlawful to sell or buy at an excessive price or to agree to do so, concluding “In this case, there was an agreement, coupled with overt acts in pursuance thereof. This is not a treble damage case, where a sale must have been completed before a cause of action matures. It is an injunction suit, aimed at stopping harmful practices”.

Whether the regulation changes an established practice contrary to the provisions of Section 2(h) of the Act, 50 U.S. C.A.Appendix § 902(h), seems to be a question for the Emergency Court of Appeals. Bowles, Administrator, v. Sanden & Ferguson Co., 9 Cir., 149 F.2d 320.

Other cases pending in the above Court, decided about the same time as the instant case, present like questions. Here the defendants assert that they discontinued the practices condemned by the administrator as soon as they were advised, and state that they will conform to the regulation as interpreted by the Administrator in any future purchases of alfalfa seed; and that they had no intention whatsoever of violating the law, claiming that they were mislead by opinions expressed by responsible officers of O.P.A. which, as they construed them, were contradictory or else they misunderstood their meaning. The definition of the regulation in question as given by the Administrator seems to be plain and free from doubt, so that there would seem to be no excuse for failure of compliance in the future on the part of the defendants.

As it appears to the Court, from the evidence and arguments of counsel, a violation of R.M.P.R. No. 471 has been established by the proof, whether such violation was intentional or not, if we are to accept the interpretation of the Administrator who promulgated it; and that such, interpretation should be given great weight does not require the citation of authorities.

In this case there appears evidence of good faith on the part of the defendants, and while that alone would not be decisive of the issue, it is a matter to be given serious consideration by the Court in an equity suit.

The final question for decision is whether, in view of the evidence and authorities relied upon by counsel for the respective parties, the public interest requires the issuance of an injunction at this time; the Court is of the opinion that this question should be answered in the negative, and such is the order herein.

However, after considering all the evidence, favorable and unfavorable to the defendants, the Court is also of the opinion that the case should remain open on the docket during the 1945 seed buying season to enable plaintiff to renew his application for injunction in the event a violation should occur, and such is the further order herein. Each side will pay its own costs.


author: LEIBELL, District Judge.

text:
    GILBERT v. GULF OIL CORPORATION.
    District Court, S. D. New York.
    July 30, 1945.
    Max J. Gwertzman, of New- York City, for plaintiff.
    Matthew S. Gibson, of New York City (Archie D. Gray, of Houston, Tex., and Fred J. Locker, of New York City, of counsel), for defendant.
   LEIBELL, District Judge.

Plaintiff sues the defendant in tort claiming that through the defendant’s negligence in delivering gasoline at plaintiff’s warehouse, locatéd at Lynchburg, Virginia, the warehouse took fire and was destroyed with most of its contents. The complaint alleges four claims or causes of action. Plaintiff seeks damages in the first cause of action in the sum of $41,899.10 for the destruction of plaintiff’s warehouse; in the second, $3,602.40 for damages to plaintiff’s merchandise and fixtures; in the third, $300,000 for damages to the property of plaintiff’s customers whose goods were in plaintiff’s custody and control; and in the fourth, $20,038.17 for loss of the use of the warehouse, loss of profits and for expenditures in attempting to salvage customer’s property.

Plaintiff is a resident of the City of Lynchburg, Virginia, where the warehouse was located and the goods were stored. The majority of his customers were residents of that section of Virginia. The defendant corporation is a resident of the State of Pennsylvania, but through a certificate filed with the New York Secretary of State was authorized to do business within the State of New York and is actually doing business here in the Borough of Manhattan. Defendant, in like manner, is legally authorized to do business in the State of Virginia.

The gasoline which was being delivered at the plaintiff’s warehouse at the time of the fire, had been ordered in the State of Virginia, and the delivery was being made by a distributor, Jennings-Watts Oil Co., Inc., also a resident of the State of Virginia, doing business in the City of Lynch-burg. The fire took place March 8, 1944. The complaint was filed in this Federal Court on May 15, 1945.

The defendant has moved, through an order to show cause, for an order dismissing the complaint filed herein :

“* * * upon one or. the other or both of the following grounds:
“1. That the venue is improper, as the plaintiff is a non-resident of this district and state, the defendant is a corporation organized under the laws of the Commonwealth of Pennsylvania, the alleged cause of action sounds in tort and arose outside of this state and district, to wit, in the State of Virginia, and said alleged cause of action did not arise out of, or have any connection whatsoever with, any business transacted by the defendant in this state and district; and
“2. That jurisdiction of this action should not be assumed by this court because :
“a. The customers of the plaintiff whose property was alleged to have been damaged and destroyed number approximately 350; all of them reside in the City of Lynchburg, Virginia, or vicinity and not in the State of New York or within the jurisdiction of this court or within the reach of its processes; and many of them will be necessary and material witnesses for the defendant ;
“b. There are numerous lay witnesses, including firemen, police officers, and other municipal employees, as well as contractors and engineers, whose testimony will be material and necessary on behalf of the defendant, and all these persons reside in and about the City of Lynchburg, Virginia, and are beyond the reach of the processes of this court:
“c. It will be necessary for the defendant in the defense of this action to call as witnesses certain agents, servants, officers, and employees of a Virginia corporation, to wit, the Jennings-Watts Oil Co., Inc. and all of such agents, servants, officers and employees reside in the State of Virginia, outside the jurisdiction of this court and beyond the reach of its processes; and said corporation itself may well be a necessary or proper party defendant in this action, for the reason that defendant will show that the negligence alleged in the complaint, if any, was committed by an employee of said corporation and not by an employee of defendant ;
“d. Upon the trial it will be necessary to prove the ordinances of the City of Lynch-burg, Virginia and numerous applicable statutes and court decisions of the State of Virginia; and
“e. There are available to the plaintiff in the city of his residence, Lynchburg, Virginia, both state and federal courts with sufficient jurisdiction to entertain this action, to summon before it and hear personally all material witnesses, to view the premises, and to reach with process all necessary and proper parties plaintiff and defendant; * *

I have concluded that the venue of the action is not improper for any technical reason, but that for good and sufficient reasons hereinafter stated this Court in the exercise of its discretion should decline to assume jurisdiction of this action.

The plaintiff, in opposing the defendant’s motion, states that on March 8, 1944, the date when the explosion and fire took place, the plaintiff had purchased from the Gulf Oil Corporation 251 gallons of gasoline and the plaintiff annexes to an opposing affidavit a copy of the invoice. The invoice is important, but on this motion it aids the defendant rather than the plaintiff. It shows that the contract for the purchase of the gasoline was made and performed at Lynch-burg in the State of Virginia.

Plaintiff states that the driver of the delivery wagon was in the office of the warehouse at the time of the explosion and was waiting for a delivery receipt for the gasoline to be signed by plaintiff; that plaintiff and his office manager, Mr. Judd, and various other employees of the plaintiff were in the warehouse; and that in plaintiff’s opinion “no independent outside witness could be found who knew anything whatsoever regarding the delivery of the gasoline- and the explosion and fire which took place.” Plaintiff’s affidavits also state that various engineers were brought from New York for the purpose of examining the premises and investigating the origin of the fire and the explosion; that plaintiff engaged the services of an appraiser, who does not reside in Lynchburg, Virginia, but resides in the State of North Carolina, to examine the damage to the goods of plaintiff’s customers. Plaintiff also asserts that a great many of the customers who had property in his warehouse and who sustained losses by reason of the explosion and fire, do not at the present time reside in Lynchburg, and that if their testimony is necessary it will have to be taken in various localities where they are now residing. In conclusion the plaintiff states that he “is prepared to bring all the employees who were present and have any knowledge of the origin of the fire and the explosion to appear as witnesses at the trial which has been brought in New York.”

The attorney for the plaintiff has also filed an opposing affidavit herein, to which he has annexed a certificate from the Secretary of the State of New York showing that the defendant, when authorized to do business within the State of New York, designated the Secretary of State to accept service on behalf of the defendant corporation in New York state. Plaintiff’s attorney argues from that that the defendant has thereby expressly consented to have service made upon the corporation in New York. He states:

“The plaintiff is prepared to bring to the trial all the employees who were present and who have any knowledge of the occurrence. In addition, the plaintiff is prepared to bring the fire officials who appeared after the occurrence and who made an investigation. They have likewise indicated that they would be delighted to come to New York to testify. Insofar as expert witnesses are concerned, none of them reside in Lynchburg, Va. or its vicinity. The engineers all come from New York and the appraiser on the damages resides in North Carolina. In regard to the 350 customers, very many of them no longer are in Lynch-burg, Va. but have scattered because of the war over various parts of the country and some are even overseas. Their testimony will have to be taken by deposition in many cases and in view of the large amount of damages and the extremely long account which is involved, this case properly requires the service of a special master who can of course take hearings anywhere in the country if necessary.”

He adds in a concluding paragraph that “there is no showing anywhere by the defendant that it could be served in Lynch-burg, Va.”

In reply affidavits the defendant shows that in June 1938 it filed with the Secretary of the Commonwealth of Virginia a power of attorney designating the Secretary of Virginia the lawful agent and attorney in fact of the defendant “upon whom all legal- process against the defendant may be served and has authorized such secretary to enter an appearance in its behalf in any case or proceeding and has stipulated and agreed that any lawful process against the defendant which is duly served on said agent and attorney-in-fact shall be of the same legal force and validity as if served on the defendant.” Defendant’s attorney shows that the plaintiff may prosecute this action in the state of Virginia, that the United States District Court for the Western District of Virginia, sitting at Lynchburg, Virginia, has jurisdiction to entertain this action and can obtain jurisdiction of the person of the defendant, and that it will not be necessary for the plaintiff to sue the defendant in the State of Pennsylvania. Concerning the plaintiff’s suggestion that the testimony of many of the customers could be taken on deposition herein before a Special Master, the defendant replies that it would be better if their testimony were made available by their presence in person in the state courts of the State of Virginia or in the Federal District Court there. The state courts hold sessions at Lynchburg, Virginia.

In his reply brief on this motion the plaintiff’s attorney argues:

“In effect, the arguments raised by the defendant attempt to limit the plaintiff to suit solely in Lynchburg. The court can readily realize that this action, involving as it does, a claim for damages in an amount close to $400,000.00 is one which may stagger the imagination of a local jury, which is surely unaccustomed to dealing with amounts of such a nature, and furthermore, it may be difficult to obtain a jury which has not conceived preconceived notions concerning the facts in this case, which was widely publicized in the local newspapers. This may react in unfairness to either the plaintiff or the defendant.”

These reasons are not too convincing and are far outweighed by the other considerations advanced by the defendant.

The defendant’s attorney asserts that: “There is every good reason why this action should be prosecuted in the City of Lynchburg, Virginia, and no good or sufficient reason why it should be on the docket of this Court.” I agree with that conclusion and I believe that this Court, in the exercise of a sound discretion, should decline jurisdiction of this action. If this action had been brought in the New York Supreme Court that court, in the exercise of a sound discretion, could have declined jurisdiction. That has been the rule in the courts of New York State as appears from the decisions of its highest court. See, Gregonis v. Philadelphia & Reading Coal & Iron Co., 235 N.Y. 152, 139 N.E. 223, 32 A.L.R. 1, an opinion by Judge Crane, and Murnan v. Wabash R. Co., 246 N.Y. 244, 158 N.E. 508, 54 A.L.R. 1522, an opinion by Judge Pound.

Under Section 225 of the General Corporation Law of the State of New York, Consol. Laws N.Y. c. 23, an action may be maintained against a foreign corporation by a non-resident “where a foreign corporation is doing business within this state.” But the statutory provision does not require the State Court to accept jurisdiction in a tort action between non-residents where the tort occurred in some other state. Judge Crane discusses the origin and history of the New York statute above referred to and he cites a number of cases which have reiterated the discretionary power of the State Court to decline to assume jurisdiction in a tort action between non-residents, where the cause of action arose outside the state. And this is so, even if the defendant is a foreign corporation legally authorized by the Secretary of State to do business within the State of New York.

The plaintiff’s attorney argues that in the matter of assuming jurisdiction the Federal Court does not follow the State Court in a case of this kind, since the jurisdiction of the Federal Court is expressed by the laws of Congress and by the federal decisions. That particular point has been ruled upon to the contrary by the Circuit Court of Appeals for this Second Circuit in a recent case entitled Weiss v. Routh, 1945, 149 F.2d 193. In that case a dissenting stockholder of a Virginia corporation sued in this Court for the fair cash value of his stock, and did not avail himself of the remedy afforded by § 3822 of the General Corporation Law of Virginia (Code 1942). The District Court in this District had held that the dissenting shareholder was not limited to the remedies accorded him under the Virginia statute, and that this Court had the right to award him the fair cash value of his shares. 52 F.Supp. 418. The Circuit Court of Appeals, on its own motion, raised the question of whether the United States District Court of the Southern Dis-tict of New York should have accepted jurisdiction of the case. Assuming the fact that the plaintiff had a remedy in equity on which he could file suit in this District Court, the Circuit Court of Appeals went on to say—

“It follows that both the New York Supreme Court in which the action was originally brought, and the district court to which it was removed, had jurisdiction over the action at bar. It does not however also follow that they should have asserted that jurisdiction. That question was not raised before Judge Goddard or before us: we have taken the objection of our own motion, for upon it depends the propriety of entertaining the action at all. When a trial involves ‘the internal affairs’ of a corporation, the rule is that the court of a foreign forum will not assume jurisdiction over it; and the first question is whether the doctrine of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, applies: i.e. whether in deciding to accept or refuse jurisdiction we should follow the state law. It might be argued that those considerations which will set a court in motion are peculiar and personal to itself, and that it does not follow that what is enough to move a state court to act, should be enough to move a federal; or vice versa. Such a doctrine would, however, imply that the decision to accept jurisdiction is not controlled by any principle and may be at the judge’s whim; and that would certainly be much too strong a statement. Here, as elsewhere, although judicial discretion does indeed imply that the limits are not rigidly fixed, it does not mean that there are none; and in dealing with the question at bar, we are to remember the purpose of conformity in ‘diversity cases.’ It is that the accident of citizenship shall not change the outcome: a purpose which extends as much to determining whether the court shall act at all, as to how it shall decide, if it does. For this reason it seems to us that we should follow the New York decisions.” [149 F.2d 195.]

Applying that ruling to the facts in the case at bar, I am of the opinion that this Court should follow the law of the State of New York in this case where Federal jurisdiction is based upon the diversity of citizenship; and that I should exercise a sound discretion in deciding whether or not this Court should assume jurisdiction over this action. For reasons hereinabove stated I am of the opinion that an order should be entered herein declaring that this Court refuses jurisdiction of this action, and directing that the complaint be dismissed for that reason.


author: RICE, District Judge.

text:
    BOWLES, Administrator, v. MURPHY et al.
    Civil Action No. 800.
    District Court, D. Colorado.
    Sept. 8, 1945.
    Max D. Melville, Regional Litigation Atty., Office of Price Administration, and George Baer, Associate Enforcement Atty., Office of Price Administration, both of Denver, Colo., for plaintiff.
    Byron G. Rogers and Frank A. Bruno, both of Denver, Colo., for defendants.
   RICE, District Judge.

This cause came on to be tried to the Court on July 18 and 19, 1945, a jury having been expressly waived by the parties. Plaintiff appeared by Max D. Melville, Regional Litigation Attorney, and George Baer, Associate Enforcement Attorney, his attorneys of record herein, and the defendants appeared by Frank A. Bruno and Byron G. Rogers, their attorneys of record herein, and the Court, having heard and considered the evidence and argument of counsel, makes the following Findings of Fact and Conclusions of Law:

Findings of Fact

I. This is an action brought pursuant to Section 205(e) of the Emergency Price Control Act of 1942, as amended and extended June 30, 1944, 50 U.S.C.A.Appendix § 901 et seq., wherein the Administrator of the Office of Price Administration seeks to recover treble damages against the defendants, co-partners, for an alleged violation of Maximum Price Regulation 540, in the sale by them of a 1941 Dodge Sedan to one Herbert C. Anderson of Denver, Colorado.

II. The defendants on or about October 31, 1944, sold, delivered and transferred to Herbert C. Anderson, a used 1941 Dodge Four-Door Luxury Liner Sedan, equipped with heater andi fluid drive. It is agreed by the parties that the ceiling price of the Dodge Sedan sold by the defendants, provided the dealer sold the same with the written warranty, was the sum of Thirteen Hundred Ninety-three- Dollars and Seventy-five Cents ($1393.75).

III. As part payment for the Dodge Sedan, the defendant received from the purchaser as a trade-in, one 1940 Ford Two-Door Sedan and Nine Hundred Dollars ($900) in cash; Two Hundred Dollars ($200) direct from the purchaser and Seven Hundred Dollars ($700) by check from the Fishel Finance Company. It was admitted that the ceiling price of the trade-in car, the Ford Two-Door Sedan, for trade-in purposes was, at the time, Seven Hundred Fifteen Dollars ($715).

IV. The contention of the Administrator is that there were two types of overcharge in the transaction: First, there was an overcharge of Two Hundred Seventy-eight Dollars and Seventy-five Cents ($278.75) by reason of the fact that no written warranty was given to the purchaser by the seller. The other type of overcharge was for Two Hundred Twenty-two Dollars ($222) resulting from the defendant’s failure to give the purchaser the full, reasonable value allowance fori th,e Ford car trade-in.

The evidence in regard to the written warranty was conflicting. The weight of the evidence is to the effect that no written warranty was given, and I find as a fact that the seller did not give to the purchaser a written warranty, and that by reason of its failure to give a written warranty under the rules and regulations affecting a ceiling price, there was an overcharge, by reason thereof, of Two Hundred Seventy-eight Dollars and Seventy-five Cents ($278.75).

It is my conclusion that there was likewise an overcharge by the seller of Two Hundred Twenty-two Dollars ($222) resulting from the defendants’ failure to give the purchaser the full, reasonable value allowance for the Ford car traded in. The weight of the evidence is that the purchaser, learning of the Dodge Sedan and desiring to acquire it, approached the salesman of the defendant and began negotiations for the purchase of the Sedan. Thereupon, the salesman inquired of the purchaser what sort of can he had to trade in and being told of the Ford, the salesman drove the Ford some distance and after returning advised the purchaser that he would trade for Nine Hundred Dollars ($900) difference. The purchaser commented' that that was beating down the ceiling price of his car. Thereupon, the salesman informed the purchaser “we are dealing for differences on this particular car.” A report of the transaction was made by the salesman, a copy of which was furnished to the purchaser showing that the trade was for a difference of Nine Hundred Dollars ($900). This report was made in triplicate, an original and two carbon copies. It is admitted by the defendants that when the report of the transaction was made to the Denver War Price and Ration Board, the records reflected that the Dodge had been sold for Fourteen Hundred Ninety-three Dollars ($1493), and that they had paid for the Ford, Seven Hundred Fifteen Dollars ($715), Defendants admit too that after the transaction was had, the original report of the sale made by the salesman, was changed to show that an allowance of Four Hundred Ninety-three Dollars ($493) had been made for the Ford car. The purchaser denies any mention of an allowance of Four Hundred Ninety-three Dollars ($493) as the amount allowed for his Ford, and under all the circumstances, I accept his testimony as the more worthy of belief. The salesman for the defendants attempted to explain why the transaction was reported to the Denver War Price and Ration Board showing Seven Hundred Fifteen Dollars ($715) to be the amount paid for the Ford. The explanation was that a Mr. Brady, a price clerk of the Denver War Price and Ration Board, had told them to report that they had paid the ceiling price for trade-ins regardless of the amount actually paid. This same salesman admitted to the Court upon questioning that he knew that that was not the proper way to do it. Both the purchaser and the defendants signed the reports to the Denver War Price and Ration Board. The purchaser said that he signed the statement of the transaction to be given to the OPA in blank, and the record as a whole would justify the conclusion that he did sign in blank. The salesman for the defendants testified that Four Hundred Ninety-three Dollars ($493) was the reasonable trade-in value of the Ford. Other experienced automobile dealers testified to the same effect. At least one of the other dealers admitted that if he had purchased the automobile for Four Hundred Ninety-three Dollars ($493), he would have expected and would have endeavored to sell the same for Seven Hundred Fifteen Dollars ($715) plus the Twenty-five per cent (25%) mark up by reason of giving a written warranty. That is exactly what was done by the defendants after having received the Ford. And it was sold to a purchaser who had made an inquiry concerning that particular type of car prior to the time it was received by the defendants. The Ford car was sold by the defendants for a total of Eight Hundred Ninety-three Dollars ($893). It is my conclusion from all the evidence, first, that the reasonable value of the Ford traded in was Seven Hundred Fifteen Dollars ($715), and it is my conclusion from all the evidence that the trade was conducted by the defendants solely on a basis of Nine Hundred Dollars ($900) difference without regard to the ceiling price of said) car and that this was a scheme for obtaining more than the allowed ceiling price for the Dodge sedan.

It is my conclusion from the evidence that a failure of the defendants to furnish a written warranty was the result of negligence rather than intentional. There is no good reason-shown under the evidence why the defendant did not furnish a written warranty. A written warranty only warranted the car for the first thirty days or the first one thousand miles and required the defendant to make needed repairs at half price.

V. It was admitted at time of trial that the purchaser of the automobile in question had not brought any suit for recovery of any overcharge.

Conclusions of Law

I. The Court has jurisdiction of the parties hereto and of the subject matter hereof.

II. That the defendants violated Section 7, Maximum Price Regulation 540, in failing to give to the purchaser a written warranty.

III. That the trade as effected by the defendants for a difference of Nine Hundred Dollars ($900) was a wilful evasion of the price regulation and resulted in an overcharge of Two Hundred Twenty-two Dollars ($222) as contended by the plaintiff.

IV. Defendants were not entitled to and did not rely upon the alleged advice of a clerk of the Denver War Price and Ration Board that it was unnecessary for them to certify the true amount for the allowance of the trade-in.

V. Plaintiff is entitled to judgment for damages in the sum of two overcharges, Two Hundred Seventy-eight Dollars and Seventy-five Cents ($278.75) and Two Hundred Twenty-Two ($222), or Five Hundred Dollars and Seventy-five Cents ($500.-75) plus Two Hundred Forty-nine Dollars and Twenty-five Cents ($249.25) or a total of Seven Hundred Fifty Dollars ($750) by reason of such violations of the regulations.

The Clerk of the Court is directed to enter judgment against the defendants for a total of Seven Hundred Fifty Dollars ($750) and costs of this action upon receipt of and the filing of the foregoing Findings of Fact and Conclusions of Law.


author: KENNERLY, District Judge.

text:
    FIRST NAT. BANK OF HOUSTON, HOUSTON, TEX., et al. v. SCOFIELD, Collector of Internal Revenue.
    Civil Action No. 1287.
    District Court, S. D. Texas, Houston Division.
    July 16, 1945.
    Edward S. Boyles and M. U. S. Kjorlaug, both of Houston, Tex., for plaintiffs.
    Brian S. Odem, U. S. Atty., and Miles L. Moss, Asst. U. S. Atty., both of Houston, Tex., and Samuel O. Clark, Jr., Asst. Atty. Gen., and Andrew D. Sharpe and Leon F. Cooper, Sp. Assts. to Atty. Gen., for defendant.
   KENNERLY, District Judge.

This is a suit by plaintiff, The First National Bank of Houston, Houston, Texas (for brevity called Taxpayer), and its successor, First National Bank in Houston (for brevity called Successor Taxpayer), against defendant, Collector of Internal Revenue (for brevity called Collector), to recover $21,316.49, plus $3,118.92 interest, claimed by plaintiffs to have been unlawfully and under protest paid September 14, 1940, to Collector as income tax and interest for the year 1937. Plaintiffs also sue for interest from the date of payment.

The basis of plaintiffs’ claim is that in 1931 the Public National Bank and Trust Company of Houston (for brevity called Public National) was, because. of financial difficulties, about to close its doors. A number of other banks and business institutions, including taxpayer, in order to prevent such failure, raised a Guaranty Fund (sometimes called Contingent Fund) of $1,200,000, and arranged for and contracted with the National Bank of Commerce of Houston (for brevity called Liquidating Agent) to take over the Public National. Taxpayer furnished $150,000 of the Guaranty Fund, which was not returned to it, but was lost by it, and was claimed as a deduction in its income tax return for 1937. The Commissioner of Internal Revenue refused to allow such deduction and assessed against the Taxpayer such taxes, amounting to $21,316.59, and interest thereon, amounting to $3,118.92. In the Commissioner’s letter of June 12, 1940, assessing such taxes, the following wording appears:

“(a) The amount of $150,000 contributed by you to the liquidating agent of the Public National Bank and Trust Company of Houston in 1931 and deducted as a loss under Item 24 of the Income and Excess-Profits Tax Return filed for 1937, is disallowed for the reason that it is held not to be a loss sustained in 1937.”

Taxpayer’s claim for refund was refused by the Commissioner, and this suit followed.

The facts are substantially as follows:

(a) Most of the facts have been stipulated by Stipulation filed March 29, 1945, and a supplemental stipulation, to which stipulations and the exhibits attached reference is made.

(b) After October 26, 1932, and until liquidating agent made its report (November 8, 1937), taxpayer had no information from liquidating agent respecting the liquidation of Public National.

(c) After receiving liquidating agent’s report (November 8, 1937), taxpayer examined it, accepted it as correct, and thereafter had no further claim for a return of its $150,000, or any part thereof, and sustained a loss of the full amount thereof.

(d) Taxpayer sustained a loss during the year 1937 and after November 8, 1937, of such sum of $150,000, which was not compensated by insurance or otherwise.

1. It is clear that taxpayer sustained a loss of its $150,000. Whether súch loss was sustained in 1937, the year taxpayer deducted it in its income tax return, depends on the meaning of the liquidating agreement between Public National and Liquidating agent, the agreement between taxpayer and the liquidating agent, and the action of the parties under such agreements. In the liquidating agreement, dated October 26, 1931, there is no definite time fixed for liquidating the Public National. It is said (Paragraph IV) in part:

“Liquidating Agent hereby accepts its appointment hereunder as such and agrees to proceed with all due and reasonable diligence to liquidate said Public National and to collect and reduce to cash all of the assets of said Association coming into its possession or so much thereof as may be realized upon, and after deducting actual expenses of liquidation then unpaid, as well as any other moneys or funds theretofore advanced by Liquidating Agent under the terms hereof, the net cash proceeds so collected and realized shall be promptly applied as a credit on Public National’s obligation.”

The agreement between taxpayer and the liquidating agent is in the form of a letter, dated October 27, 1931, from taxpayer to liquidating agent, and provides in part with respect to the $150,000:

“Said payment is made with the understanding and agreement that it is a part of a total fund of approximately $ 1 200 000 paid to you by the undersigned and other subscribers for the purpose of indemnifying you against loss, if any, you may sustain in the liquidation of said Public National Bank & Trust Company.
“It is confemplated that the liquidation by you of said Public National Bank & Trust Company will be fully completed within one year from the date hereof. If, in working out such liquidation, it is not practicable to finish same within said one year period, then such additional time as may be necessary to complete the liquidation may be taken, provided, however, that liquidation shall be finally completed and report made to the subscribers of the indemnity fund at such date as may be reasonably practicable under all the circumstances.
“Said indemnity fund is for the following purposes:
“(a) If, in liquidating Public National Bank & Trust Company, you sustain losses equal to or exceeding said indemnity fund of approximately $1 200 000, then the full amount of said fund shall belong to you;
(b) If, in liquidating Public National Bank & Trust Company, you sustain no loss or sustain a loss less than the sum of $1 200 000, then and in either event the amount of said indemnity fund remaining in your hands shall be repaid to the subscribers of said fund on the same prorata basis as such subscribers contributed to such fund;
“(c) Final settlement with the subscribers shall be made when the liquidation is fully completed; provided, however, that if at any time the indemnity fund in your hands exceeds the liability of Public National Bank & Trust Company assumed by you, less the amount then or theretofore realized by you from the assets of Public National Bank & Trust Company taken over by you, then and so often as any such excess exists you will refund such excess to the subscribers of the aforesaid prorata basis.”

The stipulation shows the steps taken by the liquidating agent in liquidating the Public National, and it is perfectly clear therefrom, and from the evidence, that the liquidation was not completed and report made showing that taxpayer would not receive back its $150,000, until November 8, 1937.

Paragraphs 14 and 15 of the stipulation filed March 29 1945, show the final steps in the liquidation. They are as follows:

“On August 12, 1937, the receiver of the Public National Bank and Trust Company, filed a petition in this Court, in cause entitled ‘In the matter of the Liquidation and Winding Up of the Affairs and Business of The Public National Bank and Trust Company of Houston, Insolvent — No. 763 In Equity’, in which it is shown, among other things, that with respect to the judgments, hereinbefore referred to, obtained against stockholders of the Public National Bank and Trust Company upon their statutory stockholders’ liability there remained uncollected and unsatisfied the sum of $65,-006.12 of the judgments obtained in 1933; $276,687.13 of those obtained in 1934; all of those obtained in 1935; and all of those obtained in 1936. The receiver asked permission and approval of the Court to sell and transfer to The National Bank of Commerce the said judgments, claims and demands against the stockholders upon the crediting by the said Bank on its claim against the Public National Bank and Trust Company of' the sum of $38,003.38. On August 27, 1937, this Court entered an order authorizing and approving the sale and transfer, which, thereupon, was made.
“On November 8, 1937, the National Bank of Commerce prepared a ‘Final Statement-Public National Bank and Trust Company Liquidation,’ showing that it had sustained a loss of $373,278.79 over and above the guaranty fund of $1,200,000.00, a copy of said statement being hereto attached, marked Exhibit F, and made a part of this stipulation.”

Exhibit F shows on its face that it is a final statement, and the Guaranty or Contingent Fund of $1,200,000 is shown deducted, indicating that taxpayer was not to receive back its $150,000. No such deduction is shown in previous statements.

While the witness for the Government, R. P. Doherty, Executive Vice-President of the Liquidating Agent (National Bank of Commerce), testified that his bank thought that its contribution ($125,000) to the Guaranty Fund was lost and “charged it off” in 1931, and while he said that he felt that the liquidation of the Public Nation was “finished” in 1933, at which time as stated in the stipulation the liquidating agent bought certain assets of the Public National and “appropriated the entire amount of the Guaranty Fund of $1,200,-000,” he also on cross examination testified:

“Q. Mr. Doherty, I want to clear up one other thing. When you say you bought the assets in 1933, I think you used the expression on direct examination that you thought more or less that was the end of the matter. A. With the exception of what might be realized from the stockholders’ assessments and some judgments that the receiver had.
“Q. Now then, I don’t mean to be critical at all. Apparently you did report to your cestui que trust just mentioned that this thing was finally finished. A. Yes.
“Q. And if you had felt that it was finished in 1933, you would have so reported? A. That is right.
“Q. And the fact is that it was not and you still collected some stockholder liabilities and the judgments? A. Collected stockholders’ assessments up to October 1937.
“Q. And when you got the last one in, you made your report? A. The receivership was closed on October 22, 1937, and we made our report October 30, 1937.
“Q. And until October or November 1937, as I have said, you did not consider your trust had been completed, did you? A. No.
“Q. And you made report as soon as you did consider it completed? A. Yes, sir.”

That taxpayer and its officers so understood and viewed the agreements and administration thereunder is certain.

The agreements created a trust with the liquidating agent as trustee, and the taxpayer was not bound by any action of such agent or trustee until a full report was made to it and it knew all the facts. When the report was received (November 8, 1937), the taxpayer had the right to object to all or any part of it, to sue to set it aside, wholly or in part, and there could be no loss until taxpayer expressly or impliedly approved what the agent or trustee had done. Taxpayer was not bound by rumors, newspaper reports, or the action of other subscribers to the Guaranty Fund.

I conclude that taxpayer sustained such loss of $150,000 during 1937 and after accepting the action of the liquidating agent or trustee, as shown by its Report of November 8, 1937, and that such loss was properly deducted in making its Income Tax Return for 1937.

Defendant seems to place great reliance on the action of other banks who contributed to the Guaranty Fund with respect to charging off or claiming as a deduction their contribution, but I think the evidence on that point of no great value. Each seems to have done some long range guessing.

Defendant also insists .that the most that can be said is that the loss of the taxpayer’s $150,000 was ascertained in 1937, and that it was not sustained in 1937, but if at all, very much earlier. I think it perfectly clear that it was sustained in 1937.

Judgment for plaintiffs.


author: HULBERT, District Judge.

text:
    JEROME v. TWENTIETH CENTURY FOX FILM CORPORATION.
    District Court, S. D. New York.
    June 20, 1945.
    See also 58 F.Supp. 13.
    O’Brien, Driscoll & Raftery, of New York City (Arthur F. Driscoll and Milton M. Rosenbloom, both of New York City, of counsel) for plaintiff.
    Edwin P. Kilroe, of New York City, for defendant.
   HULBERT, District Judge.

Motion by defendant for summary judgment. Federal Rules of Civil Procedure, Rule 56(c), 28 U.S.C.A. following section 723c. The action is for infringement of copyright.

A. For the purpose of this motion it is assumed:

1. Plaintiff is the authoress, and on July 25, 1896, secured a copyright, of a song entitled “Sweet Rosie O’Grady.”

2. She renewed the copyright July 25, 1923.

3. On July 10, 1925, plaintiff and her publisher Jack Mills, Inc., entered into a contract of sale of the moving picture rights throughout the world in the song to one Herman Starr, reserving “all rights of every kind and character in and to the aforesaid musical and literary composition and the renewal of copyright of the same, save and except the so termed motion picture rights of the same herein purported to be granted to the purchaser * * * ” (Starr) including the “right to make one or more motion picture versions thereof and to assign to others the right to do so.” (Italics mine)

The contract between plaintiff and Starr required the latter to announce on the film and in paid advertising of such motion picture photoplays that same was based or adopted from or suggested by the aforesaid literary or musical composition written by plaintiff, “together with the name of the Sellers, except where the name of such photoplay shall be published with the names of other photoplays in group or list advertising, the name of MAUDE NUGENT need not be announced in connection therewith.”

4. On July 10, 1925, Starr sold, assigned, conveyed and transferred to Columbia Pictures Corp., all his right, title and interest in and to the motion picture rights in the musical composition “Sweet Rosie O’Grady.”

The assignment to Columbia by Starr was made subject to the foregoing provision of the contract between Starr and plaintiff.

B. Thus plaintiff assigned to Starr and his assigns, all her motion picture rights in her song and she gave Starr or his assigns permission to obtain a copyright on any motion picture that might be produced under the assignment. A motion picture was made by Columbia and it obtained a copyright thereon Nov. 22, 1926. See Special Stat. of 1912, 37 Stat. 488, 17 U.S. C.A. § 5, which allowed it to do so.

Attached to defendant’s motion papers is an affidavit of Leo Jaffe, Assistant Treasurer of Columbia, who avers that Columbia has not transferred, conveyed or assigned to plaintiff any right or interest of any kind or type which Columbia acquired by assignment from Starr.

C. Plaintiff’s contention that only a license to make one motion picture was granted by her assignment to Starr is squarely negated by the wording of the contract and the recorded assignment to Starr.

D. It does not appear that Columbia ever assigned or licensed defendant to produce the motion picture entitled “Sweet Rosie O’Grady”; whether it infringes upon Columbia’s copyright or whether Columbia has ever sued defendant for or claimed an infringement.

E. But as each new arrangement of a song is separately copyrightable, Carte v. Evans, C.C.Mass., 27 F. 861, 862; Edmonds v. Stern, 2 Cir., 248 F. 897, so each new motion picture made from a particular song might be so distinct as to be separately copyrightable. Harper & Bros. v. Kalem Co., 2 Cir., 169 F. 61, 64, affirmed 222 U.S. 55, 32 S.Ct. 20, 56 L.Ed. 92, Ann.Cas.1913A, 1285.

Since Columbia was given the right only to protect the copyright on its own motion picture against infringement, Columbia might not be the proper party to sue and the plaintiff could in that event sue for infringement of the song copyright under the rights she reserved in her contract with Starr. Kalem Co. v. Harper Bros., 222 U. S. 55, 32 S.Ct. 20, 56 L.Ed. 92, Ann.Cas. 1913A, 1285; See Goldwyn Pictures Corporation v. Howells Sales Co., Inc., 2 Cir. 282 F. 9. This latter case seems to hold that the owner of the original material could sue for infringement of a motion picture allegedly made from that material, provided there is no outstanding copyright, on a motion picture made with the consent of the owner of the original material, which would also be infringed. See O’Neill v. General Film Co., 171 App.Div. 854, 866, 869, 157 N.Y.S. 1028; Societe des Films Menchen v. Vitagraph Co., 2 Cir., 251 F. 258; De Croisset v. Vitagraph Co. of America, 2 Cir., 262 F. 100.

F. It appears, therefore, a question of fact exists whether plaintiff is the proper party to sue for alleged infringement because it has not also been shown whether defendant’s picture is made with the consent of, or infringes upon, the Columbia copyright or may be within the domain of the plaintiff’s copyright.

Motion denied.


author: GODDARD, District Judge.

text:
    UNITED STATES ex rel. McLAUGHLIN v. AMERICAN CHAIN & CABLE CO. et al.
    District Court, S. D. New York.
    April 18, 1945.
    John F. X. McGohey, U. S. Atty., by Laurence H. Axman, Asst. U. S. Atty., both of New York City, and J. Gregory Bruce, Sp. Asst, to Atty. Gen., for plaintiff.
    ' Frederick S. Duncan, of New York City, for defendant American Chain & Cable 'Co.
    Chadbourne, Hunt, Jaeckel & Brown, of New York City, for defendant Pyrene Mfg. Co.
   GODDARD, District Judge.

The United States moves for a determination that the present qui tam suit is based upon evidence in the possession of the United States at the time the suit was brought. The Government also, in the event that such determination is made, moves to dismiss the complaint as to two defendants, American Chain & Cable Company, and Pyrene Manufacturing ¡Company, who have been served.

This is an “informer’s” or qui tam action brought under the provisions of Sections 3490-3494 of the Revised Statutes, 31 U.S. C.A. §§ 231-235. The suit is to recover alleged overcharges made by the defendants throughout a period of years in selling chains to the Government. The complaint was filed February 11, 1943.

On December 23, 1943, Section 3491 of the Revised Statutes was amended 31 U.S. C.A. § 232 to read in part—

“(C) * * * The court shall have no jurisdiction to proceed with any such suit brought under * * * this section whenever it shall be made to appear that such suit was based upon evidence or information in the possession of the United States, or any agency, officer or employee thereof, at the time such suit was brought: Provided, however, That no abatement shall be had as to a suit pending on December 23, 1943, if before such suit was filed such person had in his possession and voluntarily disclosed to the Attorney General substantial evidence and information which was not theretofore in the possession of the Department of Justice.”

The» amended statute is constitutional. United States v. Weekly Publications, 2 Cir., 144 F.2d 186, and since the complaint in the case at bar was filed on February 11, 1943, the amended section is controlling.

After the amendment permitting the United States to appear and take over the prosecution of pending suits brought imder Section 3491 of the Revised Statutes, the United States did enter an appearance on March 4, 1944, and assumed prosecution of this suit on the ground that the suit was based upon evidence or information in the possession of the United States or its agencies, officers or employees, at the time such suit was brought, and that it was not a suit pending on December 23, 1943, when, before such suit was filed, such person [the plaintiff] had in his possession and voluntarily disclosed to the Attorney General substantial evidence and information which was not theretofore in the possession of the Department of Justice.

Although the relator, Peter McLaughlin, asserts that he furnished at least some information to the Department of Justice which it did not previously possess, it is abundantly clear that all the material information for the suit was elicited by the Government, before the relator filed suit on February 11, 1943, from hearings held by the Plouse of Representatives Committee on Naval Affairs on July 15 and 16, 1942, which hearings were attended by a representative of the Department of Justice. [See Committee Minutes pages 1089, 1137-1144, and Exhibits 482, 485, 500, 506.] It also had the information set forth in a complaint of the Federal Trade Commission of December 22, 1942 [Docket No. 4878, paragraph Four, Sections Sixteen and Seventeen, paragraph Six]. It is to be noted that in the plaintiff’s complaint he includes only such portions of a letter and a telegram as are found in the minutes [page 1139] of the hearings held by the Committee on Naval Affairs.

Having made the above determination, the motion to dismiss the suit must be and is granted for lack of jurisdiction. United States v. Anaconda Wire & Cable Co., D.C., 57 F.Supp. 106.

The relator asks that he be allowed compensation for his services in drawing the complaint and other services in connection with the suit, but under the circumstances the court has no authority to grant such an allowance, and the request is denied.

Settle order on notice.


author: CAMPBELL, District Judge.

text:
    CORNELL WOOD PRODUCTS CO. v. HARTFORD STEAM BOILER INSPECTION & INS. CO.
    No. 4098.
    District Court, N. D. Illinois, E. D.
    April 16, 1945.
    Findings of Fact
    1. This suit is based upon a certain policy or contract of insurance (No. 43400) issued by defendant to plaintiff January 4, 1941, whereunder plaintiff seeks to recover (1) for direct loss or damage to certain objects owned or leased by plaintiff specified in said policy and (2) for daily indemnity at the rate of $2,000 per day during the period of alleged Total Prevention of business on the premises described as the Assured’s (plaintiff’s) plant located on the Chippewa River at Cornell, Wisconsin, alleged to have been due or caused by an “accident”, as defined in said policy, to an object or objects described in said policy;
    2. That an “accident” within the purview and coverage of said policy was specifically defined and limited therein as follows:
    “ * * * ‘accident’ shall mean a sudden and accidental breaking, deforming, burning out or rupturing of the object or any part thereof, which manifests itself at the time of its occurrence by immediately preventing continued operation or by immediately impairing the functions of the object and which necessitates repair or replacement before its operation can,be resumed or its functions restored”;
    3. That on August 30 and 31 and September 1, 1941, excessive rainfall caused said Chippewa River to overflow its banks and to inundate certain portions of plaintiff’s plant and certain of the objects specified in and insured by said policy, as therein provided;
    4. That plaintiff took such precautionary steps as it deemed proper and necessary to protect the property of said insured against loss and damage from said flood waters;
    5. That there was no breaking, deforming, burning out or rupturing of any insured objects or parts thereof, within the scope or meaning of the policy definition of an “accident” insured against; and
    6. That the softening and swelling of certain generator separator wedges alleged and proved by plaintiff was not “sudden and accidental” and did not manifest itself as required by said policy, but was the result of the submersion thereof in water for sixty hours or more following said flood and inundation.
    Conclusions of Law
    As a matter of law, based upon the pleadings, the policy or contract of insurance, the Stipulation of Facts, the testimony introduced in addition to said Stipulation, this Court’s special Findings of Fact as above outlined and an examination of authorities submitted by the respective parties, this Court concludes as follows:
    1. That under said policy or contract of insurance plaintiff has no right to recover against the defendant upon the issues herein and that judgment should be entered for the defendant at plaintiff’s costs;
    2. That the provisions, definitions and limitations of said policy or contract of insurance are full, complete, definite, specific, certain and unambiguous as to the coverage extended thereby and that said policy can and should be interpreted by the application of the common speech meaning of said policy provisions, definitions and limitations ;
    3. That under the allegations of the complaint, as amended, and the evidence herein, there was no “accident” as defined in and insured against by said policy or contract of insurance, either as related to “direct damage” under Section I or to Total Prevention of business under Endorsement No. 3 of said policy.
    Poppenhusen, Johnston, Thompson and Raymond, of Chicago, Ill., for plaintiff.
    Arthur S. Lytton, of Chicago, Ill., for defendant.
   CAMPBELL, District Judge.

This is a suit by the plaintiff to recover under a policy of insurance issued by the defendant on thirty-six objects of a mechanical and electrical nature.

The plaintiff operates a dam, power house and plant on the Chippewa River at Cornell, Wisconsin. On August 30 and 31 and September 1, 1941, this river overflowed its banks during a heavy rainfall which produced the greatest rise in the history of the river, causing the same to inundate the plant of the plaintiff and most of the objects therein insured by the defendant.

The facts are almost entirely set forth in a detailed stipulation with attached exhibits which has been duly filed herein and has been received in evidence. Some additional oral testimony was heard at the trial before the Court without a jury.

Three questions are presented:

First, whether the occurrences of August 30, 31 and September 1, 1941, constitute an “accident” as defined in the policy sued upon.

Second, the ownership of the objects enumerated in the policy.

Third, the amount of loss or damage to the said objects.

As to the first question, the plaintiff contends and defendant denies that the sudden flood and resulting tremendous rise of water level and inundation of the plant is an accident as defined in the policy sued upon herein. The defendant also contends that the submersion of the insured objects was the result of the deliberate and intentional act of the plaintiff in permitting water to accumulate in the room where the objects were located by ceasing its efforts to eject and control the flood waters. On this latter point I find no merit to the defendant’s contention. The evidence shows that the plaintiff took all reasonable precaution to protect the insured objects from the flood waters and abandoned its efforts in this regard only when in the exercise of sound discretion it seemed necessary to do so in order not to endanger human life.

On the. question as to whether the flood described constitutes an accident as that term is defined in the policy sued upon, I am of the opinion that it does not. I believe that a flood such as occurred in this case comes within the broad and general definition of the term “accident.” The policy sued upon, however, does not cover the objects insured therein against any and all type of accidents, but specifically defines within precise limitations the term “accident” as follows:

“ 'Accident’ shall mean a sudden and accidental breaking, deforming, burning out or rupturing of the object or any part thereof, which manifests itself at the time of its occurrence by immediately preventing continued operation or by immediately impairing the functions of the object and which necessitates repair or replacement before its operation can be resumed or its functions restored;”

The evidence in this case clearly discloses that although the flood itself might be regarded as accidental in a generic sense, there certainly was no breaking, deforming, burning out or rupturing of any of the objects insured. All of the objects insured were, of course, damaged by being submerged. In one instance (No. 2 Generator), certain fiber separator wedges were found to be softened, swollen and therefore ineffective when that generator was later taken apart. This swelling, however, was the result of the sixty hour submersion in water (Stipulation p. 36) and certainly could not be regarded as sudden or accidental, even if it might be regarded as a “deforming.” I must therefore conclude that the objects insured were not damaged or destroyed as the result of an accident as defined in the policy.

Many authorities are cited by the plaintiff in its briefs and I agree that they fully and aptly state the recognized principles of insurance law and contract construction. In this case, however, we are confronted not with a problem of general construction, but with the problem of applying the common speech meaning of the clear and limited definition contained in the policy itself to the facts in question. I find no ambiguity in the policy definition and therefore no necessity to apply the general anthorities cited by the plaintiff.

One case cited by the plaintiff, however, construes an insurance policy, the language of which is identical with the policy in question herein. I refer to the case of Ocean Accident & Guarantee Corporation, Ltd., v. Penick & Ford, Ltd., Inc., 101 F.2d 493. In this case the Circuit Court of Appeals for the Eighth Circuit found that the evidence disclosed proof of an actual rupture of a copper strap in a piece of machinery insured and held such rupture to be a breaking and deforming within the policy definition. The other elements of the definition being also present, the Court decided that the jury properly found for the plaintiff. In applying the same reasoning and common speech meaning to the clear language of the policy definition of “accident” in this case, I find that the plaintiff has not proved an accident within such definition and therefore is not entitled to recover.

Since I find for the defendant on this question, it is unnecessary to consider the further questions of ownership and amount of damage.

The defendant made a motion for judgment at the end of plaintiff’s evidence and a similar motion at the end of all of the evidence and since there was no jury both motions were taken under advisement by the Court. In view of what I have stated hereinabove, I would have granted the defendant’s motion made at the conclusion of plaintiff’s evidence had the case been tried to a jury. Since all of the evidence is now-in, however, and since the record is complete, I shall dispose of the case at this time by finding for the defendant on the basis of all the evidence on the issue of want of policy coverage.

Order of Judgment

Wherefore, upon consideration of all of the evidence offered by both parties herein, it is hereby ordered that judgment be and same is hereby entered herein for defendant and against plaintiff upon the issues herein, together with costs of defendant against said plaintiff.


author: LEAVY, District Judge.

text:
    BOWLES, Administrator, O.P.A., v. JAMES HENRY PACKING CO.
    No. 884.
    District Court, W. D. Washington, N. D.
    Dec. 12, 1944.
    George H. Layman, District Enforcement Atty., and C. E. Hughes, Litigation Atty., O.P.A., both of Seattle, Wash., for plaintiff.
    Almon Ray Smith and Henry Qay Agnew, both of Seattle, Wash., for defendant.
   LEAVY, District Judge.

This matter is not an easy one of disposition. Like every lawsuit, there are substantial reasons that persuade both the litigant and counsel that they are on the right side.

I might state at the outset that I intend to make a disposition of this case now, though of course will make no formal findings and conclusions, and will permit counsel to submit them later, but will state generally what the facts are as I now find them, and the conclusions of law that we draw from them.

I think it is quite appropriate, because of the importance of this case to the defendant as well as to the government, to touch briefly upon what the objectives of this unusual, emergent and drastic legislation were and are. When it was enacted, it was sought to surround it with all sorts of safeguards, because it was such a departure from legislation, affecting as it does the most intimate private affairs of the American citizen, and it was expressly written into the act that it would automatically end at a given time, unless Congress saw fit to renew it. It is purely a legislative enactment that Congress in its wisdom thought was essential for the preservation of the nation in a period of crisis, and some of the cases that have arisen under the act and the regulations turned largely upon the issue as to whether the act was one to prevent inflation solely — and there is some language from the courts indicating such was the primary purpose, which is doubtless true in the particular cases being considered. The purposes of the act, however, are substantially broader than that of merely preventing inflation. The very first sentence of the act indicates that: “It is hereby declared to be in the interest of the national defense and security and necessary to the effective prosecution of the present war”. Now, this is the broad purpose of the act, and then: “to stabilize prices and to prevent speculative, unwarranted, and abnormal increases in prices and rents; to eliminate and prevent profiteering, hoarding, manipulation, speculation, and other disruptive practices”. 50 U.S. C.A.Appendix § 901.

After this act had been in effect from the date of its enactment until the date of expiration, as fixed by its own terms, Congress saw fit to extend and to modify it, and to alter some of the drastic provisions, but still keep within its framework such parts as would make effective the major objectives, 50 U.S.C.A.Appendix § 901 et seq. Among other things, they wrote new language into the act, conferring somewhat greater discretionary powers upon the courts.

As I said at the outset, this is a most novel and unusual piece of legislation, and confers tremendous powers that ought only to be exercised by those who are given the responsibility of enforcing them with great circumspection and full knowledge of the effect that mistakes, if they make such, might have.

The courts have been and are even now denied the right to pass upon a regulation promulgated by an administrative official as to its constitutionality, or as to its effect, and likewise as to the act itself. In fact, some judicial construction has gone so far even in a criminal proceeding to hold that in defense of such criminal action, the accused could not interpose a constitutional question in the lower courts, and there has been set up by Congress in the enactment of this act a special court to pass upon such questions.

The enforcement of the act has resulted in a great amount of hardship, in some instances completely wiping out some people’s businesses and their fortunes, while on the other hand it has made it possible for others to make fortunes. It has led to a new specie of crime and lawlessness known as “Black Market”.

The act provides for both criminal and civil proceedings. In the instant case, the evidence indicates that the government sought first to proceed on the criminal side of the law and secured an indictment. That this indictment was later dismissed is not a matter of concern to this Court in making a disposition of the instant case, nor to pass upon what causes there were that motivated or brought about the dismissal of the indictment. It is enough to say that the evidence introduced in the case at bar would, in the judgment of the Court, not have sustained that degree of willful and unlawful violation of the act to support a criminal prosecution or conviction, but that is quite another matter from passing upon the question as to whether or not there was this civil violation.

If these two instruments that are called the “lease” and the “contract of employment” were effective instruments for what they purported to be, then I do not believe there was a violation. The terminology of the lease and of the contract of employment is not at fault. The draftsman of both is to be complimented upon his knowledge of the law involving contracts, both for the leasing of premises and the employment of persons, but we must go farther than a mere superficial examination of the documents themselves.

Here are the undisputed facts of the situation that confronted the defendant company, the James Henry Packing Company, when the law in question became effective, and the various regulations were put into operation, and particularly M.P.R. 169 was announced and made effective: The defendant, a meat packer which found the outlet of its product through some two or three hundred customers, who were retailers, and in addition to those two or three hundred customers, through one of their own stores that they owned exclusively— found that by reason of the situation growing out of these regulations and maximum wholesale ceiling prices, and there being no ceiling price whatever upon livestock because livestock was considered an agricultural product — it could no longer process and sell certain grades of beef, except at a loss. This created a situation where the packers, and the smaller packers, particularly, could not supply the trade and sell their products within the limitations fixed by the regulations — -that is, Regulation 169 and others that were pertinent, without suffering a loss, particularly as to certain types and grades of meat. If they ■could not slaughter and could not sell, then their customers would be lost, and their business and its future jeopardized.

This defendant, with advice of able counsel, gave thought and consideration to the regulation without an intent to violate it, but with a desire to comply with' it and yet continue to remain in business and make a profit. The testimony of Mr. Joseph, its manager, was in substance, at least, that this gave rise to these leases and contracts of employment. Had it not been for the Emergency Price Control Act and the O.P.A. regulations, such an arrangement would never have been thought of, and immediately when they ceased, it is clear to the Court, the arrangement would have been cancelled.

Now let us see for a moment, from all of the facts and circumstances surrounding these transactions, if such leases and contracts were in fact steps such as would make the packing company the real party, not only in interest, but in control and possession, and having, in addition to the advantages of control and possession, all of the liabilities of operating the businesses.

I am constrained to find that situation is not supported by the facts here, and my reasons for so finding are that Mr. Joseph testified that out of his two or three hundred customers who were retailers, he selected twenty-five who were strategically located in the city so that they might maintain the business of the packing firm in supplying wholesale meat, and they might have at least that much of an advantage when the war is over and the restrictions were gone. The retailers selected were placed in a decidedly advantageous position over the other two hundred and fifty or two hundred and seventy-five that were not chosen.

While there is no direct evidence, it is only a logical and reasonable inference from the evidence that some representative of the defendant company stated to these retailers in substance that “Your business will be greatly increased ,even enough that you can pay a percentage of your gross receipts from your meat market operations, and still be money ahead and still maintain your customers”, therefore, this lease agreement. It is clear to this Court that the lease, insofar as actual possession, control, direction and operation, and the employment contract, insofar as directions and orders and management are concerned, were never contemplated as effective in-strumentalities for taking over by the defendant company of the various meat markets. Not a thing was- done during the whole four-month period to indicate such action. The same operator and owner at the time of the execution of the instruments has continued to be such throughout the whole period of time here involved.

The rentals that were fixed, the Court must find were arbitrarily fixed and were never fixed with any thought of actually being paid, because there is no basis at all to show why the minimum rental should be $25 as indicated by the stipulation in the evidence, and the maximum, $35, when some of the places did a volume of business that was three and four times, what it was in others. I must hold that neither the lease nor the contract of employment created what they purported to create on their face, and they were merely the outgrowth of activities on the part of this defendant to meet a situation that confronted it by reason of an uncontrolled maximum price on livestock, and because selling its product as a processor under a controlled and maximum price made it difficult to continue processing meat at a profit. It is true the public was not compelled to pay any additional sum or any appreciable additional amount for the meats it bought, but the dealer was compelled to part with a margin of his gross profits ranging from 5 % late in these transactions, to 10% at the beginning, and he parted with that by giving it to the defendant. The defendant took such percentage of profits openly and' in good faith, not with an intent to commit an offense. When I use the words “good faith” I use them in- counterdistinction to the words “willful” arid “malicious” and “intentional”. He took it to make up the losses that he would sustain if he went out in the open market and bought livestock at the then going price. It thus becomes a method of indirection, in permitting the defendant to dispose of his processed beef products at a price in excess of the maximum, and therefore, it is a violation.

Under the law that existed prior to the time Congress amended it in July of 1944, this Court would have no discretion but to assess the damages and the penalties. With the amendments and with the provisions in the act as I understand it, even though all of the sales herein involved occurred prior to the date when the act was amended, they are still covered by it, and the issue of good faith, or as to whether or not the act was willful and the result of a failure to take practical precautions against the occurrence of the violation, becomes an issue here, and upon that issue turns the question as to what penalties, if any, should be assessed, and for what period of time.

I have already stated that I think the defendant initiated this novel and unusual procedure for the purpose of self-protection and self-preservation, and probably the suggestion came from others who were trying to do likewise, but that, of course, does not make it valid. In fact, it only goes to show to this Court how readily, if such undertakings were condoned and judicially approved, there would be a breakdown in the effective enforcement of this price control act.

The situation was, substantially different in October from what it was in July. It cannot only be argued with much force, but I do not hesitate to find as a fact, there was neither a willful violation nor was such violation the result of a failure to take practical precautions against the occurrence of a violation during the month of July.

The defendant through its president and manager, and through its counsel, sought to work out some plan whereby it would not violate the law, and yet be able to carry on its meat processing business to a degree sufficient to insure its survival, so I feel in making a disposition of this case that I should divide the whole period of time into lesser periods. The fact that the government has seen fit to aggregate four months and eight days into one action, I do not think, under the broad discretionary powers now given by the act, would prohibit me from making segregation of such periods, where the evidence discloses a different situation prevailed. I do this on the ground that on July 30th a letter went forward from O.P.A. officials, indicating clearly that the O.P.A. questioned this entire procedure, and at the very least, it should have been a warning. For that reason I think the overcharge made during the month of July should be measured by the amount thereof, which would be the damage without penalties. It is evident that upon the receipt of that letter there was some condition about Mr. Joseph’s health, or something of that nature, that caused him to take no immediate action. That would be no excuse whatever in a matter of such importance as this is. However,- the O.P.A. took no action, but by August 30th there was again a letter from them to the defendant, which again clearly indicates that the arrangement could not be approved, and that the conduct of the business under this arrangement would be looked upon and taken as an evasion and a violation. While there is some language by the writer of that letter that there might be further conferences, it is not sufficiently persuasive for me, in the exercise of discretion, to say that it meant the same practices should continue thereafter indefinitely, however, because of that letter and the negotiations which had taken place wherein the defendant was seeking to take reasonable precautions to avoid becoming subject to damages and penalties, hold that for the month of August, likewise, they should be liable only for the amount of the overcharges.

Now, as to September, October, and such days in November as are involved-— from September 1st until the conclusion of these transactions, I find that violations were knowingly made, and were the result of a failure to take practical precautions. All precautions that could have been taken were not taken from September 1st and for that reason the judgment will be the amount of the overcharges plus 50% in addition, whatever that may be for such period.


author: FAKE, District Judge.

text:
    CITY OF NEWARK v. HORNS et al.
    Civil Action No. 4110.
    District Court, D. New Jersey.
    Sept. 14, 1945.
    Philip J. Schotland, of Newark, N. J. (George B. Astley, of Newark, N. J., of counsel), for plaintiff.
    Morris H. Cohn, of Newark, N. J., for defendants.
   FAKE, District Judge.

The issues here arise on motion to dismiss the complaint on the ground of lack of diversity of citizenship and on the further ground that plaintiff has no standing before the court under Section 205(e) of the Emergency Price Control Act of 1942, as amended, 50 U.S.C.A.Appendix § 925(e).

The violations alleged in the complaint occurred prior to June 30, 1944, at which time the Administrator was without authority to institute a suit such as appears here, but the buyer could. The fact that the Administrator brought a suit without authority on June 6, 1944 cannot now be construed as defeating plaintiff’s right to sue in the instant case.

This suit being founded on a federal statute involving a federal question, diversity of citizenship is not a prerequisite to the bringing of a suit.

The motion to dismiss is denied.


author: WHITAKER, Judge.

text:
    VAN ZANTE v. UNITED STATES.
    No. 46378.
    Court of Claims.
    Oct. 1, 1945.

      Keith Brewster Van Zante, per se.
    William A. Stern II, of Washington, D. C., and Francis M. Shea, Asst. Atty. Gen., for defendant.
    Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
   WHITAKER, Judge.

This case is before us on demurrer. Plaintiff in his petition sues for the sum of $7,539.13, pay to which he claims he is entitled as an officer in the United States Naval Reserve.

He alleges that on September 30, 1942, he was ordered to inactive duty in the Naval Reserve, and that later, on January 21, 1943, he was discharged from the United States Naval Reserve by the Secretary of the Navy. He alleges that he contested the discharge and requested trial by court-martial, and continued to request trial by court-martial as often as once in six months, on the ground that he had been wrongfully discharged.

The statutes pertinent to plaintiff’s claim are codified in the United States Code as section 853c and section 1200, articles 36 and 37, all of Title 34 of the United States Code Annotated. Section 853c reads as follows:

“Any member of the Naval Reserve * * * may be ordered to active duty by the Secretary of the Navy in time of war or when in the opinion of the President a national emergency exists and may be required to perform active duty throughout the war or until the national emergency ceases to exist; * * * Provided, That the Secretary of the Navy may release any member from active duty either in time of war or in time of peace. * * * ”

According to plaintiff’s petition, he was released from active duty on September 30, 1942, and placed in an inactive status. The above-mentioned section clearly authorizes such action.

It is clear that persons in the Naval Reserve on an inactive status are not entitled to compensation, except that provided for in section 855/, 34 U.S.C.A.

This section provides in part:

“Officers and enlisted men of the Naval Reserve shall receive compensation at the rate of one-thirtieth of the monthly base pay of their grades, ranks, or ratings, not to exceed $10, for attending, under competent orders, each regular drill duly prescribed under the* authority of the Secretary of the Navy, including drills performed on Sunday, for the organization to which attached, or for the performance of an equal amount of such other equivalent instruction or duty, or appropriate duties, as may be prescribed by the Secretary of the Navy: Provided, * *

But plaintiff’s petition does not show that he is entitled to the compensation provided for in this section, and this is the only compensation to which a member of the Naval Reserve is entitled.

Plaintiff relies upon the provisions of articles 36 and 37 of section 1200, 34 U.S.C.A. Article 36 provides for the dismissal of officers in the naval service by order of the President or by sentence of a general court-martial. Article 37 provides in part as follows:

“When any officer, dismissed by order of the President, makes, in writing, an application for trial, setting forth, under oath that he has been wrongfully dismissed, the President shall, as soon as the necessities of the service may permit, convene a court-martial to try such officer on the charges on which he shall have been dismissed. And if such court-martial shall not be convened within six months from the presentation of such application for trial, or if such court, being convened, shall not award dismissal or death as the punishment of such officer, the order of dismissal by the President shall be void: Provided, * *

In the proviso a dismissed officer’s right to compensation is limited to six months after dismissal, unless he shall at least once every six months continue to demand a trial, in vain. Plaintiff alleges that his dismissal was wrongful and he did continue to demand a trial once every six months. However, even though plaintiff’s petition may bring him within the provisions of articles 36 and 37 of section 1200 of 34 U.S.C.A. of the Code, nevertheless, he has not alleged facts sufficient to show that he is entitled to recover any sum from the United States as compensation for his services, because his petition shows he was on an inactive status in the Naval Reserve Corps, and such an officer is not entitled to any compensation, as stated above, except that provided for in section 8552, and plaintiff has not alleged facts sufficient to show that he is entitled to the compensation therein provided for.

It results that defendant’s demurrer must be sustained and plaintiff’s petition must be dismissed. It is so ordered.

WHALEY, Chief Justice, and LITTLE-TON, Judge, concur.

MADDEN and JONES, Judges, took no part in the decision of this case.

       This section is a codification of the Acts of June 25, 1938, c. 690, Title I, sec. 5, 52 Stat. 1176; June 13, 1939, e. 205, sec. 12(d), 53 Stat. 821; June 24, 1941, c. 233, sec. 2, 55 Stat. 261; August 4, 1942, c. 547, sec. 15(b), (d), (e), 56 Stat. 739.