source: Caselaw Access Project

author: MADDEN, Judge. WHITAKER, Judge,

license: Public Domain

text:
    STEIN v. UNITED STATES.
    No. 45596.
    Court of Claims.
    Oct. 1, 1945.
    WHITAKER and LITTLETON, Judges, dissenting.
    This case having been heard by the Court of Claims, the court, upon the evidence and the report of a commissioner, makes the following special findings of fact:
    1. Plaintiff is a citizen of the United States and a resident of Chicago, Illinois. She filed her individual income tax return for the calendar year 1936 on March 15, 1937, showing a tax due of $24,277.02, which was paid in quarterly installments. The last installment of $6,069.25 was paid December 14, 1937. January 20, 1939, an additional assessment of $469.54, plus interest of $53.50, was made against plaintiff for 1936, which was satisfied February 1, 1939, by payment of $522.34 and abatement of 70 cents.
    2. March 9, 1940, plaintiff filed a claim for refund of $7,945.59 paid for 1936, on the grounds (1) that the sum of $7 '69.01, reported as interest on special assessment bonds issued by various municipalities, was not taxable, and (2) that the sum of $12,033.24, received as a result of the redemption of 120% shares of Class B preferred stock by Puro Filter Corporation of Illinois, hereinafter called the Puro corporation, was not taxable. The Commissioner of Internal Revenue allowed plaintiff’s claim for refund of tax paid for 1936 on the bond interest and refunded $2,201.29, together with interest thereon in the amount of $52.80. By letter dated October 9, 1941, he rejected plaintiff’s claim for refund of the tax paid on money received by her for the redemption of the preferred stock.
    3. In 1926 S. M. Stein, husband of plaintiff, secured an option to purchase all the stock of Chicago Water Purifying Company, hereinafter called the Chicago company, which had been engaged in selling and leasing water filters since about 1913. To finance the proposed purchase he caused the Puro corporation to be organized, with authorized capital stock issued as follows:
    “1,250 shares of Class A 7% preferred stock, par value $100.
    “2,680 shares of Class B 6% preferred stock, par value $100.
    “2,680 shares of common stock, no par value.”
    Practically the entire issue of Class B preferred stock was subscribed at par by Mr. Stein and friends and associates. Mr. Stein assigned his option to the subscribers for the Class B preferred stock and they in turn assigned the option to the Puro corporation, receiving in asserted consideration for the assignment 2,680 shares of common stock, which was distributed among them in proportion to their subscriptions for Class B preferred stock. The amount realized from subscriptions for Class B preferred stock was paid to the stockholders of the Chic.«go company in part payment for the stock of that company, and the 1,250 shares of Class A preferred stock of Puro corporation was issued to them in payment of the balance of the purchase price.
    4. As part of the agreement for the purchase of the Chicago company stock, provision was made in the articles of incorporation of Puro corporation requiring that each year for five years 250 shares of Class A preferred stock would be redeemed for cash, thus completely retiring in five years the 1,250 shares of Class A preferred stock which had been issued in part payment for the Chicago company stock. This provision was complied with, the last of Class A preferred stock of Puro corporation was retired June 30, 1931, and none has been reissued.
    5. Provision also was made in the articles of incorporation of the Puro corporation for the redemption of Class B preferred stock upon order of the board of directors. The following circumstances contributed to a demand on the part of the investors in Puro corporation stock for such a provision. The option for the purchase of the Chicago company stock did not specify the price but granted merely the right to negotiate exclusively for a definite period of time. While negotiations were in progress there was a period of doubt whether the sale would be consummated. Some of the subscribers to Class B preferred stock considered that, even if the purchase of the Chicago company stock should be consummated, in some respects the investment was speculative or hazardous — the business fluctuated with good and bad times and, if the then current agitation for a general city filtration plant in Chicago should result in a municipally owned plant, it would materially and adversely affect the business of the Chicago company. Moreover, because the Puro corporation’s assets would consist principally of water filters of a patented type, and refrigerating equipment, with little salvage value, which would therefore be valuable only so long as the corporation was an operating concern, banks would not agree to lend money to the Puro corporation without the endorsement of responsible stockholders or officers.
    After all Class A preferred stock had been redeemed, the board of directors from time to time, as conditions permitted, ordered the retirement of Class B preferred stock, as follows:

    6. These redemptions were made pro rata among all the holders of Class B preferred stock, except as to the redemption of October 1, 1934. For that year holders of approximately 54 shares of Class B preferred stock declined to surrender their shares for redemption because they deemed the stock a good investment. Thereafter Class B preferred stock was called for redemption with the proviso that the stock called should cease to bear dividends after the redemption date and, in consequence, there were no more refusals to surrender for redemption.
    7. All classes of stock had equal voting privileges. The stipulated dividends on preferred stock were cumulative and, in the event of liquidation or dissolution, the assets available for distribution to stockholders were to be applied first to the payment of accumulated dividends and retirement of the preferred stock at par, Class A having, while it remained outstanding, priority. After payment of accumulated dividends and retirement of all outstanding preferred stock at par, the assets remaining, if any, were to be distributed to the holders of the common stock.
    There were some transfers of stock from the original subscribers, and some holders of preferred stock redeemed in 1936 were not, at the times of redemption, owners of common stock. The extent to which preferred stock and common stock were transferred separately is not shown by the evidence, and it can not be determined to what extent relative ownership of outstanding stock was altered as Class B preferred stock was redeemed.
    8. All redemptions of preferred stock were made from earnings and profits. No diminution of the corporation’s business operations was planned, anticipated, or realized in connection with the redemption of the preferred stock, nor was there any modification of the charter reducing the amount of authorized stock.
    9. The first dividend paid by Puro corporation on its common stock was on December 23, 1936, at the rate of $2.00 per share.
    10. The corporation’s business was consistently profitable and its earnings and profits were at all times in excess of the amounts paid for redemption and retirement of Class B preferred stock. The corporation had undivided profits on January 1, 1936, of $353,013.17, and the total amount paid out by the corporation in 1936, in redemption and retirement of Class B preferred stock, was $53,200.
    11. The 120% shares of Class B preferred stock which plaintiff surrendered for redemption, and for which she received $12,033.24 in 1936, were acquired by her as an original stockholder in the company. See finding 2. She also, at these times in 1936, was the owner of shares of the common stock of the Puro company. Whether these shares were those originally issued to her does not appear from the evidence. During 1936 plaintiff also surrendered for redemption certain Class B preferred stock purchased by her from other stockholders, but the amounts received therefor were not taxed as dividends.
    12. Because of controversies with the Bureau of Internal Revenue in connection with the taxability of amounts paid for redemption of such stock, no redemptions of Class B preferred stock were made after December 31, 1936. The first receipts from redemption of Class B preferred stock were not reported as dividends in the income tax returns of the stockholders for 1932, but the Treasury Department took the position that the redemptions were dividends. A long controversy ensued, but the Treasury Department adhered to its position, and the stockholders did not petition the Board of Tax Appeals for redetermination. For the years following, until and including 1935, both the taxpayers and the Treasury Department treated the redemptions of Class B preferred stock as payments of dividends in the determination of the tax liabilities of individual stockholders and the corporation. In its return for the calendar year 1936, the Puro corporation claimed credit, as dividends paid, for the amount of such redemptions of Class B preferred stock. The revenue agent in charge in Chicago recommended to the Commissioner of Internal Revenue that such credit be not allowed. The Commissioner by letter of January 12, 1943, advised the corporation that the claimed credit would be allowed in the event the distributions to the stockholders are held in the -case at bar to be taxable to the- stockholders as dividends. A 90-day deficiency letter dated June 16, 1943, advising the Puro corporation of additional tax due for the calendar year 1936, on the ground that the corporation was not entitled to such credit, was transmitted to the corporation. September 11, 1943, the corporation filed with the Tax Court of the United States a petition for a redetermination of the deficiency.
    Llewellyn A. Luce, of Washington, D. C., for plaintiff.
    J. W. Hussey, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyer, both of Washington, D. C., on the brief), for defendant.
    Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
   MADDEN, Judge.

The plaintiff, at the time of the original formation of the Puro corporation in 1926, acquired by subscription shares of its Class B 6% preferred $100 par value stock, at $100 per share. With each share of preferred went a share of common stock of no par value. Neither the plaintiff nor any other stockholder paid any separate cash consideration for the common stock, though they assigned to the corporation an option for exclusive negotiation with the stockholders of the Chicago Water Purifying Company for the purchase of their stock, which option had been acquired by S. M. Stein, the plaintiff’s husband, the moving party in the formation of Puro, and had been assigned by him to the small group of his friends and associates who subscribed for stock in Puro. The Chicago company had an established business of selling and leasing water filters.

The investors in Puro stock thought that their investment was somewhat speculative, as to the security of their capital since the physical property of the Chicago company whose stock they hoped to obtain was a specialized machinery which would have little salvage value if Chicago should, as it might, install a municipally owned filtration plant. They also were aware, at the time they subscribed for their stock, that the purchase of the Chicago company’s stock might fall through, in which case they would have wanted to get their money back. For these reasons, perhaps inter alia, they had the articles of incorporation of Puro provide for the redemption of the Class B preferred stock upon order of the board of directors.

The stock of the Chicago company was obtained and the business was operated profitably. No dividends were paid on the Puro common stock until 1936, but, beginning in 1932, approximately one-tenth of the preferred stock of the company was redeemed each half year, so that by the end of 1936, eight of these redemptions had occurred and most of the preferred stockholders had been paid four-fifths of the amounts originally paid for their stock. Yet on January 1, 1936, Puro had undivided profits of $353,013.17, or considerably more than the amount originally paid for the Class B preferred and the common stock.

The plaintiff was required to pay income taxes upon the payments made to her upon the redemption of her preferred stock, upon the basis that these payments were, for tax purposes, the equivalent of dividends, and were not returns of capital. For the taxes so paid by the plaintiff on the $12,033.24 of redemption money she received in 1936, she brings this suit.

Section 115 of the Revenue Act of 1936, c. 690, 49 Stat. 1648, 26 U.S.C.A. Int.Rev. Acts, page 868, says:

“(a) Definition of dividend. The term ‘dividend’ when used in this title (except in section 203(a) (3) and section 207(c) (1), relating to insurance companies) means any distribution made by a corporation to its shareholders, whether in money or in other property, (1) out of its earnings or profits accumulated after February 28, 1913, or (2) out of the earnings or profits of the taxable year (computed as of the close of the taxable year without diminution by reason of any distributions made during the taxable year), without regard to the amount of the earnings and profits at the time the distribution was made.
******
“(c) Distributions in liquidation. Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock, and amounts distributed in partial liquidation of a corporation shall be treated as in part or full payment in exchange for the stock. The gain or loss to the distributee resulting from such exchange shall be determined under section 111, but shall be recognized only to the extent provided in section 112. Despite the provisions of section 117 (a), 100 per centum of the gain so recognized shall be taken into account in computing net income, except in the case of amounts distributed in complete liquidation of a corporation. For the purpose of the preceding sentence, ‘complete liquidation’ includes any one of a series of distributions made by a corporation in complete cancellation or redemption of all of its stock in accordance with a bona fide plan of liquidation and under which the transfer of the property under the liquidation is to be completed within a time specified in the plan, not exceeding two years from the close of the taxable year during which is made the first of the series of distributions under the plan. In the case of amounts distributed (whether before January 1, 1934, or on or after such date) in partial liquidation (other than a distribution within the provisions of subsection (h) of this section of stock or securities in connection with a reorganization) the part of such distribution which is properly chargeable to capital account shall not be considered a distribution of earnings or profits.
>■4 if?
“(g) Redemption of stock. If a corporation cancels or redeems its stock (whether or not such stock was issued as a stock dividend) at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock, to the extent that it represents a distribution of earnings or profits accumulated after February 28, 1913, shall be treated as a taxable dividend.
5*4 í-4 % ífc H*
“(i) Definition of partial liquidation. As used in this section the term ‘amounts distributed in partial liquidation’ means a distribution by a corporation in complete cancellation or redemption of a part of its stock, or one of a series of distributions in complete cancellation or redemption of all or a portion of its stock.”

Treasury Regulations 94, promulgated under the Revenue Act of 1936, contains the following:

“Art. 115-9. Distribution in redemption or cancellation of stock taxable as a dividend. — * * *.
“The question whether a distribution in connection with a cancellation or redemption of stock is essentially equivalent to the distribution of a taxable dividend depends upon the circumstances of each case. A cancellation or redemption by a corporation of a portion of its stock pro rata among all the shareholders will generally be considered as effecting a distribution essentially equivalent to a dividend distribution to the extent of the earnings and profits accumulated after February 28, 1913. On the other hand, a cancellation or redemption by a corporation of all the stock of a particular shareholder, so that the shareholder ceases to be interested in the affairs of the corporation, does not effect a distribution of a taxable dividend. A bona fide distribution in complete cancellation or redemption of all of the stock of a corporation, or one of a series of bona fide distributions in complete cancellation or redemption of all of the stock of a corporation, is not essentially equivalent to the distribution of a taxable dividend. * * * ”

The Government says that Section 115 (g), quoted above, is applicable; that the payments to the plaintiff in redemption of her preferred stock were made to her “at such time and in such manner as to make the distribution * * * essentially equivalent to the'distribution of a taxable dividend * * *and that they were, therefore, properly taxed. We agree. The corporation had large net earnings, and had no thought of liquidating its operating assets, or curtailing its operations. It was distributing a part of its net earnings or profits. If it had, as it might have, distributed some of those earnings to the holders of its common stock, that distribution would undoubtedly have been a taxable dividend. Instead, it distributed the earnings as the price of the redemption of its preferred stock. To whatever extent the ownership of the preferred and common stock was, as it was of the time of the original issue, in the same persons, share for share, the distribution went to the same persons in the same amounts as it would have gone if it had been distributed as a dividend on the common stock. The shares, the redemption money for which was taxed to the plaintiff, were shares originally issued to her. The record does not show whether she still had the common shares similarly acquired, though it does show that she still had common shares. If there had been a change in the facts in this regard, and if it is material whether there was such a change, the plaintiff could and should have proved the facts as they were in 1936.

One of the reasons for the provision in Puro’s articles of incorporation for redemption of the preferred stock was the thought of the original investors that, while the business might be profitable for a time, it might be ruined, with a large loss of capital asset value, by the installation by the City of Chicago of a municipal filtration plant. The investors seem, therefore, to have desired to have their capital paid back to them out of current profits, while retaining, in their common shares, the share in the earnings of the company which they had before, less the 6% which the preferred stock paid.

The plaintiff contends that, since the redemption was an honest business transaction, it is not taxable. We think that the question of whether a distribution is “essentially equivalent to the distribution of a taxable dividend” under section 115(g) does not depend on the presence or absence of honesty in the distribution. The question is, as the statute makes it, a question of equivalence, and if that is present, the statute expressly taxes the distribution.

In Rheinstrom v. Conner, Collector of Internal Revenue, 125 F.2d 790, the Circuit Court of Appeals for the Sixth Circuit listed a number of factors which are of assistance in determining equivalence. On the facts before us, as recited in the findings, we think the requisite equivalence was present and the payments were taxable as income.

The plaintiff’s petition will be dismissed. It is so ordered.

WHALEY, Chief Justice, and JONES, Judge, concur.

WHITAKER, Judge,

dissenting.

The inclusion in plaintiff’s income of the entire amount received by her for the redemption of her preferred stock in the Puro corporation was proper only if “the distribution and cancellation or redemption in whole or in part [was] essentially equivalent to the distribution of a taxable dividend.” The majority opinion holds that it was. I do not think so.

Plaintiff and other holders of the preferred stock paid cash for it. They received their common stock in consideration of the transfer to the corporation of their option to purchase the stock of the Chicago Water Purifying Company. At the time they bought the preferred stock it was agreed that it would be redeemed at the discretion of the Board of Directors. It was redeemed pursuant to this agreement.

In the opinion and in the findings it is said that it was redeemed from earnings and profits. This is a conclusion that I do not think is justified. Whether or not it was redeemed from earnings or profits or with the money which these people originally paid for the stock, it is impossible to say.

Moreover, at the time it was redeemed some of the holders held only the preferred stock. They did not own any common stock, and when their preferred stock was redeemed, their interest in the company ceased. Nor is it true that the preferred stock was redeemed pro rata until after the corporation called it and required all holders of it to permit its redemption. Before this some of the holders of it preferred to keep the stock and declined to allow it to be redeemed.

For the distribution to have been essentially equivalent to the payment of a dividend, the distribution must have been out of earnings and profits, it must have been pro rata, and it must have been to persons who remained stockholders after the redemption. It did not fulfil these requirements and, therefore, I cannot agree that it was proper to include within the plaintiff’s income the entire amount she received upon the redemption of her stock.

LITTLETON, Judge, concurs in the foregoing opinion.


author: MADDEN, Judge.

text:
    CHESTNUT SECURITIES CO. v. UNITED STATES.
    No. 46235.
    Court of Claims.
    Oct. 1, 1945.
    This case having been heard by the Court of Claims, the court, upon the evidence and an agreed statement of facts, makes the following special findings of fact: •
    1. The plaintiff is a corporation incorporated under the laws of the State of Delaware on or about December 2, 1931, with its principal office and place of business at Wilmington, Del., and with places of business and offices at Dallas, Tex., and Tulsa, Okl.
    2. On February 28, 1941, plaintiff filed! its federal corporation income, declared value excess-profits, and defense tax return for the calendar year 1940 with the Collector of Internal Revenue for the District of Delaware and paid the tax shown thereon to be due. This return was made upon the so-called “accrual” method of reporting income. It reported total income of $104,746.80, total deductions therefrom of $40,791.25, a net income of $63,955.55 and a total tax thereon of $1,320.83. Included among the claimed deductions and as interest in line 20 was the sum of $800.-39 and as taxes on line 21 the sum of $8,-452.48. In schedules attached to the return the interest item of $800.39 was shown as interest paid to the Oklahoma State Tax Commission and the item of taxes aggregating $8,452.48 was shown to include $5,590.98 paid as Oklahoma state income tax.
    3. After an examination of plaintiff’s books and records and the return mentioned above, a Revenue Agent in a report dated March 25, 1942, recommended an additional tax or deficiency upon that return of $1,141.72 resulting from proposed adjustments as follows:
    Adjustments to Net Income
    Net income as disclosed by return ...................... $63,955.55
    As corrected................ 71,109.32
    Net adjustment as computed below .................... 7,153.77
    Unallowable deductions and additional income:
    (a) Depletion .... $1,012.36
    (b) Oklahoma Income Tax .. 5,564.03
    (c) Interest...... 577.38
    Net adjustment as above...... $ 7,153.77
    A copy of the Revenue Agent’s report was transmitted to plaintiff on April 22, 1942, by the Revenue Agent in charge at Dallas Texas.
    On May 29, 1942, a so-called 90-day letter was addressed to the plaintiff by the Commissioner of Internal Revenue which proposed a deficiency of income tax in the amount of $1,141.72 upon plaintiff’s return for the calendar year 1940. This sum, together with deficiency interest of $88.92, aggregating $1,230.64, was timely assessed and thereafter paid as follows: $926.80 was paid in cash on June 11, 1942; $214.92 was paid by statutory credit on November 28, 1942; and $88.92 was paid in cash on February 11, 1943.
    4. On December 27, 1943, plaintiff filed a formal claim for refund with the Collect- or of Internal Revenue for the District of Delaware in the amount of $1,013.33, stating therein that the $5,564.03 Oklahoma income tax and the $577.38 interest thereon paid to the Oklahoma State Tax Commission during the year 1940 were proper deductions in computing taxable net income for the calendar year 1940. The facts relating to the Oklahoma tax were as follows:
    Plaintiff was licensed as a foreign corporation to do business in the State of Oklahoma during the years herein involved. Its chief source of income was from interest and dividends upon corporate securities, together with income from joint operations of oil properties. The books and records of plaintiff are kept upon the accrual basis and its return for income tax purposes has been made accordingly.
    On March 5, 1935, the Supreme Court of the State of Oklahoma in the case of Chestnut Securities Commission v. Oklahoma Tax Commission, 173 Okl. 369, 48 P.2d 817, involving a franchise tax of plaintiff, rendered a decision holding that certain intangible personal property belonging to plaintiff did not have a “business situs” in the State of Oklahoma and that the intangibles were therefore not subject to the tax under the laws of Oklahoma, since the property was held outside the State and was not used nor employed in business transacted by the corporation within that State. Plaintiff in making its return for income tax purposes to the State of Oklahoma for the years 1936, 1937, and 1938 did not include as income the income received by virtue of ownership of that intangible personal property. In view of the Oklahoma court decision, plaintiff did not think it was required to include that income in its return. No effort was made by the State of Oklahoma to tax the income from these properties prior to 1940.
    On or about May 8, 1940, the Oklahoma Tax Commission, through its agent, proposed the following additional assessments of income taxes against plaintiff by reason of the omission from income of the income derived from personal property held outside the State:
    Year Additional Tax
    1936 .......................... $1,949.86
    1937 .......................... 1,541.95
    1938 .......................... 2,083.38
    $5,575.19
    These deficiencies were protested by plaintiff and on or about July 1, 1940, a hearing was had before the Oklahoma Tax Commission, which resulted in a decision by the Commission holding that the deficiencies in tax were due to the State of Oklahoma and, on or about August 24, 1940, plaintiff paid to the State the deficiencies with interest thereon, and at the same time, gave notice as required by statute of its intention to sue for their recovery. Pursuant to the laws of the State of Oklahoma, the tax paid was held in a separate fund by the State of Oklahoma, pending the outcome of the suit.
    On or about September 19, 1940, a suit for recovery of the taxes was instituted in the United States District Court for the Western District of Oklahoma, the case being styled Chestnut Securities Company, a corporation, Plaintiff v. Oklahoma Tax Commission, Defendant, and assigned Number 571 Civil. A trial was had and judgment was entered for the defendant Commission in the year 1940, from which plaintiff, in March 1941, took an appeal to the United States Circuit Court of Appeals for the 10th Circuit. On or about January 16, 1942, the Circuit Court of Appeals affirmed the judgment of the District court, the opinion being reported in 125 F.2d 571. The Supreme Court of the United States denied certiorari on April 13, 1942, 316 U. S. 668, 62 S.Ct. 1035, 86 L.Ed. 1744. The basis for the decision by the Circuit Court was that the intangible personal property which was almost identical with that involved in the first case above mentioned, decided by the Supreme Court of Oklahoma, had a “business situs” within the State of Oklahoma for the purpose of income taxation.
    5. No part of the sum of $1,013.33 claimed for refund by plaintiff from the defendant, as shown in finding 4, has been refunded or repaid to the plaintiff.
    Maxwell M. Mahany, of Tulsa, Okl., for plaintiff.
    John A. Rees, of Washington, D. C., and Samuel O. Clark, Jr., Asst. Atty. Gen. (Robert N. Anderson and Fred K. Dyar, both of Washington, D. C., on the brief), for defendant.
    Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
   MADDEN, Judge.

The plaintiff, a Delaware corporation, reported and paid its federal income tax o» the accrual basis. In the year 1940 it paid, to the State of Oklahoma $5,575.19, with interest thereon, for state income taxes for the years 1936, 1937, and 1938, on the income of certain intangible personal property. The reason the plaintiff had not paid those taxes to the state in the years 1936, 1937, and 1938 was that it thought, because of a decision of the Supreme Court of Oklahoma, that the intangible personal property referred to did not have a taxable situs in Oklahoma and that therefore neither it nor its income could be taxed by that ■state.

In 1940, however, the state proposed to assess the tax for the years 1936, 1937, and 1938. The plaintiff protested, a hearing was had before the State Tax Commission which held that the tax was owed, and the plaintiff paid the tax, with interest, giving statutory notice of its intention to sue to get it back. Under the Oklahoma law the state held taxes so paid in a separate fund until the litigation was decided. The plaintiff sued in the United States District Court and lost, in the year 1940. The Circuit Court of Appeals affirmed and the Supreme Court of the United States denied certiorari in 1942.

In 1941 when the plaintiff filed its federal income tax return for the year 1940, it took deductions for taxes paid and interest paid to the State of Oklahoma in 1940 as recited above. The Commissioner of Internal Revenue disallowed the deductions and required the plaintiff to pay its taxes without the benefit of the deductions, which the plaintiff did, and filed a timely claim for refund. It sues here to recover $1,013.33, the amount which the dis-allowance of the deductions added to its income tax for 1940.

The Government concedes that under Section 23 of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 23, the plaintiff would have been entitled to the deductions claimed, if it had been making its returns on a cash basis. But the Government urges, since the plaintiff’s accounts were kept and its tax returns made on the accrual basis, it could not take its deduction for the taxes and interest paid to the State of Oklahoma until the year -1942, when its suit for their return was finally decided adversely to it.

We think the Government is wrong. One is not entitled to accrue a debt or other liability which is asserted against him but which he disputes and litigates, until the litigation is concluded. But if a liability is asserted against him and he pays it, though under protest, and though he promptly begins litigation to get the money back, the status of the liability is that it has been discharged by payment. It is hardly conceivable that a liability asserted against him, which he has discharged by payment, has not yet “accrued” within the meaning of the tax laws and the terminology of accounting. Accrual, from the debtor’s standpoint, precedes payment, and does not survive it.

The Government cites Security Flour Mills Co. v. Commissioner, 321 U.S. 281, 64 S.Ct. 596, 598, 88 L.Ed. 725. In that case the taxpayer in 1935 obtained an injunction against the collection of the tax, the court requiring as a condition of the granting of the injunction that the taxpayer pay the amount of the tax into a depository designated by the court. The taxpayer, on its income tax return for 1935 took deductions of the amounts paid into the depository, as taxes accrued in that year. The Supreme Court held that they had not accrued, within the meaning of the tax statutes. The court said “Since it denied liability for, and failed to pay, the tax during the taxable year 1935, it was not in a position in its tax accounting to treat the Government’s claim as an accrued liability.” In the instant case the taxpayer denied liability, but paid. We think it thereby “accrued” the taxes and interest, if accrual is requisite at all, in the case of the debtor, when actual payment has occurred.

The plaintiff is entitled to recover $1,-013.33 with interest as provided by law.

It is so ordered.

JONES, Judge, took no part in the decision of this case.


author: LEAHY, District Judge.

text:
    WHITE et al. v. E. L. BRUCE CO.
    Civil Action No. 406.
    District Court, D. Delaware.
    Oct. 17, 1945.
    Defendant charged plaintiffs with infringement of patents Nos. 2,341,161 and 2,288,585. Plaintiffs then filed suit under the Declaratory Judgment Act, 28 U.S.C.A. § 400. In its answer defendant counterclaimed and charged additional infringement of patent No. 2,276,253. Plaintiffs answered the counterclaim, denied infringement, and contended ’253 is invalid. In April, 1945, in the course of taking depositions, defendant concluded since plaintiffs’ infringement of ’253 was of such short duration — inconsequential from the point of view of damages — and as plaintiffs had abandoned the use of the infringing apparatus covered by ’253, to seek to withdraw ’253 from its counterclaim. Plaintiffs object and contend that ’253 should not be withdrawn from adjudication, but if defendant’s motion is granted, then under Rule 41 of the Federal Rules of Civil Procedure it should only be upon the condition that defendant reimburse plaintiffs for their entire expense in connection with the preparation for trial on ’253, including the expenses of taking depositions, legal fees and expenses, etc., in the amount of $5,842.88.
    C. Willard Hayes (of Cushman, Darby & Cushman), all of Washington, D. C., and Arthur G. Connolly, of Wilmington, Del., for plaintiffs.
    Newton A. Burgess and John F. Ryan (of Burgess, Ryan & Hicks), all of New York City, and William H. Foulk, of Wilmington, Del., for defendant.
   LEAHY, District Judge.

Long prior to the institution of suit, at a conference with defendant’s Vice-President and counsel, all details of plaintiffs’ alleged infringing apparatus were voluntarily revealed. Later, defendant charged plaintiffs with infringement of ’585 and ’161. In its counterclaim defendant charges infringement of the additional patent ’253. Plaintiffs deny infringement and attack validity. The fact that plaintiffs may have used an infringing apparatus for only several days, and while such an infringement may be “inconsequential from the point of view of damages,” nevertheless there has been a charge of infringement. The quantum of damages is irrelevant.

The Act permits an alleged infringer to bring any actual controversy over validity or infringement of a patent into court and to keep it there until adjudication. The rule should be the same when an additional patent swings into the orbit of controversy by means of the patentee’s charge of additional infringement. Under Rule 41 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, the Court, in the given situation, is clothed with discretion to allow a dismissal of any action, whether contained in the complaint or in a counterclaim. Cincinnati Traction Bldg. Co. v. Pullman-Standard Car Mfg. Co., D.C, 25 F.Supp. 322. Once a declaratory judgment action is at issue, as here, the trial date having been fixed, continued, and fixed again for a date certain, a patentee should not be permitted to withdraw his claim of infringement and thus avoid an adjudication, for it is not infringement but validity which has the greater public importance. Sinclair & Carroll Co., Inc. v. Interchemical Corporation, 325 U.S. 327, 65 S.Ct. 1143. See also Cridlebaugh v. Rudolph, 3 Cir., 131 F.2d 795; Booth Fisheries Corporation v. General Foods Corporation, D.C. Del., 48 F.Supp. 313; Young v. John McShain, .Inc., 4 Cir., 130 F.2d 31.

Plaintiffs are entitled to an adjudication of the issue of infringement and validity of ’253, for plaintiffs are entitled to chart their course of future activities. They may not do so if a threat of future litigation hangs in abeyance. Defendant should not be permitted to withdraw its patent with freedom to sue plaintiffs in the future in this or in some other jurisdiction. The rule of the cited cases, supra, does not permit the patent owner to bring his patent into a litigation and then to withdraw it at will. The court will deny the motion to dismiss the charges of infringement of ’253. The trial of this case has been fixed to commence November 5th, 1945, and ’253 will remain among the issues to be adjudicated.

       Plaintiffs filed no counterclaim for declaratory relief with respect to ’253, as the issues of infringement and validity were complete by defendant’s counterclaim and plaintiffs’ answer thereto. If any such counterclaim for declaratory relief had been filed, it may have been redundant, subject to a motion to strike. See Stanley Works v. C. S. Mersick & Co., D.C., 1 F.R.D. 43; Forstner Chain Corporation v. Germex Co., D.C., 1 F.R.D. 115; Ob-lak v. Armour & Co. et al., D.C., 1 F.R.D. 648.


author: HOLTZOFF, Justice.

text:
    MILLER v. SUPER SEAL CONTAINER CORPORATION et al.
    Civil Action No. 24791.
    District Court of the United States for the District of Columbia.
    Oct. 16, 1945.

      Judgment for defendants dismissing the complaint.
    Julius Aronoff, of Washington, D. C., for plaintiff.
    Roy St. Lewis, of Washington, D. C., for defendants.
   HOLTZOFF, Justice.

This is an action by A. R. Miller against Gustave Glocker and Clarence Falk, to compel specific performance of an agreement made on August 17, 1939, between the plaintiff and the individual defendants, whereby the defendant Glocker agreed to deliver to the plaintiff 12,000 shares of the capital stock of the Super Seal Container Corporation. The Corporation is joined as a party defendant.

It is not disputed that pursuant to the agreement the plaintiff received in the aggregate 7,000 shares of stock, and that the balance of 5,000 shares were never delivered to him. He seeks to compel delivery of the remaining 5,000 shares.

The defendants rely, first, on the three-year statute of limitations and, second, on a written release executed by the plaintiff.

The defense of the statute of limitations was not established. Part of the stock received by the plaintiff under the contract was delivered to him within three years preceding the commencement of the action. It is, of course, an elementary rule that part payment on account of an obligation tolls the statute of limitations, Cooper v. Olcott, 1 App.D.C. 123. This principle is applicable to instances of partial performance other than payments of money, Sutherland v. MacLeod, 311 Mass. 295, 41 N.E.2d 9, 139 A.L.R. 1375; Cuthbertson v. Hill, 65 Vt. 573, 27 A. 71.

The defendants’ principal reliance is however, on a written release executed by the plaintiff on April 24, 1942. The release is not under seal. The plaintiff contends, first, that the release is void for lack of consideration and, second, that it was obtained by fraud. The first of these contentions is founded on a misconception of the dealings between the parties. True, there appears to be no consideration for the release if its execution is treated as a separate and independent transaction. At about the same time, however, the defendant Falk purchased from the plaintiff 5,000 shares of capital stock of the Super Seal Container Corporation. The oral testimony indicates that this purchase and the execution of the release were part and parcel of a single, entire transaction. It is not necessary that there be a separate consideration for each item of a series of agreements, which were treated by the parties as one. A single consideration suffices for all of them. Restatement of the Law of Contracts, sec. 83; 1 Williston on Contracts, Rev.Ed., sec. 137A. Consequently the contention that there was a lack of consideration falls.

It is next claimed that the release was obtained by fraud. Formal and solemn documents, such as a release, are not to be lightly ignored or set aside. Else the security and sanctity of contracts would be shattered, and persons could not deal with one another in reliance upon the binding character of obligations that may be entered into between them. A party seeking to upset a release on the ground of fraud has a heavy burden to sustain. These observations have a peculiar application to the instant case. The plaintiff and the individual defendants are men of education, business experience and sagacity. The court is not confronted with a case of an ignorant or unlettered person who asserts that he has been overreached by his intellectual superiors. The plaintiff and the defendants had been in the investment banking business for a number of years and, apparently, were accustomed to negotiate and handle transactions of the kind involved in this litigation. There is no doubt that the plaintiff realized the full import of the document that he executed.

It is the general rule that proof justifying a verdict or decree on the basis of fraud, must be clear and satisfactory, Lalone v. United States, 164 U.S. 255, 257, 17 S.Ct. 74, 41 L.Ed. 425. The rule in this jurisdiction exacts compliance with even a higher standard. In the District of Columbia, fraud must be shown by clear and convincing evidence, Public Motor Service, Inc. v. Standard Oil Co. of New Jersey, 69 App.D.C. 89, 99 F.2d 124, 126. The case cited overruled Milson v. Gerstenberg, 43 App.D.C. 165, 175, which had adhered to the principle that fraud need be established only by a preponderance of evidence.

The plaintiff supports his contention that the release was obtained by_fraud by his oral testimony to the effect that at the defendants’ request he agreed that 5,000 shares of the stock which he was to receive should be set aside and placed in a pool to which the other individual defendants were to make like contributions, and that the stock so pooled should be sold to a concern known as the Tyner Glass Company, in order to induce the latter to undertake the manufacture and distribution of glass vacuum containers on behalf of the Super Seal Container Corporation. He further testified that he executed the release in reliance on the representation that the 5,000 shares of stock due him were to be so used, but that, as a matter of fact, the negotiations with the Tyner Glass Company had previously reached an unsuccessful termination and no stock was ever turned over to that concern. He asserts that he ascertained these facts subsequently to the execution of the release.

The plaintiff’s oral testimony as to the alleged fraud is not corroborated. The individual defendants vehemently deny his story. To be sure, there are some minor contradictions in their testimony, but too much importance should not be attached to this circumstance. As a result of observing their demeanor on the witness stand, the court is inclined to believe that some of these contradictions and inconsistencies were due, in part at least, to the impetuous and at times impulsive manner in which their testimony was given. In this connection, it seems significant that although all of the important transactions between the parties appear to have been in writing, not a scrap of paper is produced to substantiate the alleged agreement to create a pool for the purpose of turning over a block of stock to the Tyner Glass Company. The plaintiff has not sustained the burden of proof resting upon him to establish the charge of fraud by clear and convincing evidence. The release must be deemed valid and binding.

Judgment for the defendants dismissing the complaint on the merits with costs.

Let counsel submit draft of proposed findings of fact and conclusions of law and form of judgment, in accordance with the foregoing opinion.


author: KENNAMER, District Judge.

text:
    MITCHELL v. WRIGHT et al.
    No. 102-O.
    District Court, M. D. Alabama, E. D.
    Oct. 12, 1945.

      Arthur D. Shores, of Birmingham, Ala., and Thurgood Marshall, of New York City, for plaintiff.
    Robert Harwood, Atty. Gen., of Alabama, and Hill, Hill, Whiting & Rives, of Montgomery, Ala., for defendants.
   KENNAMER, District Judge.

The named plaintiff, William P. Mitchell, brings this suit on behalf of himself and all others similarly situated against Mrs. George C. Wright and Virgil M.' Guthrie, defendants, as individuals. In paragraph 7 of the amended complaint the defendants are described as administrative officers of the state of Alabama, whose manner of appointment and qualifications are set out in section 21, title 17, Alabama ¡Code of 1940.

Plaintiff William P. Mitchell further avers in paragraphs 8, 9, 10, 11, and 12 of the complaint, as follows:

“That under the laws of the State of Alabama (Alabama Code of 1940) Title 17, Section 12, registration is a pre-requisite to the right of the citizen of said State to vote in any election, federal, state or local, held in said State, and unless and until said plaintiff and other members of the class in whose behalf this suit is brought are registered, as provided by said laws of Alabama, the said plaintiff and other members of the class on whose behalf this suit is brought will not be entitled to vote at any election held in the State of Alabama, and in said County and Precinct including the election of federal officers.
“That defendants have established and are maintaining a policy, custom, and usage of denying to plaintiff and others on whose behalf this suit is brought the equal protection of the laws by requiring them to submit to tests not required of white electors applying for registration and have continued the policy of refusing to register qualified negro electors while at the same time registering white electors with less qualifications than those of Negro applicants solely because of race or color.
“That on or about the 5th day of July, 1945, during the regular registration period while defendants, Mrs. George C. Wright and Virgil M. Guthrie, were acting as registrars of voters under the laws of Alabama in conducting the registration of persons qualified to register, plaintiff made application at the Macon County Court House, the place for registration of persons qualified to register, he filled out the regular form for registration, he produced two persons to vouch for him as required by the board, he correctly answered such questions as were asked in proof of his qualifications, and was ready, willing and able to give any further information and evidence necessary to entitle him to be registered; that by reason of the said fact hereinbefore made, plaintiff was entitled.to be registered as a voter. Plaintiff applied for registration in order to be eligible to vote in future federal as well as state elections.
“Plaintiff further shows that during such registration period and on or about the 5th day of July, 1945, white persons presenting themselves for registration were not required to present persons to vouch for them, but were registered forthwith, whereas your petitioner solely because of his race and color was required to wait long hours before being permitted to file his application, was required to present persons to vouch for him, after which the said defendants denied plaintiff application and wrongfully refused and illegally failed to register plaintiff on said July 5, 1945, solely on account of his race, color and previous condition of servitude. Plaintiff further states that it has become the general habitual and systematic practice of said Board of Registrars, including these defendants, Mrs. George C. Wright and Virgil M. Guthrie, and their predecessors in office to refuse to register Negro residents of Macon County, including the plaintiff, William P. Mitchell.
“That the defendants in refusing to register plaintiff and other qualified Negroes pursuant to the policy, custom and usage set out in paragraph nine (9) herein were acting under color of authority of Macon County and the State of Alabama, and the refusal to register plaintiff and others in whose behalf this action is brought is a violation of sections 2 and 4 of Article 1 and Amendments 14, 15, and 17 of the United States Constitution and Sections 31 and 43 of Title 8 of the United States Code [8 U.S. C.A. §§ 31 and 43].”

The plaintiff asks (1) for a declaratory judgment, (2)^that this court issue a permanent injunction, and (3) that the plaintiff have a judgment for $5,000 damages.

The defendants, through their attorneys and the Attorney General of Alabama, have filed a motion to dismiss the amended complaint on fifty or more separate grounds, many of the grounds being in substance repetitions, but the motion as a whole raises the question of the jurisdiction of this court and the sufficiency of the complaint as to form.

The amended complaint in no manner brings into question any provisions of the Alabama State Constitution or any statutes of the State of Alabama as being in conflict with any provision of the Constitution of the United States.

Oral arguments have been heard by the court by able counsel for both the plaintiff and the defendants, and briefs in support of said arguments have been presented by counsel for the plaintiff and the defendants. All have been carefully studied and considered by the court, and the court has made diligent research for enlightenment. The court now renders the following opinion and order:

The motion to dismiss the cause of action as a class action will he granted.

A class action is an action brought in behalf of other persons similarly situated. Calabrese v. Chiumento, D.C., 3 F.R.D. 435.

For the plaintiff Mitchell to be able to prosecute this action as a class action, it must be brought in behalf of other persons similarly situated. And for these other persons to be similarly situated, it must be more than a likelihood that there are such other persons similarly situated, the situation must actually exist, and the “Class” must be a reality, not a possibility.

Does a class actually exist here, or is there, according to the complaint, as amended, an implied allegation, or belief, that such a group or class is in the making, or that there is a possibility of such a class developing.

“The purpose of a ‘class action’ is to enable the court to determine finally the rights of a numerous class of individuals by one common final judgment.” Farmers Co-op. Oil Co. v. Socony-Vacuum Oil Co., D.C., 43 F.Supp. 735.

Registration is an individual matter, each case is considered on its own merits and demerits, and whether a person is entitled to be registered or not is determined solely by weighing his qualifications and disqualifications, if any, by the standards outlined in the Constitution and statutes of the State of Alabama, which standards are not questioned by the plaintiff in this action. The question of unconstitutional discrimination in registration cannot be determined by groups or classes but must be determined as to each individual.

The plaintiff here relies on McDaniel v. Board of Public Instruction for Escambia County, Florida, D.C., 39 F.Supp. 638, for his authority for bringing this suit as a class action; however, there is a clear distinction in the mind of this court as between “Negro school teachers” and a “portion of a race of people, unclassified and without further identification, who would be entitled to be registered as qualified voters, if they possessed certain qualifications and do not possess certain disqualifications.” One— “school teachers,” is specific and definite, easily recognizable as a group or class, whereas, the other, “Negro citizens of the United States and residents and citizens of the State of Alabama and Macon County, Alabama, who (as alleged in the complaint) possess all the qualifications to be registered as voters and possess none of the disqualifications of voters,” is indefinite, unclassified, and is not recognized by the public or anyone as a group or class. What marks them as a class? What characteristics do they possess that sets them apart as a specific group or class? Where and how are they identified as such a group or class ? There is a difference between a group or class such as school teachers, stockholders, employees, or bondholders, wherein the very word or phrase itself carries with it the thought of several or numerous persons similarly situated and identified, and the broad and general allegation of Negro citizens who possess all the qualifications to be registered as voters and possess none of the disqualifications of voters.

This court could not determine by one common final judgment the rights of such a group as is named party plaintiffs in this suit.. There is not such a group or class in esse as to make it a class action. The mere allegation that the defendants discriminated against other members of the Negro race in Macon County in refusing registration to them because of their race and color would not suffice to place them in a class with the plaintiff Mitchell, unless it was determined by this court that such person, or persons, possessed all the qualifications required by law and none of the disqualifications, and that refusal to register said person or persons by the defendants was solely on account of race discrimination, which can only be done by considering all the facts and circumstances of each particular case, and only after such finding, if true, would that person become a member of such class.

In the opinion of this court, it is not a matter for the court to first organize a class in order for a class action to be prosecuted. It is not for the court to devise such a class, and it is not for the court to set up a class and describe them and identify them so that - they might have the necessary characteristics to be denominated a class for the purpose of bringing a class action. Such a class must be in existence and must possess such characteristics or identity to make it ascertainable and recognizable as a group possessing similar likeness. It must be more than a request to the court to find others who have suffered the same fate as the plaintiff, with the same qualifications and none of the disqualifications, and designate them as being similarly situated and therefore entitled to become members of the class for the purpose of prosecuting a class action.

The motion to dismiss the complaint as to a declaratory judgment and permanent injunction against the defendants will he granted.

“Defendants, (as alleged in plaintiff’s complaint), hold office pursuant to the laws of Alabama as Administrative officers of the State of Alabama. (Alabama Code of 1940, Title 17, Section 21.)”

This law under which the defendants hold office as registrars of Macon County, Alabama, Section 21, Title 17, of the Code of 1940, is as follows: “Registration shall be conducted in each county by a board of three reputable and suitable persons to be appointed by the governor, attditor and commissioner of agriculture and industries, or by a majority of them acting as a board of appointment, and who must be also qualified electors and residents of the county and who shall not hold an elective office during their term. One of said members shall be designated by the board of appointment as chairman of the board of registrars for each county. Provided, however, that in counties of over three hundred and fifty thousand population, according to the last or any subsequent federal census, that the governor shall appoint the chairman of the board of registrars.”

No challenge is made by the plaintiff of the law under which the defendants hold office as members of the board of registrars of Macon County, or that said defendants are or have been illegally or unconstitutionally appointed, or that they have no right to hold the office of registrars of Macon County, Alabama, or that they have no authority to examine applicants for registration as to their qualifications and disqualifications, under oath or affirmation, and to take testimony touching such qualifications.

Section 32 of Title 17, Alabama Code of 1940, sets forth who shall be qualified to register, provided they shall not be disqualified under the laws of the state, and it is as follows:

“1st. Those who can read and write any article of the constitution of the United States in the English language, and those who are physically unable to work; and those who can read and write any article of the constitution of the United States in the English language and who have worked or been regularly employed in some lawful employment, business or occupation, trade or calling for the greater part of twelve months next preceding the time they offer to register, and those who are unable to read and write, if such inability is due solely to physical disability; or
“2nd. The owner in good faith in his or her own right,, or the husband of a woman or the wife of any man who is the owner in good faith in her or his own right of forty acres of land situated in this state, upon which they reside; or the owner in good faith in his or her own right, or the husband of any woman or the wife of any man who is the owner in good faith in his or her own right of real estate situated in this state, assessed for taxation at the value of three hundred dollars, or more; or the owner in good faith, in his or her own right, or the husband of any woman or the wife of any man who is the owner in good faith in her or his own right, of personal property in this state assessed for taxation for three hundred dollars or more; provided that the taxes due upon such real or personal property for the next year preceding the year in which he or she offers to register shall have been paid, unless the assessment shall have been legally contested and is undetermined.”

Section 33 of Title 17 is as follows: “Any person making application to the board of registrars for registration who fails to establish by evidence to the reasonable satisfaction of the board of registrars that he or she is qualified to register, may be refused registration.”

Section 34 of Title 17 is as follows: “The action of a majority of the board of registrars shall be the action of the board, and a majority of the board shall constitute a quorum for the transaction of all business.”

And Section 35 provides for the right of . appeal from registration, as follows: “Any person to whom registration is denied shall have the right of appeal, without giving security for costs, within thirty days after such denial, by filing a petition in the circuit court or court of like jurisdiction held for the county in which he or she seeks to register, to have his or her qualifications as an elector determined. Upon the filing of the petition, the clerk of the court shall give notice thereof to the solicitor authorized to represent the state in said county, who shall appear and defend against the petition on behalf of the state. Upon such trial the court shall charge the jury only as to what constitutes the qualifications that entitle the applicant to become an elector at the time he or she applied for registration, and the jury shall determine the weight and effect of the evidence, and return a verdict. From the judgment rendered an appeal will lie to the supreme court in favor of the petitioner to be taken within thirty days. Final judgment in favor of the petitioner shall entitle him or her to registration as of the date of his or her application to the registrars.”

The action of the defendants, of which the plaintiff complains, is the failure by them to perform an administrative act, the act of placing plaintiff’s name on the roll of qualified electors of Macon County, Alabama, solely on account of his race; however, the action of the board of registrars in denying him registration is but the first step in the procedure set up by the laws of Alabama through which his request for registration must travel before it becomes final. Section 35 of Title 17 provides for the right of appeal from the action of the board of registrars, without giving security for costs, to the circuit court of that county, and from the circuit court to the Supreme Court of Alabama.

“An action by a national bank to recover the amount of taxes levied by a State and paid under protest, upon the ground that they were excessive, discriminatory and violative of Rev.Stats. § 5219, held not maintainable in the District Court, where the plaintiff failed to avail itself of an administrative remedy afforded by the state law as conclusively established by a decision of the State Supreme Court.” First National Bank of Greeley v. Board of County Commissioners of County of Weld, 264 U.S. 450, 44 S.Ct. 385, 68 L.Ed. 784.

An action such as this can not be maintained in the Federal courts until the plaintiff has availed himself of that administrative remedy afforded by the laws of Alabama, which, in this case, is an appeal from the action of the board of registrars to the circuit court of Macon County, Alabama, and from that court to the Supreme Court of Alabama. And this is not in conflict with the opinion of Justice Frankfurter in Lane v. Wilson, 307 U.S. 268, 59 S.Ct. 872, 83 L.Ed. 1281, where the law itself worked discrimination against the colored race, and the court held that resort to the federal court may be had without first exhausting the judicial (distinguished from administrative) remedies of the state courts.

The plaintiff, at the time he presented himself for registration to the board of registrars of Macon County, Alabama, nor at any time since, or now, made, or makes, objection to the administrative machinery established by state law for registration of voters, but, on the contrary, took advantage of the initial step in such machinery to present himself to the board of registrars at the proper time and place for registration, however, after he was denied registration by the board, he forsook the remaining parts of the machinery, or the other steps open to him, by the same law which created the initial step, the board of registrars, and which remaining parts or other steps he nowhere complains of as being unfair or unconstitutional, and shifted his quest for registration from the administrative machinery of the state of Alabama, to the Federal District Court for the middle district of Alabama, in which district Macon County is located.

He makes no charge in this court that if he pursued the course open to him in the state machinery that he would not be registered, and from aught that appears here, had he followed the procedure open to him by state law, he might have found relief in the circuit or the Supreme Courts of Alabama.

A case very much in point to the case now before this court is Trudeau v. Barnes, 5 Cir., 65 F.2d 563, 564, and in that case, Circuit Judge Bryan says: “It is idle to say that the defendant as registrar had the arbitrary power to deny plaintiff the right to vote. We cannot say, and refuse to assume, that, if the plaintiff had pursued the administrative remedy that was open to him, he would not have received any relief to which he was entitled. At any rate, before going into court to sue for damages he was bound to exhaust the remedy afforded him by the Louisiana Constitution.”

In the event the plaintiff follows the administrative remedy afforded by the Alabama law, and is granted registration, at whatever step in such machinery registration is granted, such registration, under Alabama law, shall be as of the date of his application to the board of registrars, therefore, throughout the machinery, registration remains an administrative act.

This court is of the opinion that the plaintiff is precluded from shifting from the initial step of the state machinery to the federal court and must avail himself of that administrative remedy afforded by the state laws of Alabama.

It is ordered, adjudged, and decreed by the Court that the motion to dismiss the complaint, as amended, be, and the same is, granted, and the complaint, as amended, is dismissed.


author: CONNOR, District Judge.

text:
    BOWLES, Price Administrator, v. GRANITE STATE PACKING CO. et al.
    Civil Actions Nos. 386, 403.
    District Court, D. New Hampshire.
    Sept. 28, 1945.

      McLane, Davis & Carleton, by John P. Carleton, all of Manchester, N. H., and Widett & Kruger by Harold Widett, all of Boston, Mass., for Granite State Packing Co.
    Clinton S. Osgood and Charles B. McLaughlin, both of Manchester, N. H., for the OPA.
   CONNOR, District Judge.

These are two actions brought by Chester Bowles, Administrator of the Office of Price Administration, against the Granite State Packing Company, a corporation, and Alex Shapiro and Mitchell Muskat, officers thereof.

The plaintiff alleges that the defendants have engaged in acts and practices which constitute a violation of Section 4(a) of the Emergency Price Control Act of 1942, as amended, 56 Stat. 23, 765, 57 Stat. 566, Pub.L. 383, 78th Cong., 58 Stat. 632, 50 U.S.C.A.Appendix § 904(a), Executive Order 9250, 7 FR 7871, Executive Order 9328, 8 FR 4681, 50 U.S.C.A. Appendix § 901 note, in that the defendants have violated Maximum Price Regulation No. 574 — Live Bovine Animals (Cattle and Calves), issued January 29, 1945, effective January 29, 1945, as amended to date, effective in accordance with the provisions of the Act. Pursuant to Section 205(a) of the Act the administrator seeks to enforce compliance with Section 4(a). 50 U.S.C.A.Appendix § 901 et seq.

The defendants, in their answers, generally deny the allegations set forth in the complaints and further answering say that if the violations be proved that such were not wilful and intentional, that they were acting in good faith and that the public interest does not require that granting of an injunction.

The separate actions covered different periods of alleged violations and for the purposes of trial were ordered consolidated.

Jurisdiction is conferred upon the Court by Section 205(a) of the Act.

The corporate defendant has its principal place of business in Manchester, within this District, and has been and is the owner and operator of a slaughtering establishment known as the “Granite State Packing Company.”

The defendant, Alex Shapiro, is president, treasurer and director of said corporation and the owner of the majority of the common stock.

The defendant, Mitchell Muskat, is the office manager, director and the owner of shares of stock. Both reside in Manchester and actively direct, manage and participate in the corporation’s business, the greater part of which involves the production of certain products for the United States Army.

The pertinent regulation, Maximum Price Regulation 574, provides that a slaughterer’s payments for all live cattle slaughtered in each monthly accounting period must come within the maximum range of prices established in the regulation. Maximum and minimum ranges were set up in-December 1943, under the Government program'of paying subsidies to slaughterers. The regulation requires a slaughterer to report his live cattle purchases to the Office of Price Administration, by filing with it each month, a copy of the Defense Supplies Corporation form on which he claims his subsidy from the Government. The regulation also adopts the method used in the subsidy program for determining the total maximum and minimum permissible payments for cattle slaughtered by a given slaughterer during a monthly accounting period. The maximum permissible amount which the slaughterer may pay for cattle during the accounting period is determined by a formula involving certain conversion factors. Under the subsidy program a slaughterer becomes eligible only if he does not exceed the permissible payments so computed. The regulation adopts ranges of prices, computation methods and reporting form which is to be employed by the slaughterer.

During the months of March, April and May 1945, the undisputed evidence disclosed that the corporate defendant paid various sums in excess of the maximum legal price for live cattle purchased throughout this period. The figures are, $6979.43, $4771.48 and $6816.89 for the months of March, April and May respectively.

The violations charged are admitted by the corporate defendant but it is contended that since the other defendants, who are officers and agents of the corporation, did not make purchases individually, but acted only on behalf of the corporation, they did not violate the provisions of the regulations and the complaints should be dismissed as to them.

This contention merits scant consideration. It has long been held that a corporation can act only through its officers and agents and they may not escape civil liability or susceptibility to injunctions or other orders to enforce compliance, merely by insisting that they acted only as agents. Any doubt which may exist is resolved adversely to the defendant’s contention by examination of the regulation itself which provides, Sec. 2(a), that “no person shall buy or receive live cattle at prices in excess of those provided therein,” and, Sec. 7(a), that the word “person” includes a “corporation” or “any representative” of the same.

It is not denied that violations did occur within the months above referred to, but the defendants take the position that such could not have been avoided, because of market conditions, delays in transit, and the geographical location of the defendant’s plant.

It is their further contention that definite efforts were made by them to prevent these violations or their continuance. While it is true that the defendants did Undertake certain measures to keep within compliance of the regulation, I am not impressed with their claim that good faith was exercised and that sufficient and proper precautions were taken. These violations were of a substantial character. In the month of March the excess payments amounted to 3.53% of the total purchases; in the month of April, 2.74%; and in the month of May 3.09%. It is of further significance that the violations involved consecutive months. If compliance was sincerely desired, their mode of operations could have been altered or recourse had to the administrator and the Emergency Court of Appeals. Good faith dictated such a course, rather than adherence to a policy which resulted in continued noncompliance and portended further infractions. Their failure to comply with the regulation was not wholly involuntary, and no reason appears why these actions should be dismissed.

Whether the violations were the result of negligence or of inadvertence or of wilfulness, becomes important only in determining whether an injunction should be ordered. The statute neither requires nor directs that a request on the part of the Administrator for injunctive relief must of necessity be granted. While the language of the particular section appears mandatory in its terms, discretion is still retained by the Court in the matter of granting such process. The essential question presented is whether, in the exercise of sound discretion, the Court should grant the relief prayed for. It has been indicated to the Court that during the months of June and July the defendants were in compliance.

Some time has elapsed between the hearing and the submission of briefs and oral argument. Much has transpired in the interim. Hostilities have ceased, and the i equirements of the Government, in respect to its demand for meat have been drastically revised. Had the conditions which obtained at the time of bringing these actions continued, a different conclusion than the one herein reached would have probably been indicated.

In substance and in effect this is an equitable proceeding and the requirements of equity practice and relief should not be lightly considered. The rule is well established that a writ of injunction is used only to stop existing or threatened violations and not to punish past offenses. Brown v. Hecht Co., 78 U.S.App.D.C. 98, 137 F.2d 689; Swift & Co. v. United States, 276 U.S. 311, 48 S.Ct. 311, 72 L.Ed. 587, and Walling v. Shenandoah-Dives M. Co., 10 Cir., 134 F.2d 395.

It is equally well settled that injunctive process is to be cautiously dispensed and to be issued only in the sound ■discretion of the Court, according to the .necessities of the particular case. It was designed to deter, not to punish.

The Court cannot but take judicial notice of the changed conditions in the •cattle market and the fact that with cessation of the war, Army requirements have been definitely lessened and possibly ended.

With the foregoing factors in mind, I am not convinced that this situation is one which necessitates the issuance of an injunction. With the benefits that should accrue to the defendants, due to the improved and expanded market, there seems to be little reason why they should not be able to fully comply with the terms of the Act.

Under all the circumstances, and adopting the language of the Court in Hecht Co. v. Bowles, 321 U.S. 321, 328, 64 S.Ct. 587, 591, 88 L.Ed. 754, “the fairest course to follow and one which would be as practically effective as the issuance of an injunction,” is to retain these cases on the docket, with the right of the administration on reasonable notice, and a showing that violations of the Act have been resumed, to again apply to this court for in-junctive relief.

Accordingly such order will be entered.


author: WATSON, District Judge.

text:
    BOWLES, Price Administrator, v. YANKEE BREWING CO. et al.
    Civil Action No. 1799.
    District Court, M. D. Pennsylvania.
    Aug. 30, 1945.

      See also 4 F.R.D. 508.
    Stephen E. Gombar, Acting Dist. Enforcement Atty., of Scranton, Pa., for plaintiff.
    Matthew D. Mackie and Raymond T. Law, both of Scranton, Pa., for defendant Ernest E. Ferranti.
    S. U. Colbassani, of Scranton, Pa., for defendant Frederick Wilkins.
   WATSON, District Judge.

This is an action by the Administrator of the Office of Price Administration for an injunction to enforce compliance and for treble damages arising out of the sales by the defendants of domestic malt beverages at prices in excess of those permitted by maximum price regulations.

Defendant, Ernest E. Ferranti, has moved for dismissal of the complaint as to him, for the reason that the complaint sets forth no fact upon which liability of any nature could be imposed upon him.

Section 205(e) of the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 925(e), reads as follows: “If any person selling a commodity violates * * * ” and proceeds to define the punishment.

Section 302(h) of the above Act, 50 U.S. C.A.Appendix, § 942(h), defines “person” as follows: “The term ‘person’ includes an individual, corporation, partnership, association, or any other organized group of persons, or legal successor or ’representative of any of the foregoing * *

The complaint alleges that “Defendant, Ernest E. Ferranti, is a resident of the Borough of Winton, County of Lacka-wanna, and State of Pennsylvania, and is the president and a director of the Defendant corporation, Yankee Brewing Company, and at all times herein mentioned participated actively in the management and conduct of its affairs and business and in the sales of domestic malt beverages hereinafter referred to.”

Such allegations are sufficient, if proven, to support a finding that defendant, Fer-ranti, was in fact a legal representative of the defendant corporation.

The motion of the defendant Ernest E. Ferranti to dismiss the complaint, as to him, is hereby denied.


author: UNDERWOOD, District Judge.

text:
    GREER v. SANFORD, Warden.
    No. 2131.
    District Court, N. D. Georgia, Atlanta Division.
    Sept. 28, 1945.
    Guy Fred Greer, in pro. per.
    M. Neil Andrews, U. S. Atty., and Harvey H. Tisinger, Asst. U. S. Atty., both of Atlanta, Ga., for respondent.
   UNDERWOOD, District Judge.

Petitioner was sentenced on September 25, 1941, in the United States District Court for the Eastern District of Tennessee to a term of two years in the penitentiary on the first count of a three-count indictment, No. 4631, for violation of the internal revenue laws. During the service of this sentence petitioner earned a total of 144 days statutory good time and 20 days industrial good time. He was discharged on conditional release on April 13, 1943.

At the September term, 1943, of the United States District Court for the Eastern District of Tennessee, petitioner was indicted on a two-count indictment, No. 4866, Greenville (which indictment was transferred to Knoxville as criminal No. 14010), the first count charging possession of non-tax-paid whiskey and the second count charging unlawful concealment of same. On January 17, 1944, he was sentenced to a term of two years on each count, said terms to run concurrently, and was fined $200. Petitioner entered a plea of guilty to the second offense, which offense occurred within the 164-day period of the conditional release under indictment No. 4631. A parole violator warrant was issued on September 23, 1943, but petitioner was not taken into custody thereunder until July 17, 1945, after he had served the sentence imposed under indictment No. 4866 (14010) less statutory and industrial good time. Petitioner was in custody serving the sentence imposed under indictment No. 4866 (14010) from the time the parole violator warrant was issued until same was served on July 17, 1945, on which date he was taken into custody under said warrant to serve the conditional release forfeiture of 164 days, or such portion thereof as is not restored hereafter by the Attorney General.

Petitioner’s sole contention in this ha-beas corpus proceeding is that his industrial good time was illegally forfeited and that, if allowed, the term of his parole expired before the issuance and service of the parole violator warrant.

The forfeiture of industrial good time was under an amendment to the regulations governing the allowance, forfeiture and restoration of good time.

“Parole and Conditional Release Violators. All inmates released on parole or conditional release after February 11, 1937, to whom industrial, farm, or camp good time had previously been allowed and who are returned to imprisonment for violation of parole or conditional release shall serve the remainder of the sentence originally imposed in accordance with the provisions of Section 6 of the Act of June 25, 1910 (36 Stat. 820, 18 U.S.C.A. Section 719.)”

Whether the forfeiture in this case of the industrial good time in question is just or unjust is not for this Court to determine, since the Court is of the opinion that the Attorney General has the power to declare such forfeiture and has in this case done so under 18 U.S.C.A. § 719, as amended May 13, 1930 and June 29, 1940. Morgan v. Aderhold, 5 Cir., 73 F.2d 171; Aderhold v. Perry, 5 Cir., 59 F.2d 379.

See also: Bragg v. Huff, 4 Cir., 118 F.2d 1006; Wipf v. King, 8 Cir., 131 F.2d 33; Wald v. Hiatt, D.C. Pa., 56 F.Supp. 504; and unreported opinions of this Court as follows: Grady Hall v. Aderhold, Warden, decided August 30, 1935; George Hudson v. Aderhold, Warden, decided December 5, 1935; Jack Shearer v. Sanford, Warden, decided July 17, 1941, affirmed 5 Cir., 115 F.2d 214; Jimmie McBride v. Sanford, Warden, decided April 15, 1942; and Leo Erwin v. Sanford, Warden, decided June 3, 1942.

Whereupon, it is considered, ordered and adjudged that the writ of habeas corpus be, and same is hereby, discharged and petitioner remanded to the custody of respondent.


author: BARNES, District Judge.

text:
    SHERMAN v. PERE MARQUETTE RY. CO.
    Mo. 45C1057.
    District Court, N. D. Illinois, E. D.
    Oct. 3, 1945.

      Royal W. Irwin, of Chicago, 111., for plaintiff.
    Erwin W. Roemer and Gardner, Carton & Douglas, all of Chicago, 111., for defendant.
   BARNES, District Judge.

The defendant, Pere Marquette Railway Company, moved to dismiss this case on the ground that this court is not a court of proper venue by reason of the fact that the plaintiff, after the incurrence of the injuries alleged in the complaint, entered into valid agreements that any suit instituted because of his injuries would be brought in the Circuit Court for the County of Wayne, Michigan, or in the Federal Court at Detroit, Michigan. In its brief in support of the motion to dismiss, the defendant states the facts as follows:

“Plaintiff brings this action under the Federal Employers’ Liability Act to recover damages, alleged at $100,000 for injuries sustained by him on August 11, 1944, in Wayne County, Michigan, while he was allegedly employed by the defendant.
sfc * * # * s|e
“The defendant is a Michigan corporation with its main office in Detroit. On August 11, 1944, plaintiff was in the general employ of the defendant in Wayne County, Michigan, although he was then actually employed by Union Belt of Detroit, an unincorporated association consisting of the Wabash, Pere Marquette, and Pennsylvania railroads, for which Union Belt acts as a switching agent in Wayne County (the question of whether Union Belt of Detroit, and not this defendant, was the plaintiff’s employer under the Federal Employers’ Liability Act at the time of his injury is not raised on this motion to dismiss). Plaintiff is a resident of Berkley, a suburb of Detroit located in Oakland County, which adjoins Wayne County.
“After plaintiff’s injury Union Belt of Detroit paid him at his request the sum of $200 per month for the period of nine months from September, 1944, through May, 1945. At the time of receiving each payment plaintiff signed an agreement acknowledging receipt of the $200. * * * the agreement signed May 1, 1945, and typical of all those involved, was as follows (italics added) :
“ ‘Received of the Union Belt of Detroit the sum of ($200.00) Two Hundred and 00/100 Dollars advanced to me at my request and as provisional aid to me, pending determination whether or not there is any liability on the part of said Union Belt of Detroit in respect of personal injuries or otherwise, arising out of an accident occurring on or about the eleventh (11th) day of August, 1944, at or near Detroit, Michigan, when I was injured while employed as a switchman by the Pere Marquette Railway Company and while in the service of the Union Belt of Detroit, and in respect of which injuries I have made claim against said Union Belt of Detroit, the validity of which has not been determined or admitted by it. In the event that I am awarded any amount by said Union Belt of Detroit by way of settlement or compromise, or by a Court or other tribunal by judgment or award, the above amount shall be credited against said settlement, compromise, judgment, or award. Neither said advance or payment, nor this receipt is or shall be deemed or construed as an admission of liability by said Union Belt of Detroit.
“ cIn the event that I shall institute suit because of my injuries, I agree that any such suit will be brought in the Circuit Court for the County of Wayne, Michigan, or in the Federal Court at Detroit, Michigan. I have read the above and understand same.’
“ * * * It will be necessary for the def mdant to have in attendance at the trial of the case to testify as witnesses at least eight railroad employees (including a fireman, engineer, conductor, switch-man, etc.) and at least three other persons, all of whom are residents of Wayne County, Michigan. It will be necessary for these witnesses to be transported to Chicago, a distance of some 300 miles from Detroit, and the railroad employees mentioned will necessarily be kept out of service for a period of approximately one week. Plaintiff could have instituted this suit in the Circuit Court for the County of Wayne or in the United States District Court at Detroit, where all the witnesses reside and the accident occurred. The federal and Michigan Courts mentioned are courts of competent jurisdiction and would furnish plaintiff with a fair and speedy trial without the necessity of travel and hotel accommodations for the witnesses and with only minor interruptions of their work. A trial in Chicago will create an unreasonable burden upon the defendant, both in the performance of its duties as a common carrier and as an essential war industry, because of the shortage of man-power and travel accommodations and facilities. * * * The Union Belt of Detroit in performing industrial switching serves some 400 industries, about half of which have been engaged in war production. It is not only difficult but impossible for Union Belt to obtain sufficient operating personnel to take adequate care of current needs, with many employees working two shifts and others working considerable overtime. The removal of operating personnel from the service of Union Belt to act as witnesses at the trial of this case in Chicago would interfere with the operations of, and would be a distinct handicap and hardship to, the Union Belt of Detroit in its service to vital industries. * * * The affidavit of F. A. Young, general passenger agent of the defendant, sets forth the well known facts about the tremendous burden imposed on the railroads by the war effort with particular reference to providing equipment and manpower necessary to furnish passenger travel. The affidavit states, for example, that the defendant’s passenger revenues alone have increased more than 400% since 1939, while at the same time there has been a reduction in the coach and sleeping car equipment available for the handling of passenger business.”

It seems to the court that the only questions which will require consideration are: (1) Is the contract to bring suit in the Circuit Court for the County of Wayne, Michigan, or in the Federal Court at Detroit, Michigan, valid in view of Sections 5 and 6 of the Federal Employers’ Liability Act, 45 U.S.C.A. §§ 55, 56, and (2), assuming that the contract is valid, can the defendant, Pere Marquette Railway Company, take advantage of it?

Sections 5 and 6 of the Federal Employers’ Liability Act are as follows:

Section 5: “Any contract, rule, regulation, or device whatsoever, the purpose or intent of which shall be to enable any common carrier to exempt itself from any liability created by this chapter, shall to that extent be void.”

Section 6: “Under this chapter an action may be brought in a district court of the United States, in the district of the residence of the defendant, or in which the cause of action arose, or in which the defendant shall be doing business at the time of commencing such action.”

Section 6 was enacted in 1910 and after the enactment of Section 5 in 1908. Section 5 refers to “any liability created by this chapter/’ and Section 6 says that “under this chapter an action may be brought,” etc. The court is of the opinion that the mere fact that Section 6 was enacted after Section 5 does not prevent Section 5 from applying to “any liability” created by Section 6.

The Federal Employers’ Liability Act creates certain rights in employees of common carriers by railroad while engaged in interstate commerce. Some of those rights are substantive and some are adjective. The act also imposes certain duties or liabilities on such common carriers, and some of those duties or liabilities are substantive and some of them are adjective. One of the rights which the act granted to employees of common carriers by railroad while engaged in interstate commerce was the right to bring an action for a violation of the act “in the district * * * in which the defendant shall be doing business at the time of commencing such action.” One of the duties or liabilities imposed on common carriers by a railroad while engaging in interstate commerce was the duty or liability of submitting to suits for a violation of the act “in the district * * * in which the defendant shall be doing business at the time of commencing such action.” This right and this corelative duty or liability are of course an adjective right and an adjective duty or liability. It cannot be denied that the contracts in question in this case have the purpose or intent to enable the common carrier to exempt itself from the liability to submit to suit for a violation of the Federal Employers’ Liability Act “in the district * * * in which [it] shall be doing business at the time of commencing such action.” The narrow question is then, are such contracts denounced by Section 5 of the Federal Employers’Liability Act? The act, including Sections 5 and 6, is remedial. The Supreme Court of the United States in Baltimore & Ohio R. Co. v. Kepner, 314 U.S. 44, at page 53, 62 S.Ct. 6, at page 10, 86 L.Ed. 28, 136 A.L.R. 1222 says:

“The privilege was granted because the general venue provisions worked injustices to employees.”

Section 5 is, and was by Congress intended to be, a very broad provision. The Supreme Court of the United States in Duncan v. Thompson, 315 U.S. 1, at page 6, 62 S.Ct. 422, at page 424, 86 L.Ed. 575, said:

“And the adoption of Section ■ 5 of the present act without adding any of the other limitations which some of the state statutes had embodied argues persuasively that Congress wanted Section 5 to have the full effect that its comprehensive phraseology implies.”

The comprehensive phraseology of Section 5 certainly includes within its meaning a contract the purpose or intent of which is to enable the common carrier to exempt itself from liability to suit for a violation of the act “in the district * * * in which the defendant shall be doing business at the time of commencing such action.” The beneficial effects of the statute should not be whittled away by the courts by distinguishing between adjective and substantive rights and adjective and substantive duties or liabilities. Adjective rights and their corelative duties or liabilities are frequently as important as substantive rights, and substantive rights and their co-relative duties or liabilities are of little value without adjective rights and their corelative duties or liabilities whereby the substantive rights may be enforced. It has been said that the word “liability” in Section 5 is limited to the liability of the carrier to respond in damages, but when we say that we beg the real question, which is as to the meaning of the word “liability” in Section 5. It is said that venue is a privilege that may be waived, and that the case of Neirbo Co. v. Bethlehem Corp., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167, 128 A.L.R. 1437, lends support to this view. Generally speaking, venue is a privilege which may be waived, but it may not lie contracted away in the face of a specific statute which prohibits such contracting, as does Section 5 of the Employers’ Liability Act under consideration.

The court is of the opinion that the contracts in question in this suit are void because they are prohibited by Section 5 of the Federal Employers’ Liability Act. The court’s attention has been called to the decisions in Clark v. Lowden, D.C., 48 F.Supp. 261, Herrington v. Thompson, 61 F.Supp. 903, filed in the Western District of Missouri, Detwiler v. Lowden, 198 Minn. 185, 269 N.W. 367, 838, 107 A.L.R. 1054, and Peterson v. N. Y. Central R. Co., a decision without opinion by one of the judges of this court. These four decisions do support the contentions of the defendant and are worthy of great respect, but this court finds itself unable to follow them.

Coming now to the second question before the court. The defendant says that the question is one of intent of the parties as to whether the defendant should have the benefit of the contracts in question. Assuming that that is the question before the court, the court cannot say, from a consideration of the contracts in question and the affidavits which have been filed by the defendant and which are abstracted in its statement of the facts h.ereinabove set forth, that the contracts in question were made for the benefit of the defendant. On the contrary, the court is of the opinion that the contracts in question on their faces show that they were made for the sole benefit of the Union Belt of Detroit and not for the benefit of the defendant, and that the affidavits do not alter this conclusion.

For the foregoing reasons, the motion to dismiss will be overruled and denied and the defendant will be ruled to plead within twenty (20) days.


text:
    SECCHI v. UNITED STATES COMMISSIONER OF IMMIGRATION et al.
    No. 191.
    District Court, M. D. Pennsylvania.
    Sept. 21, 1945.
    Plaintiff not represented by attorney.
    Herman F. Reich, Asst. U. S. Atty., of Lewisburg, Pa., for the Government.
   WATSON, District Judge.

This proceeding is titled by Alfred William Secchi, the petitioner, “A Motion to set aside a'warrant for deportation”, in which the petitioner requests the Court to vacate and set aside the warrant for the reason that “it has impaired deponent and deprived deponent of his liberty”. Respondent Hiatt, Warden of the United States Penitentiary, where the petitioner is held at the present time under a judgment and commitment issued pursuant to a sentence imposed by the United States District Court for the District of Maryland, filed a motion to dismiss the petition on the grounds that the Warden is not a proper party to the proceedings attacking a deportation warrant. The United States Commissioner of Immigration, who does not reside in and has not been served within this District, entered a special appearance objecting to the jurisdiction of this Court over him.

After due consideration it is the opinion of this Court that the petitioner has set up no facts not previously alleged and covered by the decision of this Court in Secchi v. United States Bureau of Immigration et al., 58 F.Supp. 569. The Respondent, Hiatt, is not a proper party to these proceedings, nor has proper service been made upon the respondent, the Commissioner of Immigration, Transcontinental & Western Air, Inc., v. Farley, 2 Cir., 71 F. 2d 288; and for these reasons alone the motion to set aside warrant for deportation must be denied and the proceedings dismissed.

Now the motion to set aside warrant for deportation is hereby denied, and the proceedings dismissed.