author: KALODNER, District Judge.

text:
    PFEIFFER et al. v. McGARVEY.
    Misc. No. 1102.
    District Court, E. D. Pennsylvania.
    July 26, 1945.
    Joseph S. Conwell, Jr., of Philadelphia, Pa., for petitioner.
    Clarence M. Freedman, of Philadelphia, Pa., for respondent.
   KALODNER, District Judge.

This is a petition for a stay of eviction proceedings brought under the authority of Section 300 of the Soldiers’ and Sailors’ Civil Relief Act of 1940, 54 Stat. 1181, as amended, 56 Stat. 771 (1942), 50 U.S.C.A. Appendix § 530, hereinafter referred to as the Act.

The circumstances as they appear in the pleadings are as follows: Frank E. Pfeiffer, now in the United States Navy, and his wife, Kathryn, together with their two children, reside at 2071 N. 63rd Street in Philadelphia. These premises were leased by Frank Pfeiffer’s aunt, Alice M. Pfeiffer, with whom, it is alleged, the petitioners came to live in 1942.

On October 19, 1944, the defendant, Robert N. MxGarvey, purchased the premises. After allegedly obtaining from the Office of Price Administration a certificate of authority to maintain eviction proceedings on the ground that he himself wished to occupy the house, McGarvey, on April 17, 1945, after due notice, began eviction proceedings against Alice M. Pfeiffer in Magistrate’s Court No. 24 of Philadelphia County. It is admitted that he made no application in the Magistrate’s or any other Court for leave to proceed. The hearing was held on April 24, 1945, and judgment of possession was rendered in favor of McGarvey.

At the time of the hearing in the Magistrate’s Court, the present petitioners sought to intervene to make application for the benefits accorded to servicemen and their dependents under the aforementioned Act. The amended pleadings herein disclose a dispute between the parties as to whether the Magistrate disposed of the matter on the procedural ground that Frank and Kathryn Pfeiffer were not entitled to intervene, or on the substantive ground that under the circumstances they were not entitled to relief under the Act. This, of course, raises a jurisdictional issue for, if the matter were already disposed of on the merits, the necessary procedure is to seek review in the proper court. Radding v. Ninth Federal Savings & Loan Ass’n, D.C.S.D.N.Y., 1944, 55 F.Supp. 361; see Riordan v. Zube, 1920, 50 Cal.App. 22, 195 P. 65.

However, where the petition fails to make out a case on the merits, which I am of the opinion is true here, it is not necessary to give further attention to the other issues. See Brooks v. Dewar, 1941, 313 U.S. 354, 359, 61 S.Ct. 979, 85 L.Ed. 1399.

It is admitted that the lessee of the property in controversy is neither Frank nor Kathryn Pfeiffer, but rather a third party, their aunt, Alice M. Pfeiffer. It is not alleged that the latter is a dependent of Frank Pfeiffer or of any other person in the armed service. In truth, it is not asserted that she is entitled to any benefits of the Act in connection with any phase of this case. Moreover, it does not appear that she entered into the lease in a representative capacity or otherwise than individually and for her own use.

Whether petitioners are guests of Alice Pfeiffer, as they allege, or boarders, as defendant alleges, it is clear that under ordinary circumstances their right to possession, if any, must stand or fall upon the right of Alice Pfeiffer. The question presented, therefore, is whether, under the Act, petitioners have a better right to possession than the lessee herself, through whom they must otherwise claim. I am of the opinion that in this case the answer to that question must be in the negative.

Using, as it does, the terms “agreed rent,” “eviction or distress,” “right of possession,” and “tenant,” Section 300 of the Act seems to have reference to disturbance of a landlord-tenant relationship. See Lesher v. Louisville Gas & Electric Co., D.C.W.D.Ky., 1943, 49 F.Supp. 88, 89. It is evident here that the petitioners are not tenants of the property involved. While petitioners reside on the premises, they are, on their own allegations, merely invitees. Exclusive possession and control exists in Alice Pfeiffer, lessee, who is charged with care of the property and with payment of the rent. She is in full occupation of the premises, and has not relinquished her control, possession or occupation, nor substituted the petitioners for herself in any way.

However, because of the use of the word “occupy,” subsection (1) of Section 300 of the Act is capable of a broad construction, and, indeed, it may warrant a wider construction than the technical legal definition of “tenant” admits. Nevertheless, the title of Section 300, and subsection (2) thereof, clearly indicates that the persons entitled to protection under the Act are those in the armed service, or their dependents, upon whom there rests at least an obligation to pay rent for the leased premises. Here the petitioners are under no such obligation, either express or implied. Petitioners, as I have said, are merely invitees, and their presence comes within the orbit of Alice Pfeiffer’s possession and occupation, which are hot protected by the Act.

In view of these circumstances, I am of the opinion that the petitioners do not “occupy” the premises within the meaning of the Act. I do not feel that the Act was intended to apply automatically merely on the basis of presence, of those within its purview, without regard to the nature of their presence and their obligations with respect to the property. Moreover, since petitioners are merely the guests of Alice Pfeiffer in her home, I do not believe an action similar to this could be maintained against her; there being no agreement between petitioners and Alice Pfeiffer’s successive landlords granting separate rights to the petitioners, it follows that they cannot maintain this action against Alice Pfeiffer’s present landlord, the defendant.

Finally, it may be noted that the two unreported cases in this District relied upon by the petitioners are distinguishable. In both cases, those seeking protection under the Act were tenants in full possession and custody under lease.

The situation here presented emphasizes the urgent and compelling need for remedial legislation by the Congress of the United States to adequately safeguard the welfare of relatives of servicemen now beyond the scope of existing law.

The extremely distressing situation precipitated by prevailing unrestrained speculation in homes and apartment houses menaces the welfare of the families of servicemen with inevitable consequent injurious effect upon the morale of our armed forces.

Experience has demonstrated that housing rental ceilings have proved a dismal failure in the absence of adequate price ceilings on sales.

But it is for the Congress to remedy the situation by legislation or for the Executive to take appropriate action under the sweeping provisions of the Second War Powers Act.

For the reasons stated, petition for stay of eviction proceedings is denied.


source: Caselaw Access Project

author: BARNES, District Judge.

license: Public Domain

text:
    MARINE OPERATORS et al. v. BARNHOUSE et al.
    No. 44 C 404.
    District Court, N. D. Illinois, E. D.
    Oct. 20, 1944.
    James J. McKenna, of Chicago, Ill., for Roy A. Barnhouse.
    J. Albert Woll, U. S. Dist. Atty., of Chicago, Ill., for the Government.
   BARNES, District Judge.

This cause is before the court on the motion of Leonard C. Brown, Deputy Commissioner United States Employees Compensation Commission, to dismiss the complaint.

The complaint was filed to review, set aside, and suspend, as not in accordance with the law and the evidence, an order, made by said Deputy Commissioner by virtue of authority conferred upon him by the Defense Bases Compensation Act, 55 Stat. L. p. 622, 42 U.S.C.A. § 1651 et seq., for the payment of compensation to Roy A. Barnhouse. It appears from the complaint that the Deputy Commissioner’s findings and order were, in part as follows:

“That Roy A. Barnhouse * * * was in the employ of the Marine Operators * * * from February 19th to June 5th, 1943, at Waterways, Alberta, Canada; * * * that on or about the 15th of May, 1943, the claimant sustained injuries arising out of and in the course of the employment when he jumped from a truck of the employer after being carried to the mess hall for dinner, and bruised the metatarsal and strained the transverse arch of both feet, causing the falling of said arches; * * * that, as a result of said injuries the employee was wholly disabled beginning with the sixth day of June, 1943, continuing indefinitely, * * *.
“That the employer, Marine Operators, and the insurance carrier, United States Fidelity and Guaranty Company, shall pay to the claimant herein, Roy A. Barnhouse, compensation in the amount of $675. and further compensation at the rate of $25 per week beginning with the 12th day of December, 1943, until the termination of said disability or the further order of the Deputy Commissioner.”

It appears from the brief of plaintiffs (p. 2), in opposition to the motion to dismiss, that the only contention of plaintiffs, as a basis for setting aside the Deputy Commissioner’s award, is that: “There is no basis in the record upon which the honorable commissioner could reasonably find that there was any causal connection between the incident of jumping off of the rear of the truck and the subsequent condition of ill-being complained of.”

This statement is followed by certain quotations from the transcript of the evidence presented before the Deputy Commissioner, and a discussion of the evidence in support of plaintiffs’ contention that there is no foundation for the finding of a causal connection between the jumping from the truck and the condition of claimant.

The record, made before the Deputy Commissioner, shows that at the hearing held at Jefferson City, Missouri, on December 1, 1943, three witnesses testified: The claimant, his brother Robert, and his foreman, Harry Whitting. Claimant was not represented by counsel and he and his witnesses were examined by the Deputy Commissioner. The employer and insurance carrier (plaintiffs here) were represented by counsel, who cross-examined claimant and his witnesses.

Claimant’s testimony, briefly, was : He is 27 and resides at Chamois, Missouri; about May 12th or 14th, 1943, while working at Alberta, Canada, as a caulker on barges, his feet got sore and swollen so he could not wear shoes, and his ankles were weak, “I haven’t the slightest idea what caused them to do that”; that he hurt his feet one day at noon when he was required to jump off a truck onto the ground; it could have been from jumping off the truck; his feet stung and hurt so that he could hardly walk on them, hurt on ball of foot, but when he got warmed up his feet felt better; that he saw the doctor about a week later; that the doctor’s assistant examined him and said it looked like broken arches but the doctor said it wasn’t; that the manager let him stay off his feet while they were sore; that the only accident he can think of was that of jumping off the truck, or jumping from the scaffolds on the barges; that he is 27 and has been caulking since he was 15; that he never had any trouble with his feet before he went to Canada, and never went to a doctor; that he passed the railroad examination and worked for Missouri Pacific before he went to Canada; has not been able to do anything since he came back from Canada; feet and legs hurt up to hips. He went back to work after lunch the day he jumped off the truck; it was four or five days or a week later, when walking around camp, that he felt this weakness in his ankles.

Whitting’s testimony, briefly, was: He was claimant’s foreman; claimant started limping about noon one day, his feet began to swell, said his feet were 'about killing him, and witness told him to keep off his feet and sent him to the open shed; claimant told witness that he didn’t know why feet were hurting, except that he had hurt them jumping off the truck one day; witness did not know about claimant jumping off the truck; they had been bringing up the matter of men jumping off trucks every day or two at the Safety First meetings; they load men on the trucks like cattle, sometimes 65 or so on a truck; one man got his neck broke jumping off the truck; after claimant left, there was a rule established against jumping off the trucks; two or three other men sprained their ankles on the frozen ground jumping out of a truck; witness called to see claimant at the hospital ; claimant went to doctor two or three times to have his feet taped and he sat in the open shed but finally they swelled so he-could not get back and forth to quarters;, witness had worked on jobs with claimant before and had not known of claimant having trouble with feet before that time;. truck bed is about 4% feet high; could not say for sure that claimant’s foot trouble is result of jumping out of a truck but two or three men sprained their ankles on that frozen ground doing that.

Robert Barnhouse’s testimony, briefly, was: He and claimant had been at Alberta six or seven weeks before claimant went to the doctor; claimant said he had jumped out of a truck, and that is all witness knows could be the cause of claimant’s trouble.

The record also shows a medical report on claimant dated February 4, 1944, signed by W. V. Ergenbright, Captain Medical Corps, U. S. Engineer’s Office, Alberta, Canada, reading in part:

“No. 3. On 26 May 1943, Mr. Barnhouse was recommended for a medical discharge by Major S. F. Lubben, M.C., at Waterways; diagnosis; fallen transverse arches, bilaterally, and a history of bitter complaints against his feet for the preceding ten days. On 5 June 1943, Mr. Barnhouse presented himself at the U. S. E. D. Dispensary at Edmonton, with copies of the recommendation for medical discharge from Waterways. He was admitted to the U. S. E. D. Dispensary, and was discharged on 12 June 1943. Diagnosis was depressed metatarsal arches, bilaterally, which were symptomatic. On 17 June 1943, a medical discharge was granted by Captain Weiner.
“No. 4. In reviewing Mr. Barnhouse’s record, there is no statement that he suffered any traumatic injury to his feet.”

At the hearing, the plaintiffs requested permission to have a’ physical examination made of claimant, and the request was-granted by the Deputy Commissioner. The record shows the reports of these physicians, Drs. Peden and Sauer. Dr. Peden’s conclusion was: “There is no evidence of bone or joint disease or injury of any nature.” Dr. Sauer’s conclusion was: “It is my opinion that the cause of the progressive shortening of this man’s extensor tendons and the deformity .of his plantar arches, is wholly unrelated to his alleged accident (jumping from a truck) and not-occupational in origin.”

In the recent case of Norton v. Warner Co., 321 U.S. 565, page 568, 64 S.Ct. 747, 749, 88 L.Ed. 931, the court said: “Sec. 19(a) of the Act [33 U.S.C.A. § 919(a)] gives the Deputy Commissioner ‘full power and authority to hear and determine all questions in respect of’ claims for compensation. And Sec. 21(b) [33 U.S.C.A. § 921(b)] gives the federal district courts power to suspend or set aside, in whole or in part, compensation orders if ‘not in accordance with law’. In considering those provisions of the Act in the Bassett case, [South Chicago Coal & Dock Co. v. Bassett], we held that the District Court was not warranted in setting aside such an order because the court would weigh or appraise the evidence differently. The duty of the District Court, we said, was to give the award effect, ‘if there was evidence to support it.’ 309 U.S. [251], at page 258 [60 S.Ct. 544, 84 L.Ed. 732], And we stated that the findings of the Deputy Commissioner were conclusive even though the evidence permitted conflicting inferences. Id., 309 U.S. page 260 [60 S.Ct. 544, 84 L.Ed. 732]. * * * thus it is that the judicial review conferred by Section 21(b) does not give authority to the courts to set aside awards because they are deemed to be against the weight of the evidence. More is required. The error must be one of law, such as a misconstruction of the act.”

It is established by the foregoing and like authority that this court is not authorized to set aside the award here merely because it may be of the opinion that the finding of the Deputy Commissioner is against the weight of the evidence presented to him, but that the only duty of the court is to determine whether there was evidence to support the award.

Had the claimant produced an expert who testified that, in his opinion, the claimant’s jumping from the truck might or could have resulted in the injuries of which he suffers, there would be no question but that the findings of the Deputy Commissioner would be supported by the evidence. The court is of the opinion, however, that even in the absence of such evidence as this, the evidence which is in record, together with the reasonable inferences to be drawn therefrom, supports the findings of the Deputy Commissioner, and that the motion to dismiss the complaint should be granted.

Counsel for the defendants may, at the opening of the court on Monday, October 30, 1944, present drafts of papers giving effect to the views hereinabove expressed.


author: MOSCOWITZ, District Judge.

text:
    In re REALTY ASSOCIATES SECURITIES CORPORATION.
    No. 45024.
    District Court, E. D. New York.
    May 1, 1945.

      See, also, D.C., 56 F.Supp. 1008.
    Lewis, Marks & Kanter, of Brooklyn, N. Y., and Julius Silver, of New York City (Lloyd B. Kanter, of Brooklyn, N. Y., and Jack L. Rappaport, of New York City, of counsel), for Bondholders’ Protective Committee.
    Percival E. Jackson, of New York City (Theodore N. Tarlau, of New York City, of counsel), for John Vanneck, Barbara B. Vanneck, Equitable Holding Corporation, and Frank Bailey.
    George Zolotar, of New York City (Kiva Berke, of New York City, of counsel), for Securities and Exchange Commission.
    Herrick & Feinstein, of Brooklyn, N.Y., Abraham Feinstein, of Brooklyn, N. Y., of counsel), for bondholders.
    Irving L. Schanzer, of New York City, for Prudence Realization Corporation.
    Hooker, Alley & Duncan, of New York City (James B. Alley, of New York City, of counsel), for debtor.
    Lynn G. Goodnough, of Brooklyn, N. Y., for Realty Associates, Inc.
    Halpin & Keogh, of New York City (Eugene J. Keogh, and Edward S. St. John, both of New York City, of counsel), for Trustees.
    Charles J. Buchner, of Brooklyn, N. Y., for bondholders.
   MOSCOWITZ, District Judge.

A motion was heretofore made herein by certain bondholders (creditors) of the debtor to disqualify the Bondholders’ Protective Committee consisting of Messrs. Edwin B. Meredith, Chairman, a business man and financial executive, Jacob R. Schiff, an attorney-at-law, and Milton C. Zaidenberg, associated with an investment and security firm. In connection with such application specifications of charges were ' filed. These charges were referred to Hon. Edward R. Finch, as Special Master, to report thereon with his opinion.

On March 26, 1945, the Special Master filed an opinion in which he recommended that the application to disqualify the Bondholders’ Protective Committee or any members thereof should be denied. On March 29, 1945, the Special Master filed a supplemental report in which he recommended that the cost of the proceeding should be borne by the debtor. A motion has been made to confirm the report of the Special Master recommending that the motion to disqualify the committee be denied.

In view of the fact that the subject matter in the Special Master’s opinion is of such vital importance to the members of the bar, the pertinent portions thereof will be set forth in this opinion, as follows :

“Among the grounds urged for disqualification is that:
“ ‘The Bondholders’ Protective Committee and its members fall far below the rigid uncompromising standards required of fiduciary and should be disqualified from serving as a committee from this proceeding.’

“There is no dispute over the well-settled principle that:

“ ‘A bondholders (creditors) committee is a fiduciary for all bondholders and as such owes undivided loyalty and allegiance to the bondholders and to them alone.’ Mos-cowitz, J., In re Realty Security Associates, 56 F.Supp. 1008.
“The dispute in the case at bar is whether the facts shown are sufficient to disqualify the Committee or any member of the Committee.
“The Bondholders’ Protective Committee was formed July 30, 1943, at the instance ■of an attorney who is a member of the Committee but not its Chairman and who has been a bondholder since 1933. (Respondent’s Exhibit B-ll.) It is urged by petitioner that this Bondholder’s Committee .amounts to a strictly one-man Committee organized, financed and dominated by the lawyer member at whose instance it was formed to make fees for the Committee Members and defeat reorganization of the Debtor.
“It is further urged that this member ■of the Committee selected his nephew by marriage as counsel to the Committee, and .an employee of a company controlled by him as Chairman. In addition, that this same member financed the operations of the Committee by advancing funds in an amount of $3,800.00 which was wholly out of proportion to his investment in the bonds of the Debtor. These funds were to pay for advertising, circularization and the services of an agent for nine weeks at Fifty Dollars ($50.00) a week, and to explain to the bondholders the criticism of the bondholders’ Protective Committee to the Debtor’s voluntary plan, and to obtain authorization from the bondholders to join with the Bondholders’ Protective Committee.
“Even assuming the above facts, they are insufficient to show a conflict of interest or divided loyalty. They are also insufficient to show disqualification of the Committee or any of its members.
“The fact that the Chairman of the Committee has business loyalties or obligations to a corporation in which the dominating member of the Committee is a controlling stockholder, or even that the Chairman has business loyalties to a member of the Committee does not create as such an interest conflicting with or divided loyalty to the interest of bondholders within the purview of the authorities. Such a conflict of interest or division of loyalty could only arise if the Chairman of the Committee while acting for the bondholders, had established an interest or an obligation opposed to those of the bondholders so that he could not act impartially as between such interest and the bondholders.
“Every person has loyalties and obligations to others but objectionable interests and obligations must be within an orbit where the interest conflicts with and is opposed to those of the bondholders. For example,, ties to the Debtor or any of its affiliates would be within the prohibited orbit. It was because the Bondholders Directors Committee had such ties to the Debtor that it was disqualified on application made by the Bondholders’ Protective Committee, in Re Realty Associates Securities Corporation, D. C., 56 F.Supp. 1008. A similar situation was considered in Woods v. City Nat. Bank & Trust Co., 312 U.S. 262, 61 S.Ct. 493, 85 L.Ed. 820.
“The fact that the member of the Committee at whose instance it was formed has advanced monies for the necessary and effective functioning of the Committee provides no grounds for removal. An attorney may advance money necessary for the conduct of the proceeding upon the credit of the cause to be repaid. (Thornton ‘Attorneys at Law/ Vol. 2, p. 671, Sec. 389. Wood on ‘Fee Contracts of Lawyers/ p. 38.) The Bankruptcy Act, 11 U.S.C.A. Sec. 102, contemplates such expenditures and makes provisions for reimbursement from the Debtor’s estate where the court finds such expenditures necessary and for the benefit of the bondholders. In the case at bar, the dominating member of the Committee is not acting as counsel to the Committee. As noted however, it is not necessary to press the objection on that ground.
“It is next urged that the employment of an agent to visit bondholders, explain the objections of the Bondholders’ Protective Committee to the plan and to obtain authorizations are grounds for disqualification. The record shows that this agent was selected by the Chairman of the Committee and employed by the Committee as a whole. The Committee had the right to explain their criticism of the plan proposed by the Debtor and to solicit authorizations for the purpose of bringing about concerted action either through the mails or through agents. The Committee asserts that it had to employ such agents and seek authorizations particularly in view of the fact that the Committee had difficulty in obtaining a list of the bondholders from the Debtor. But this allegation is in dispute. In any event, the facts show no ground for disqualification of the Committee or its Members. Whether the Committee have the right to look to payment for their efforts in this proceeding within the limitations of the Bankruptcy Law is not now before us.
“It is next urged that the purchase of bonds by the Committee member at whose instance the Committee was formed and the fact that the other two members of the Committee owned no bonds, furnishes grounds for disqualification.
“The facts as to the purchase of bonds shows that the member at whose instance the Committee was formed made an initial purchase of two bonds in 1933 during a prior proceeding of this same Debtor, which prior proceeding however was terminated by means of a composition confirmed by order of this Court on April 5, 1934. Since this order terminated that proceeding and effected a discharge in bankruptcy, the purchase of these bonds is not objectionable in this proceeding. (Gilbert’s ‘Collier on Bankruptcy/ 1937, Sec. 1580, 1331.) Thus from June 6, 1934 to September 28, 1943, the Debtor was free from judicial control. The present proceeding is new and in no sense a continuation of the 1933 proceeding., The second and last acquisition of bonds by this member of the Committee occurred in April, 1943. Such purchase was prior to the commencement of the present proceeding on September 28, 1943 by the filing of the Debtor’s petition for its reorganization. Even considering that on July 30, 1943, the Bondholders’ Protective Committee was formed and that the statutory provisions regarding the purchase of securities of the Debtor would apply from that date, still the purchase of these bonds in April would not be made ‘after the commencement of such proceeding.’ (Chapter 10 of the Bankruptcy Act as amended 11 U.S.C.A. Section 649).
“It is next urged that the employment by the Committee of the agent for the purpose of having him procure from bondholders authorizations giving the Committee and the nephew of the dominating member of the Committee as counsel to the Committee, the right to pursue the civil remedies for these bondholders, violates Subdivision 2 of Section 274 of the Penal Law of the State [Consol.Laws N.Y. c. 40] The authorities however, are unanimous in holding that these acts constitute no violation of that law. Moses v. McDivitt, 88 N.Y. 62; See 139 A.L.R. 636, 650.
“It is next urged that the fact that the dominating member of the Committee filed an affidavit and certificate of prejudice against a Judge in the 1933 proceeding and subsequently withdrew such affidavit and certificate based upon an affidavit by him that the filing was ill-advised and unjustified, whereupon the proceedings were dismissed, should bar him from serving as a fiduciary for bondholders. Since these proceedings were dismissed, they furnish no ground for disqualification as a member of this Committee.
“It is next urged that the fact that the other members of the Committee own no bonds and may not have had previous experience as a member of such a Committee or had any previous experience in real estate matters should disqualify such members. There is nothing in the statute, or elsewhere, which would disqualify Committee' Members under such circumstances.
"It follows that the application to disqualify the Bondholders’ Protective Committee, or any of the Members thereof, should be denied.”

The Special Master in a carefully prepared decision has adequately decided the issues before him. His opinion and supplemental report will be accepted and is herewith confirmed.

Title 11, United States Code Annotated, Section 609, does not require that an individual need be a security holder of the debtor in order to qualify as a member of a committee. In this case Mr. Schiff is a small bondholder; the two other members of the Committee hold no bonds. Mr. Schiff owns five bonds of the debtor — two totaling $1750 in amount, which he acquired in December, 1933, for approximately $500 and three totaling $2625 in amount, which he acquired on April 13, 1943 for $2310. The Special Master found that Mr. Schiff financed the operations of the Committee by advancing funds in the amount of $3800 which were to pay for advertising, circularization and the services of an agent for nine weeks at fifty dollars a week to explain to the bondholders the criticism of the Bondholders’ Protective Committee to the debtor’s voluntary plan and to obtain authorizations from the bondholders to have the Bondholders’ Protective Committee represent them.

The fact that Mr. Schiff, an attorney-at-law, advanced the funds to the Committee does not make it a violation of Chapter X, 11 U.S.C.A. § 501 et seq. If this be regarded as objectionable, the remedy is not with the court but is with the Congress. There can be no question that a committee acts as a fiduciary for all bondholders and that as such its primary loyalty must be to the bondholders. Chief Judge Cardozo in discussing the obligations of a trustee stated in Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546, 62 A.L.R. 1:

“A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions. Wendt v. Fischer, 243 N.Y. 439, 444, 154 N.E. 303.”

Also see City Bank Farmers Trust Co. v. Cannon, 291 N.Y. 125, 51 N.E.2d 674; Matter of Ryan’s Will, 291 N.Y. 376, 52 N.E.2d 909; Ten Eyck v. Craig, 62 N.Y. 406; Magruder v. Drury, 235 U.S. 106, 35 S.Ct. 77, 59 L.Ed. 151; Dudley v. Mealey, 2 Cir., 1945, 147 F.2d 268, 272.

The individuals constituting a committee for bondholders should be honest, loyal, trustworthy, without conflicting interests and persons whose undivided loyalty and allegiance is to the bondholders. The fact that committees do not act in the sense of public duty alone, that they expect to be compensated for their services is not sufficient to disqualify them. Chapter X provides that the compensation of such committees shall be fixed by the court and that they may only receive compensation if they render beneficial services.

Mr. George Zolotar, attorney for Securities and Exchange Commission, and Mr. Kiva Berke, of counsel, properly point out these principles.

The question is not here presented whether the sum of $3800 advanced by Mr. Schiff was for expenses properly incurred and whether they may properly be reimbursed. That question should be reserved and will be passed upon if and when such reimbursement is requested.

There can be no question as to the desirability of protective committees in a Chapter X proceeding. The organization of proper committees should be encouraged. The following decisions are apt: In re Philadelphia & Reading Coal & Iron Co., 3 Cir., 1939, 105 F.2d 358 and In re Rosenbaum Grain Corporation, D.C.Ill.1935, 13 F.Supp. 601.

This Court had occasion to consider the basis for disqualifying a committee in this proceeding, known as the Bondholders’ Directors Committee — 56 F.Supp. 1008.

There, there was a conflict of loyalties. No disloyalty on the part of this committee to the bondholders has been shown.

Motion to disqualify the Bondholders’ Protective Committee is denied.- The Special Master will be allowed the amount he requested for his services, which is modest indeed.

Settle order on notice.

       “It is also clear that committeemen do not act from a sense of public duty alone. See Weiner, Reorganization under Section 77 (1933) 33 Col.Law Rev. 834, 842. They expect to be compensated for their services and they generally hope that their positions will be as lucrative as conditions permit. In recognition of this, Chapter X contains elaborate provisions relating to allowances to parties in interest and their representatives. Secs. 241— 250, 11 U.S.C.A. §§ 641-650. In fact, Chapter X has enlarged the class of claimants who may receive compensation for the rendition of beneficial services. ‘Because some decisions under 77B treated with extreme suspicion, or rejected entirely, the claims for compensation of individual creditors or stockholders when the class to which they belonged was rcpx-e-sented by a committee, section 243 was enacted to encourage participation by individuals who might eontx-ibute somethin? of value to the plan or to the administration of the estate.' In re Porto Rican American Tobacco Co., 2 Cir., 1941, 117 F.2d 599, 601. In testifying in this regard befox-e the House Judiciary Committee, Commissioner (now Justice) Douglas declared:
      “ ‘ * * * Minorities in current reorganizations who have been fighting plans proposed by the inside few, have been denied compensation although their efforts were beneficial to the estate in the sense of eliminating from the plans unfair and inequitable provisions. Now, constructive work of this character should not be ignored in our judgment. Compensation and expenses should not be reserved for the inside few, who in spite of a show of prodigious effort, are too frequently serving objectives which are not compatible with the interests of investors. To allow the standard of compensation to remain as it is, is to put a premium upon domination of the proceedings by the management and the investment bankers. If the shift in power is to be to the security holders and their authorized representatives, the standard for allowances should be changed along the lines suggested in the Chandler bill.’ (Hearings before House Judiciary Committee on H.E. 6439 (amended and reported as H.E. 8046), 75th Cong. 1st Sess. (1937) 186).
      “There has been legislative recognition, therefore, that the motive of pecuniary reward does not play an inconsequential role in inspiring the independent and vigilant representation to which security holders are entitled. At the same time, there is little question that the Congress was also concerned with the extravagances which previously had prevailed in reorganization matters. This aspect of the problem both Section 77B [11 U.S.C.A. § 207] and Chapter X have sought to solve by prohibiting the former practice of permitting committees to fix their own compensation. Instead, complete supervision over allowances has been placed in the courts under the general direction to restrict allowances to reasonable amounts for necessary and beneficial services only. Duplicative, superfluous services are not compensable. In this connection, it may be noted that while Chapter X has broadened the allowance base, the opportunities for compensation to committees are narrower because of the increased duties which have been assigned to the disinterested trustees and their counsel with regard to the promulgation of plans and the investigation of the debtor’s affairs. Except in unusual instances, committee allowances under Chapter X have been rather modest.
      “With respect to committee disbursements, comparable considerations apply. The statute recognizes that committees and their counsel frequently are required to make expenditures in connection with the exercise of legitimate committee functions. If such expenses have been properly and necessarily incurred, the judge is authorized to allow reimbursement (Sec. 242, 11 U.S.C.A. § 642). In the period when universal use was made of deposit agreements, it was a frequent practice for committees to borrow funds from outsiders by pledging the bonds or other securities deposited with the committee. Without supervision by the court as to the nature of the expenses, committees were thus empowered to impose prior liens upon the securities. The general abandonment of the deposit agreement as a mode of committee authorization has necessarily invited the more wholesome practice of having one or more of the committee members advance the required funds and assume the risk of reimbursement.”


author: WELSH, District Judge.

text:
    UNITED STATES v. ATCHISON, T. & S. F. RY. CO.
    Civil Action No. 4906.
    District Court, N. D. California, N. D.
    July 6, 1945.
    Frank J. Hennessy, U. S. Atty., of San Francisco, Cal., Emmet J. Seawell and Thomas O’Hara, Asst. U. S. Attys., both of Sacramento, Cal., and James O. Tolbert, Atty. for Interstate Commerce Commission, of Washington, D. C., for plaintiff United States.
    J. C. Gibson and Charles L. Ewing, both of Los Angeles, Cal., for defendant railway.
   WELSH, District Judge.

Plaintiff charges defendant, which will hereinafter be referred to as the Santa Fe, with violations of the Acts of Congress known as the Safety Appliance Acts, 45 U.S.C.A. §§ 1-16. All violations are alleged to have taken place between April 4th and April 7th, 1944, in Stockton, California.

The first count sets forth that an uncoupling lever was disconnected from the lock block of a coupler; the second, that the uncoupling lever was fouled by lading; the third, that the lock block of the coupler became inoperable, and the fourth, that the handhold on the right hand side of a car was bent in against said car.

An agreed statement of facts was filed wherein each of the defects was admitted by defendant. Said agreed statement set forth that the Wabash box car involved in the first count was placed on an interchange track between the Southern Pacific Railroad and the Santa Fe; that when so placed on said interchange track by the Southern Pacific, said car was coupled between other cars which were not defective, in such fashion that the other non-defective cars could not be moved or used without the movement of said Wabash box car; that the Santa Fe inspected said cars, discovered the defective condition of said Wabash car and refused to accept the same in that condition; that said car was disconnected upon its removal to the Santa Fe yards with the other cars, and was redelivered to the Southern Pacific by placing the same on the interchange track; that to repair the defective condition it was necessary to remove the knuckle and lock block and apply complete new uncoupling mechanism.

Similar stipulations were made with reference to a Georgia flat car placed on the interchange track between the Western Pacific Railway System and the Santa Fe, which was in a defective condition because the load thereon had shifted so as to prevent the operation of the uncoupling lever, in order to repair which it was necessary to shift the entire load to clear the uncoupling lever; an A.C.L. box car placed on the interchange track by the Western Pacific on which the lock lift had worn until the anticreep stuck in the knuckle lock, in order to repair which it was necessary to remove the knuckle, free it, put back the lock lifter and apply a link at the top of the lock lifter to prevent it from dropping down and falling in the knuckle lock; and a P.R.R. box car placed on the interchange track by the Western Pacific, in order to repair which it was necessary to straighten out the handhold by the use of a bar.

A map referred to in _said agreed statement of facts was introduced at the trial as a joint exhibit. It shows the part of the City of Stockton where the main lines of the three Railroads, interchange tracks and the Mormon Yard of the Santa Fe are located; and that the distance from the Southern Pacific and Santa Fe interchange track to the Santa Fe yard was approximately eight-tenths of a mile, and from the Western Pacific interchange to the Santa Fe yard was approximately seven-tenths of a mile.

■The defendant set forth in its answer that in order to disconnect each of the disabled cars from the remaining cars in said string or train which were not defective, it was necessary to move said string or train of cars from the interchange track to the switch yards of defendant, there to disconnect the same and re-deliver it to the interchange track, and that the handling of the car described was purely incidental to disconnecting it from the remaining cars in the string or train in which it was connected or delivered by the interchange company.

Defendant’s counsel argued that the only handling which took place was that which as a practical proposition was incidental to disconnecting the cars in question from the other cars on the track so that the Santa Fe could use the cars which were not defective and not thereby block the interchange track for an indefinite period of time while it might have called on the other railroad companies to go in there and switch out these cars.

R. J. Kingston, Chief Joint Inspector at Stockton, was called as an expert witness by defendant. He explained that in order to switch out certain defective cars it was necessary to move them from the interchange track with the Southern Pacific near square 278 on the map to Mormon Yard No. 1 track, as there was no switch until they arrived at said yard.

Questioned about the possibility of switching the cars at a certain point outside the Mormon Yard, he said it was on the main line of the Santa Fe, that the switch there is governed by a tower and cannot be thrown. He further testified that the defective cars could not have been dropped at another point because there is only a single track there, and that it would have been a hazard to traffic to pull the cars anywhere other than to the Mormon Yard.

He expressed the opinion that it would have been dangerous to repairmen if an attempt had been made to make the repairs on the interchange tracks because there were five or six switch engines “running around there all the time;” whereas on the repair tracks there was the protection of a locked switch. He further testified that the movement of traffic over the main Santa Fe line in this vicinity was heavy during the month of April, and if it were possible to have used the switches which come onto this main line, it would have delayed traffic of the Santa Fe and the Western Pacific to have switched the cars on that track.

The witnesses Cleve H. Madison and A. A. Hynds, Inspectors for the Interstate Commerce Commission, expressed opinions somewhat contrary to those of the witness Kingston, but they were not as familiar with the local situation as he. His familiarity was gained from experience on the Stockton interchange transfer over a period of fifteen years.

In a situation comparable to this, involving matters of judgment, it was said: “Upon such a question, involving as it does many elements, the decision of those in charge of the business, if made in good faith, is entitled to serious consideration.” United States v. Boston & M. R. R., D.C., 243 F. 795, 796. The decision of the Santa Fe to segregate, as it did, the cars on which the “bad order” tags were placed, appears to have been made in good faith and is entitled to considerable weight as explaining why the penal provisions of the Safety Appliance Acts should not be applied.

United States v. Western & A. Railroad, D.C., 297 F. 482, 484, mentions that the “penalty is laid only on a use of the car.” It is conceived that such use must be substantial and primarily connected with actual transportation of persons or property for hire in order for the penal provisions of the statutes to become applicable.

The movement of the cars designated in plaintiff’s complaint was purely incidental to returning them to the interchange carriers which had attempted to deliver them to defendant. No use of them for any profitable or productive purpose was made by defendant.

Defendant did not attempt to repair the cars itself, but proceeded to return them to the other carriers as expeditiously as possible. No acceptance of delivery thereof by defendant was evidenced. Instead, defendant proved its rejection of the proffered delivery. The Inspector placed “bad order” tags on all of them. Defendant’s employees separated them from the non-defective cars and proceeded to return them to the other carriers to be repaired.

The moving of cars by defendant was simply one step in the process of returning them. Defendant used every effort to avoid use of said cars so that its return of them would be promp't and effective.

In Southern R. Co. v. Snyder, 6 Cir., 187 F. 492, 497, the Court emphasized the necessity for withdrawing defective cars from commercial use. Defendant’s actions herein indicated that- it complied with the spirit of the statutes in not accepting these cars or employing them commercially, but in proceeding to return them to the interchange carriers.

The present case is regarded as one wherein the principle of reasonableness of interpretation and application of statutory law should be applied. The letter of the statute calls for the exaction of a penalty if any movement whatsoever of cars, defective in the particulars specified in the statute, occurs. The spirit of the law calls for the exaction of the penalty only if the movement is of such substantiality, and under such circumstances, as to defeat the purposes of the enactment. One of the principal purposes was the protection of employees.

Such protection could be afforded in the instances herein involved by the repair of the defective cars. Repairs could properly be made only by moving the cars to points where the interchange carriers responsible for making the same could be reasonably expected to have the facilities for proceeding therewith.

In order to make the returns to these carriers, a certain amount of switching was necessary. Differences of opinion were expressed by witnesses for plaintiff and defendant, -but those given for what defendant did were not unreasonable. Among them were these — that switching cars on the main line tracks would have resulted in considerable delay or congestion of traffic; that attempting to make repairs on the interchange tracks would have been dangerous because no blocking was there possible, but reliance could have been had only on “blue flags” as signs of warning; and that the method used by defendant afforded the added protection of the use of blocks.

The Supreme Court said in United States v. Farenholt, 206 U.S. 226, 27 S.Ct. 629, 631, 51 L.Ed. 1036, 1037: “A court is not always confined to the written word. Construction sometimes is to be exercised as well as interpretation. And ‘construction is the drawing of conclusions respecting subjects that lie beyond the direct expression of the text, from elements known from and given in the text, — conclusions which are in the spirit, though not within the letter, of the text.’ ” ,

In United States v. Illinois Central R., 6 Cir., 170 F. 542, 549, the Court stated:

“It seems clear to us that Congress, having accomplished its purpose by requiring carriers to equip their cars in the manner prescribed and to continue such equipment, was content to leave the incidents of their use to be regulated by the rules and principles of the common law.
“Generally, the accepted rule is that if a given construction of a law leads to such results that it seems harsh, unreasonable, or to be performed with a great excess of difficulty, the court, on seeing such a prospect, will turn back to see if a construction is possible whereby such consequences can be avoided and another construction imposed having a more reasonable result. Such an act, we think, ought not to be so construed as to imply the intention to impose these consequences, unless its provisions are such as to render the construction inevitable. A time-honored rule for the interpretation of statutes forbids it. Said Mr. Justice Field, in delivering the opinion of the Supreme Court in United States v. Kirby, 7 Wall. 482, 19 L.Ed. 278:
“ ‘All laws should receive a sensible construction. General terms should be so limited in their application as not to lead to injustice, oppression, or an absurd consequence. It will always, therefore, be presumed that the legislation intended exceptions to its language, which would avoid results of this character. The reason of the law in such cases should prevail over its letter.’ ”

In United States v. Illinois Central, D. C., 156 F. 182, 190, it was said: “The authorities we have cited seem clearly to show that, if a strict and literal construction would lead to manifest injustice and oppression, then the language used should be so construed as to avoid those results. The defendant is a common carrier, engaged in the performance of important duties to the public, involving great and various obligations, to which it is strictly held. * * * We cannot resist the conviction that the most urgent insistence upon a literal construction of the statute would balk in a case where a train running at speed between stations in some way broke some part of the safety appliance equipment. The literal interpretation contended for by the counsel for the United States demands, and counsel insists upon, the conclusion that, if the train proceeds at all for any distance (even the shortest) after the break occurs, the offense is complete, and that it is not for the courts to say that an offense has not been committed, but that it is for the executive officers to decide whether the government will overlook the offense or prosecute it. The courts, however, if appealed to, could hardly yield to a view which would exclude them from the function and the duty of passing upon the proper meaning of the act, and determining for themselves whether a person accused was guilty of a public offense; and in the exercise of that duty they can scarcely fail to say that common sense demands some relaxation from a literal construction in the case supposed.”

This Court agrees with the views above indicated, and holds that common sense demands here sufficient relaxation from a literal construction to permit the defendant Santa Fe to switch the cars herein involved without incurring a penalty.

That leeway should be allowed to railroads with respect to repairs was evidently apparent to Congress when it enacted Section 13 of the Safety Appliance Acts and thereby allowed the hauling of equipment “discovered to be defective or insecure to the nearest available point where such car can be repaired.” Necessarily, the determination of what is the “nearest available point” and what is a reasonable movement of equipment involves judicial discretion. Similar determinations of what is reasonable must be made in applying other sections of the Act. When a movement of cars is purely incidental to the return thereof to one interstate carrier by another, the reasonableness of such movement is a matter for determination by the Court.

That the switching done by defendant herein was reasonable, and that no penalty should be exacted therefor, is indicated by the following authorities:

In United States v. Northern Pacific R. Co., 9 Cir., 287 F. 780, 784, the Court said: “It is the duty of the interstate carrier to inspect the cars before receiving them into and hauling them in its trains, and, if found defective, to refuse so to haul them.”

In United States v. Louisville R., 6 Cir., 1 F.2d 646, 648, the Illinois Central pushed in upon the Terminal Company’s interchange track a cut of some 20 cars; upon inspection, one was found defective, and was marked with a placard showing that it was in bad order and to be returned. The Court analyzed four physically possible courses of action, and commented: “There was no way of completing the rejection by a return except in the manner adopted. * * * Statutory niceties aside, there is no appealing reason why one railroad should be penalized for a car movement that would have been lawful if by another road. * * * We are not persuaded that the course which was taken is subject to condemnation. * * * Upon the whole case, we conclude that the Louisville Company correctly interpreted its statutory duty.”

In Baltimore & O. S. W. R. Co. v. United States, 6 Cir., 242 F. 420, 425, the Court announced: “In case a defective car is received from a connecting carrier in a string or train of cars, the mere incidental handling of such car by the receiving carrier, refusing to accept it, in such manner as may be necessary to disconnect it from the other cars for redelivery to the connecting carrier and to proceed with the use of the other cars, would not be a use or hauling of such defective car by the receiving carrier which would subject it to the penalties of' the Act; such incidental handling of the car not being in contravention of the purposes of the Act, but a necessary step in furtherance thereof.”

This Court takes judicial notice that the alleged violations took place in time of war when the burden of traffic on the lines of defendant, and the other railroads herein mentioned, was unusually heavy.

It is therefore believed that defendant should not be held to as strict accountability in relation to the provisions of the Acts under which this suit is prosecuted as under ordinary conditions when more facilities would be available and more time could be taken for determining methods of procedure and execution of the details of operation.

Testimony offered at the trial, and the agreed statement of facts, indicate that defendant was in urgent need of the non-defective cars to which the defective ones were connected. While witnesses for plaintiff expressed the belief that other means of detaching the defective cars might have been used, the evidence as a whole sustains defendant’s actions as reasonable and practicable under the circumstances.

It is therefore ordered that defendant be given judgment, without costs, upon findings of fact and conclusions of law to be prepared and submitted by the attorneys for defendant.


author: TAYLOR, District Judge.

text:
    BOWLES, Adm’r, Office of Price Administration, v. CHEROKEE TEXTILE MILLS et al.
    Civil Action No. 673.
    District Court, E. D. Tennessee
    June 21, 1945.

      Allen T. Guild, Thomas P. Gore, and John M. Cate, all of Nashville, Tenn., for plaintiff.
    Charles H. Smith, of Knoxville, Tenn., for defendant.
   TAYLOR, District Judge.

This action is brought to enforce compliance with a subpoena duces tecum issued out of the Office of Price Administration for the production of certain documents, records, papers, etc., by the defendants.

The subpoena was regularly issued and served, and has not been complied with.

The Price Administrator is making a survey under the Bankhead Act, 7 U.S.C.A. § 724, to enable him to make or establish a maximum price for major cotton products at a level which will reflect the parity price of cotton plus an equitable allowance for conversion and profits for the cotton goods industry. He takes the position that once he has determined administratively that the matter called for in the subpoena is material to the subject under consideration, and has caused the subpoena to issue, that the court has power to enforce compliance, but has no jurisdiction to review the soundness of the administrative determination of materiality. In other words, that his broad powers to investigate, looking to the fixing of prices, gives him also the exclusive fight to determine finally whether the contents of the record, paper or document called for is material; that the statute so provides.

I think that Congress did not so intend, for if such determination is not subject to judicial review the statute would so ignore Constitutional safeguards as to render the provision invalid. It is argued that the language of sec. 202(a) of the Emergency Price Control Act of 1942, as amended, leaves no doubt of the Congressional intent to vest in the administrator the exclusive right to determine the question of materiality or evidential value. The statute provides, sec. 202(a), 50 U.S.C.A.Appendix § 922(a) : “The Administrator is authorized to make such studies and investigations, to conduct such hearings, and to obtain such information as he deems necessary or proper to assist him in prescribing any regulation or order under this Act, or in the administration and enforcement of this Act and regulations, orders, and price schedules thereunder. * * * ”

It is my opinion, after considering the cases cited by counsel which bear upon the question, that it was squarely before the Circuit Court of Appeals for the Sixth Circuit in Goodyear Tire & Rubber Co. v. National Labor Relations Board, 122 F.2d 450, at page 453, 136 A.L.R. 883, in which the court said, in part: “The statute does not require the District Court to issue the order, but simply gives it jurisdiction to issue. The enforcement of the subpoena is thus confided to the discretion of the District Court, which is to be judicially exercised. We think that the review in this case extends no further than the determination as to whether or’ not there was an abuse of its discretion. Applying this rule, we think that it was open to the company to contend that the documents called for do not relate to the particular matter in question; that this contention made in the answer raises an issue of fact for determination by the court, and if determined in its favor, that the application of the Board as to documents found not so to relate should be dismissed upon the merits.”

It is true that the statute here involved uses language broad enough to authorize the court to compel production of documents, etc., whether of evidential value or not, but I cannot assume, as said in the American Tobacco Company case (Federal Trade Commission v. American Tobacco Co.), 264 U.S. 298 at page 305, 44 S.Ct. 336, 337, 68 L.Ed. 696, 32 A.L.R. 786, “that Congress intended to authorize one of its subordinate agencies to sweep all our traditions into the fire (Interstate Commerce Commission v. Brimson, 154 U.S. 447, 479, 14 S.Ct. 1125, 38 L.Ed. 1047), and to direct fishing expeditions into private papers on the possibility that they may disclose evidence of crime. We do not discuss the question whether it could do so if it tried, as nothing short of the most explicit language would induce us to attribute to Congress that intent.”

Before the courts are permitted to strike down enactments of the Congress upon the idea that the Congress intended to compel a citizen to do that which the Constitution says he may not be required to do, the language used in the statute must be so clear and specific as to permit no other reasonable construction consistent with organic law. I believe the language here used may be reasonably construed to relate to documents and to testimony with respect to matters material to a determination of the question under investigation, that is, the price at which a certain commodity shall be sold. My conclusion is that the court has jurisdiction to determine the question whether the matter called for in the subpoena is material to the determination the administrator is authorized to make, but before the aid sought by the administrator will be granted, it must appear from evidence that the papers, documents or evidence which are sought are material to a determination of the matter under investigation.

I think this action will dispose of the motion to strike portions of the answer, since the narrow question is whether the administrator is given sole authority to determine relevancy and materiality. I do not think the Congress so intended.

An order may be prepared for approval and entry denying the relief sought until it shall appear from evidence that the court, in the exercise of sound judicial discretion, should require the production of the evidence sought, because the same is material to the determination the administrator is authorized to make.


text:
    PUEBLO TRADING CO. v. BAXTER CREEK IRR. DIST.
    Civil Action No. 4195.
    District Court, N. D. California, N. D.
    July 11, 1945.

      Franklin A. Dill, of San Francisco, Cal., for petitioner.
    W. Coburn Cook, of Turlock, Cal., for plaintiff.
   WELSH, District Judge.

Plaintiff recovered herein a default judgment against defendant for $24,760.00 principal, and $10,240.79 interest. Its complaint was based on ownership of certain interest-bearing bonds of said defendant, hereinafter referred to as the “District.”

Subsequent to said judgment, the Board of Supervisors of Lassen County passed a resolution to the effect that the sum of $43,542.16 was necessary to be raised by assessment to pay said judgment, and the County Assessor was ordered forthwith to prepare an assessment roll of said District. An affidavit of the attorney for defendant was filed herein setting forth that the officers of Lassen County had omitted certain lands from the assessment roll. An order for preparation of a supplemental assessment roll was made wherein it was provided “any landowner owning any portion of said lands may apply to this court for relief from said assessment if in good faith said landowner contends that said assessment is erroneous for the reason that said lands are not subject to the indebtedness of said District.”

H. J. Clark, Lurley Clark, Lenora M. Bailey, Lyal Zeitler, George McRorey, Rfi chel McRorey and Lyman Dermott Stiles filed a petition for an order to show cause, pursuant to said provision of said order. Each alleged that he was not subject to assessment to pay said judgment by reason of the fact that lands now owned by him were excluded from said District by an order of the Board of Directors thereof made April 1, 1922, pursuant to a petition filed January 15, 1921, and that, accordingly, the above entitled court is without jurisdiction to order the assessment of said lands which are not located within the boundaries of said District.

Plaintiff’s return to the order to show cause recited that the lands now owned by petitioners were included in the boundaries of said District when it was organized on February 8, 1917; that the bonds were issued and dated July 1, 1921, and sold August 2, 1921; that no notice of the application of the then owners of said lands for exclusion from said District was published prior to March 17, 1922; and that plaintiff is informed and believes that said petition for exclusion was not actually filed on January 15, 1921.

It is argued that" petitioners’ lands are liable to assessment for the payment of plaintiff’s judgment because the bonds were issued before the order of exclusion was made; that petitioners’ predecessors were guilty of laches and that petitioners are now estopped to deny that their lands are subject to assessment.

Plaintiff’s contention with reference to the date of filing of the petitions for exclusion is answered by an affidavit filed herein on its behalf on April 25, 1945, which refers to a full, true and correct copy of the original affidavit of the publication annexed thereto as an exhibit. Said affidavit sets forth a printed copy of the “Notice of Filing Petitions for Exclusion of Lands from Baxter Creek Irrigation District.” The first paragraph of said Notice reads: “Notice is Hereby Given by the undersigned, Secretary of Baxter Creek Irrigation District, that on the 15th day of January, 1921, there were filed with the Board of Directors of said Baxter Creek Irrigation District three petitions praying that certain lands situate in said District, and in said petitions described be excluded and taken from said District."

Said affidavit of publication is prima facie evidence of the fact that said petitions were filed on the 15th day of January, 1921, as therein set forth. No evidence to the contrary has been introduced.

Plaintiff is in error in claiming that the date of the order of exclusion is determinative of whether or not the lands of petitioners can now be assessed to meet plaintiff’s judgment. The California Irrigation District Act, which was in effect in the years 1921, 1922 and 1923, makes the date of the filing of the petition the time for determining whether lands excluded from a district may be released from an obligation to pay outstanding bonds.

Section 77 of said Act, Stats.1897, p. 254, provides:

“The failure of any person interested in said district, other than the holders of bonds thereof outstanding at the time of the filing of said petition (for exclusion of lands from the District) with said board, to show cause, in writing, why the tract or tracts of land mentioned in said petition should not be excluded from said district, shall be deemed and taken as an assent by him to the exclusion of such tract or tracts of land, or any part thereof, from said district * *

Section 79, Stats.1897, p. 279, provides that if there be outstanding bonds of the District "at the time of the filing of said petition” for exclusion of certain lands, the holders of such outstanding bonds may give their assent in writing to the petition for the exclusion of such lands.

Section 84, Stats.1897, p. 280, provides that nothing in said Act shall in any manner operate to release any of the lands so excluded from the district from any obligation to pay or any lien thereon of any valid “outstanding bonds or other indebtedness of said district at the time of the filing of said petition” for exclusion of said lands, and specifies — ■

“But said land so excluded shall not be held answerable or chargeable for any obligation of any nature or kind whatever, incurred after the filing with the board of directors of said district of the petition for the exclusion of said lands from said district * *

As the petition for exclusion of the lands now owned by petitioners was filed January 15, 1921, prior to the issuance of the bonds of the District on July 1, 1921, said lands are not subject to any lien of any assessment levied for the purpose of paying said bonds.

Plaintiff, having acquired the bonds so issued after the filing with the Board of Directors of said District of the petition for exclusion of said lands, has no ground on which to stand and maintain that said lands are liable to assessment. Its claims relative to laches and estoppel are also untenable.

Laches is summarized as “such delay in enforcing one’s rights as works disadvantage to another.” 30 C.J.S., Equity, § 112, p. 520. It is explained as “the neglect, for an unreasonable and unexplained length of time, under circumstances permitting diligence, to do what in law should have been done." Id.

In Hayes v. Druggists’ Circular, 2 Cir., 32 F.2d 215, 217, it was also said: “Such neglect to assert a right, taken in conjunction with lapse of time more or less great, and other circumstances causing prejudice to an adverse party, operate as a basis for laches in a court of equity.”

In Baltimore Trust v. Norton Coal Mining Co., D.C., 25 F.Supp. 968, 971, it was stated: “In such cases, courts of equity act upon their own inherent doctrine of discouraging, for the peace of society, antiquated demands, refuse to interfere where there has been gross laches in prosecuting the claim, or long acquiescence in the assertion of adverse rights.” The Court there added that it could see no ground to apply the doctrine of laches: “In fact it should only be applied in extreme cases and where some litigant has been placed in a more precarious position by reason of the length of time that has elapsed and because of this has been lulled into a false sense of security.”

This Court can see no ground for applying these doctrines here. Petitioners have neither done, nor omitted to do, anything which has placed plaintiff in a more precarious position by reason of lapse of time. Nothing transpired prior to plaintiff’s procuring the supplemental assessment roll in 1944, to cause petitioners to even suspect that their lands were claimed to be within the boundaries of defendant district. Their predecessors in interest, too, had no reason to take any further steps after they filed petitions for exclusion from the District and the prescribed procedure was followed terminating in the order of exclusion made by the Directors of the District.

Estoppel, as recently as Automatic Paper Co. v. Marcalus Mfg. Co., 2 Cir., 147 F.2d 608, 613, is referred to as “an equitable doctrine, and its essence lies in mutuality.”

In Walker v. Lightfoot, 9 Cir., 124 F.2d 3, 6, the Court said: “It is applied where a party, by his conduct, misleads another who relies on the facts indicated by such conduct, to the latter’s disadvantage.”

In Buss v. Prudential Insurance Co., 8 Cir., 126 F.2d 960, 966, the indispensable elements of an estoppel are listed as: “(1) ignorance of the party who invokes the estoppel * * *; (2) a representation by the party estopped which misleads; (3) and an innocent and detrimental change of the party asserting the estoppel in reliance upon the representation.”

Every one of these elements is lacking in the instant case, and none of the above quoted principles applies. This lack occurs by reason of the fixing by the California statute of the date of filing of the petition for exclusion as the test time for determining whether ¡or not bondholders acquire any rights as against property sought to be, or actually, excluded, from an irrigation district.

In Harelson v. South San Joaquin Irrigation District, 20 Cal.App. 324, 331, 128 P. 1010, 1013, this apt language was used: “If a bonded indebtedness had been created and the bonds had been sold and had become a lien on the land before plaintiff petitioned to have it excluded, a question of estoppel might arise. But no such situation existed.”

Certain presumptions, too, aid petitioners herein. Presumptions are evidence. California Code of Civil Procedure, sec. 1957, subd. 2.

Applicable presumptions under the California Code of Civil Procedure are: “entries in public * * * books * * * made in the performance of his duty by a public officer of this state, or by another person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts stated therein.” Sec. 1920.

“That official duty has been regularly performed.” Sec. 1963, subd. 15.

“That the ordinary course of business has been followed.” Sec. 1963, subd. 20.

“That the law has been obeyed.” Sec. 1963, subd. 33.

The order of the Board of Directors of the District with respect to the petitions of the predecessors in interest of petitioners herein was recorded in the office of the County Recorder of the County of Lassen, State of California, on October 29, 1923. The following excerpts therefrom reinforce the above mentioned presumptions and furnish added evidence favorable to petitioners:

“The petitions of Lyman C. Stiles, Ira M. Hamilton and Charles Hollfelder, praying for the exclusion of certain lands in said petitions and hereinafter described, from Baxter Creek Irrigation District, coming on regularly to be heard before the above named board of directors on the first day of April, 1922, at two o’clock P.M. * * * and proof having been made that notice of said hearing, as required by law, has been given by publication in the Lassen Advocate, a newspaper of general circulation published at Susanville in said County of Lassen, the county wherein said irrigation district is situated, for the time and in the manner required by law * * * and evidence in support of said petitions having been introduced before said board * * * and it appearing from said evidence to the satisfaction of said board of directors that it will be impossible to irrigate the lands m said petitions described, or any portion thereof, from the system of canals and ditches now being constructed for the district, and it further appearing that said lands will derive no benefits from said district, and that it is for the best interest of the district that the lands in said petitions described and sought to be excluded from said district and all thereof shall be excluded therefrom;
“It is therefore ordered that all of those certain lands situate in the County of Lassen, State of California, in said petitions and hereinafter particularly described, be, and the same are hereby excluded from said Baxter Creek Irrigation District.”

The recordation shows the signatures of Geo. W. Dieter, President, and J. A. Pardee, Secretary.

The recitals in said order are, in the absence of any evidence to the contrary, entitled to be regarded as true. Inasmuch as the order recites that the petitions came on regularly for hearing, that notice was given for the time and in the manner required by law, and that no cause was shown why the prayer of said petitions should not be granted, this Court cannot do otherwise than hold that the proceedings were regular and adequate for the Board of Directors to act as it did.

Said Board found that it would be impossible to irrigate the lands described, or any portion thereof, from the system of canals and ditches constructed for the District and said lands would derive no benefits from said District. It would be in equitable for this Court to now make any order which would burden the owners of said lands with assessments resulting from bonds issued by the District, from which District said lands were, more than twenty years ago, excluded.

It is therefore held that the lands of the aforesaid petitioners herein, and each of them, are not located within the boundaries of the Baxter Creek Irrigation District, defendant in above entitled action, are not subject to the indebtedness of said defendant, and are not liable or subject to assessment by said defendant, the Board of Supervisors of Lassen County, California, the Assessor, Tax Collector, Treasurer, or any other officer of said County, or any of them, to pay the judgment rendered in the above entitled action; and

It is hereby further ordered that the order heretofore made herein on the 26th day of September, 1944, requiring that the Board of Supervisors and officers of Lassen County, California, prepare an assessment roll of said lands and assess said lands for the payment of the judgment in the above entitled action be amended so as to exclude the property described in Exhibit “A” attached to the petition filed on the 2nd day of April, 1945.


author: MEANEY, District Judge.

text:
    UNITED STATES v. NATIONAL WHOLESALE DRUGGISTS’ ASS’N et al.
    No. 618-C.
    District Court, D. New Jersey.
    July 19, 1945.

      Wendell Berge, Asst. Atty. Gen., Thorn Lord, U. S. Atty., of Newark, N. J., Daniel B. Britt and William Schwartz, Sp. Assts. to Atty. Gen., for the Government.
    Lindabury, Depue & Faulks and Stryker, Tams & Horner, all of Newark, N. J. (Hodges, Reavis, Pantaleoni & Downey, of New York City, of counsel), for defendant McKesson & Robbins, Inc.
   MEANEY, District Judge.

The indictment charges the National Wholesale Druggists’ Association, 23 wholesale drug corporations alleged to be members of the National Wholesale Druggists’ Association, and 29 individuals, with conspiracy in restraint of trade and commerce in violation of Section 1 of the Sherman Act, 15 U.S.C.A. § 1.

The charges as set forth in the indictment are that these defendants have been engaged from in or about 1932 to the date of its return, February 6, 1942, in a continuing conspiracy “to raise, fix and maintain the wholesaler’s margin of profit on drug products by (a) raising, fixing, stabilizing, and maintaining the wholesale selling prices of said drug products and by (b) fixing and maintaining the wholesale purchasing prices of said drug products at levels demanded by the said defendants and other members” of the association. The theory of the indictment is of a continuing conspiracy, charging the defendants with having “regularly and continuously entered into those agreements and done those things which they conspired to do.”

McKesson & Robbins, Incorporated, one of the 23 wholesalers named as defendants, has filed a plea in abatement, the legal sufficiency of which the government attacks by demurrer. The defendant has joined with its plea, a motion to quash and for leave to inspect the grand jury minutes. To these pleadings the government has filed its motion to strike.

The motion to quash and the plea in abatement, as to defendant McKesson & Robbins, and for an inspection of the minutes of the Grand Jury which returned said indictment, are based upon the following allegations :

(1) From December 8, 1938 to July 1, 1941 the business, assets and property of the company were in custodia legis. The company filed a voluntary petition in the United States District Court for reorganization, which petition was duly approved on December 8, 1938 and that as a result thereof the company became powerless and without capacity to operate as a corporation except under the control of said Court. During the period, December 8, 1938 to July 1, 1941, a trustee duly appointed by the Court had title to the assets, property and franchises of the company and operated its business to the exclusion of the company and its officers, directors, employees and agents and that the company did not, nor did its directors, officers, employees or agents in its behalf, in fact, perform or purport to perform any act with respect to the operation of its business or the management or control of said property. On July 1, 1941, pursuant to Court order, the said trustee transferred title to the company of all its assets, properties and franchises, and relinquished to the company the operation and management thereof.

(2) On information and belief, no evidence whatever was submitted to the Grand Jury which returned the indictment, that during the period from December 8, 1938 to July 1, 1941, the business, assets and property of the company were in custodia legis and the company had, during said period, no capacity or power to engage in, and did not engage or purport to engage in the combination or conspiracy alleged in the indictment.

(3) On information and belief, there was no evidence whatever before the Grand Jury which tended to prove or proved that after July 1, 1941 the company engaged in the combination or conspiracy as alleged in the indictment.

The motion to quash and the plea in abatement challenge the indictment upon the ground that no evidence to support it was given before the Grand Jury and, primarily, that there was no evidence to show a re-entry or rejoinder in the alleged conspiracy after July 1, 1941 when the control of defendant, McKesson & Robbins, Inc., by the trustee was terminated.

There is no dispute between the parties that for the period from December 8, 1938-to July 1, 1941, defendant was in the custody and control of the District Court for Southern New York whose trustee was in exclusive possession and management. During such period there was no legal capacity in the defendant to engage in the conspiracy. The position taken by the defendant is that the filing of the petition constituted an effective withdrawal from the conspiracy and that the government has failed to produce any evidence to show an effective re-entry or rejoinder in such conspiracy subsequent to July 1, 1941.

The undisputed facts show that commencing on July 1, 1941 McKesson & Robbins was again in full possession and control of its assets and business. It appears further, without dispute, that six of the individual defendants named in the indictment were officers and agents of the corporation from 1932 to December 8, 1938 at which time they became agents of the trustee and acted as such until the trusteeship terminated on July 1, 1941. On the latter date, when the defendant corporation resumed its business, these same individuals were reinstated in their former positions.

It also appears that the purchase and sale of drug products at prices in accord with the schedules established under the conspiracy were continued throughout the entire period during which the trustee was in control as well as during the period following the termination thereof. Throughout the entire period the officers and agents remained the same; albeit under the control of the court for the duration of the trusteeship. These were the identical persons who had been officers of the defendant corporation prior to December 8, 1938 and who were re-instated on July 1, 1941.

For the purposes of this motion it must be conceded that the conspiracy and the purchases and sales pursuant thereto, prior to the appointment of the trustee, were illegal. The matter is then resolved down to the question of whether, upon the resumption of legal control of the business and assets of the defendant corporation by the same officers and agents who had previously participated in and had been members of the conspiracy and having full knowledge thereof, the continued practice by such officers and agents of strict compliance with the prices established and maintained under the conspiracy constituted a re-entry into the conspiracy by the defendant corporation.

It is the conclusion of the Court that upon the facts, this question must be answered in the affirmative.

The contention of the defendant is that the acts of McKesson & Robbins in buying and selling drugs under the terms and at the prices fixed and maintained under and pursuant to the stabilization plans theretofore adopted, without more, fall' short of establishing an effective re-entry or re-joining in the conspiracy, since it is-alleged the plans in themselves are not illegal.

Whether the position taken by the defendant would be sound if the facts disclosed no identity of control, need not now be determined. The mere purchase and sale at prices established by an alleged conspiracy without knowledge or agreement would not necessarily affect a joinder in a conspiracy.

In the present case, such action as may have been taken by the trustee in adhering to the price schedule established before his appointment, was of course not a continuance of participation in any conspiracy which may have theretofore existed. But when the same officers and agents who-were in control of the company before the trusteeship resumed full management of the company after expiration of trusteeship, they were in a different position from that of the trustee. During the incumbency of the trustee, they had been in charge of the operations of the company. When they resumed nominal as well as actual control, their acts were in no wise to be considered merely as continuation of the practices established by the trustee. These acts were rather the result of deliberate choice, and constituted adherence to the price schedules as established by McKesson & Robbins in conjunction with their alleged co-operators and are to be deemed, in the absence of any declaration’ or indication to-the contrary, to be a resumption of the attitude originally adopted by them. Substantial conformity with the results of the original price agreements and controls, with practically no variation therefrom, is gravely indicative of an intent on the part of the refurbished company to resume participation actually in the alleged conspiracy, with consequent enjoyment of the fruits thereof.

Any other interpretation of the acts of the agents and officers of the McKesson & Robbins Company would make the fortuitous intervention of the trusteeship a shield behind which they could find cover for dire machinations and reprehensible skullduggery.

In the case of Eugene Dietzgen Co. v. Federal Trade Commission, 7 Cir., 142 F.2d 321, at page 331, the Court found a joinder in a conspiracy where the defendant, although not a party to the initial conspiracy, subsequently adopted the schedule and made his prices agree. In that case the Court stated:

“Where numerous competitors .fixed the prices which they agree to maintain, and another competitor, not a party to the agreement originally, adopts the schedule and makes his prices agree, to the last penny, as the petitioners did, with the prices which the competitors fixed and charged, he cannot avoid responsibility for his action even though he be less active in' the first instance, or because his subsequent action was without affirmative, express agreement on his part to maintain the prices fixed by the others.
“We must look to the substance and not to the form of the conspirators’ conduct.”

To the same effect is the holding in United States v. Masonite Corp., 316 U.S. 265, 266, 62 S.Ct. 1070, 86 L.Ed. 1461.

It follows that where a party to the original express agreements, after having withdrawn from the scheme, resumes buying and selling under the schedules initially agreed upon, with full knowledge of such agreements and of the methods by which the schedules thereby established are to be maintained, they cannot seek to avoid liability by alleging that they did not expressly agree anew to participate.

The defendant has argued that it was compelled to purchase and sell at the prices fixed under the initial agreements in order to avoid economic and financial ruin, and that therefore the fact that it did purchase under the schedule established is not indicative of any participation, re-entry or continuation therein. The Supreme Court in United States v. Socony-Vacuum Oil Co., Inc., et al., 310 U.S. 150, at pages 220, 221, 60 S.Ct. 811, 843, 84 L.Ed. 1129, has effectively disposed of such an attempted justification of similar practices. In the cited case that court stated: “But such defense is typical of the pro-testations usually made in price-fixing cases. Ruinous competition, financial disaster,, evils of price cutting and the like appear throughout our history as ostensible justifications for price-fixing.”

And further: “Congress * * * has not permitted the age-old cry of ruinous-competition and competitive evils to be a defense to price-fixing conspiracies.”

Pleas in abatement, being dilatory pleas- and not favored in law, must be pleaded' with strict exactness, certainty and completeness and must set forth facts, and not conclusions of law, nor evidence of facts and every inference must be against the pleader. A plea on information and belief is insufficient. Olmstead v. United States, 9 Cir., 19 F.2d 842, at page 845, 53 A.L.R. 1472; United States v. Lehigh Valley Railroad Company, D.C., 43 F.2d 135.

Where it appears that sufficient evidence was before the jury from which an-inference of guilt may be drawn, it is not within the province of this court to inquire further.

This rule was clearly laid down in the Olmstead case, supra [19 F.2d 845], where the Court stated: “ * * * the decisions-of the Supreme Court and those of most of the inferior federal courts have been to the-effect that an indictment cannot be abated, * * * unless it affirmatively appear in the plea that no competent evidence of the commission of the offense charged therein was presented to the grand jury, or unless all of the evidence was unlawfully procured' in violation of substantial rights of the accused, so as to subject it to exclusion if' offered against him.”

The pleas here fall short of establishing the requisite lack of evidence of facts from, which the Grand Jury could properly have returned the indictment.

For the same reasons the motion to quash must fail.

The defendant has joined with its plea and motion to quash the additional motion for an inspection of the Grand Jury minutes. The language in support of this motion is identical with that of the prior motion and plea.

While it is apparent that the Court has the power to grant a motion for inspection of the Grand Jury minutes, that power will be exercised only in cases of extreme compulsion. Where there is no allegation of an improperly constituted body, nor of fraud, misconduct or corruption and no positive allegation that there was no evidence of any sort before the Grand Jury, such power will not be exercised. Compare United States v. Gouled, D.C., 253 F. 242; United States v. Oley, D.C., 21 F.Supp. 281; and United States v. Morse, D.C., 292 F. 273.

For the reasons above set forth and after a careful examination of the briefs presented, it is my conclusion that the demurrer to the plea in abatement should be sustained. The motions to quash and for an inspection of the Grand Jury minutes are denied and the Government’s motions to strike are granted.

Orders may be entered accordingly.


author: MILLER, District Judge.

text:
    In re TAPP.
    No. 14132.
    District Court, W. D. Kentucky, Louisville Division.
    July 23, 1945.
    Marcus C. Redwine and Harvey T. Lisle, both of Winchester, Ky., for Peoples State Bank & Trust Co., James M. Tapp, and M. L. Tapp’s administrator.
    D. A. Sachs, Jr., of Louisville, Ky., for trustee.
   MILLER, District Judge.

Three creditors of the bankrupt, James Prewitt Tapp, have petitioned for a review of the Referee’s order of April 27, 1945.

Following the adjudication of the bankrupt on March 15, 1941, the Trustee was authorized to institute suit in the Clark Circuit Court of Kentucky to set aside a preferential real estate mortgage. The Circuit Court held that the payments to the three creditors in question from the proceeds of the sale of the mortgaged property were preferential, but made a -distribution of these proceeds according to its own theory of the case instead of ordering them paid to the Trustee. It also sustained the bankrupt’s contention of a $1,000 homestead exemption. On appeal by the Trustee the Kentucky Court of Appeals affirmed the lower court’s ruling that the payments were preferential and invalid and that the bankrupt was entitled to the homestead exemption, but held that the proceeds should be paid in their entirety to the Trustee in Bankruptcy for administration in the bankruptcy proceedings. See Kessler v. Tapp, 297 Ky. 607, 180 S.W.2d 552. The mandate, issued on June 20, 1944, reads in part as follows:

“It is therefore considered that said judgment be affirmed insofar as it denied a recovery of the $1,000 homestead exemption, and is reversed in the particulars indicated and cause remanded with directions to enter a judgment in conformity with this opinion.”

Thereafter on September 27, 1944, the Clark Circuit Court entered its judgment as directed by the mandate. This judgment provided that the Trustee recover from the three defendants, Peoples State Bank and Trust Company, J. M. Tapp and M. L. Tapp, severally the respective amounts received by each with 6% interest per annum thereon from the date of the filing of the action. The defendants did not construe the mandate as imposing liability for interest and accordingly objected to the entry of the judgment as worded, and prayed an appeal to the Court of Appeals which was granted as part of the judgment. The defendants paid the principal of the judgment on October 23,' 1944, but continued with their appeal to the Court of Appeals. On February 6, 1945, the Court of Appeals affirmed the judgment of September 27, 1944. See Tapp v. Tapp’s Trustee, 299 Ky. 345, 185 S.W.2d 534. The defendants paid the remainder of the judgment on March 27, 1945.

While the second appeal was pending, and on November 2, 1944, the Peoples State Bank & Trust Company, James M. Tapp, and M. L. Tapp’s administrator filed motions for leave to file their respective claims against the bankrupt estate by reason of the mortgage indebtedness against the bankrupt’s real estate, the payment of which had been declared preferential and invalid by the judgment of September 27, 1944. The Trustee objected to the filirg and allowance of these claims on the ground that they were not filed within the time limitation provided by Section 57, sub. n of the Bankruptcy Act, Section 93, sub. n, Title 11 U.S.C.A. On April 27, 1945, the Referee sustained the objection of the Trustee and overruled the motions of the three creditors to file said claims. It is this order which is now being reviewed.

Section 57, sub. n, of the Bankruptcy Act provides that except as otherwise provided in the Act claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed, provided, however, that a claim arising in favor of a person by reason of the recovery of the trustee from such person of money or property, may be filed within thirty days from the date of such recovery, “but if the recovery is by way of a proceeding in which a final judgment has been entered against such person, the claim shall not be allowed if the money is not paid or the property is not delivered to the trustee within thirty days from the date of the rendering of such final judgment, or within such further time as the court may allow.” The Trustee contended and the Referee held that the judgment of the Clark Circuit Court entered on September 27, 1944, in accordance with the mandate of the Court of Appeals of Kentucky is the final judgment referred to in Section 57, sub. n, of the Bankruptcy Act, and that since the proofs of claim were not tendered until November 2, 1944 such action was not within the time limit so provided. The creditors contended that since the judgment of September 27, 1945, was appealed from it was not a final judgment within the meaning of the statute and did not become final until subsequently affirmed by the Court of Appeals of Kentucky in its second opinion on February 6, 1945. We agree with the general rule, contended for by the petitioners, that a judgment of the trial court, from which an appeal has been duly taken, is not a final judgment in the cause. See Hall v. Proctor Coal Company, 236 Ky. 813, 34 S.W.2d 425; Knox County v. Newport Culvert Co., 248 Ky. 661, 59 S.W.2d 558; Faulkner v. Faulkner, 270 Ky. 693, at page 702, 110 S.W.2d 465. But this rule clearly has reference to such a judgment from which an appeal can be validly taken. If a judgment of a lower court is not subject to review it becomes a final judgment. It is the end of that particular litigation. In the present case the first opinion of the Court of Appeals of Kentucky determined the rights of the parties. The judgment of September 27, 1944, entered in accordance with the mandate was a final determination that the payments received by the petitioning creditors were preferential and should be repaid to the trustee. Irrespective of the question of interest, under the Kentucky rule that the decision of the Court of Appeals in remanding a case with directions is the law of the case on a subsequent appeal from a judgment entered in conformity with the direction, this question of liability had been finally determined. Bates v. Northern Coal & Coke Co., 162 Ky. 459, 172 S.W. 918; Tapp v. Tapp’s Trustee, 299 Ky. 345, 347, 185 S.W.2d 534. “It is the inherent power of an appellate court in equity suits to decide and terminate a case by directing a specific judgment upon a reversal of the chancellor’s decree. Preece v. Woolford, 200 Ky. 604, 255 S.W. 285. When the court exercises that power, it is conclusive and final, binding alike on the trial court and itself. * * * Hence, in the absence of some agreement of settlement, there was nothing else for the trial court to do but enter that judgment. Neither party had a right to reopen the record and have a retrial when that stage in the proceedings had been reached. Each had had his day in court.” Noel’s Adm’x v. Black’s Adm’r, 244 Ky. 655, 656, 51 S.W.2d 955, 956. See Denny v. Wickliffe, 1 Metc., Ky., 216; McLean v. Nixon, 18 B. Mon., Ky., 768. In the present case the second appeal to the Court of Appeals from the judgment entered on September 27, 1944, was ineffectual to keep open the question of final liability. Although the question of interest was not specifically passed upon hy the Court of Appeals in its first decision, yet the allowance of interest in the judgment of September 27, 1944, legally resulted from the court’s ruling. The claim against each defendant was a liquidated one. “The amount of the recovery, if liability existed, was not, and reasonably could not have been, the subject of dispute.” Tapp v. Tapp’s Trustee, 299 Ky. 345, 347, 185 S.W.2d 534, 536. Interest followed as a matter of law. Accordingly, that part of the judgment which allowed interest was in conformity with the mandate of the Court of Appeals and became part of the final judgment in the case.

Since the tendered proofs of claim were not filed within the thirty days from the date of the recovery by the Trustee from the petitioning creditors the Referee correctly sustained the trustee’s objections to their filing. The order of April 27, 1945, is affirmed.