source: Caselaw Access Project

author: DUFFY, District Judge.

license: Public Domain

text:
    In re READ-YORK, Inc.
    No. 25136.
    District Court, E. D. Wisconsin.
    Nov. 20, 1944.
    Timothy Cronin, U. S. Atty., of Milwaukee, Wis., for U. S. Government.
    David L. Phillips and Walter W. Hammond, both of Kenosha, Wis., for Alfred _R. Davies, trustee.
    Willard H. Putnam, of Industrial Commission, of Madison, Wis., for Industrial Commission of Wisconsin.
   DUFFY, District Judge.

The trustee in bankruptcy has petitioned for confirmation in him of title to certain personal property. He also asks that the United States Government be restrained from interfering with his custody and possession of such property.

Under date of May 26, 1943, Read-York, Inc., secured a contract with the federal government for the manufacture of three gliders for the Army Air Force for the sum of $426,230. Funds for the performance of the contract were loaned and advanced by the federal government. One glider was manufactured but failed to meet the required tests, and the government thereafter terminated the contract. An appeal from the termination was denied by the Board of Contract Appeals on May 30, 1944. On the following June 29, Read-York, Inc., was adjudicated bankrupt. Its schedules admitted liabilities in excess of $700,000 with assets consisting entirely of personal property of a market value probably not in excess of $5,000.

The question before the court is whether title to the remaining assets is in the federal government by virtue of the May 26, 1943, contract as, amended August 6, 1943. Neither the original contract nor the amendment was recorded or filed pursuant to Wisconsin statutes.

Supplemental Agreement No. 1, dated August 6, 1943, among other things provided :

“Article 44. Partial Payments. Partial payments, which are hereby defined as payments prior to delivery, on work in progress for the Government under this contract, may be made upon the following terms and conditions.

“(a) The Contracting Officer may, from time to time, authorize partial payments to the Contractor upon property acquired or produced by it for the performance of this contract: * * *

“(b) The title to all property upon which any partial payment is made prior to the completion of this contract shall vest in the Government in its then condition forthwith upon the making of any such partial payment or payments: * * * ”

It is without dispute that the government made partial payments totaling $333,359.40 to Read-York, Inc., upon property acquired by the contractor, and the government claims title by virtue of said payments and the terms of the amendment to the contract hereinbefore quoted. Since the bankrupt ceased operating, the property has been and is now in the possession and custody of Army Air Corps representatives.

At the time of the oral argument as well as in its written brief the government has contended that as its claim is more than colorable and as it is in actual possession of the property in question, title to said property cannot be determined in a summary proceeding, and that the trustee must resort to a plenary suit. Harrison v. Chamberlin, 271 U.S. 191, 46 S.Ct. 467, 70 L.Ed. 897. While it must be admitted that the claim of the government under a written contract is not merely colorable, yet the delay attendant upon a plenary suit would be unfortunate. The fundamental question to be here decided is a question of law. It is difficult to perceive how any evidence which might be produced upon the trial of the plenary suit could influence the decision of the law question. The terms of the written contract which is before the court and the manner in which the bankrupt operated are without dispute. If possible the court should endeavor to decide the question of law at this time.

The trustee initiated these proceedings by a petition. An order to show cause containing a temporary restraining order against the government was then issued. In response to said petition the government filed an affidavit and a motion which asked the court (1) to deny the petition of the trustee for confirmation of title in him as said trustee, and (2) that the temporary restraining order be dissolved. There was no special appearance by the federal government objecting to the jurisdiction of this court to proceed by summary proceedings. An objection to summary jurisdiction must be timely. In re West Produce Corporation, 2 Cir., 118 F.2d 274, 277. Filing of a responsive pleading as was done here has been held a waiver of the right to have the issues tried in a plenary suit. Bagley v. Rowley, 6 Cir., 127 F.2d 139; Galbraith v. Vallely, 256 U.S. 46, 41 S.Ct. 415, 64 L.Ed. 823. I, therefore, conclude that under the circumstances of this case the court may properly determine at this time the issue of law here involved.

Certainly no creditor other than the federal government could come into a bankruptcy court in this State and obtain for itself title to personal property by virtue of a contract not filed as required by Wisconsin law. In re Urban, 7 Cir., 136 F.2d 296. When the federal government enters into a contract with a private corporation, even in this time of war, are its rights and duties any different than if the contract were between private parties ?

It is the long established policy of the State of Wisconsin, as is revealed by its statutes, such as Sec. 241.05, that where title to personal property has been supposedly passed by sale or otherwise and there has been a failure to transfer possession of such property, the presumption of fraud arises. Likewise Sec. 241.06. Wisconsin Statutes require all contracts of consignment to be filed and failure to do so results in the vesting of title in the consignee for his benefit or for the benefit of his creditors. Sec. 272.19, Wis.Stats., provides that personal property in Wisconsin shall be bound only from the time it is seized. In Burnett County Abstract Co. v. Eau Claire Citizens’ Loan & Investment Co., 216 Wis. 35, 255 N.W. 890, the court held that an alleged conditional sale of an automobile not accompanied by delivery of possession was presumptively void as against a bona fide assignee of a subsequent conditional sales contract and a buyer thereunder. In the case at bar the personal property in question was kept in the space in the Simmons plant which was rented by Read-York, Inc., and such property had been used by Read-York, Inc., as its own.

The First War Powers Act of 1941, 50 U.S.C.A.Appendix § 601 et seq., was passed as a war measure to enable the government to enter into contracts for the full prosecution of the war promptly and without adhering to many statutory requirements such as advertising, accepting low bids, etc. The national emergency demanded that the federal government be in a position to act expeditiously. The legal title of the First War Powers Act is “An Act to expedite the prosecution of the war effort.” 55 Stat. 838. By no provision in the War Powers Act did Congress grant an immunity to the federal government from complying with Wisconsin statute law requiring the filing of contracts purporting to transfer title to personal property while the possession of same remains unchanged, nor do the executive orders issued pursuant to the War Powers Act contain any such provision, and no clause in the federal Constitution purports, unaided by Congressional enactment, to nullify any such State regulation. The case at bar does not present a situation where Congress in the aid of its power to raise and support armies, Art. I, Sec. 8, Cl. 12, or under the supremacy clause, Art. VI, Cl. 2, has declared State statutes inapplicable to defense contracts.

The United States Supreme Court in Penn Dairies v. Milk Control Commission, 318 U.S. 261, 275, 63 S.Ct. 617, 623, 87 L.Ed. 748, stated: “ * * * An unexpressed purpose of Congress to set aside statutes of the states regulating their internal affairs is not lightly to be inferred and ought not to be implied where the legislative command, read in the light of its history, remains ambiguous. Considerations which lead us not to favor repeal of statutes by implication, United States v. Borden, 308 U.S. 188, 198, 199, 60 S.Ct. 182, 188, 84 L.Ed. 181; United States v. Jackson, 302 U.S. 628, 631, 58 S.Ct. 390, 392, 82 L.Ed. 488; Posadas v. National City Bank; 296 U.S. 497, 503-505, 56 S.Ct. 349, 352, 353, 80 L.Ed. 351, should be at least as persuasive when the question is one of the nullification of state power by Congressional legislation.”

The government argues that military secrecy required that the contract in question should not be subject to public scrutiny. But the original contract contained no provision regarding the title of the property being in the federal government. Of course filing such a contract was not a necessity. However, more than two months after the date of the original contract came the amendment designated a “supplemental agreement” and containing the language hereinbefore quoted. This provision pertaining to title of the personal property apparently was an afterthought on the part of someone since it was clearly inconsistent with various provisions of the original contract. In any event, it is not perceived why at least a portion of the contract pertaining to title of the personal property could not have been filed and thereby give notice to -creditors that the contractor with whom they were dealing was not the owner of the property.

The government however leans heavily upon the case of United States v. Allegheny County, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209, contending it is on “all fours” with the case at bar. Undeniably there is some similarity. In the Allegheny case Mesta Machinery Company, a Pennsylvania corporation, was engaged in the manufacture of heavy machinery at its plant in the County of Allegheny. In 1940 the War Department desired to produce a quantity of large field guns. Mesta’s plant was not equipped for the manufacture of such ordnance. Mesta and the government agreed that certain added equipment should be furnished at government cost and should remain the property of the United States. Mesta manufactured one machine and the government furnished ten others, but the large proportion of the machinery was purchased by Mesta from other tool manufacturers. This machinery was inspected and accepted upon behalf of the United States which thereupon compensated Mesta in accordance with the agreement. The contract provided that title to all such property should vest in the government upon delivery at the site of the work and upon inspection and acceptance. After this was done the machinery was bolted on concrete foundations in Mesta’s plant on real property owned by it. After the installation of the machinery, Allegheny County revised Mesta’s previously determined assessment for ad valorem taxes. The assessor added onto the value of the real estate a sum equivalent to the value of the machinery in question. The Supreme Court held that title to the property in question was in the United States, and that the attempt of Allegheny County to levy an assessment thereon was a violation of the United States Constitution.

Some of the language used in the court’s opinion in the Allegheny case favors the contention of. the government herein. However, I do not think the Allegheny decision is controlling. No sale to the government of personal property acquired by the contractor, as in the Allegheny case, is involved in the case at bar. Furthermore, the critical issue in the Allegheny case was whether the county was taxing personal property of the government under the guise of levying an ad valorem real estate tax. Also, the case at bar presents a question of title not between the original parties to the agreement but rather between one of those parties and subsequent creditors of the other. The intervening rights and creditor interests in the case at bar distinguish it from the Allegheny case. Moreover, in that case there was not, as here, a clean cut issue between the application of State law as provided for in the Bankruptcy Act and an undeclared Congressional policy as contended for herein by the government.

The government contends that federal law is controlling; but the trustee’s title is predicated on federal law, namely the Bankruptcy Act, 11 U.S.C.A. § 1 et seq. The trustee is in the most favored creditor’s position. The government will have full opportunity to file its claims and obtain an adjudication as to their rank and priority.

Although I have chosen to rest the decision of this case upon the grounds hereinbefore stated, I also believe that the contract with its amendments must be construed as a whole, and that, ascertaining the intent of the parties from the entire contract, title to all the personal property purchased by the contractor and upon which partial payments had been made did not ipso facto vest in the federal government, even after the amendment of August 6. I believe title would vest only after some affirmative action and constructive delivery of the property to the government, such as its being turned over to a designated transportation agency. The government argues that it was its money which purchased the property in question and therefore it deserves first consideration. While the government did furnish Read-York, Inc., with practically all of the money with which it started and operated its business, nevertheless such was advanced in the form of loans and Read-York, Inc., was required to pay 2%% interest on the unliquidated balance of advanced payments.

An order may be entered granting the request of the trustee in bankruptcy and denying the motion of the United States Government.


author: NORDBYE, District Judge.

text:
    HOLLAND v. ALTMEYER et al., Social Security Board.
    Civil Action No. 1033.
    District Court, D. Minnesota, Fourth Division.
    May 31, 1945.

      Charles S. Kidder (of Orr, Stark & Kidder), of St. Paul, Minn., for petitioner.
    Victor E. Anderson, U. S. Atty., and Linus J. Hammond, Asst. U. S. Atty., both of St. Paul, Minn., for defendants.
   NORDBYE, District Judge.

The above cause came before the Court on defendants’ motion for a summary judgment on the grounds that there is no genuine issue as to any material fact and that defendants are entitled to judgment as a matter of law and for judgment in accordance with Section 405(g), Title 42 U.S. C.A., affirming the decision of the Social Security Board, and as to which the petitioner herein has proceeded to obtain a review.

The facts appearing in the record and which seem relevant are as follows: When the petitioner herein resigned in April, 1942, from his position as District Agent for the State Farm Mutual Insurance Company at Bloomington, Illinois (hereinafter called the Bloomington Company), he applied for, and was granted, the “Primary Insurance Benefits” contemplated by Section 202(a) of the Social Security Act, 42 U.S.C.A. § 402(a). He also applied for, and was granted, on behalf of his two minor daughters, the “Child’s Insurance Benefits” contemplated by Section 202(c) of the Act, 42 U.S.C.A. § 402(c). At or about the time the petitioner resigned as District Agent for the Bloomington Company, he purchased a general agency writing insurance for the Farmers Mutual Automobile Insurance Company of Madison, Wisconsin (hereinafter called the Madison Company). This agency was sold to plaintiff with the consent of the Madison Company, and in appointing the petitioner District Supervisor for that company, a letter of appointment was issued which sets forth in some detail the duties of the District Supervisor. This letter was in the following form:

“Farmers’ Mutual Automobile Insurance Co.

“312 Wisconsin Ave.

“Madison, Wisconsin.

“April 21, 1942.

“Mr. J. H. Holland,

“Pine City, Minnesota.

“Dear Mr. Holland:

“Your license authorizing you to represent our Company in the State of Minnesota has already been sent to you.

“This letter will serve to notify you officially of your appointment as District Supervisor effective April 1, 1942.

“Your principal duties are as generally outlined on page 3 of your rule book and are as follows: It will be your duty to appoint (subject to Home Office review and approval), train, supervise, and service all agents in the district assigned to you and to do any and all things necessary to maintain and increase the volume of business in your territory.

“It will also be your duty to perform for any and all of our insureds the usual services on claims — for example: to provide loss reports; in the event of a loss to put our insured in touch with our nearest claim representative; and to see that all of your agents are properly servicing the losses of our insureds in their respective territories; and to perform such claim duties as they may be called upon to perform from time to time by the Home Office.

“It will also be your duty to educate agents in the proper selection-of risks and to handle an occasional inspection of individual risks as may be requested by the Underwriting Department.

“It will also be your duty to assist the Accounting Department whenever assistance is requested by them to keep agents’ accounts up to date, and further to inform the Accounting Department when in your opinion there are circumstances surrounding an agent’s habits, etc., which may eventually lead to difficulty for the Company in collecting accounts current or other funds due the Company.

“Periodically new rules, regulations, or commission scale adjustments will necessarily be formulated by the Company, and it will be your duty to abide by them and to instruct your agents regarding any new rules, regulations or commission scale adjustments as they are issued.

“Your compensation for all services rendered for the Company will be an overwriting commission of 6% on all premiums developed and produced by the agents in your district. This includes both new and renewal business. You will undoubtedly produce business for our Company through your own agency. Your commission on this personally-produced business is the same as paid to local agents as outlined on page 7 of the rule book as follows:

“First six months — 20% of gross premiums

“Second six months — 10% plus reinstatement fee, if any

“Thereafter — 10% plus reinstatement fee, if any.

“In addition you will receive your regular overwriting commission of 6% on business which you develop yourself.

“The following territory is being assigned to you and will comprise your district :

“Chisago County

“Isanti County

“Mille Lacs County

“Kanabec County

“Pine County

“Morrison County

“Crow Wing County

“Aitkin County

“Carlton County

“We sincerely hope that your new duties as outlined herein will be to our mutual benefit.

“Your very truly,

“[Signed] Karl Brecht

“Karl Brecht

“Agency Supervisor.”

After entering upon his appointment as District Supervisor for the Madison Company, and during the month of June, 1942, by reason of his employment by that company, the petitioner received more than $15 in income for that month. Because of this income, the Bureau of Survivors and Old Age Benefits declared that Holland and his children were ineligible for the primary and child benefits for that or any other month in which income in a like amount was received. Because of the Bureau’s ruling, he sought, and was granted, a hearing before the Referee. The Bureau’s decision was sustained. The matter was then taken to the Appeals Council of the Social Security Board, which adopted and affirmed the Referee’s decision. The matter has been brought to this Court by virtue of the section (42 U.S.C.A. § 405(g), which vests review jurisdiction in this Court in the following terms and to the following ‘extent:

“Any individual, after any final decision of the Board made after a hearing to which he was a party, * * * may obtain a review of such decision by a civil action commenced within sixty days after the mailing to him of notice of such decision or within such further time as the Board may allow. Such action shall be brought in the district court of the United States for the judicial district in which the plaintiff resides. * *• * The court shall have power to enter, upon the pleadings and transcript of the record, a judgment affirming, modifying, or reversing the decision of the Board, with or without remanding the cause for a rehearing. The findings of the Board as to any fact, if supported by substantial evidence, shall be conclusive, * * *. The court * * * may, at any time, on good cause shown, order additional evidence to be taken before the board, * *

Petitioner now contends that this jurisdiction should be exercised to rectify the errors which he claims were made by the Board when it held that he was an employee of the Madison Company and therefore not entitled to the benefits which his employment with the Bloomington Company occasioned.

The Referee’s decision, being the only written one and having been adopted by the Appeals Council, apparently expresses the decision of the Board. The pertinent portions of the Referee’s decision will be found in the following summarization:

“* * * The right to discharge was quite patently possessed by the company. There are also a number of signs of control by the company as to how the work shall be done. It must be done in accordance with the rules and regulations of the company. On behalf of the company the wage earner was to exercise supervision and give training to all of the subordinate agents in his territory. He was to assist the accounting department in keeping agents’ accounts up to date. In other words, he was to receive specific instructions as to particular accounts that came within the scope of his work. The wage earner was to perform for the insureds numerous services on claims, such as providing loss reports, putting the insured in touch with the nearest claim representative, and following up the subordinate agents to see that they were properly servicing the losses of the insureds. Further, he was to perform such claim duties as he might be called upon to perform from time to time by the home office. This latter is a very definite instance of a reservation by the company of the right to control and direct the individual performing services.

“Stationery of the company was provided to the wage earner and he merely added his own name as district supervisor to this letterhead. On his business card he described himself as district supervisor of the company. While he was probably known to the general public as writing a considerable variety of insurance lines, he did not have an office or did not put out literature holding himself out as an independent broker in insurance. It would be quite possible for him to represent certain companies in such a manner as to be an independent contractor with respect to those companies and, yet, to be with respect to another company an employee. The very title of his position, ‘district supervisor,’ is one more likely to be used to describe an official of the company having with respect to it the status of an employee. That he was paid by commission is not persuasive on one side or the other. * *

The Referee found that these facts sufficiently established that “certain extent” of control and that “certain number” of the usually recognized earmarks of an employer and employee relationship to justify a conclusion that the petitioner herein was an employee of the Madison Company. The bases for the facts indicated by the Referee are found in the written appointment of the petitioner, the rules and regulations of the company, and from the undisputed testimony.

At the outset, it seems clear that this Court cannot substitute its inferences from the admitted facts in place of those indicated by the Referee. The judgment of the administrative body must prevail if the “judgment was based upon conclusions reasonably reached upon due consideration of all relevant issues presented after parties in interest had been given a fair hearing or a fair opportunity to be heard upon the facts and the applicable law. Gray v. Powell, 314 U.S. 402, 62 S.Ct. 326, 86 L.Ed. 301.” Walker v. Altmeyer, 2 Cir., 137 F.2d 531, 533. Granted that the element of control as reflected in this record over the details and means by which the supervisory duties of the District Supervisor should be performed may seem to fall short of meeting the standards which many cases require in spelling out the relationship of employer and employee, the Court should not be unmindful of the responsibility which Congress has vested in this administrative body under the Social Security Act. The language of the Supreme Court in National Labor Relations Board v. Hearst, 322 U.S. 111, 130, 64 S.Ct. 851, 860, 88 L.Ed. 1170, which states, “That task has been assigned primarily to the agency created by Congress to administer the Act,” is applicable herein. What this Court may deduce from the admitted facts might seem more sound and plausible than the findings of the Referee in light of the generally accepted definition of employer and employee and in light of the regulations of the Social Security Board. But, obviously, if each court were vested with authority to control the interpretation of the various relationships which come before the Social Security Board, there would probably be an utter lack of uniformity in the administration of the Act. Situations similar to the instant one have, or undoubtedly will, arise in various parts of the country and uniformity of administration of the Act is highly desirable. It must be remembered that the Board is confronted not only with the responsibility of determining when a recipient of social security benefits has lost such benefit payments by reason of employment within the meaning of the Act, but also the primary question as to when the wage earner is entitled to the benefits of the Act.

Moreover, it would seem that the Board’s conclusions that the Madison Company had control over the details and methods of the work to be performed by the petitioner, as well as the results to be achieved, has substantial support in the evidence. Holland’s appointment as District Supervisor should be distinguished from the appointment of a mere solicitor of insurance. The interest of the employer with reference to an insurance agent is primarily concerned with the results which he achieves; that is, if an agent produces a certain volume of acceptable insurance risks, there is no real control of the details or methods by which the results are obtained. Holland, however, was vested with numerous duties of a supervisory nature, and as to which the employer outlined in some detail in the letter of appointment. The performance of these duties necessarily required a certain close contact with' the Home Office as to the method of performing them. It is recognized, of course, that Holland did not have any particular tenure of appointment; the right of discharge rested with the Madison Company. The agents to he appointed by Holland required the approval of the Home Office. The training, supervising, and servicing of agents would undoubtedly require literature from the Home Office, advertising matter, rule books, and other information which would enable the District Supervisor to acquaint the insurance solicitor with the performance of his duties for this particular company. Holland was required to perform such claim duties from time to time as the Home Office called upon him to perform. Such duties may well require advice, direction, and supervision from the Home Office. Indeed, it is difficult to understand how the District Supervisor could handle occasional inspection of individual risks as might be required by the underwriting department without the Home Office exercising control of the details and methods of such inspection. Then, again, it will be observed that, when the accounting department requested the District Supervisor’s services in assisting it to keep the agents’ accounts up to date, Holland was required to render such assistance. Such services presumably would be rendered under the supervision, direction and control of the accounting department. It will be noted that Holland was required to inform the accounting department of any circumstances surrounding the agents’ habits, etc., which might lead to difficulty in the handling of funds due the company. When one considers the numerous duties set forth in the letter of appointment, due consideration must be given to the probable manner in which such duties should and would be performed and the probable direction and control of the employer over the manner and circumstances of the performance of such duties. The record does not supplement by actual experience the exact manner in which many of the duties outlined would be performed. The employment began as of April 1, 1942, and the hearing before the Commissioner was had in October, 1942. In any event, it seems fairly clear from the record and the inferences that may properly be drawn therefrom that the employer retained sufficient control over the manner of performance of at least a goodly share of the duties assigned to Holland. It is sufficient if it appears that the employer had the right to direct and control the manner in which the services are to be performed, but not only did the employer have the right to direct and control, but it is fairly inferable, and a reasonable implication from the very nature of the duties assigned to Holland, that the employer would necessarily be required to exercise a certain amount of control and direction of the manner and method by which the duties were to be carried out. This Court, of course, lacks the power to evaluate the evidence. Social Security Board v. Warren, 8 Cir., 142 F.2d 974. The Referee and the Appeals Council have found that the admitted facts fairly reflect the relationship of employer and employee within the meaning of the regulations and in light of the purposes of' the Act. The legislation is remedial. It deals with practically every phase of the relationship of wage earner and employer. Strict technical interpretation of the factual situation, according to narrow common law . standards, is not mandatory on the Board. In administering this type of legislation, the practical problems confronting the Board are well recognized. National Labor Relations Board v. Hearst, supra. It would seem, therefore, that a determination of the Referee and the Appeals Council has “warrant in the record” and a “reasonable basis in law.” National Labor Relations Board v. Hearst, supra.

Petitioner contends that the Referee failed to make a finding that he purchased the agency for a specified price, and that he had the right to sell the agency to someone acceptable to the Madison Company. That there was evidence to this effect is conceded, but while no formal finding of that fact was made by the Referee, he did indicate in his decision that he had given consideration to that contention. In referring to this evidence in his decision, the Referee stated:

“* * * He (Holland) said the only restriction was that in case he resigned he must sell his business to an individual approved by the company. He believed he had a vested interest in the renewal commissions and that on terminating his connection with the company, he could sell these commissions to a successor approved by the company.”

Regardless of the informal manner in which the petitioner’s contention was recited by the Referee, there is no reason to assume that the evidence bearing on the vested interest in the agency was not given due consideration by the Referee as one of the “numerous factors” which he considered in reaching his decision.

There remains only one further matter to be commented upon. Petitioner refers to the statement made at the hearing when the Referee stated:

“If you can think of anything else which distinguishes your services with the Company at present from your services for the State Farm Mutual, I would like for you to say so. I think you will appreciate why this was a problem to the Bureau of Old Age and Survivors Insurance. Here they granted you benefits on the basis of a connection as an agent with the State Farm Mutual and then while that award was pending you raised the question of whether or not your services for these other companies would be services in employment. To hold that they were right in granting you benefits you must distinguish between the two types of services.” (Record, pp. 54, 55.)

The contention is made that the Referee assumed to require the petitioner to prove that he was an employee of the Bloomington Company, which, of course, was a conceded fact. But, obviously, this burden was not placed on Holland by the Referee. This question evidently was prompted by a desire on the part of the Referee to learn from the petitioner if he, the petitioner, could distinguish between the two tenures of employment, first, with the Bloomington Company, when the relationship of employer and employee was the basis for the security benefits, and the present employment with the Madison Company, which was the employment in issue. As to each company, he had been a District Agent or Supervisor. The companies were both farm mutuals. The record indicates that the Referee did consider the distinction between the two employments as indicated by the petitioner in his testimony, and such consideration appears from the summarization which is to be found in the following recitals made by the Referee:

“He drew a distinction between his services for the group of State Farm Mutual companies, with which he had been connected prior to the time when he had applied for benefits, and various other companies since that time. He stated that with the State Farm Mutual companies he had no continuing interest in the business, in other words, no equity which he could sell when his services terminated, that he was expected to give full time to the State Farm Mutual work and that he could not write other automobile insurance. He appeared to believe that the form of contract which he had with the State Farm Mutuals was a more ‘binding’ one than with the other companies because it was in legal form and had many details.” (Record, pp. 9, 10.)

In this connection, some question has arisen as to whether the written contract between the petitioner and the Bloomington Company was in evidence. When reference was made to it in the testimony, the petitioner indicated that the Referee probably had a copy of the contract, but as to such statement the Referee made no response. The petitioner now contends that he assumed that the contract was before the Referee and therefore he did not formally offer it in evidence. He contends that an inspection of this contract would clearly indicate the difference in the control of the District Agent as evidenced by the agreement with the Bloomington Company, as compared with the arrangement between the Madison Company and himself. However, it is elementary that this Court is limited to the record before the Referee and cannot consider new and additional evidence. Furthermore, no showing is now .made which would indicate that the matter should now be remanded to the Board for the purpose of receiving additional evidence. It fairly appears that the petitioner called to the Referee’s attention substantially all the factual data which related to the difference between the contracts of employment and which would have any material bearing upon the issues. The summarization made by the Referee fairly points out the principal differences between the two contracts.

It follows, therefore, that defendants’ motion for judgment as prayed for must be, and is, granted and that the decision of the Referee and the Appeals Council must be in all things affirmed. It is so ordered. An exception is allowed to the petitioner.


author: MANDELBAUM, District Judge.

text:
    CONNERS MARINE CO., Inc., v. PETTERSON LIGHTERAGE & TOWING CORPORATION. THE EVERETT FOWLER.
    District Court, S. D. New York.
    Dec. 4, 1944.

      Purdy & Lamb, of New York City, for libelant.
    Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Robert S. Erskine and J. F. Gerity, both of New York City, of counsel), for respondent.
    John F. X. McGohey, U. S. Atty., Vincent A. Catoggio, Sp. Asst, to U. S. Atty., and Edwin H. Friedman, all of New York City, for respondent-impleaded.
   MANDELBAUM, District Judge.

Libelant seeks the recovery of damages sustained by its scow, “Everett Fowler” while under charter to the respondent, Petterson Lighterage & Towing Corporation. The respondent, in turn, has impleaded the United States, alleging that it was the latter’s negligence that caused the damage. It is conceded that the scow in question was turned over to the respondent in good condition and that it was returned in damaged condition. The damage alleged seems to have resulted from the pounding received by the scow while tied up in New York Harbor during a storm that arose during the 5th or 6th of April, 1944.

The respondent charterer, pursuant to a contract entered into with the United States, loaded the scow with drums of gasoline. On April 4, 1944, the scow was towed to a designated point for unloading, where, pursuant to instructions by a U. S. Army Patrol boat, it was secured to either a stakeboat provided by the government for that purpose or to other barges tied up in the vicinity. The record is inconclusive as to this point, and gives rise to the motion by the United States to dismiss the claim of impleader against it. The claim against the United States is brought in the alternative, either under the Suits in Admiralty Act, § 2, 46 U.S.C.A. § 742, or under the Public Vessels Act, § 1, 46 U.S.C. A. § 781. It does not appear that the Suits in Admiralty Act is applicable in the instant case, since under this Act the “vessel” must be a “merchant vessel” or a “tugboat”. Clearly the stakeboat is neither of these and jurisdiction would therefore not attach under the Act. Mack Engineering & Supply Co. v. United States, D.C.S.D.N.Y., 291 F. 713.

It is conceded by the government that the stakeboat is a public vessel under the Public Vessels Act, § 1, 46 U.S.C.A. § 781, but in order to find the United States liable, the evidence must disclose that the stakeboat physically caused the damage to the scow. O’Neal v. United States, D.C., 11 F.2d 869, affirmed, 2 Cir., 11 F.2d 871. The record does not bear out this fact. No proof has been offered to show the exact means of damage, nor is there any exact proof to show where the scow was lying. The pounding of the scow could consistently be attributed to other barges or to vessels other than the stakeboat.

On the 5th of April, when the possibility of damage to the scow by the effect of the storm first became apparent, the Army officials of the port notified the respondent of the fact and suggested the removal of the scow. The respondent requested the government to do so. Whether or not the government undertook to do this work is in dispute, but in any event, it was the respondent that caused the removal of the scow on April 6th after the damage was sustained. I cannot agree with the respondent’s contention, in holding the government liable for failure to move the scow, in view of the evidence offered. I cannot find that the government in fact or even impliedly assumed responsibility for the safe-keeping of the scow. The government’s motion to dismiss as against it must therefore be granted.

The evidence of delivery by the owner in good condition and the return by charterer in damaged condition makes out a prima facie case entitling the owner to the benefit of a presumption of fault by the charterer or by those to whom it had entrusted the scow. See Howard v. Dobbins-Trinity Coal Co., Inc., 2 Cir., 1940, 111 F.2d 571, and cases cited.

In view of the notice of the impending storm admittedly given to the respondent, and it knowing that possible damage might result therefrom, it became incumbent upon the respondent to investigate the condition of the scow and take further precautions for its safe-keeping. The mere calling of the Army officials by the respondent to undertake the duties imposed upon the respondent is insufficient, and I cannot but find the respondent’s failure in this respect amounts to negligence.

Accordingly, a decree will be entered for libelant against respondent for the damage sustained by the scow. The matter of the amount shall be referred to a Special Master to hear and report.

The following are the court’s findings:

Findings of Fact

1. The scow “Everett Fowler” was turned over to respondent in good condition and returned in a damaged condition.

2. The damages to the scow were sustained by reason of a pounding received during a storm on the 5th or 6th day of April, 1944.

3. The respondent received sufficient notice of the approaching storm but did nothing to safeguard the scow.

4. The stakeboat is a public vessel.

Conclusions of Law

1. The Suits in Admiralty Act does not apply for jurisdiction to attach against the United States.

2. There is no evidence that the stake-boat caused the damage to the scow and requires a dismissal of the action against the United States.

3. The respondent was responsible for the safe guarding of the scow.

4. The respondent was negligent in failing to safeguard the scow.

5. The respondent is liable for the damage sustained by the scow.


author: WYZANSKI, District Judge.

text:
    VON KNORR v. MILES.
    No. 2513.
    District Court, D. Massachusetts.
    May 9, 1945.

      John C. Johnston, of Boston, Mass., for. plaintiff.
    Edmund J. Brandon, U. S. Atty., and Charles E. Cunningham, Asst. U. S. Atty., both of Boston, Mass., for defendant.
   WYZANSKI, District Judge.

This case is before the court upon (1) plaintiff’s complaint, as amended April 3, 1945; (2) defendant’s answer of June 26, 1944; (3) an agreed statement of facts filed in open court March 20, 1945; (4) defendant’s affidavit as to his domicile, filed April 25, 1945, which plaintiff’s counsel in open court agreed might be taken as evidence; and (5) defendant’s motion for summary judgment filed March 19, 1945; Defendant also made a motion to dismiss but that is no longer before the court since it has been superseded by defendant’s motion for summary judgment.

The gist of plaintiff’s complaint is that defendant, as military commander, has, without due process of law, deprived plaintiff of his liberty to pursue his employment in connection with contracts between Cities Service Oil Company and the War or Navy Departments. The plaintiff primarily relies upon an alleged deprivation of his constitutional rights, but he secondarily suggests that he is entitled to relief because the defendant has interfered with advantageous contractual relations which the plaintiff enjoyed and for which he is entitled to redress in this court in view of the diversity of citizenship between himself and defendant.

Plaintiff is a naturalized citizen of Massachusetts and of the United States. On August 13, 1943 he was and for six years had been an employee of Cities Service Oil Company at one of its places of business in Massachusetts. It does not appear that he had any written contract of employment. Nor is there any showing as to the nature of his work, the usages of employment in the business, the period of time by which his wages were computed, or the existence of any collective bargain covering his employment. In the absence of such a showing, and in accordance with Paragraph 6 of the agreed statement, I infer as a fact that plaintiff was employed by Cities Service Oil Company at will and not for a fixed period. Campion v. Boston & Maine R. R. Co., 269 Mass. 579, 582, 169 N.E. 499; Fenton v. Federal Street Building Trust, 310 Mass. 609, 612, 39 N.E.2d 414; Littell v. Evening Star Newspaper Co., 73 App.D.C. 409, 120 F.2d 36. See Williston Contracts, Revised Edition, §§ 39, 1027.

Defendant is a major general of the United States Army and is and since February 11, 1942, has been commanding the First Service Command, which extends over the area where plaintiff was employed. Defendant was born in 1882 in the District of Columbia where his father was domiciled and on duty as a high officer in the Regular Army. He lived in various places within the United States until he entered the Military Academy at West Point, New York, where he remained for four years. For the past 39 years he has been an officer in the Regular Army, and has been stationed at various places within and without the United States. Since February 11, 1942, when he assumed his present command, he has resided in a private dwelling house on Mount Vernon Street, Boston. He intends to reside in Boston upon the termination of active military service, and it is his intention to consider Massachusetts as his domicil. From these admitted facts, I infer as an ultimate fact that for the purposes of the statute conferring jurisdiction, upon the District Courts in suits where there is diversity of citizenship, Jud.Code § 24(1) (b), 28 U.S. C.A. § 41(1) (b), Major General Miles is clearly a citizen and resident of either the District of Columbia or of Massachusetts. If it were necessary to go further and resolve this ambiguity, I should find that for jurisdictional purposes defendant is a “citizen” of Massachusetts inasmuch as (a) he, though stationed in Massachusetts, has some freedom as to his choice of abode, including the right to live in a private dwelling, (b) he has expressed a definite intention to live here permanently, (c) being 63 years of age he is unlikely to be stationed elsewhere before his retirement, and (d) no other place has any but an unrealistic and highly technical claim to be his domicil. Mooar v. Harvey, 128 Mass. 219, 220, 221. See American Law Institute, Restatement, Conflict of Laws § 21, comment c. Compare District of Columbia v. Murphy, 314 U.S. 441, 453, lines 17 and 18, 62 S.Ct. 303, 86 L.Ed. 329. But see Kinsel v. Pickens, D.C.W.D.Tex., 25 F.Supp. 455, 456; Harris v. Harris, 205 Iowa 108, 109, 215 N.W. 661, 662; Dicks v. Dicks, 177 Ga. 379, 389, 170 S.E. 245, 250.

December 12, 1941, the President of the United States promulgated Executive Order No. 8972. Therein, after reciting the danger of sabotage, the President directed the Secretaries of War and Navy to establish guards and “to take other appropriate measures, to protect from injury or destruction” national-defense material, premises and utilities. “National-defense material” includes “supplies * * * intended for the use of the United States in connection with the national defense.” Act of August 21, 1941, 55 Stat. 655, 50 U.S.C.A. § 104. “National-defense premises” include all “places wherein such national-defense material is being produced.” Act of November 30, 1940, 54 Stat. 1220, 50 U.S.C.A. §§ 101, 104-106.

January 10, 1942, “by order of the Secretary of War” the Under Secretary of War issued “administrative instructions” for the discharge of subversives from private plants; and the Under Secretary joined with an Assistant Secretary of the Navy in an accompanying “memorandum.” The administrative instructions relate principally to contacts with representatives of organized labor and are not material to this case. The essence of the memorandum is in paragraph 2a which provides that “when adequate investigation reveals that there is good cause to suspect * * * an employee of subversive activity, Army or Navy representatives have authority to request the immediate removal of the individual from the project.” (Emphasis added.) The memorandum further provides for methods whereby an individual may contest his removal.

February 20, 1943 the Secretary of War by circular No. 57 authorized and directed, all service commands, as well as others, to establish guards and to take other appropriate measures to protect from injury or destruction national-defense material, premises and utilities. In paragraph III 3 of the circular “appropriate measures” is defined to include “the dismissal of subversives from private plants engaged in war .production.”

Major General Miles, as commander of the First Service Command, through a series of instructions to subordinate officers, authorized and directed Lt.-Col. William J. Bingham to write, and Lt. Samuel W. Whiting to deliver, Exhibit 1, a letter, on the stationery of Headquarters First Service Command, dated and delivered August 13, 1943. The letter was from Lt.Col. Bingham to Cities Service Oil Company. The opening paragraph of this letter stated “By direction of the Commanding General, First Service Command, you are hereby directed to remove Mr. Hans Von Rnoor [sic], 199 Canton Street, Dedham, Mass, from employment on and access to work under War and Navy Department contracts, or anything pertaining to such work.” Major General Miles also authorized and directed the writing and delivery of Exhibit 2, a letter written and delivered also on August 13, 1943, but directed to plaintiff personally. Both of these letters were written and delivered upon the basis of an investigation conducted without the presence of plaintiff or his counsel, and plaintiff was not, and has not been, informed of the evidence or given an opportunity to examine the witnesses whose testimony was included in the investigation.

A fair inference from the agreed facts is that Cities Service Oil Company, solely due to these letters, terminated plaintiff’s employment August 13, 1942. It is agreed that for jurisdictional purposes plaintiff’s damages from loss of this employment, if in contemplation of law he has sustained any damages, exceed, exclusive of interest and costs, $3,000.

In the manner provided by the memorandum of January 10, 1942, and other War Department procedure, plaintiff prosecuted an “appeal” to military authorities higher than Major General Miles. Plaintiff’s appeal was unsuccessful and it is agreed that he has exhausted his administrative remedies.

Upon the basis of the foregoing facts plaintiff seeks an injunction restraining defendant from interfering with his employment by Cities Service Oil Company and declaring invalid “the order to the Cities Service Company” dated August 13, 1943.

Defendant, among other points, challenges the jurisdiction of this court and this challenge must be cpnsidered at the outset.

It is plain that this court cannot take jurisdiction of this case on the ground that there is diversity of state citizenship between the parties. Plaintiff is a citizen of Massachusetts. If, as I believe, Major General Miles is also a citizen of Massachusetts, then the parties are citizens of the same state. If, on the other hand, Major General Miles has retained citizenship in the District of Columbia, then he is not a citizen of any “state”, and the case for that reason is not within the scope of the diversity jurisdiction clause of Jud.Code § 24(1) (b), 28 U.S.C.A. § 41(1) (b). Hepburn v. Elzey, 2 Cranch 445, 2 L.Ed. 332; Hooe v. Jamieson, 166 U.S. 395, 397, 17 S.Ct. 598, 41 L.Ed. 1049.

A more difficult question is whether this court can take jurisdiction under the clause in Jud.Code § 24(1) (a), 28 U.S.C.A. § 41 (1) (a), which confers jurisdiction over suits of a civil nature where the matter in controversy exceeds $3,000 and “arises under the Constitution or laws of the United States.”

Both parties agree that for plaintiff to bring his case within the quoted language he must at the least show that he has been deprived of his employment by an act of defendant which purported to be an official order as distinguished from an official recommendation. If the letters of August 13, 1943 were only official recommendations, and the Cities Service Oil Company and its officers were not under any legal duty to comply, and ran no risk of fine, imprisonment or like sanction, then it is agreed that the letters were mere recommendations rather than “orders” and this court would have no jurisdiction to review their validity. England et al. v. Devine, D.C., Mass., 59 F.Supp. 379. Thus the issue is whether there was any penalty for non-compliance with the letters of August 13.

To show that there was a penalty plaintiff points to Act of Congress of March 21, 1942, 56 Stat. 173, 18 U.S.C.A. § 97a, which provides: “whoever shall enter, remain in, leave, or commit any act in any military area or military zone prescribed, under the authority of an Executive order of the President, by the Secretary of War, or by any military' commander designated by the Secretary of War, contrary to the restrictions applicable to any such area or zone or contrary to the order of the Secretary of War or any such military commander, shall, if it appears that he knew or should have known of the existence and extent of the restrictions or order and that his act was in vw>.ttion thereof, be guilty of a misdemeanor and upon conviction shall be liable to a fine of not to exceed $5,000 or to imprisonment for not more than one year, or both, for each offense.”

This statute inter alia provides a penalty if a person (1) “shall * * * commit any act”, (2) “in any military area * * * prescribed, under the authority of an Executive order of the President * * * by any military commander designated by the Secretary of War”, (3) “contrary to the order of the Secretary of War or any such military commander”, (4) “if * * * he knew or should have known of the * * * order.”

The first element of the statutory crime would have been present if Cities Service Oil Company had defied the letter of August 13. Had the Company continued to employ plaintiff, the Company would have committed an act.

This act, moreover, would have been committed in a military area of the type stipulated in the statute. The President by Executive Order 9066, February 19, 1942, 7 Fed.Reg. 1407, Code of Fed.Reg., Cum. Sup. Title 3, pp. 1092-1093, gave the Secretary of War authority “to prescribe military areas in such places * * * as he or the appropriate Military Commander may determine”. April 22, 1942 the Secretary of War designated Lt.-Gen. Hugh A. Drum as Military Commander of the Eastern Defense Command, including Massachusetts, and delegated to him for that region the authority included in Executive Order 9066. Pursuant .to that delegation, Lt.-Gen. Drum on May 15, 1942 prescribed a territory, including Massachusetts, as a military area.

If Cities Service Oil Company had flouted the directions in the letter of August 13 the third element of the statutory crime would also have been present. It is true that there was no order of Lt.-Gen. Drum requiring employers to discharge employees thought to be subversive. But there was an order of the Secretary of War. I do not refer to the memorandum of Under Secretary of War Patterson January 10, 1942, which merely gave Army representatives the “authority to requesti" employers to remove employees, That memorandum was merely an internal administrative instruction as to behavior of Army representatives and did not bind any outsider. But Circular 57 of the War Department issued February 20, 1943, presumably over the signature or by express direction of the Secretary of War, is a different type of document. The Secretary of War purporting to act by virtue of Executive Order No. 8972, dated December 12, 1941, authorizes and directs “defense commands”, among others, to establish patrols and “to take other appropriate measures to protect from injury or destruction 'national-defense material, national-defense premises and national-defense utilities, as defined in Executive Order No. 8972, in any case where action is necessary or desirable for such protection.” And the Secretary adds that “ ‘appropriate measures’ * * * include * * * the dismissal of subversives from private plants engaged in war production.” There is thus established a chain of official directions beginning with the President’s direction to the Secretary of War to take appropriate measures to protect plants (Executive Order 8972), including the Secretary’s direction to military commands to take action in appropriate cases for the dismissal of subversive employees (War Dept. Circular 57), and terminating with the direction of Maj.-Gen. Miles as military commander addressed to Cities Service Oil Company. When Maj.-Gen. Miles gave his direction to dismiss plaintiff he was acting for the Secretary of War, and his order was in legal effect an order of the Secretary of War.

The fourth element of the statutory crime, knowledge or duty to know of the order, would also have been present if Cities Service Oil Company had defied the letter of August 13.

One other point deserves mention before going further. Counsel for defendant suggest that if Cities Service Oil Company had defied the letter of August 13, 1943 there would have been no violation of the Act of March 21, 1942 because the letter was based upon executive instructions some of which antedated the statute, that is Executive Order No. 8972, dated December 12, 1941, a War Department memorandum dated January 10, 1942, and earlier versions of what became War Department Circular 57 dated February 2, 1943. But the argument is refuted by Hirabayashi v. United States, 320 U.S. 81, 89, 63 S.Ct. 1375, 87 L.Ed. 1774, and Toyosaburo Korematsu v. United States, 323 U.S. 214, 65 S.Ct. 193, in which defendants were convicted under the Act of Mar. 21, 1942 for having violated military orders based upon an executive order which antedated this same statute.

Inasmuch as defiance by Cities Service Oil Company of the letter of August 13, 1943 would have involved a crime, it follows that that letter was in legal effect an order of the type which is subject to judicial consideration. But there remain these other procedural questions, (1) whether plaintiff has a locus standi to question the order, (2) whether a suit challenging the order is a suit against the United States, (3) whether in a suit challenging the order the Secretary of War is a necessary party, and (4) whether this is an appropriate case for the exercise of equity jurisdiction.

The order of August 13, 1943 was directed at Cities Service Oil Company but the effect of the order was to injure plaintiff by terminating his employment. Under these circumstances plaintiff has a locus standi. Stark v. Wickard, 321 U.S. 288, 303, 64 S.Ct. 559, 88 L.Ed. 733; Columbia Broadcasting System v. United States, 316 U.S. 407, 422, 62 S.Ct. 1194, 86 L.Ed. 1563; Pierce v. Society of Sisters, 268 U.S. 510, 535, 45 S.Ct. 571, 69 L.Ed. 1070, 39 A.L.R. 468; Independent Service Co. v. Tousant et al., D.C., 56 F.Supp. 75.

This proceeding cannot correctly be described as a suit against the United States in which the Government has not consented to be sued. No property of the United States is involved in these proceedings. If damages are payable they are payable by an individual, a Federal officer alleged to be acting without authority, not by the nation. Mitchell v. Harmony, 13 How. 115, 136, 14 L.Ed. 75. Just as it has been held that a suit against state officials alleged to have interfered with property without authority is not a suit against a state (Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714, 13 L.R.A.,N.S., 932, 14 Ann.Cas. 764) so in this case a suit against an officer of the United States for interfering with a contractual right is not a suit against the nation. Philadelphia Co. v. Stimson, 223 U.S. 605, 620, 32 S.Ct. 340, 56 L.Ed. 570.

The question whether the Secretary of War is an essential party in this litigation is not free from doubt. See Brooks v. Dewar, 313 U.S. 354, 359, 61 S.Ct. 979, 85 L.Ed. 1399; Jarvis v. Shackleton Inhaler Co., 6 Cir., 136 F.2d 116, 121; National Conference on Legalizing Lotteries, Inc. v. Goldman, 2 Cir., 85 F.2d 66. There are certainly some cases which would indicate that the Secretary of War might be an indispensable party. Webster v. Fall, 266 U.S. 507, 45 S.Ct. 148, 69 L.Ed. 411; Gnerich v. Rutter, 265 U.S. 388, 44 S.Ct. 532, 68 L.Ed. 1068. But if those cases be still valid precedents, which is at least doubtful in the light of Colorado v. Toll, 268 U.S. 228, 45 S.Ct. 505, 69 L.Ed. 927, they seem to me inapplicable here. It must be acknowledged that the particular order of August 13, 1943 was in legal effect an order of the Secretary of War but it was not issued by him, or after he had considered or learned of the particular facts which led to its promulgation. He had already delegated to Major General Miles the full power at his discretion to issue or not to issue within his command orders of the type of August 13, 1943. There is therefore no danger such as Judge Learned Hand anticipated in the National Conference on Legalizing Lotteries case that if the head of the department were not brought into a suit to enjoin an order enforced by a subordinate official of the department, the subordinate might find himself in a dilemma as to whether to obey the instruction of his chief or the order of a court. Nor in the case at bar is there any need to have the Secretary of War join in any rescission of the outstanding order. Furthermore, even if the Secretary of War were a party to this suit, it is not clear that he would say that he was the final superior official. He might claim that in military matters he was a subordinate of the President as Commander-in-Chief and that no injunction could issue under any circumstance because the President was not joined as a defendant and, under the doctrine of Mississippi v. Johnson, 4 Wall. 475, 18 L.Ed. 437, could not be enjoined. Unless the courts are to admit their incapacity to enjoin any military orders, it would appear that they should not regard as indispensable parties persons higher in the line of authority than the man in whose name the order goes forth. As an additional point it may also be noted that the cases which involve .the validity of orders like that of August 13, 1943, customarily present facts which from the governmental as well as the private viewpoint can be more conveniently examined in the district where the order was issued and made operative than in the District of Columbia where the Secretary of War is officially established. For the foregoing reasons and consistently with the opinion of the Supreme Court in Brooks v. Dewar supra, I have concluded that it is not necessary to dismiss this suit because the Secretary of War has not been joined.

Also there seems to be no principle of equity which stands in the way of this court taking jurisdiction. It was agreed in open court that plaintiff has exhausted every available administrative remedy. He has no opportunity to challenge the order of August 13, 1943 by defying it and standing the risk of criminal prosecution. His employer has already obeyed and left the employee with no opportunity to claim relief except in a court of equity. It would therefore appear that there is no adequate remedy and indeed no alternative remedy save the one that plaintiff is now following.

The jurisdictional points having been disposed of, the merits of the controversy remain to be considered.

The order, embodied in the letter of August 13, 1943 to Cities Service Oil Company, summarily directs a corporate employer having contracts with the War and Navy Departments to remove one of its employees from access to work on such contracts. It was issued without giving the employee any opportunity to know the evidence or .the grounds upon which it was based or to have the assistance of counsel. The order ostensibly finds warrant in the Act of March 21, 1942, 56 Stat. 173, 18 U.S.C.A. §.97a, as has already been stated. It may also conceivably find additional warrant in the power of the President as Commander-in-Chief, — though this is an issue which I find unnecessary to decide or upon which to intimate any judicial opinion. It is perhaps appropriate, however, for me to say that the order is not sustainable, as defendant argues, by § 2 of the Act of December 16, 1940, 54 Stat. 1224, 10 U.S.C.A. § 1193. That statute merely distributes administrative power within the bureaucracy of the War Department, and imposes no duties on outsiders.

These points seem to be involved: (1) is the Act of March 21, 1942, as here applied, invalid as involving a delegation of legislative power contrary to Article I of the United States Constitution; (2) is the order of August 13, 1943 invalid on the ground that Congress has no constitutional power in time of war to exclude from plants manufacturing government war supplies persons suspected of subversive activities; and (3) is the order of August 13, 1943 invalid on the ground that even if Congress has constitutional power to exclude from plants manufacturing government supplies persons suspected of subversive activities, the power was here exercised without the due process of the law guaranteed by the Fifth Amendment since .the exclusion order was not preceded by a hearing where plaintiff was notified of the charge against him, where he had an opportunity to hear the evidence against him and to present his own evidence, and where he was allowed to have the assistance of counsel.

Plaintiff does not lay any stress on the first two points, presumably because of the decisions in Hirabayashi v. United States, 320 U.S. 81, 63 S.Ct. 1375, 87 L.Ed. 1774, Toyosaburo Korematsu v. United States, 323 U.S. 214, 65 S.Ct. 193, and Ex parte Endo, 323 U.S. 283, 65 S.Ct. 208, but it is nonetheless appropriate to notice them.

The question of delegation of legislative power disappears when the full background of the Act of March 21, 1942 is stated. Prior to the enactment of the Act of March 21, 1942 the President had issued not only Executive Order 8972, dated December 12, 1941, authorizing appropriate measures to protect national defense measures, but also Executive Order 9066, dated February 19, 1942, which specifically refers to Executive Order 8972 and which provides for exclusion of persons from military areas and zones. Both Executive Order 9066 and (under the doctrine of incorporation by reference) Executive Order 8972 were laid before Congress when it was considering the enactment of the Act of March 21, 1942. Congress was aware from these and other sources that measures for excluding subversive employees from plants as well as curfew measures were outstanding. 88 Cong.Rec. 2722, 2725, H.R. Rep. No. 1906, 77th Cong., 2nd Sess., S. Rep. No. 1171, 77th Cong. 2nd Sess. In passing the Act of March 21, 1942 Congress, therefore, ratified measures of that type and gave them the force of compulsory orders to which penalties were attached. There having been Congressional ratification of executive action, there is no room for the doctrine of improper delegation of legislative power. Hirabayashi v. United States, 320 U.S. 81, 91, 102-105, 63 S.Ct. 1375, 87 L.Ed. 1774; Toyosaburo Korematsu v. United States, 323 U.S. 214, 217, 65 S.Ct. 193; Ex parte Endo, 323 U.S. 283, 287, 65 S.Ct. 208.

In considering the constitutional authority of Congress in time of war to exclude a person from a plant having a government contract for war supplies it would perhaps be possible under some circumstances to invoke either the power of Congress to “make all needful Rules and Regulations respecting the * * * Property * * * of the United States”, U. S. Constitution, Art. IV, § 3, cl. 2, or the powers of Congress “to declare War”, “to raise and support Armies” and “to provide and maintain a Navy.” Article I, § 8, els. 11, 12 and 13. However, the former alternative is unavailable in the case at bar since there has been no showing as to what contracts there were between Cities Service Oil Company and the government, as to when the government had acquired or would acquire title to the supplies being furnished, as to the extent to which the government had any property on the premises of the company or as to the employment contracts of the company. I, therefore, leave unresolved the question whether the order of August 13, 1943 can be supported by the power of Congress under Article IV, § 3, cl. 2. Compare United States v. Allegheny County, 322 U.S. 174, 183, 64 S.Ct. 908, 88 L.Ed. 1209. For similar reasons I do not express any opinion on the question whether the order of August 13, 1943 can be supported on the theory that the plaintiff’s employment was the result of a privilege extended by the government which created no legal rights and which was subject to termination at the pleasure of the government. Compare Perkins v. Lukens Steel Co., 310 U.S. 113, 127, 60 S.Ct. 869, 84 L.Ed. 1108. On the facts disclosed it is appropriate and sufficient to view the application of the order of August 13, 1943 and the statute of March 21, 1942 upon which it rests solely in the light of the war powers of Congress under Article I, § 8, els. 11, 12 and 13.

Cities Service Oil Company was operating what was in essence a private arsenal of our democracy. The supplies it was preparing were designed for the use of the armed forces of the United States. The processes which it was applying may have involved government secrets, and, at the least, the data on volume and type of production, on transportation and on like matters were confidential. Interference with such production processes, or disclosure of such confidential data, were dangers against which Congress was empowered to provide. And an obvious and logical provision was an order excluding from areas where there were such processes and data any person or persons in whom the government lacked confidence.

Such an exclusion order is as plainly within the war power as the more drastic orders excluding persons from the public streets at nighttime, sustained in Hirabayashi’s case, from an entire city, sustained in Korematsu’s case, or from the Pacific Coast states, sustained in Endo’s case, 323 U.S. p. 302, lines 16-20, 65 S.Ct. 208. All those orders interfered with employment, and on a much wider scale than here where plaintiff remains free to work for his former employer in jobs having no connection with war contracts and free to work for other employers in Massachusetts or elsewhere. It is true that the orders in those three Supreme Court cases were orders directed to an entire group on the basis of a military commander’s doubts as to their loyalty, whereas here the order is directed to a particular person. But if that be a distinction, it would seem that the order here was more not less justifiable because it rested on views as to an individual’s loyalty rather than a group’s loyalty.

Moreover, quite apart from the precedents supplied by the cases of Hirabayashi, Korematsu, and Endo, it is clear on broad grounds of constitutional principle that an order excluding any person from a defense plant in war time is valid.

Two interests are in competition and must be considered: the government’s concern to prevent both sabotage and disclosure to the enemy of secret processes, statistics and information; and the private individual’s concern to go where he pleases and engage in such work as is offered him.

It is not mere rhetoric to say that the government’s interest in avoiding sabotage and espionage in war time is one of its most vital concerns. National survival is quite literally at stake. Every school boy knows that the experience of this nation during the last war and of Continental countries during this war shows how easily a country’s military efforts may be hampered by the admission to war plants of persons who on their face appeared unobjectionable. Saboteurs do not parade with foreign credentials of professional competence. And arsenals are not guarded if watchmen exclude only those in whose satchels they have already found bombs. To avoid grave risks a prudent government may rationally favor a policy denying access to war plants not only by a person proved dangerous but also by any person in whom the government lacks absolute confidence.

The interest of Von Knorr or any other individual in continuing at his job is the sort of interest which the law recognizes and protects at least against certain types of private interference, Compare American Law Institute, Restatement of Torts, § 766. Yet it is an interest which is commonly recognized as being subject to greater practical hazards than most so-called “property rights.” In the case at bar it was an interest in a mere relationship of employment which Von Knorr no doubt hoped would be continued, but which was not embodied in any firm agreement giving Von Knorr enduring contractual rights. Moreover, it was an interest in a relationship of employment on work flowing as an indirect result of a government contract with Von Knorr’s employer and which might terminate whenever the government terminated its contract. It was, finally, an interest which was not of grave economic importance, even from a personal viewpoint, for in theory and (in the light of the war time demand for labor), in fact Von Knorr still had the opportunity for many types of gainful and dignified employment. Thus the interest was practically circumscribed and economically of relatively little value.

In balancing these obviously unequal competing interests Congress and the Executive were entitled to prefer the interest of the government to that of the individual, and to regard that preference as so plain an exercise of the war power as not to place the government under any obligation to make “just compensation” to the individual whose interest was adversely affected. Compare United States Constitution, Amendment V.

The reasons just given for sustaining the power of Congress to exclude persons from defense plants in war time cut the ground from under plaintiff’s principal contention that the order of August 13, 1943 is invalid under the Fifth Amendment to the Constitution because the. order was issued without notice to plaintiff, without a hearing, without an opportunity to hear and present evidence, and without the assistance of counsel. Notice, hearing, counsel and the like are admittedly usually appropriate criteria of due process of law. But these guarantees have significance only if in the end the government’s right to act turns on an official finding that certain facts exist. Compare Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129. Where in rare cases such as orders excluding persons from defense plants in war time, the government’s right to act is absolute and not dependent upon the facts concerning, or the merits of, any particular case, the formalities of a notice, hearing and counsel are not requisite. Compare United States v. Ju Toy, 198 U.S. 253, 263, 25 S.Ct. 644, 49 L.Ed. 1040. No matter what evidence might be offered by counsel for the government or counsel for the individual, the government would remain legally free to disregard the testimony and rely upon its uncorroborated suspicions. Since in this highly exceptional case, because of its vital interest in war materials and war secrets during war time the government’s exclusionary powers are complete, it can refuse admittance to defense plants without giving an explanation, without listening to a protest and without the semblance of a trial.

It is hardly necessary to add that these conclusions of law do not imply that this court believes that it is desirable, as distinguished from legal, for a government, no matter how absolute its power may be, to deny a chance for employment to any citizen merely on the basis of suspicion. Military commanders, like other authorities, will no doubt find it possible as well as just in most cases to give an employee notice of the facts which create their suspicion about him and a chance to present his side of the case. Even where power is free of judicial restraint, those who wield it may impose upon themselves self-restraint. And they may accept as canons for their conduct the standards of procedure which in the overwhelming majority of cases are regarded as fundamental to fair play.

Complaint dismissed, with costs.