author: BURKE, District Judge.

text:
    GRAVES et al. v. UNITED STATES.
    Civil Action No. 1706.
    District Court, W. D. New York.
    July 7, 1945.
    Jacob Ark, of Rochester, N. Y., for plaintiffs.
    George L. Grobe, U. S. Atty., of Buffalo, N. Y. (Marvin C. Taylor, of Washington, D. C., of counsel), for defendant.
   BURKE, District Judge.

The government on June 29, 1943, through its agency, Metals Reserve Company, requisitioned from the plaintiffs 8268 pounds of bronze castings which had been designed for use as handle brackets for blowtorches. It was determined by the government that $1641.58 was fair compensation for the materials taken. The plaintiffs were unwilling to accept such determination. Pursuant to the statute, 50 U.S.C.A.Appendix, § 721, the government paid plaintiffs fifty percent of the amount so determined and the plaintiffs bring this action to recover an additional amount, which, when added to the amount already paid, will be just compensation.

The plaintiffs contend that market value of the requisitioned property is not the proper measure of compensation because there was no market value in the true sense, the property being especially made for handle brackets and not being a commodity that is freely bought and sold in the open market. The only evidence of value produced by the plaintiffs was the cost of reproducing bronze castings, such as were taken.

Prior to the taking amended Conservation Order M-9-c, issued by the War Pro¡-duction Board, restricted the itse of copper-base alloy in the manufacture of blowtorches and prohibited its sale for any non-permitted use. The availability of plaintiffs castings for use as handle brackets had been taken away by Conservation Order M-9-c. The governmental right to impose use restrictions is not challenged by the plaintiffs. At the time of the taking there was no available use for the requisitioned handle brackets as such nor was there any available use except for remelt or for sale to the government. The plaintiffs contend that they did have inherent value for subsequent use as handle brackets by the plaintiffs themselves as manufacturers of blowtorches. They introduced proof that formal appeals by them to the War Production Board for permission to use copper products for blowtorch tanks were allowed, on a number of occasions, both before and after the taking. There was no proof as to the likelihood of allowance of such appeals at the time of the taking. There was no proof as to market value except as scrap and sale to the Government under the Copper Recovery Program.

They contend further that, prior to October 21, 1943, the date which one of the plaintiffs testified that they first received an interpretation from the War Production Board that the term “tank” in order M-9-c included fittings, bronze handle brackets were not restricted for military orders. But the same witness testified that at the time their production had been converted to substitute steel tanks, prior to the taking on June 29, 1943, they were using steel handle brackets because there had been an interpretation by the War Production Board that all fittings of a tank were to be considered part of the tank in the interpretation of order M-9-c.

To say that there was no market for the requisitioned property as bronze castings is but another way of saying that the property was not available for use as bronze castings. But to say that the property had no market value is to ignore the fact that there was a ready market for it as remelt or for sale to the government, not the best possible use but the only available use, and that came about because of the valid exercise of lawful war time powers in restricting the use of copper products. The plaintiffs cite Sinclair Refining Co. v. Jenkins Process Co., 289 U.S. 689, 53 S.Ct. 736, 77 L.Ed. 1449, 88 A.L.R. 496, as authority for the appraisal of value by reproduction cost. That suit was one for damages for breach of contract. The plaintiffs here are entitled to receive just compensation, not damages as for a breach. “A sufficient ground for the distinction lies in the fact that in the one case the requisition or cancellation is a lawful act under the power of eminent domain, while in the other the act constituting the breach is unlawful.” DeLaval Steam Turbine Co. v. United States, 284 U. S. 61, 70, 52 S. Ct. 78, 79, 76 L.Ed. 168. Moreover the subject of appraisal in the Sinclair Refining case was a patent, in the language of the Court “a thing unique”. There was in that case absence of market value. At page 697 of 289 U.S., at page 739 of 53 S.Ct., 77 L.Ed. 1449, 88 A.L.R. 496, the Court said: " *' * * But the absence of market value does not mean that the offender shall go quit of liability altogether.”

The plaintiffs cite authorities, United States v. New River Collieries Co., 262 U.S. 341, 43 S.Ct. 565, 67 L.Ed. 1014; Phelps v. United States, 274 U.S. 341, 47 S.Ct. 611, 71 L.Ed. 1083; Seaboard Air Line R. Co. v. United States, 261 U.S. 299, 43 S.Ct. 354, 67 L.Ed. 664, in support of the principle controlling in cases of the taking of private property under the power of eminent domain that the Government’s obligation is to put the owner in as good a position pecuniarily as if the property had not been taken. That principle is applicable in the case at bar. It must be remembered, however, that the obligation relates to the position of the owners at the time of the taking, not at some time prior thereto before the plaintiffs’ property had felt the effect of lawful governmental orders restricting its use and fixing maximum prices for its sale. The application of the principle poses the question: “What was the plaintiffs’ position at the time of the taking?” They had on hand bronze castings which they could not use themselves unless permitted to do so by appeal to the War Production Board, noir could they sell them for use as bronze castings or for any other use that was prohibited. They could have sold them to a purchaser who desired to hold them until the lifting of the restrictive regulations, but there was no evidence of any market for such purpose. There was a ready market for the castings as remelt but that too had felt the force of maximum price regulations. Under Office of Price Administration regulations the price for remelt was limited to 10% cents per pound. These governmental restrictions, unquestionably lawful and general in their scope, affecting not only plaintiffs’ property but all property in its class, were actualities which circumscribed the market. A court in evaluating property requisitioned by the government may not ignore their effect. Whatever may have been plaintiffs’ damage because of these restrictions, it may not be reflected in fixing just compensation for the taking. Plaintiffs’ loss because of the restricted market was the result, not of the taking, but of lawful governmental action in imposing restrictions as to use and fixing ceiling prices, for which the law affords no remedy. Omnia Commercial Co. v. United States, 261 U.S. 502, 510, 43 S.Ct. 437, 67 L.Ed. 773. “ * * * when competent authority has fixed prices at a maximum, or has denied owners some specific use of their property, it is patently a disregard of its authority, either indirectly to allow a higher price on condemnation, or to allow the price to be figured in disregard of the limitation imposed.” United States v. Delano Park Homes, 2 Cir., 146 F.2d 473, 474.

For the purpose of securing copper for use in the prosecution of the war, the government inaugurated the Copper Recovery Program to secure idle and excess inventories of copper products. For copper products which could not be utilized in their existing state because of use restrictions the government offered certain fixed prices according to grade. The price fixed for the grade in which plaintiffs’ castings were classified was 19.93 cents per pound. That price was offered to the plaintiffs and refused by them. It was universally offered by the government to holders of copper products of a class similar to plaintiffs’ bronze castings. The Copper Recovery Program established a legál market for plaintiffs’ property in excess of the maximum scrap price set by the Office of Price Administration. When the Copper Recovery Program prices were being generally offered the government was not committed to the requisitioning of copper products. Cf. United States v. Miller, 317 U.S. 369, 372, 63 S.Ct. 276, 87 L.Ed. 336, 147 A.L.R. 55. The price fixed by the Copper Recovery Program afforded a market for plaintiffs’ property and that market was the best available market. The plaintiffs are entitled to recover as compensation for their property the value thereof as fixed by the Copper Recovery Program less the amount received on account. Findings and Conclusions are filed herewith.

Findings of Fact

1. On June 29, 1943, the United States, through its agency Metals Reserve Company, requisitioned and took from the plaintiffs 8268 pounds of bronze castings.

2. The plaintiffs were engaged as manufacturers of blowtorches. The requisitioned castings had been designed and cast especially for the use of plaintiffs as handle brackets for blowtorches.

3. Prior to June 29, 1943, Amended Conservation Order M-9-c issued by the War Production Board prohibited the use of bronze handle brackets in the manufacture of blowtorches and prohibited their sale for that use or for any prohibited use.

4. On June 29, 1943, there was no market for the requisitioned bronze castings in their existing state. There was no< market except as scrap and except the market created by the government under the Copper Recovery Program. No use of copper products prohibited by Conservation Order M-9-c could be made, except as allowed by appeals to the War Production Board. Appeals had been allowed before that date on the application of the plaintiffs to use copper base alloys in blowtorch tanks for emergency orders and on several occasions after June 29, 1943, the War Production Board allowed the use of copper base alloys in the manufacture of blowtorch tanks on the plaintiffs’ applications.

5. There was no evidence, however, that on June 29, 1943, there was any likelihood of the allowance of appeals for the use of copper base alloys in the manufacture of blowtorches.

6. Prior to June 29, 1943, plaintiffs had converted their manufacturing methods to the use of steel handle brackets in the manufacture of blowtorches in accordance with an interpretation by the War Production Board that all fittings of a tank were to be considered part of the tank under Copper Order M-9-c.

7. Prior to June 29, 1943, the Office of Price Administration, acting pursuant to the authority derived from the Emergency Price Control Act, established a nationwide price ceiling for copper base alloy scrap. Under this regulation the maximum price for copper base alloy scrap was 10%$ per pound. If sold as scrap the maximum scrap price of plaintiffs’ bronze castings would have been 10%$ per pound. There was a ready market for plaintiffs’ castings as scrap at this price.

8. To secure copper for use in the prosecution of the war the government inaugurated the Copper Recovery Program to secure copper products in idle or excess inventories.

9. Under the Copper Recovery Program the government offered generally to holders of copper products of the class in which plaintiffs’ castings fell a price of 19.93$ per pound.

10. The action of the government in establishing a price for copper base alloy products created a market for said products at the prices fixed by said program. At that time the government was not committed to a plan of requisitioning copper base alloy products from private holders thereof.

11. The government offered to purchase the bronze castings held by the plaintiffs at the price established by the Copper Recovery Program of 19.93$ per pound. This price was refused by the plaintiffs.

12. The reproduction cost of the requisitioned castings on the date of the taking was $3916.10. In addition thereto it would have been necessary to expend the sum of $152.95 for embellishment of the reproduced castings to place them in the condition of the castings which were actually requisitioned, making a total of $4069.05.

13. The fair market value of the requisitioned castings on the date of the taking was the Copper Recovery Program price of 19.93 cents per pound or $1647.81, on account of which plaintiffs have received $815.79.

Conclusions of Law

1. Plaintiffs’ property was lawfully requisitioned under the statute. 50 U.S. C.A.Appendix, § 721.

2. The market for plaintiffs’ property on June 29, 1943, the date of the taking, had been limited by lawful use restrictions imposed by the War Production Board and by lawful maximum price regulations for scrap fixed by the Office of Price Administration.

3. The best available market for plaintiffs’ property on the date of the taking was at the price fixed by the Copper Recovery Program.

4. Any loss sustained by the plaintiffs because of the limited market caused by lawful governmental regulations as to allowable use and maximum prices for scrap, may not be reflected in computing fair compensation.

5. Plaintiffs are entitled to recovery as the fair market value of their property $1647.81, less $815.79 heretofore paid on account.


source: Caselaw Access Project

author: BROADDUS, District Judge.

license: Public Domain

text:
    BLACKARD et al. v. JONES, Collector of Internal Revenue.
    Civil Action No. 1219.
    District Court, W. D. Oklahoma.
    June 28, 1944.

      Ira J. Underwood, of Tulsa, Okl., for plaintiff.
    Charles E. Dierker, U. S. Atty., of Oklahoma City, Okl., for defendant.
   BROADDUS, District Judge.

The court finds:

1. The facts stipulated by the parties.

2. The estate tax upon the shares of stock held by Kate Chestnut on the day of her death, August 9, 1938, was fixed by the taxing authorities by dividing the gross assets of the Securities Company by the issued shares and multiplying the result by the number of shares of which Kate Chestnut died seized.

3. The value of one share of stock of Chestnut Securities Company on August 9, 1938, the date of the death of Kate Chestnut was $91.89 and the value of the 4,584 shares subject to an estate tax was $421,218.76.

Conclusions of Law

A. The burden was upon plaintiff taxpayers to prove that the determination of the tax by the Commissioner was invalid and further, to establish the basic facts from which a correct determination of the tax could be made.

B. The determination of the value of the stock by dividing the total value of the gross assets of the Chestnut Securities Company by the number of outstanding shares and multiplying the result by the number of shares held by Kate Chestnut on the date of her death was arbitrary and fixed an excessive value on such shares. The method followed was in conflict with the then prevailing regulations of the Bureau of Internal Revenue as promulgated by the Secretary of the Treasurer.

C. The value of the shares of stock in the Chestnut Securities Company of which Kate Chestnut died seized could not be determined by sales, or from bid and asked prices and must be determined upon the basis of the company’s net worth, earning power, dividend paying capacity, and all other relevant factors having a bearing upon the value of the stock.

The Policies of Insurance

4. Policy 9928,842 was issued by the Equitable Life Assurance Society of America on November 13, 1935, as a Single Premium Life policy for $40,000, consideration for which was $37,540, and annuity policy 9928,843, consideration for which was $4,860, was prepared in conjunction with it The two policies were one and the same transaction and are considered as such, and the Equitable Life Assurance Society would not have entered into the life insurance contract unless the annuity contract, entered into on the same day, was a part of the transaction.

Conclusion

D. The two policies created no insurance risk and the amount payable to the beneficiary named in the so-called life policy was not insurance within the scope of Sec. 302(g) of the Revenue Act of 1926, 44 Stat. 9, 70, as amended, 47 Stat. 169, 279, 48 Stat. 680, 752, 26 U.S.C.A. Int.Rev.Code, § 811(g), and the amount payable under the policy designated a life policy was taxable under Sec. 302(c) of the Revenue Act of 1926, as amended, it being a transfer to take effect in possession or enjoyment at or after deat.

       Total net assets, $2,388,986.47, divided by 19,500 outstanding shares, equals $122.- 51.

       The testimony of the witness Rubin reflects consideration of the net worth of the Securities Company, its earning capacity, dividends paid, and other relative factors effecting the value and has received careful consideration. However, the value affixed by the court more nearly reflects the fair market value, particularly is this true when any allowed deduction of more than 25 % of the asset value enters the realm of pure speculation. The valuation fixed is 75 % of the value of the net assets and upon such valuation, the stocks should produce 5% on the net asset value.
      For the year 1938 and preceding years this was not an excessive earning upon the fixed valuation. The court may exercise its judgment in the light of the court’s knowledge and give to expert testimony only its merited weight. Weicker v. Howbert, 10 Cir., 103 F.2d 105, 107, note 7; Wyoming Inv. Co. v. Commissioner, 10 Cir., 70 F.2d 191, 193; Emerald Oil Co. v. Commissioner, 10 Cir., 72 F.2d 681, 683; Phipps v. Commissioner, 10 Cir., 127 F.2d 214.
      Tbe Chestnut Securities Company was a holding company of the Chestnut family, with 19,500 shares outstanding of the par value of $100.00. Until the death of Kate ■Chestnut on August 9, 1938, the stock of the Company was all held by the Chestnut family, and under her will the stock of which she died seized by devise vested in stockholders of the company and members -of the family.
      The corporate powers of the Chestnut ■Company, a Delaware corporation, were extensive. The evidence establishes that it exercised only the power of investment in marketable securities, the management •of such securities, and tbe distribution of the corporate earnings.
      The value of its securities on August 9, 1938 was $2,383,986.47. No share of the ■stock of the Company had ever been sold nor had there been any bid and asked prices. The net worth of the shares of the Chestnut Company which Kate Chestnut died seized, must be determined upon the Company’s net worth, earning power, dividend paying capacity, and all other relevant factors having a bearing upon the value of the stock. 26 C.F.R. 80; 10 C. Other relevant factors would include a ■consideration of comparable stocks for which there was an established market value, and which were listed on the stock exchange. There was no specific provision to that effect either in the statute or the regulations at the time of the death of Kate Chestnut. Subsequent legislation provided that where the stocks were not listed on an exchange, and there had been no sales thereof, that tbe value of the stocks or securities of companies engaged in tbe same or similar lines of business which are listed on the exchange, should be taken into consideration in addition to all other factors, Sec. 501 of the Revenue Act of 1943 amending Sec. 811 of Tit. 26, U.S.C.A. Int.Rev.Code; Estate of Webb v. Commissioner, C.C.H. Dec. 13, 1929. It was a recognition by Congress of an important factor to be considered in such cases. Even though subsequently enacted it is of assistance in interpretation of the prior statute. Tiger v. Western Investment Company, 221 U.S. 286, 31 S.Ct. 578, 55 L.Ed. 738; Great Northern Ry. Co. v. United States, 315 U.S. 262, 277, 62 S.Ct. 529, 86 L.Ed. 836; W. A. Shenffer Pen Co. v. Lucas, 59 App.D.C. 323, 41 F.2d 117; Coleman v. United States, 37 F.Supp. 273, 276, 93 Ct.Cl. 127. If the meaning of a statute may he gathered from a subsequent statute relating to the same subject, it is a legislative construction of the first statute. United States v. Phez Co., 9 Cir., 28 F.2d 106. Without such a provision the factor was within the meaning of the regulation.
      The stipulation of the parties classified the assets of the Chestnut Company and fixed the net assets value upon such classification as follows:
      U. S. Government bonds, Treasury
      notes and Mayo Hotel bonds.... $ 807,244.43 Marketable industrial stocks ..... 1,073,223.75
      Producing oil royalties............ 99,378.21
      Producing oil and gas leases...... 14,814.93
      Notes receivable ................... 335,781.36
      Accounts receivable................ 19,028.42
      Cash in Banks .................... 27,395.68
      Accrued interest .................. 12,119.66
      Total value .................... $2,388,983.47
      Its net earnings for the years '1930 to 1938 inclusive are to-wit:
      Year Net Earnings Per Share 1833 $ 96,418.91 $ 4.94 1934 92,610.65 4.75 1935 86,226.66 4.42 1936 101,911.91 5.23 1937 105,141.06 5.39 1938 90,938.38 4.66 Totals $573,277.57 $29.39 Average $ 95,546.26 $ 4.90

        Erom the earnings and for the same period of time dividends were paid as fol-
      lows: Year Per Share Total 1933 $ 1.00 ? 19,500.00 1934 — — 1935 — — 1936 5.00 97,500.00 1937 6.00 117,000.00 1938 16.00 312,000.00 Totals $28.00 $546,000.00 Average $ 4.67 $ 91,000.00
      The average dividend for such period is approximately 4% upon the value of the stock fixed by the Government.
      As a general rule the market value of listed stock is less than the assets value of such stock. The stock of which Kate Chestnut died seized, would not he of equal value to the assets value of such shares. There was no established market value for such shares and the market therefor was probably limited to Tulsa, Oklahoma, and its surrounding trade territory. The members of the family owning the remaining stock controlled its affairs and could prevent liquidation of the Company. If the Chestnut family had agreed to liquidation of its assets, there would have been some cost and loss incident to liquidation.
      The Government asserts that there was no evidence of the value of stock to companies engaged in the same or similar business, which are listed on exchanges, properly comparable to tlie Cliestnut Company stock. There is evidence and a comparison of the market and assets value of stock of companies which were engaged in a similar line of business and the stock of which companies unquestionably must have been of greater market value than the stock of the Chestnut Company. The assets value and market value of such companies are shown by the following table:
      Asset Value National Bond & Market N.Y.S.E. % Difference Share $25.32 $21.75 14% Lehman Corp. 31.28 25.75 18% Adams Express American Inter-13.48 11.25 17% national Corp. Selected Industries Inc. $5.50 Cumulative Pri- or ($25.00 par) Stock Callable 9.28 7.12 23% at $110.00 89.52 67.00 25%
      From the difference in the market and assets value of tho shares noted, it is reasonable to believe that the market value of the stock of the Chestnut Company on August 9,1938 would be 25% less than the asset value. Other factors, such as the earning and dividend record of the Chestnut Company, force the conviction that the market value of the stock must have been on the day of tlie death of Kate Chestnut 25% less than its asset value. No satisfactory evidence* has been introduced to establish a lesser value.
      The nature of the securities owned by the Chestnut Company and the low earning capacity, account for the earnings and dividend record of the Company when compared with other companies in a similar line of business. While the managing officers of the Company were unknown, their investment record and tlie dividends earned and distributed, establish that such officers proceeded with caution and ability. The local or Tulsa market for the stock should have been good, and if the stock had been offered for sale, it would have been attractive to the members of the Chestnut family unless the members of the family, by concert of action, fixed a pric6 less than its actual value.

       Burnet v. Houston, 283 U.S. 223, 228, 51 S.Ct. 413, 75 L.Ed. 991; United States v. Anderson, 269 U.S. 422, 433, 46 S.Ct. 131, 70 L.Ed. 347; Reinecke v. Spalding, 280 U.S. 227, 233, 50 S.Ct. 96, 74 L.Ed. 385; Forbes v. Hassett, Collector, 1 Cir., 124 F.2d 925.

         The value of the gross estate of the decedent shall be determined by including the value at the time of death of all property of the decedent to the extent of the interest of the decedent at the time of death. Opening paragraph of section 302(a) of the Revenue Act of 1926, as amended May 10, 1934, c. 277, sec. 404, 48 Stat. 754, 26 U.S.C.A. Int.Rev.Code, §811.
      The value of property includible in the gross estate is the fair market value at the time of decedent’s death. Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell. 26 C.F. R. 80:10(a). If the value of shares of stock can not be determined by sales, or from bid and asked prices as prescribed in the preceding provisions, then * * * the value is to be arrived at * * * upon the basis of the company’s net worth, earning power, dividend paying capacity, and all other relevant factors having a bearing upon the value of the stock. 26 C.F.R. 80:10(c); Laird, et al., v. Commissioner, 3 Cir., 85 F.2d 598; Wishon v. Anglim, Collector, D.C.N.D.Cal., 42 F. Supp. 359; Worcester County Trust Co. et al. v. Commissioner, 1 Cir., 134 F.2d 578.
      The value fixed by the Commissioner was based .solely upon the net assets of the Securities Company. If liquidation and distribution of the company could have been had on the day of death, the expense of liquidation and sale of assets would have been considerable, presuming a ready market existed. Weber v. Rasquin, Collector, 2 Cir., 101 F.2d 62. The applicable regulation here is the one noted. The cases of United States v. Ryerson, 312 U.S. 260, 61 S.Ct. 479, 85 L.Ed. 408; Guggenheim v. Rasquin, 312 U.S. 254, 61 S. Ct. 507, 85 L.Ed. 813; Powers v. Commissioner, 312 U.S. 259, 61 S.Ct. 509, 85 L.Ed. 817, are not in point.

       26 C.F.R. 80:10(c), Note b, supra. The government does not urge that the Chestnut Company was organized to avoid the payment of any tax or that its organization is not bona fide. It may not be doubted that the taxpayer may decrease the amount of his taxes by means which the law permits. Gregory v. Helvering, 293 U.S. 465, 470, 55 S.Ct. 266, 79 L.Ed. 596, 97 A.L.R. 1355; Jones v. Helvering, 63 App.D.C. 204, 71 F.2d 214; Helver-ing v. Johnson, 8 Cir., 104 F.2d 140, 143.

       Helvering v. Le Gierse, 312 U.S. 531. 61 S.Ct. 646, 85 L.Ed. 996; Keller’s Estate v. Commissioner, 312 U.S. 543, 61 S.Ct. 651, 85 L.Ed. 1032.


author: CONGER, District Judge.

text:
    AMERICAN AGR. CHEMICAL CO. v. O'DONNELL TRANSP. CO., Inc., et al. O'DONNELL TRANSP. CO., Inc., v. REPUBLIC STEEL CO. THE HUGH O'DONNELL.
    District Court, S. D. New York.
    May 29, 1945.

      Bigham, Englar, Jones & Houston, of New York City (R. F. Shaw, of New York City, of counsel), for libellant.
    Macklin, Brown, Lenahan & Speer, of New York City (Leo F. Hanan and J. F. Quarto, both of New York City, of counsel), for respondent.
    Maclay, Lyeth & Williams, of New York City (Mark W. Maclay, of New York City, T. R. Wheeler, of Buffalo, N. Y., and A. J. Gentholts, of Cleveland, Ohio, of court-sel), for respondent impleaded.
   CONGER, District Judge.

I have before me two actions. They were consolidated for the purpose of trial only.

In the first action, libellant American Agricultural Chemical Company, hereinafter referred to as the American Company, seeks to recover from the respondent O’Donnell Transportation Co., Inc., hereinafter referred to as the O’Donnell Co., damages for loss of cargo. The above respondent has brought into this action by interpleader the Republic Steel Corporation, hereinafter referred to as Republic Steel, as a respondent.

In the second action, O’Donnell Co. sues to recover from Republic Steel for the damage which happened to its barge “Hugh O’Donnell.”

Both actions were the result of a misfortune which occurred to this barge and which was caused by the following set of circumstances.

During the month of August, 1942, the American Company and the O’Donnell Co. entered into an agreement in and by which the O’Donnell Co. agreed for a stipulated freight to receive, transport and deliver for the American Company two cargoes of sulphate of ammonia. The cargoes were to be moved by barges from the plant of the Bonner-Hanna Coke Corporation plant at Buffalo, New York, to the plant of the American Company at Cartaret, New Jersey.

Pursuant to the said agreement, the O’Donnell Co. furnished two barges, the “Hugh O’Donnell” and the “Gwynn.” These barges were loaded at the concrete dock of the Republic Steel. The loading was completed in the early morning of October 25, 1942 (Sunday).

John P. Feeney was the employee of the O’Donnell Co. who had charge of the O’Donnell boats when they were in Buffalo. He had been given notice by the Superintendent of Transportation of Republic Steel that the O’Donnell barges must be moved from the dock of the Republic Steel where they were moored. Mr. Fee-ney thereupon attempted, with some help, to shift the barges by hand from the ore dock to.the B & O dock which was just beyond the said steel dock. In doing so the stern of the “Hugh O’Donnell” came in contact with the steel dock of Republic Steel thereby causing the barge to leak heavily and sink shortly thereafter. As a result the cargo was a complete loss and the barge was damaged, necessitating, it is claimed, quite extensive repairs.

I shall first discuss the claim against the Republic Steel, impleaded respondent, in one action and respondent in the other.

The main contention of the O’Donnell Co. is that “while the barge ‘Hugh O’Donnell’ was being moved along the dock of the Republic Steel Corporation, due to the unsafe, broken-down and dilapidated condition of the dock, the barge ‘Hugh O’Donnell’ was caused to strike and catch on a broken piece of steel piling which ripped loose a stern plank of the barge, causing her to leak heavily, and sink shortly thereafter.” Par. Four, O’Donnell Co. libel.

There is another charge of negligence made by the O’Donnell Co. and that is that the Superintendent of the Republic Steel ordered the barges moved from their loading berth to another berth and that while the maneuvering was taking place the barge was damaged, as I have indicated above. I do not take this charge of negligence very seriously.

The Republic Steel had two docks there; the ore dock to which the barges were tied up and the steel dock a little further along the river. Both were busy docks. Sunday afternoon and evening and Monday morning vessels were expected to use these docks.

This information was conveyed to Mr. Feeney and he was asked to take his barges from the ore dock and not to use the steel dock. I see nothing out of the way with this. The Republic Steel needed its dock facilities for other vessels coming. There was other dockage in the vicinity. There was no special reason for the barges to remain where they were, at least none was offered during the trial. The barges were fully loaded. When told that the barges were in the way and that they would have to be moved, Mr. Feeney made no protest; at least there is no proof that he made any.

He testified that he tried to get a tug to move the barges and failing to get one he started to shift the barges by hand, a procedure which the testimony shows was not new to Mr. Feeney.

In connection with the claim of negligence that the steel dock was out of repair and unsafe, there is the further claim that the Republic Steel and its employees failed to give any warning to the “Hugh O’Donnell” or those in charge of her as to the unsafe condition of the dock.

The steel dock was fairly new; built in 1937. It was faced with steel interlocking piling driven into the bed of the stream. From photographs in evidence, it appears from the water line up at least to be sturdy and in good condition; certainly not dilapidated.

The defect in the dock, if any, was below the water line. Of course, the burden of proof is upon the' libellant O’Donnell Co. to prove that such a defect and unsafe condition existed and that this caused the damage to the barge. In this libellant O’Donnell Co. has failed. It has not sustained that burden.

Part of libellant’s contention is based upon the manner in which the steel piles were constructed. When construction of the dock was first started the steel piling used was 50 feet long. As the work progressed it was discovered that the pilings were not long enough.

To make them longer an extra piece was welded and bolted on the end of each pile. Part of libellant’s contention is that this welded and bolted part projected out into the water. It also attempted to prove by a diver who inspected the face of the dock under water subsequent to the accident, that he found a loose bolt and a loose plate about 2 or 3 feet under the water line.

I am satisfied that these plates, so welded and bolted, and the loose plate and the loose bolt were not such projections into the water that they could, would or did cause the damage to the “Hugh O’Donnell.” Li-bellant O’Donnell Co. has failed to prove the existence of any projection along the face of the dock which might be classed as a defect or an obstruction which might be a menace to vessels either using or passing the dock.

It appears that from the fall of 1937 to May 1, 1944, 346 wooden vessels and 722 steel vessels (in all 1068 vessels) berthed at this dock and no claim had been made with respect to any of those vessels for anything defective about the dock. Of course, this is not positive proof that no such claimed defect existed but at least it should be considered.

It was in the early part of December, 1942, that the diver examined the face of the dock for the O’Donnell Co. It was then that he said he discovered the loose bolt on the face of the piling which he said projected into the water about 2 to 3 inches and was 2 to 3 feet under the water. I cannot find that this had anything to do with the accident to the “Hugh O’Donnell.” The proof is too meager and conflicting. Near the downstream end of the steel dock there is a sewer discharging pipe emptying into the stream. From the description given by Mr. Feeney it is apparent that the barge came in contact with the dock at a point that is upstream from this discharge pipe. ' This is further corroborated by Mr. Feeney who fixed it at a point between the sixth or seventh bollard or mooring post on the steel dock. Both these mooring posts are upstream from the discharge pipe.

The diver for libellant testified that he examined the face of the dock about SO feet upstream from the discharge pipe and about 100 feet downstream from it; that he could not tell just where he found the loose bolt but that it was some place in the 100 feet examined by him downstream from the discharge pipe. If that is so it could have nothing to do with the accident.

The diver for the Republic Steel who examined the dock a few days later said he found a loose bolt in the piling between the sixth and seventh bollard (upstream) from the discharge pipe; that it was only loose and would not pull in or out — simply .could be turned around.

The diver for the O’Donnell Co. may have been mistaken in placing the location of the loose bolt. He may just as well have been mistaken as to the extent of its projection from the face of the dock. At any rate I am not convinced that this loose bolt had anything to do with the damage to the barge.

I think the accident may be laid to another cause and one which may be fairly inferred from the evidence.

The two barges were being shifted together along the stream; they were made up tandem; they were buckled up close together. As the barges left the ore dock they came to a space where there is no dock and at this point there is a sharp bend in the stream. Here the rope with which the men were pulling the barges was slackened and the boats allowed to drift around this turn. There was a discharge pipe at this point as well as one in the steel dock. As the barges were rounding the turn, or just after, the “Gwynn” was ahead and because of the current and because of the water coming out of the discharge pipe (or perhaps both) the “Gwynn” was caused to go away from the steel dock throwing the hind boat (“Hugh O’Donnell”) stern into the dock hitting the steel piling.

I think that conditions at this point in the stream were a bit unusual. There was more water coming out of the discharge pipes than usual; there was a heavy current. It was coming down. There had been “quite a freshet.” “All Friday night it poured rain.” (Testimony of Captain Stern of the “Hugh O’Donnell.”) In the language of Captain Stern, “with the current and that discharge pipe, on the steel dock, brushing against the bow of the ‘Gwynn’ with kind of — and the current coming down at the same time to the stern of the ‘Hugh O’Donnell,’ she dragged her stern right in there.” The force of the impact is best described by ' Captain Stern: “ * * * it slung the ‘Hugh O’Donnell’s’ stern in and hit one of these piles, and it hit pretty heavy”; and by Captain Sessler of the “Gwynn,” “She sets up again that dock pretty heavy.”

“Q. And you fetched up pretty hard against the steel dock? A. Pretty hard, yes, sir.”

“Q. And this point X is where the O’Donnell brought up against the steel dock with a good heavy impact? A. As near as I can explain it, yes, sir.”

I can only conclude that by reason of the foregoing that the port stern corner of the “Hugh O’Donnell” went up and against one of the piles of the steel dock with such force that one of the stern planks of the “Hugh O’Donnell” was loosened to such an extent that it allowed water to leak into the barge in considerable quantities.

I find against O’Donnell Co. on this branch of the controversy.

I now take up the claim of American Company against O’Donnell Co.

Libellant American Company sues upon an oral contract of carriage made with respondent O’Donnell Co. It has the usual allegations of a libel of this type. It alleges delivery of the cargo to respondent by putting it on board respondent’s barge “Hugh O’Donnell”; that after loading and prior to sailing the barge was caused and allowed to sink by reason of which the cargo became a total loss and that thereby and in violation of its agreement respondent O’Donnell Co. wholly failed to make delivery of the cargo.

I am satisfied that libellant has made out a case and should succeed.

Respondent insists the contract is one of private carriage, and that the burden is upon the libellant to establish by a fair preponderance of the proof the negligence of the carrier. I agree that the burden of proof is on libellant. I hold that it has met that burden in either of two ways: (1) The proof shows that the sinking of the barge was caused by the carelessness and negligence of Feeney in that the barge was caused to strike hard against the steel pier as a result of which the barge sprung a leak; that this was brought about by Feeney who was attempting by hand to pull the two barges down the river and around the bend, which in my opinion was careless and negligent under all the circumstances as I have outlined them above. (2) Under the other theory upon which respondent might be held liable, libellant has met the issue. There was an implied warranty by the owner (O’Donnell) that the barge was seaworthy. Before the voyage commenced this barge was not seaworthy. It was rendered unseaworthy by the negligence of the agent of the owner. It is not a sufficient answer that the barge was seaworthy when loading. The obligation and warranty goes beyond that. The Fred E. Hasler, D.C., 51 F.2d 779.

What I have above written is on the assumption that the contract was oral (made over the telephone) and confirmed by a letter or letters. Respondent contends that the bill of lading is also part of the contract. The oral agreement and the letters contain all the terms of the contract of carriage. Nothing was said or written about a bill of lading or that any other condition was imposed on either party except as agreed upon orally and by letter.

The evidence about the bill of lading on the part of respondent is rather sketchy. I gather that an original bill of lading was mailed to libellant subsequent to the sinking of the barge. I can’t find that by agreement or by inference the bill of lading was a part of the contract of carriage. Under the circumstances I can only regard the bill of lading as a receipt for the cargo. Its provisions, therefore, do not apply here. The G. R. Crowe, 2 Cir., 294 F. 506.

In order to dispose of all of the issues raised I shall assume in the remainder of this opinion that the bill of lading was a part of the contract of carriage and that its provisions should be considered.

Respondent pleads in defense the Harter Act, 46 U.S.C.A. §§ 190-192.

In order that a carrier may take advantage of the exception provisions of the Harter Act, he must use due diligence to make the vessel seaworthy. This means seaworthiness at the commencement of the voyage. This could not be so in this case. The voyage had not yet commenced. The barge was being shifted from one dock to another. The voyage was to be from Buffalo to New York. It had not yet commenced. Under these circumstances the exemption provisions of the Harter Act afford no defense to the carrier. The Newport, 9 Cir., 7 F.2d 452; The Willowpool, D.C., 12 F.Supp. 96, affirmed 2 Cir., 86 F.2d 1002.

For another defense respondent relies on the following provisions in the bill of lading:

“(c) If the owner shall have exercised due diligence in making the vessel in all respects seaworthy and properly manned, equipped and supplied, no such carrier shall be liable for any loss or damage resulting from the perils of the lakes, seas, or other waters, or from latent defects in hull, machinery or appurtenances whether existing prior to, at the time of, or after sailing, or from collision, stranding, or other accidents of navigation, or from prolongation of the voyage.”

I can’t see that this clause in anyway affects the situation here. I realize that a private carrier may make such an agreement, but as I read it I fail to see that it exempts from liability one who, before the voyage commences, renders a vessel unsea-worthy by reason of the negligence of its own agent servants. It certainly does not do so in clear unequivocal lánguage.

Respondent has also pleaded a defense of limitation of liability under sections 4282, 4283, 4284, 4285 and 4286 of the Revised Statutes of the United States, 46 U.S.C.A. §§ 182-186.

I find against respondent as to this defense because (1) the accident did not occur without the privity and knowledge of respondent. Feeney, who was the principal actor in the chain of events which lead to the accident, was the representative of respondent in charge of operations in Buffalo. In addition to his other duties he despatched “the fleet when they came in and left.” Feeney’s duties and connection with respondent were such that his privity and knowledge is chargeable to respondent and deprives it of the privilege of limitation. The New York Marine No. 10, 2 Gir., 109 F.2d 564. (2) There was an implied warranty of seaworthiness which is a part of the personal contract of carriage entered into between the cargo owner and the carrier. The barge was unseaworthy prior to the commencement of the voyage. This unseaworthiness was caused by carelessness and negligence of the agent of respondent O’Donnell Co. Under the authorities respondent by reason thereof may not have the benefit of the limitation of liability statutes. The Cullen No. 32, 2 Cir., 62 F.2d 68; The Fred Smartley, Jr., 4 Cir., 108 F.2d 603.

Libellant American Agricultural Chemical Company is entitled to a decree against the respondent O’Donnell Transportation Co., Inc., for its loss together with the costs of this action.

Submit decree on notice.


author: DUFFY, District Judge.

text:
    BOWLES, Price Administrator, v. CHAS. A. KRAUSE MILLING CO.
    Civil Action No. 1553.
    District Court, E. D. Wisconsin.
    Feb. 22, 1945.

      John J. Burke and Lee K. Beznor, both of Milwaukee, Wis., OPA office, for plaintiff.
    Willis G. Sullivan, of Milwaukee, Wis., for defendant.
   DUFFY, District Judge.

On January 10, 1945, this court set for trial the preliminary issue raised by the paragraph in the answer alleging this action was brought without the knowledge, consent, or approval of the plaintiff as administrator of O.P.A.

At said hearing the attorneys for plaintiff admitted that Chester Bowles, the Administrator of the O.P.A., had no knowledge personally of the commencement of this action. However, Second Revised General Order No. 3, effective September 7, 1944, which was subsequent to the date this action was commenced, was received in evidence. This order conferred authority on attorneys appointed under the act to institute and conduct actions in the name of the plaintiff; it also ratified, confirmed and approved “all acts done and all proceedings had or taken by an attorney-at-law * * * purporting to act in the name of or on behalf of the Price Administrator in any suit, action or proceeding heretofore at any time brought or purporting to be brought by the Price Administrator in any court of the United States Hi H* * ”

I am of the opinion that this order was a sufficient ratification of the action of the local O.P.A. attorneys in commencing this suit. Robb v. Vos, 155 U.S. 13, 15 S.Ct. 4, 39 L.Ed. 52; Rodgers v. Bromberg, 5 Cir., 53 F.2d 723, 724; Hot Springs Coal Co. v. Miller, 10 Cir., 107 F.2d 677, 680. Defendant’s objection as stated in Paragraph 1 of the answer is overruled.

In considering the various motions to strike, it should be kept in mind that this action was brought by the Administrator of O.P.A. to recover treble damages for alleged violations by the defendant in the sale of hominy feed at prices claimed to be in excess of those permitted by MPR 401. Hominy feed is a by-product of the dry milling of corn.

The trial will be before the court without a jury. No part of the pleadings should be stricken unless clearly redundant, immaterial, impertinent, or scandalous. Rule 12(f), Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. Parts of the answer should not be stricken which have a direct relation to the controversy.

Plaintiff moves to strike Paragraph 2 of the answer which denies that at the times mentioned in the complaint any valid maximum price regulation establishing maximum prices for the sale of hominy feed was in effect pursuant to the Emergency Price Control Act. It will be noted that this denial goes further than alleging that some admittedly existing regulation is invalid; it puts the burden on the plaintiff to establish that some purported maximum price regulation actually governed the sale of hominy feed during the period covered by the complaint. The motion to strike this paragraph will be denied.

Plaintiff moves to strike the seven sub-sections of Paragraph 5 of the answer. These set forth in substance: (i) That the language of the alleged maximum price regulation involved is not susceptible of intelligent understanding; (ii) that said regulation failed to fix a maximum price for hominy feed except by reference to another regulation on another commodity, and was not reasonably certain and clear; (iii) that plaintiff’s predecessor in office failed to consult with members of the industry affected; (iv) that said predecessor failed to find that the price of hominy feed had risen or threatened to rise to an extent inconsistent with the purpose of the Emergency Price Control Act; (v) that said predecessor attempted to effect unnecessary changes in the business practices, cost practices and methods of defendant and established in the industry; and (vi) that plaintiff’s predecessor attempted to adopt an unfair price schedule which was arbitrary and capricious and attempted to create classifications and differentiations which were unnecessary. It is apparent that each of these defenses attempts to raise the issue of the validity of the maximum price regulation in controversy. It is well settled that this question is within the exclusive jurisdiction of the Emergency Court of Appeals. Sec. 204(d), Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 924(d); Yakus v. United States, 321 U. S. 414, 64 S.Ct. 660, 88 L.Ed. 834; Bowles v. Willingham, 321 U.S. 503, 64 S.Ct. 641, 88 L.Ed. 892. The motion to strike each of the six sub-sections mentioned will be granted.

Sub-section (vii) of Paragraph 5 alleges that the plaintiff’s predecessor in office failed to grant or deny or otherwise act upon the protest filed in behalf of the defendant and other members of the industry against said purported MPR 401 within the time required by law, or at any other time, and refused the request of said association that a meeting be had with representatives of said industry to advise and consult as to the meaning and effect of said regulation. However, it is settled that - the administrator’s failure to act within the period limited by statute only gives rise at most to the right of a mandatory order against him by the Emergency Court of Appeals. Safeway Stores, Inc. v. Brown, Em.App., 138 F.2d 278; Robkin v. Bowles, Em.App., 143 F.2d 600. As the issue thus raised has no possible bearing upon the outcome of the litigation in this court, the motion to strike sub-section (vii) will likewise be granted.

Plaintiff seeks to strike Paragraph 6 of the answer which sets forth that defendant charged prices for the hominy feed identical with those charged by defendant’s competitors and alleges a practical interpretation by the administrator of the regulation in question under which the defendant acted in the sale of hominy. The motion to strike this paragraph will be denied.

Paragraph 7 of the answer alleges that plaintiff issued Amendment 10 to MPR 305 for the purpose, among others, of placing hominy feed under MPR 305 and removing it from purported MPR 401; that said amendment established a fixed, definite and unambiguous maximum price for hominy feed; that plaintiff issued a statement of consideration, two paragraphs of which defendant sets forth in its answer; and that such statement of consideration was an administrative construction favorable to the defendant’s contention herein. Although defendant may make use of the administrator’s statement on the trial for whatever effect it may have, it has no place as part of the pleadings in this action and will be stricken.

Plaintiff also moves to strike a portion of defendant’s amended answer which alleges that Amendment 3 to MPR 401, effective June 3, 1944, which was prior to the commencement of this action, revoked the provisions of MPR 401 establishing maximum prices for the sale of hominy and that thereby any and all right, remedy, claim, or demand of plaintiff against defendant for the alleged violation of MPR 401 was released, extinguished and revoked. Defendant thus seeks to raise a question of law. It may remain a part of his pleading and will be determined after the testimony has been received upon the •trial. The motion to strike the portion in question of the amended answer will be defied.


author: GOODMAN, District Judge.

text:
    PHILLIPS v. MATSON NAV. CO. et al.
    No. 24260-G.
    District Court, N. D. California, S. D.
    July 13, 1945.
    Andersen & Resner and Herbert Resner, all of San Francisco, Cal., for libelant.
    Brobeck, Phleger & Harrison and R. L. Miller, all of San Francisco, Cal., for respondents.
   GOODMAN, District Judge.

Libelant seaman claims in this action damages, wages, bonus and maintenance and cure, pursuant to the Suits in Admiralty Act, 46 U.S.C.A. § 741 et seq., and the Jones Act, 41 Stat. 1007, 46 U.S.C.A. § 688, and Public Law 17, 78th Congress, 57 Stat. 45.

It is not disputed that wages for the period from October 13, 1944, to April 3, 1945, amounting to the sum of $623.20, are due.

The amount of “war bonus” to be paid to seamen and the terms conditioning its payment are fixed by the “Maritime War Emergency Board” (whose members are appointed by the President), created pursuant to /agreement between ship operators and the maritime unions. The Shipping Articles governing libelant’s employment were signed by him on June 20, 1944. They expressly incorporate therein all decisions of the “Maritime War Emergency Board.” On June 20, 1944, and at the time of libel-ant’s shore hospitalization, there was in effect decision 2B of the Board to the effect that: “Bonus shall not be payable while a crew member is on land.” Thus under the express terms of the contract between the parties litigant, libelant is not entitled to war bonus and accordingly the claim therefor is disallowed.

Maintenance for the seventy seven days ending July 10, 1945, at the rate of $2.-75 per day (which the court finds to be adequate and reasonable in this case), totalling $211.75, is allowed. One hundred days further maintenance at the same rate, amounting to the sum of $275 appears to the court to be proper under the circumstances and is allowed. Calmar S. S. Corporation v. Taylor, 303 U. S. 525, 58 S.Ct. 651, 82 L.Ed. 993.

The evidence is sufficient to justify a finding of negligence under the Jones Act. It is therefore unnecessary to rule upon libelant’s contention that respondent has an absolute liability on the ground of the vessel’s alleged unseaworthiness.

The matter of damages presents a somewhat close and difficult question. The evidence shows that libelant slipped while descending a ladder to the ship’s engine room, and as a result his right ankle struck one of the steps of the ladder. Libelant testified that he slipped on a pool of oil. Subsequent x-rays showed a chip fracture of the posterior process of the talus with no displacement. Hospitalization weeks later disclosed a localized osteomyelitis in the right tibia, which necessitated two subsequent operations. Libelant still has an open wound and he will not be able to resume his occupation, according to medical testimony, for a period of three to six months. Osteomyelitis is an infection of the marrow of the bone; it originates in some body focus or focii and can be carried in the blood stream.

I am satisfied that there is sufficient causal relationship between the trauma and the development of the subsequent condition of osteomyelitis in libelant’s right leg to justify an award of damages therefor. Under all the circumstances an award of $4,000 would in my opinion be just.

Let findings and decree in accordance with the views set forth in this memorandum be prepared and submitted pursuant to the rules.


author: LA BUY, District Judge.

text:
    WINROD v. McFADDEN PUBLICATIONS, Inc.
    No. 43 C 867.
    District Court, N. D. Illinois, E. D.
    Sept. 17, 1945.
    Vogel & Bunge, of Chicago, Ill., for plaintiff.
    Gann, Secord, Stead & McIntosh, of Chicago, Ill., for defendant.
   LA BUY, District Judge.

In plaintiff’s libel action the defendant has pleaded the Statute of Limitations and has moved for the entry of summary judgment sustaining the said Statute of Limitations and dismissing plaintiff’s suit. In support of this motion for summary judgment, the affidavits of Meyer Dworkin, Irving B. Simon and Robert E. Rothwell have been filed. These affidavits show that the issue of the magazine “Liberty” dated August 8, 1942, which contained the article which is claimed to be a libel upon plaintiff, was on June 29, 1942, delivered to the printer ; that said issue of “Liberty” was shipped to various periodical distributors throughout the United States during the period from July 17, 1942, to July 28, 1942; and on July 29, 1942, the said issue was placed on public sale by the news distributing agencies at the various newsstands and other places where the public purchases magazines. The affidavit of Robert E. Rothwell, Traffic Manager of the defendant, sets forth that: “No magazine of said issue was mailed to subscribers after July 28, 1942, with the exception that where a subscriber reported either non-receipt of his copy of said issue or receipt of a copy in a damaged condition, replacement copies were mailed to these subscribers.”

This suit was filed on August 4, 1943, and the pertinent Statute is Section 14, Chapter 83, Illinois Revised Statutes, 1943, which provides that actions for slander or libel shall be commenced within one year next after the cause of action accrued.

No counter affidavits have been filed by the plaintiff so the affidavits presented must be taken as true, but no infer-enees must be read into these affidavits and they must be held strictly to the facts alleged. Under these affidavits it is clear that the August 8, 1942, issue of Liberty Magazine was composed, printed and delivered by the defendant to its subscribers and to the periodical distributors with whom the defendant dealt all before August 4, 1942, and that it was placed on public sale on newsstands on July 29, 1942.

Under the pertinent section of the Limitation Act, the bar arises one year after the cause of action accrues, and the cause of action in libel cases accrues when publication of the libel is made.

In the case of newspapers, periodicals, magazines, tracts, pamphlets and other means of distributing news, facts, fiction or information by printing, mimeographing or writing, there are factors other than the mere writing and mailing of a single communication. In the case of a magazine, periodical or book, it must be composed, printed and distributed and all of these factors are mere steps in the general purpose of presenting and distributing a printed composition to the public for its examination and reading. In such cases the composition, printing and distribution when completed must be taken as the one act of publication. Such is the prevailing weight of authority. United States v. Smith, D.C., 173 F. 227; Means v. Macfadden Publications, Inc., D. C., 25 F.Supp. 993; Cannon v. Time, Inc., D. C., 39 F.Supp. 660; Backus v. Look, Inc., D. C., 39 F.Supp. 662; Fried, Mendelson & Co. v. Edmund Halstead, Ltd., 203 App.Div. 113, 196 N.Y.S. 285; Wolfson v. Syracuse Newspapers, Inc., 254 App.Div. 211, 4 N.Y.S.2d 640.

In Julian v. Kansas City Star Co., 209 Mo. 35, at pages 71, 72, 107 S.W. 496, at page 500, the court said: “We agree with counsel for defendant that the one issue of the newspaper, though it may have been of many thousand copies distributed in many different counties, gave but one cause of action; but to reach that conclusion we must say that there was but one publication. If we should say that the publication in Jackson county was a publication distinct from that in Platte county, then we would have to say that there were more than one publication and more than one cause of action. But there was but one publication— one utterance — and though some of the papers did not reach their destination as soon as others, yet they all emanated from the one act and all constituted but one libel, if libel at all. It is the publication of the libel, not the printing of it, that gives the right of action.” '

Under this ruling the publication of a libel in a magazine or newspaper cannot be segregated into the component parts of composition, printing and distribution, and each part held to be a different publication of the libel. The same result is arrived at by other courts which hold that if the plaintiff counts upon one particular copy of the newspaper or magazine, that the numerous copies of the magazine are but repetitions of the libelous article. In Galligan v. Sun Printing & Pub. Co., 25 Misc. 355, 54 N.Y. S. 471, at pages 473, 474, the court said: “When a libelous article is republished before the commencement of an action, a separate action cannot be maintained on such republication. The repetition of the publication may be pleaded and shown on the trial and bearing up the malice of the defendant and the extent of the injury and damage to the plaintiff.” And the court also said (54 N.Y.S. at page 473) : “There seems to be no escape from the conclusion that the plaintiff cannot be permitted to split up the alleged libelous article, or bring a second action thereon.” Other courts base their holding on the ground of necessity and convenience, as was said in the dissenting opinion of Judge Rippey in' the case of Wolfson v. Syracuse Newspapers, Inc., 279 N.Y. 716, at page 720, 18 N.E.2d 676, at page 678, where the learned Judge says: “The result cannot be affected by the sometimes asserted rule that when a newspaper is printed and put out on sale that constitutes publication as of the date of printing and first distribution as to the whole world and thereby but one cause of action arises. That has been advanced as a rule of convenience and to avoid a multiplicity of actions, especially applicable to newspapers where a large number of copies of a single edition or printing are put out. In such a case, the number of copies issued and the breadth of the circulation is open for consideration on the question of the amount of damages to be awarded. Bigelow v. Spra-gue, 140 Mass. 425, 427, 5 N.E. 144 [145].”

Whether the composition, printing and distribution are but one publication; whether the distribution of numerous copies of the same issue give rise to but one cause of action; whether the distribution of numerous copies is .but one wrong which cannot be split into several causes of action; or whether the rule be adopted because of convenience in order to avoid multiplicity of actions, the same end result is accomplished. That is that the cause or causes of action accrue on the date of publication. In this case the original publication of the August 8 issue must be held to have taken place not later than July 29, 1942. Any cause of action, therefore, which accrued to the plaintiff by reason of the original publication must be held barred by the Limitation Act. Therefore, there can be no recovery herein for the original publication of the August 8, 1942, issue.

The plaintiff, however, contends that there was a republication of the libelous article, and points to the fact that the complaint alleges in paragraph 5 that the defendant distributed and sold copies of the August 8 issue on the 5th, 6th, 7th and 8th days of August, and for several weeks thereafter by itself and through its agents and employees. The affidavit of Rothwell does not set forth any date as to when the copies referred to in his affidavit were mailed out or delivered after July 28, 1942, so that such mailings or deliveries might well be within the dates alleged in the complaint. Also, there is no statement in any of the affidavits as to whether the defendant mailed out any copies of the August 8 issue to subscribers, if new subscriptions were received within a short time before July 29, 1942, and if it did mail same out when same were mailed. And there is no statement in any of the affidavits with reference to sales and deliveries by the defendant when requests were made, if they were made, for back numbers of the August 8 issue.

Several courts, especially the New York State courts and the Federal District courts in the New York City District, have held that the later mailing out of copies of a magazine to replace copies lost or damaged in distribution or in response to requests for the purchase of single copies does not constitute a republication. Means v. Macfadden Publications, Inc., D. C., 25 F.Supp. 993; Cannon v. Time, Inc., D. C., 39 F. Supp. 660; Backus v. Look, Inc., D. C., 39 F.Supp. 662; Wolfson v. Syracuse Newspapers, Inc., 254 App.Div. 211, 4 N.Y.S.2d 640.

The decisions in the above cases are based upon two premises, first, that the mailing out of single copies of the magazine after the original distribution is a part of the original publication, and second, that to hold otherwise would nullify the statute of limitations. But this court does not agree with the reasoning of those cases.

If this rule is adopted the publisher could with immunity print a large number of extra copies of an issue containing libelous matter, retain them on hand and from time to time through the years mail them to members of the general public. The original publication may have been forgotten, but the continuous mailing of same by the publisher year after year would reiterate and emphasize the libel, and could possibly after repeated mailings cause more damage to the person against whom the libel was directed than the original publication. The publisher might, after the original publication, mail or deliver copies of the original issue to libraries, societies or organizations with requests that such copies be retained for future reference, or the defendant might mail out or deliver copies of the magazine in which the libelous article was blue penciled or marked in order to call particular attention to the article. In all of these situations there would merely be a sending out or distribution of the original issue, and there would be no reprinting of such issue.

If the defendant in this case had reprinted and recirculated the August 8 issue at a subsequent date, there is no doubt that such reprinting and recirculation would amount to a republication of that issue. The court in the case of Backus v. Look, Inc., D. C. 39 F.Supp. 662, attempted to make the distinction between such reprinting and release and the subsequent sale of single copies on request, saying (39 F.Supp. at page 663) : “The issue of the magazine complained of was never reprinted, published or released by the defendant but several miscellaneous copies were mailed out later to replace copies lost or damaged in distribution, or in response to requests for the purchase of single copies. This did not constitute a republication.” An examination of the reasoning of this case shows that the court based its decision on whether the copies which were mailed out were copies of the original issue or whether they were reprinted copies. But this court cannot, on principle, distinguish between the act of a publisher in mailing out a copy of the original issue from the act of a publisher in sending out a magazine which is identical in composition but which has merely been run through the printing presses a second time. Assuredly, the mere act of reprinting and mailing the same magazine out to the public upon request has the same effect as if one of the unsold copies of the original issue were mailed out. If the publisher had 50,000 copies of the original issue on hand unsold after the original publication, and sold same to persons requesting copies of the issue, such act of the publisher should have no other or different legal significance than if the publisher reprinted 50,000 copies of that issue and sold them to the public upon request. In both cases the effect upon the person libeled would be identical, and he should have the same remedy in both cases.

On the question of nullifying the statute of limitations, this court cannot agree with the statement of the court in the case of Wolfson v. Syracuse Newspapers, Inc., 254 App.Div. 211, 4 N.Y.S.2d 640, 642, where the court says: “For example, if plaintiff’s position is correct in law it must follow that, although a book may have had only one publication 20 years ago, if the publisher continues to make unsold copies of the single publication available to the public to-day, by sale or otherwise, such conduct amounts to a republication of any libel which the book contains and thereby becomes actionable. Believing that such a rule would nullify the clear purpose of the statute of limitations, we affirm the order dismissing the amended complaint and the judgment entered thereupon, with costs.” This court does not believe that the statute of limitations is so nullified. The publisher of a libel has it entirely within his own control as to his actions with reference thereto. After the publication of the original libel, the statute of limitations becomes effective as to the original publication, and if the publisher does nothing further, the bar of the statute becomes absolute at the end of one year. But if the publisher chooses to subsequently sell unsold copies of the magazine containing the libel, then the publisher by his own act has chosen to again send out to the public the magazine containing the libel. It is only some action of the publisher that can cause another cause of action to arise, and he should not be permitted to plead that he originally committed a wrong against the person libeled by publishing a libelous article, and because a cause of action for that wrong has been outlawed by time, that he may with immunity continue to broadcast that libel by sales to the public of unsold copies of the original issue. As above pointed out, there may be a large number of copies of the original issue remaining unsold in the hands of the publisher, and to hold that the publisher may retain those unsold copies on hand for an indefinite period, selling them from time to time to persons who request copies of same, would permit the publisher to continue the original libel for a long period of time, with the person libeled in the original issue helpless to call the publisher to account. To so hold would mean that the publisher of a libel could be protected against subsequent libels by the very fact that he had at one time published the libel. To such a doctrine this court cannot subscribe; to such an illogical conclusion this court must register its vigorous dissent. Every citizen of this country is entitled to the full protection of its laws, but such a holding would leave an innocent person subject to constant libels against his character without any redress on his part.

Under such circumstances the so-called rule of convenience to avoid multiplicity of suits is not infringed, as but one action may still be brought based on any republication up to the time of the trial of the cause; the rule that subsequent sales are but repetitions of the original libel must yield to the fact that but one suit can be brought and that the publisher should not be permitted to plead his own wrong as a defense; and the rule that there is but one publication by such republication is also overthrown by the logic and reason of the case.

The above rule has certain limitations. If an issue of a magazine is originally published on a certain date and the publisher does not send out any other copies of such issue, or direct the sale of other copies of same, then the publisher is not responsible for the acts of third parties who may have received copies and sold them or retained same for their own purposes. For example, if a library which has no connection with the publisher should in permanent form bind up copies of a magazine containing a libelous article, and persons from time to time should read the libelous article, there would be no republication of the original issue. Likewise, if a book or magazine dealer not connected with the defendant should retain copies of the issue in question and over a period of years should sell to customers such copies, these sales would not amount to a republication of hte origi-not amount to a republication of the original issue by the publisher. Thus, all sales, distributions, exhibitions or repetitions of the original issue by persons not connected with the original publisher would not be a republication. On principle and reason the original publisher should and can only be held liable for his own acts or those actions of others which he has expressly or impliedly authorized. There can be no question of implied authority as to sales by others not connected with defendant, nor the exhibition of the magazine by persons who have retained copies for reference. Because if such were the rule, there could be no limitation of action until the printing upon the paper of the magazine had become illegible or the paper itself had disintegrated. Such a rule would outlaw the purpose of the statute of limitations and render the limitation applicable only when the paper of the magazine had turned into dust. So long as the magazine could be read, it could be exhibited and such exhibition to a person not the one libeled by the article would be a republication, although the publisher had no connection whatsoever with such exhibition of the magazine. The adoption of such a rule would inevitably destroy the statute of limitations and make such Act not a statute of repose but one of action which could be revivified at any time for countless years, dependent upon the time within which the printing in the magazine would remain legible and upon the acts of persons in no way connected with the original publisher. But as above pointed out this does not apply when the publisher himself republishes the article.

In the present case the original publication of the August 8 issue was completed by the composition, printing and distribution of that issue not later than July 29, 1942. Said issue had been mailed out to defendant’s subscribers and it had sold said issue to independent distributors for sale on July 29, 1942. The fact that public newsstands, newsdealers, newsboys or other persons not connected with defendant should after that date make sales of copies of said issue would not amount to a republication by the defendant as it had completed publication when such issue was circulated to its subscribers and delivered to the news distributors for public sale on July 29, 1942.

The court is, therefore, of the opinion that insofar as the complaint is based upon the original publication by the defendant, or with reference to sales of the August 8, 1942, issue by persons other than the defendant, that the complaint will not lie. In so stating the court is not passing on the question of whether such acts would or would not be admissible in evidence on the question of damages if there should be a trial of this cause. The court is further of the opinion that the only cause of action upon which plaintiff may base his suit is upon the copies sent out subsequent to August 4, 1942. Upon that question the plaintiff’s cause of action must stand, and upon that question plaintiff is entitled to a trial herein.

The order of the court will be that the motion for summary judgment be denied, with leave to plaintiff if he so desires to amend his complaint.


author: WYCHE, District Judge.

text:
    CONSTANCE v. GOSNELL.
    Civil Action No. 574.
    District Court, W. D. South Carolina, Spartanburg Division.
    Sept. 13, 1945.

      Venable Vermont, of Spartanburg, S. C., for plaintiff.
    J. Allen Lambright and L. K. Leonard, both of Spartanburg, S. C., for defendant.
   WYCHE, District Judge.

This is an action to recover unpaid minimum wages, overtime, liquidated damages and attorneys’ fees under the Fair Labor Standards Act, 29 U.S.C.A. §§ 201-219, for work performed for the defendant by the plaintiff, and his two minor sons, Fred and Columbus1 Constance.

The complaint alleges that the plaintiff’s two minor sons live with him, that they have not been emancipated, and that the plaintiff, as their father, is entitled to any amount recovered under the Act for services rendered the defendant by them.

At a pre-trial conference the following question was presented for determination: Can a father recover judgment under the Fair Labor Standards Act for work done by his minor unemancipated sons in an action brought in his name, and if so, what is the measure of recovery?

The Fair Labor Standards Act provides: “Any employer who violates the provisions of section 206 or section 207 of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages.” § 16.

Rule 17(a), Rules of Civil Procedure, 28 U.S.C.A. following section 723c, provides that: “Every action shall be prosecuted in the name of the real party in interest ; * *

Under the common law the father is entitled to the earnings of his minor, unemancipated children during their minority. This right accrues to the father by way of compensation for the support, nurture, care, protection, maintenance and education actually afforded and furnished his children during their minority. The Etna, Fed.Cas.No.4,542; cf. State v. Scurry, 114 S.C. 191, 103 S.E. 527; State v. Lancaster, 135 S.C. 412, 133 S.E. 824. Such right can be lost only by emancipation. Emancipation may be accomplished by agreement expressed or implied. It may arise from conduct of the father inconsistent with his claim to the further obedience or services of the child, or it may occur by operation of law.

The liquidated damages for failure to pay the minimum wages under the provisions of the Act are compensation, not a penalty or punishment by the Government. Overnight Motor Transp. Co. v. Missel, 316 U.S. 572, 62 S.Ct. 1216, 86 L. Ed. 1682. As was said by the Circuit Court of Appeals of the Sixth Circuit, in the case of Northwestern Yeast Co. v. Broutin, 6 Cir., 133 F.2d 628, 630, 631: “The federal statute is premised upon the existence of an employment contract and double recovery is allowed as between the parties to the contract. * * * Thus here the claim for overtime compensation is founded upon and is coexistent with the contract. The action for double compensation may be considered as debt or as an action for wages due under the employment agreement. * * * under the federal decisions the statutory obligation contained in the Fair Labor Standards Act is read into and becomes a part of every employment contract between an employer and employee subject to the terms of the Act.” The statute also provides that the court in such action shall, in addition to any judgment awarded to plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action. It, therefore, seems that, under the common law, the plaintiff would be entitled to maintain this action for all claims provided by the statute for his two minor sons as employees of the defendant.

It follows that under the common law, the real party in interest, so far as the claims of the two minor employees against the defendant are concerned, would be their father, the plaintiff in this action, and that the action could be prosecuted in his name.

But, in South Carolina a statute was enacted in 1923 granting to the mother of minor children equal rights with their father concerning their custody and earnings, as follows: “The wife and husband are the joint natural guardians of their minor children and are equally charged with their welfare and education, and the care and management of their estates; and the wife and husband shall have equal power, rights and duties, and neither parent has any 'right paramount to the right of the other concerning the custody of the minor or the control of the services or the earnings of such minor or any other matter affecting the minor. Neither parent shall forcibly take a child from the guardianship of the parent legally entitled to its custody. The welfare of the minor shall be the first consideration and the court having jurisdiction shall determine all questions concerning the guardianship of the minor. Nothing herein contained shall be construed to relieve the father of his common law obligation to support his children, nor shall it be construed to increase the liability of the mother to support the children.” (Emphasis added) Code of Laws of South Carolina, 1942, Section 8638.

It is admitted that plaintiff’s wife, the mother of the two minor employees, is living, and that the minor employees reside with their father and mother. Such being the facts in this case, it is my opinion that under the provisions of the foregoing South Carolina statute, since the wife_ aytd husband have equal power, rights and duties, and neither parent has any right paramount to the right of the other concerning the control of the services or the earnings of such minors, the mother of the two minor children is a real party in interest and is, therefore, a necessary party to this action.

Plaintiff may be allowed ten days within which to amend his complaint by making the mother of the two minor children a party plaintiff. An order accordingly may be presented.


author: LEDERLE, District Judge.

text:
    KURTZ et al. v. FORD MOTOR CO. et al.
    No. 3749.
    District Court, E. D. Michigan, S. D.
    Aug. 20, 1945.

      Walter M. Nelson, of Detroit, Mich., for plaintiffs.
    I. Joseph Farley, of Detroit, Mich., for defendant Ford Motor Co.
    George E. Brand, of Detroit, Mich., for defendant General Products Corporation.
   LEDERLE, District Judge.

Findings of Fact.

1. This action was instituted by Cyrus B'. Kurtz, a citizen of the State of Ohio, ágainst Ford Motor Company, a Delaware corporation, and General Products Corporation, a Michigan corporation, seeking damages in the amount of $85,000. Plaintiff’s claim was predicated upon an oral contract allegedly made in Michigan in 1938 between plaintiff and both defendants for the payment of royalties on a gear-shift device allegedly produced by, and sold on automobiles of, the defendant Ford Motor Company, which device was fabricated in part by defendant General Products Corporation. Plaintiff’s claim also included a demand for payment of money allegedly due for the settlement of obligations arising under a prior written license agreement between plaintiff and General Products Corporation.

The trial lasted five weeks and, at the close of plaintiff’s case in chief, both defendants moved for a directed verdict of no cause for action, assigning a number of reasons therefor. However, these findings will be confined to the main features deemed necessary for a decision on these motions.

For brevity, defendant Ford Motor Company will be hereinafter referred to as “Ford” and defendant General Products Corporation will be referred to as “General.” During the closing arguments of the trial, Cyrus B. Kurtz, Jr., a citizen of Ohio, was added as a party plaintiff because of a possible interest in his father’s transactions in this connection. He was not present during the trial, but through his counsel adopted the pleadings of his father, the original plaintiff. For brevity, and in conformity with the manner in which the case was tried, Cyrus B. Kurtz, Sr. will be designated herein as “plaintiff.”

2. Except for a few minutes’ testimony by one of plaintiff’s associates, the only evidence introduced was testimony of plaintiff, supplemented by a number of documentary and physical exhibits. Plaintiff’s testimony as to the terms and conditions of the alleged oral contract failed to estab-Isih the terms of the contract with definiteness and certainty.

At the request of the court, plaintiff’s counsel outlined the terms of this alleged oral contract as follows:

“The oral agreement was that Kurtz would (1) give up the accessory business (2) cancel the October 1st license to General Products Corporation and (3) give through General Products Corporation to Ford Motor Company an irrevocable nonexclusive license covering gear shifter units, parts thereof and therefor and Improvements therein under any and all inventions, patents and patent applications and inventions relating to gear shifter units, and (4) to continue servicing and demonstrating shifter devices as requested by defendants, and Ford Motor Company and General Products Corporation agreed (5) to pay Kurtz $1,000 per month until production began, estimating that period at six months, and (6) to pay Kurtz 3 cents per gear shifter unit on the first 400,000 and 1*4 cents on each gear shifter unit above that figure in each year, and (7) Ford Motor Company to give General Products Corporation orders for parts which General was to fill.”

3. In order to meet the defense of the Statute of Frauds, pleaded by both defendants, plaintiff attempted to show that the alleged oral agreement was fully executed by plaintiff and the benefit thereof received and adopted by both defendants. Plaintiff calculated the total amount due him was $53,907 and insisted that both defendants owed him this sum of money, claiming in effect that it made no difference whether or not either defendant manufactured any of the devices or if Ford installed the devices on the cars sold by it. In his opening statement, counsel for plaintiff stated: “Now, we do not know, and we will not be able to show you what happened as between the Ford Motor Company and the General Products Corporation, as to how they arrived at who should pay that. As far as we are concerned, both are liable. That is our claim; .that will be our proof.”

4. The sum claimed was made up of $4,-000.00 as the balance claimed under section 4 of the alleged contract plus the balance under section 6, with interest on both items. In order to arrive at the number of gear shifter units involved, the total production of Ford from about September 1, 1939, to February 24, 1942, was used, less the cars that were sold to the United States Government.

5. On or about June 20, 1939, plaintiff and General joined in the execution of a written license to Ford on all patents, patent applications and inventions relating to gearshift units under which either plaintiff or General had the right to grant licenses as well as those under which they might thereafter have the right to grant licenses. This document reads in par-t as follows: “In consideration of the placing with us of your purchase order No. H-40213 dated June 20, 1939 * * The purchase order referred to expressed in detail the terms agreed upon. There is no claim that Ford did not fully carry out this agreement and pay for the material purchased in accordance with its terms.

6. There is no evidence that General ever manufactured any of the complete units alleged to have been invented by plaintiff. There is evidence that General manufactured and sold to Ford some parts that could be used to assemble the Ford gear shifter. It is impossible to determine from the evidence in this case what portion of Ford’s total production included the parts it purchased from General.

7. The alleged promise to pay plaintiff the sum of $1,000.00 per month was to continue up to the time that “production began.” There is no evidence in the record as to the date when such production was started, and, if this question were submitted to the jury, the date to be fixed would have to be based upon conjecture and speculation.

8. There is no evidence that the Ford employee, who is alleged to have made the agreement, had authority to do so on behalf of Ford.

9. The component terms and conditions of the alleged oral agreement were entire, indivisible and non-severable.

10. The alleged oral agreement was one that by its terms was not to be performed within one year of the making thereof.

Conclusions of Law.

1. This is a suit of a civil nature between citizens of different states where the matter in controversy, exclusive of interest and costs, exceeds $3,000, over which this court has jurisdiction. 28 U.S.C.A. §41(1).

2. Where, as here, the integral terms of an oral contract can only be arrived at by an excursion into the realm of conjecture and speculation, the court should not submit to the jury the matter of delineation of such terms.

3. An executory agreement, promising, among other things, to grant perpetual licenses under present patents and possible future patents, compensable in part by royalty payments computed upon the extent of use of inventions covered thereby, is a promise which cannot be performed within one year from the making thereof. Hand v. Osgood, 1895, 107 Mich. 55, 64 N. W. 867, 30 L.R.A. 379, 61 Am.St.Rep. 312; Radio Corporation of America v. Cable Radio Tube Corporation, 2 Cir., 1933, 66 F. F.2d 778, certiorari denied 290 U.S. 703, 54 S.Ct. 373, 78 L.Ed. 604; Sec. 380, Walker on Patents (Deller’s Ed.)

4. In Michigan every agreement, contract or promise that, by its terms, is not to be performed within one year from the making thereof is void unless such agreement, contract or promise, or some note or memorandum thereof is in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized. M.S.A. § 26.922, Comp.Laws 1929, § 13417.

5. Where any integral part of an alleged contract, which is executory, is void under the Statute of Frauds for lack of a writing and the component terms of the alleged contract are entire, indivisible and non-severable, the whole alleged contract is unenforceable. Sec. 198, Restatement of Contracts.

6. It therefore follows that the defendants’ motions for directed verdict of no cause for action must be granted.


text:
    FLETCHER et al. v. GRINNELL BROS.
    No. 3587.
    District Court, E. D. Michigan, S. D.
    July 11, 1944.

      Robert F. Robbins, of Detroit, Mich., for plaintiffs.
    Hull, Brown & Fischer and Harvey A. Fischer, all of Detroit, Mich., for defendant.
   LEDERLE, District Judge.

Findings of Fact

1. This is an action brought by the plaintiffs, employees of the defendant, for extra compensation in accordance with the provisions of the Fair Labor Standards Act, 29 U.S.C.A. § 201 et seq.

2. It is admitted by the defendant that all of the plaintiffs were, during some of the time covered by the complaint, employed by defendant, and that it did not comply with the provisions of the Fair Labor Standards Act relative to compensation and overtime pay. At the trial the evidence consisted of a disclosure by the defendant, in response to interrogatories, of the character of its business and the general method of transacting its business, supplemented by the testimony of some of its officers and most of the plaintiffs. At the close of the plaintiffs’ proof, defendant moved that the complaint be dismissed, claiming that the evidence failed to show that plaintiffs were engaged in commerce or the production of goods for commerce within the meaning of the Act, and that defendant was exempt from the provisions of the Act because it was a retail establishment the greater part of whose selling was in intrastate commerce, and that even if plaintiffs were engaged in commerce they are not subject to the Fair Labor Standards Act for the reason that their activity is covered by the Interstate Commerce Act, 49 U.S.C.A. § 304 in accordance with the provisions of Section 13 (b) of the Fair Labor Standards Act.

3. The defendant is a Michigan corporation with its principal office located in the City of Detroit. During the period covered by the complaint, it operated eight or more retail stores in various cities in the state of Michigan, one retail store in Windsor, Ontario, Canada, and another retail store at Toledo, Ohio. It is conceded that all of its sales were made at retail, and that it conducted no wholesale business. In a few isolated instances some of the merchandise sold at retail at the Michigan stores was shaped out of the state of Michigan at the request of the customer. Defendant also maintained a warehouse in the city of Detroit, where surplus stock was stored awaiting transfer either to the retail outlets or directly to the customers. In addition, defendant maintains a small factory employing approximately fifty employees at Holly, Michigan, about fifty miles from Detroit, where it manufactured pianos and piano 'benches. All of the output of this factory was sold at retail by the defendant through its regular stores. Less than 8% of the merchandise marketed by the defendant was manufactured by it. None of the plaintiffs performed any work in the Holly factory in the production of goods for commerce. On the occasional instances when the employees operating trucks stopped at the Holly plant to pick up merchandise it was for the purpose of supplying this merchandise to the Detroit warehouse or some of the retail stores located in Michigan.

4. Less than 8% of the total sales of merchandise made by defendant were made at the Windsor and Toledo stores, being approximately 3% in the Windsor store and approximately 4% in the Toledo store. Most of the merchandise sold at the Windsor and Toledo stores was shipped directly to those stores from the source of supply, and only a small amount was delivered from the Detroit warehouse. On the occasions when merchandise was to be delivered from the warehouse to the Windsor store, it was delivered by defendant’s trucks to the American side of the border and thence by other means to the store. In making deliveries from the Detroit warehouse to the Toledo store, such deliveries were incidental to deliveries to defendant’s retail stores located on the route to Toledo and to homes of retail customers located in that section of Michigan.

5. All of the plaintiffs were engaged either as truck drivers, helpers, or warehouse-men in connection with the retail sales of the defendant. The plaintiffs employed in connection with trucking also assisted at times in servicing trucks, packing and unpacking merchandise, loading and unloading trucks, and other activities in and about defendant’s warehouse. Those who were not engaged as drivers or helpers on the trucks performed miscellaneous duties around the warehouse, including the duties of watchmen, cleaners, elevator operators, etc.

Conclusions of Law

1. This is an action arising under a law regulating commerce and this court has jurisdiction. 23 U.S.C.A. § 41(8)

2. The burden of proof is on the defendant to show that its business is a retail establishment and that therefore it is entitled to the exemption of Section 213(a). Walling v. Fred Wolferman, Inc., D.C., 54 F.Supp. 917. Where it appears, however, from the evidence offered by the plaintiffs together with the cross-examination of the witnesses called by the plaintiffs that the defendant’s business is exempt from the provisions of the act, that is sufficient.

3. If the defendant is correct that it is exempt from the provisions of the Fair Labor Standards Act because it is a retail establishment, the greater part of whose sales are in intrastate commerce, it will be unnecessary to consider any other question raised by the pleadings or proofs. It is immaterial that defendant owns and maintains a number of retail outlets and that it maintains warehousing facilities to provide for necessary and economical distribution of the merchandise to its retail outlets. More than 95% of defendant’s retail sales are in intrastate commerce. Aside from the manufacturing plant at Holly, defendant’s business is solely that of a retail establishment. None of the plaintiffs performed any activity in connection with the production of goods for commerce in that the transportation from the source of supply of the small amount of merchandise transported from Holly to Detroit was carried on solely for the business of operating the re>tail establishment. All of the goods handled by the plaintiffs were goods acquired and held by the defendant for local disposition. None of them were purchased by the defendant upon order of a customer with the definite intention that the goods should be carried directly to the customer, and none of the goods were obtained from the source of supply pursuant to an understanding with a customer for immediate delivery.

4. An employer may operate a manufacturing plant and a retail establishment at the same time. Employees engaged in the retail business of the employer may be exempt from provisions of the Act while employees of the manufacturing department are not. Davis v. Goodman, 4 Cir., 133 F. 2d 52. When a question arises as to the application of the Act to a number of employees of an employer, each individual employee’s status must be considered separately. Likewise, where the employer is engaged in different types of business, careful consideration must be given to the various business activities of the employer. Walling v. Sanders, 6 Cir., 136 F.2d 78.

The test of coverage of the provisions of Sections 6 and 7 of the Act is the nature of the employment of the particular employee; the test in construing the exemption in Section 13(a)(2) must be the primary business of the employer, not the particular occupation of the employee, because the exemption relates to employers only. Fleming v. A. B. Kirschbaum, Co., 3 Cir., 124 F.2d 567, affirmed Kirschbaum v. Walling, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638; Overstreet v. North Shore Corporation 318 U.S. 125, 63 S.Ct. 494, 87 L.Ed. 656; White v. Jacobs Pharmacy Co., D.C., 47 F.Supp. 298.

5. In considering the application of the Act to a specific state of facts no abstract formula can be applied. General propositions are of little aid in determining boundaries between what is covered by the Federal legislation and what Congress intended should be left to the states. Kirschbaum v. Walling, supra. The task is one of accommodation. Walling v. Sanders, supra.

6. Plaintiffs were employed by the defendant in its retail establishment the greater part of whose selling was in intrastate commerce and they cannot recover. Judgment will be entered dismissing the complaint with costs to defendant.