author: WYCHE, District Judge

text:
    CAFRITZ v. CORPORATION AUDIT CO. et al.
    Civ. No. 23005.
    District Court of the United States for the District of Columbia.
    May 14, 1945.

      Milton Strasburger, of Washington, D. C., for plaintiff.
    Neil Burkinshaw and Dennis Collins, both of Washington, D. C., for defendants.
   WYCHE, District Judge

(sitting by special designation).

This is an action by Morris Cafritz for discovery and accounting; for a joint and several judgment against the Corporation Audit Company and Rose' Robins, administratrix of the estate of Barney Robins, deceased, for the sum of $36,134.75; for judgment against the Corporation Finance Company for the sum of $8,400, and for judgment against Rose Robins, individually, for the sum of $2,889.

By his amended complaint plaintiff alleges that during the year 1941, and for a number of years prior thereto, he had retained and employed the Corporation Audit Company as an expert accountant and auditor to keep and maintain certain books of record for himself and for several corporations in which he was directly interested as an officer and stockholder, including the books used in connection with a bank account maintained by the plaintiff in the Bank of Commerce & Savings, to audit all of his books and records at the end of each calendar year, and to prepare his income tax returns; that Barney Robins, now deceased, was the general manager in exclusive charge, direction and management of the business of the Audit Company, and had actively participated in all of the transactions between Cafritz and the said company; that during the period aforesaid, plaintiff reposed special trust and confidence in the Audit Company and in its general manager, Robins, resulting in a fiduciary relation on the'part of the Audit Company and its manager toward the plaintiff; that between February 16, 1941, and October 28, 1941, the Audit Company, by its general manager, caused to be paid out of the said bank account certain monies belonging to the plaintiff, amounting to $36,134.75, for the benefit of the Audit Company, or of its manager, and not for the benefit of the plaintiff; that the Audit Company maintained and kept in its office certain of plaintiff’s records and books of account, including check books, bank statements, and paid and cancelled checks on the Bank of Commerce & Savings; and that although plaintiff had duly demanded the same, the defendant had wholly failed and refused to deliver them to the plaintiff. It is further alleged that on or about October 29, 1941, Robins caused to be deposited in a certain bank account to the credit of the Corporation Finance Company (a company controlled by him) one of the checks of the plaintiff for the sum of $8,400.

In their answer to the complaint the defendants admit that the Corporation Audit Company was employed by the plaintiff, as alleged in the complaint, and that Robins was an officer and general manager of the Audit Company. They deny the allegation relating to the conversion of the funds. With respect to the deposit of a check for the sum of $8,400, in the account of-the Corporation Finance Company, the defendants aver that such deposit was made but that it was in the nature of a “wash transaction”, whereby the defendants received no benefit.

In compliance with Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, I find the facts specially as follows:

Findings of Fact.

1. Morris Cafritz, a builder and real estate broker, during the year 1941, and for twelve years prior thereto, had employed the Corporation Audit Company as bookkeeper, auditor and certified public accountant, to keep and maintain Cafritz’s original books of entry and those of several Cafritz-controlled corporations; to deposit checks on his behalf in several banks, and to make out income tax returns for Cafritz and his several corporations. Barney'Robins was secretary of several of such corporations, and was at all times actively in charge of the affairs of the Audit Company, of which he was general manager and executive officer.

2. Cafritz reposed special trust and confidence in the Audit Company and in Robins.

3. All fees for the services performed by the Company, including those for the year 1941, as the same became due and payable, were regularly paid by Cafritz.

4. Cafritz maintained and owned an account in the Bank of Commerce & Savings in the name of “Cafritz & Specter”, and also maintained certain accounts in other banks in his own name, and in the name of his several corporations.

5. During the year 1941, Robins, on behalf of Cafritz, deposited certain checks in the Bank of Commerce & Savings and also on said behalf deposited checks in other banks to the credit of Cafritz and his corporations.

6. Checks on the Cafritz and Specter bank account were always prepared by the Audit Company, signed by Cafritz, and handed to Robins to be deposited to the credit of the Cafritz corporations.

7. During the month of February, 1941, the Audit Company prepared, and Cafritz signed, four checks payable to his corporations, and some months later a fifth check was prepared and signed in the same manner. These five checks were executed for the purpose of making loans to the Cafritz corporations, and were handed to Robins to be deposited in the bank to the credit of the respective payees, and were to be entered by the Audit Company on the books of record o‘f the Cafritz corporations as loans, and were also to be entered in the Cafritz and Specter ledger, which at all times was kept and maintained in the office of the Audi; Company until it was demanded by Cafritz’s bookkeeper during the month of August, 1941. The other books of account were at times in the office of the Audit Company, and at other times in Cafritz’s office, but were at all times maintained and kept by or under the supervision of the Audit Company.

8. The Bank of Commerce & Savings at all times sent monthly statements of the Cafritz and Specter account, together with paid checks, to the office of the Audit Company in the Rust Building, in which building none of the Cafritz corporations were located.

9. These statements and paid checks, although demanded, were never delivered to Cafritz by the Audit Company or any other person or corporation.

10. The five checks aforesaid were charged by the bank against the Cafritz and Specter account in the amounts and on the respective dates following:

Dates Amounts

February 17, 1941, $8,000.00

February 18, 1941, 7,575.25

February 19, 1941, 6,159.50

February 20, 1941, 6,000.00

October 25, 1941, 8,400.00

11. In August of 1943, agents of the Internal Revenue Department called Cafritz’ attention to the first check above enumerated, which had on the bank records a lead pencil reference to Robins, the agents wanting to know whether Cafritz had ever given Robins personally a check for $8,000, to which Cafritz replied in the negative.

12. Cafritz at once obtained a photostat copy of the bank records for 1941, and employed a public accountant to examine all of his books of record, and the books of his corporations, to ascertain whether all of the withdrawals shown by the bank statement of the Cafritz and Specter account were entered on his books of account and properly accounted for.

13. The public accountant made the examination requested, and ascertained and reported that the withdrawals represented by the five checks mentioned were not entered on the Cafritz and Specter ledger or on any other account book of Cafritz or his corporations.

14. Cafritz promptly sent for Robins, and requested an explanation of what had become of the five, checks aforesaid, or the proceeds thereof, and an accounting therefor.

15. After waiting a reasonable time Cafritz wrote a letter to Robins, under date of August 18, 1943, calling specific attention to the five checks aforesaid, and requesting an immediate accounting.

16. In response to said letter Cafritz received from Benjamin Kay, Robins’ brother-in-law, a letter dated August 20, 1943, calling attention to Robins’ then absence from the city, and promising to call the letter to Robins’ attention upon his return.

17. A son of Robins called to see Cafritz and requested him to await his father’s return to the city.

18. On October 11, 1943, Cafritz wrote a letter to Benjamin Kay, calling attention to the importance of his former letter, but received no reply.

19. Cafritz placed the matter in the hands of his attorney, who wrote a letter to Robins, threatening suit, but no reply was received to this letter.

20. Within a few days after the last demand Robins departed this life. The defendant Rose Robins has been appointed administratrix of his estate.

21. No accounting with respect to the $36,134.75, represented by the five checks on the Cafritz and Specter account, has-ever been made by the Audit Company or Robins.

22. Cafritz and his corporations never received the proceeds of said checks or any part thereof.

23. On October 25, 1941, Robins deposited in the Security Savings & Commercial Bank to the credit of his controlled corporation, known as the “Corporation Finance Company”, a check on a local bank: for the sum of $8,400. Two days later there was charged against the Cafritz and' Specter account a withdrawal of the exact sum of $8,400, represented by one of the checks aforementioned.

24. On October 28, 1941, the Corporation Finance Company by Barney Robins,, its vice-president, drew a check on the Security Savings & Commercial Bank, payable to the order of Barney Robins, individually, for the sum of $8,400, and this check was cashed by Robins.

25. The defendants have offered no evidence to show the source from which the check for $8,400 was received by the Corporation Finance Company, and no entry for said deposit was made in the books of the Finance Company.

26. Cafritz had never had any dealings- or transactions with the Corporation Finance Company (a Robins enterprise) and at no time was indebted to said company in-any sum whatsoever.

27. The page in the Cafritz and Specter ledger devoted to the bank .account at the Bank of Commerce & Savings, is devoid of entries of deposits and withdrawals during the year 1941, although such entries had been made in years prior thereto.

28. Plaintiff gave notice to defendants-, to produce the bank statements, paid checks,. the minute book and stock book of the Audit Company, but the defendants failed to produce any of these documents or books.

29. Service of the Audit Company was terminated by Cafritz at the close of the year 1941.

30. In 1943, the furniture, trade-name and customers of the Audit Company were sold. Robins collected part of the purchase price, and after his death, Mrs. Robins, in her individual capacity, and before her appointment as administratrix, collected and received from the purchasers of said assets the sum of $2,889.

31. The Audit Company at no time notified Cafritz of any change in the manner in which it was conducting its business; it continued at all times to maintain its office in the Rust Building, with the name of “Corporation Audit Company” printed on the door. Bills for services rendered Cafritz were always in the name of said Company. The bank account of the Audit Company in the Security Savings & Commercial Bank was opened on January 1, 1930, and was continued uninterruptedly and without change until August 30, 1942, at which time the account was closed. The Audit Company was never legally dissolved.

Opinion.

At the threshhold of this case, it becomes necessary to determine the measure of duty owing by the Audit Company and Robins to the plaintiff, and this depends upon the determination of the relationship existing between the plaintiff on the one hand, and the Audit Company and Robins on the other. It is plaintiff’s contention that there existed a fiduciary relation, while this is vigorously denied by the defendants. Whether a fiduciary relation exists or not is always a question of fact. As stated by Pomeroy, Equity Jurisprudence, § 956, “Courts of equity have carefully refrained from defining the particular instances of fiduciary relations in such a manner that other and perhaps new instances might be excluded. It is settled by an overwhelming weight of authority that the principle extends to every possible case in which a fiduciary relation exists as a fact, in which there is confidence reposed on one side and the resulting superiority and influence on the other. The relation and the duties involved in it may be moral, social, domestic, or merely personal.” Hammett v. Ruby Lee Minar, Inc., 60 App.D.C. 286, 53 F.2d 144, 146. In the case of Dantzler Lumber & Export Co. v. Columbia Casualty Co., 115 Fla. 541, 548, 156 So. 116, 118, 95 A.L.R. 258, it was aptly said: “Public accountants and auditors hold themselves out to be skilled and competent to perform the duties and services which they undertake to perform as accountants and auditors, and they are bound in law to perform such services in an accurate and skillful manner. When auditors and accountants are employed for the purpose of auditing books and accounts they occupy a relation of trust and confidence to their employer based upon the superior knowledge of the business of accounting and auditing possessed bv the auditors and accountants.”

In the District of Columbia it has been recognized that the practice of accountancy has assumed such importance and requires such experience and special training as to warrant regulation. Goldsmith v. Clabaugh, 55 App.D.C. 346, 6 F.2d 94. And licenses are only issued to persons of good moral character, and after passing an examination by the Board of Accountancy. D.C.Code, §§ 2 — 901 to 2 — 906.

It is well established that when the, defendant is an accounting party, and stands as one occupying a fiduciary, relation toward the plaintiff, because of money or property intrusted to him, the burden is upon him to show that he has performed his trust and the manner of its performance. He owes this duty because of the confidential relation he bears to his principal, and because he is presumed to know how he has performed his duty. Wootton Land & Fuel Co. v. Ownbey, 9 Cir., 265 F. 91. The burden of proof is on the accountant after he has admitted the relation and the receipt of a certain sum, to prove that he had disposed properly of the amount for which he is accountable, and to show what-that amount is. Pappathanos v. Coakley, 263 Mass. 401, 161 N.E. 804. The duties arising out of fiduciary relationship and the burden of establishing the performance of such duties are recognized in several District of Columbia cases. Hammett v. Ruby Lee Minar, Inc., supra; Overholt v. Matthews, 48 App.D.C. 482. The duty of a fiduciary to account extends to property as well as money. This would necessarily include checks and other negotiable instruments. Klinzing v. Blauw Bros., Sup., 160 N.Y.S. 631.

It will be observed from the findings of fact that the check for the sum of $8,400 was cleared by the Bank of Commerce & Savings on October 25, 1941; that two days prior thereto a check on a loca¿ bank for a like amount was deposited by Robins in the Security Savings & Commercial Bank to the credit of the Corporation Finance Company, which was one of Robins’ controlled companies; that on the same day, the Finance Company drew a check payable to Barney Robins for the full amount so deposited and this check was duly cashed; that a microfilm copy of the last-mentioned check was offered and received in evidence. The defendants offered no evidence to explain the source from which the check for $8,400 came, nor why the Finance Company drew a check for that amount to the order of Robins. If a check for such an amount had come into the possession of the Finance Company as the result of a legitimate transaction the records of that company would have shown the source from which the check was received; no such records were produced, and no explanation was made respecting this deposit. In the absence of such a showing the inference may reasonably be drawn that the check for $8,400 was the one which had been delivered to the Audit Company for the specific purpose alleged by the plaintiff.

The method employed by the defendants in cashing all of the five checks would have been fully disclosed had the paid checks been produced at the trial. It was not within the power of the plaintiff to produce them because they never came into his possession after they had reached the bank for payment. It is admitted by the defendants that these paid checks were sent by the Bank of Commerce & Savings to the Audit Company, and no effort was made by the defendants to prove that they were ever delivered by the Audit Company to Cafritz. The evidence offered by the plaintiff established the fact that he never received them from the Audit Company. In this state of the evidence it was the duty of the Audit Company to have produced the checks, or to have explained the reason for their failure to do so. All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other side to have contradicted. Gotham Silk Hosiery Co. v. Aircraft Silk Hosiery Mills, 3 Cir., 147 F.2d 209.

All of the records of the Audit Company were in the possession of Robins at the time of his death, and have come into the hands of his administratrix, and of her brother, Maurice Kay. The personal ledger maintained by the Audit Company for Cafritz was produced at the trial and shows that all transactions with the Bank of Commerce & Savings, including deposits and withdrawals, were entered by the Audit Company in such ledger prior to the year 1941, but during that year, although the book remained in the possession of the Company and was always under its supervision, contained no entries of any deposits and withdrawals. The Audit Company failed in the performance of its duty to enter these transactions in this ledger. Robins, during his lifetime, had ample opportunity, after demand by the plaintiff, to have made an accounting or explanation of the failure to enter these transactions in the personal ledger as well as in the corporate ledgers of the Cafritz companies. No such explanation or disclosure was ever made. When a fiduciary is under a duty to account and he fails to do so the only inference to be drawn is that he could not satisfactorily explain the transaction without an admission of guilt.

A question has been raised by the administratrix as to the admissibility of certain testimony offered on behalf of the plaintiff, it being contended that such testimony is in violation of the so-called “surviving party” rule. No objection thereto was made by the other defendants, and of course none could be successfully maintained by them in view of a recent decision of the United States Court of Appeals for the District of Columbia. Lucas v. Hamilton Realty Corporation, 70 App.D.C. 277, 105 F.2d 800.

There are two sections of the District of Columbia Code dealing with the admissibility of testimony of a surviving party as against the personal representative of a deceased person. The first section renders inadmissible the testimony of the survivor “as to any transaction with or declaration or admission” of such deceased party. D. C.Code, T. 14, § 302. The other section renders admissible the testimony of all parties “where any of the original parties to a contract or transaction * * * are partners or other joint contractors, or jointly entitled or liable, and some of them have died.” D.C.Code, T. 14, § 304.

If section 302 stood alone, Ca-fritz’ testimony as to transactions with the deceased would have been inadmissible, although, as stated by the Court of Appeals for the District of Columbia, “the statute should not be extended to prevent the living party from testifying to the truth or falsity of mere extraneous facts * * * not involving declarations or admissions of the deceased party.” Lockwood v. Rucker, 34 App.D.C. 376, at page 381. In the District of Columbia the courts have frequently ruled that section 302 should be strictly construed. Lucas v. Hamilton Realty Corporation, supra, and cases cited therein.

Plaintiff places his reliance upon section 304, and contends that since the Audit Company and Robins are “jointly liable”, the former because of its violation of a fiduciary duty, and the latter because he actively participated in such wrongdoing, the testimony of Cafritz is admissible not only against the Audit Company, but also against the administratrix of Robins.

This statute was incorporated in the D.C.Code at the time of its adoption. I understand that the Code was prepared by a committee of lawyers and judges, and adopted in its entirety by Act of Congress on March 3, 1901. The various sections of the Code were not separately discussed by Congress, and consequently there is no legislative history of any value connected with the statute in question. It was evidently thought by the codifiers that if there were more than one person involved in the transaction there would be no danger in having full admission of evidence of all parties, such as would occur if the transaction were between two parties only and one had died. A corporation is represented by its officers and agents, consequently, a number of persons could be acquainted with the transaction. In the present instance, however, it so happens that no person other than Robins represented the corporation. This is an unusual situation not covered by any exception in the statute. Consequently, notwithstanding the fact that one of the parties jointly liable is a corporation, it would seem that this statute should be applied. If this had been a suit on a promissory note signed jointly by a corporation and an individual, it seems that the testimony of all of the parties would have been admissible under the statute. Here there are two parties who are jointly liable to the plaintiff, and, under the statute, I believe that the testimony of all the parties to the transaction should be admitted.

However, I do not regard this question of importance in this case, because the only reference in the plaintiff’s testimony related to extraneous facts “not involving declarations or admissions by the deceased party,” and further, because the written evidence in this case establishes the fact that Robins actively participated in the wrong perpetrated by the Audit Company. Executive officers of a corporation are personally chargeable with acts of a corporation if they knowingly caused the corporate acts. 3 Fletcher Cyclopedia, Corporations, Sec. 1135; American Agricultural Chemical Co. v. Barnes Co., D.C., 28 F.Supp. 73; 19 Corpus Juris Secundum, Corporations, §§ 845 and 849, pp. 271 and 277; 13 Am.Jur., § 1095, p. 1026; Mendelson v. Boettger, 257 App.Div. 167, 12 N.Y.S.2d 671. It is admitted by the administratrix in her answer to the complaint and also in the pre-trial stipulation, that "all of the work” on behalf of Cafritz “was performed by Robins, who was in exclusive charge, direction and management of the business of the Audit Company”. In addition to this, the deposit slips in Robins’ handwriting show that he frequently made bank deposits for plaintiff. Then, .again, the deposit of the $8,400 check in the Security Savings & Commercial Bank was also in his handwriting; likewise, the check of the Finance Company for like amount, payable to Robins, whereby he withdrew said sum from the bank was in his handwriting. As general manager of the Audit Company the paid checks in question came into his personal possession. With respect to the liability of the Finance Company for $8,400, it is apparent that this company, with the knowledge of its officers, participated in the cashing of the check for that amount. Any person who aids in diversion of funds held by an agent is subjected to full responsibility. 2 Am. Jur., § 282 and cases cited in note 4.

During the month of March, 1943, all of the assets of the Corporation Audit Company, including its good will, were sold. After the death of Robins, his wife, the defendant, Rose Robins, before her appointment as administratrix, and in her individual capacity as one of the stockholders of the company, collected from the purchasers of the assets the sum of $2,889. The sale was made at a time when the company was indebted to Cafritz, and the funds received therefrom constituted a trust fund for, the benefit of creditors. 13 Am.Jur., § 1047, notes 14 and 18; Nelson v. Jones, 38 Idaho 664, 224 P. 435, 38 A.L.R. 85; Scovill v. Thayer, 105 U.S. 143, 26 L.Ed. 968.

One further question has been raised by the defendants. In their answer it is alleged that the Audit Company discontinued its business in the year 1939. In support of this contention only one item of testimony was offered in evidence, namely, a copy of the Federal Tax Return of the company, bearing a memorandum that it intended to abandon its business. This tender was objected to by the plaintiff. It appears to be inadmissible for the purpose for which it was offered because the best evidence of the discontinuance of the business of the corporation would have been the minute book of the Audit Company, showing a resolution to that effect. This minute book was not produced, although plaintiff served notice for its production. It is admitted by the defendants that the Audit Company has never been legally dissolved. The plaintiff’s evidence shows that he was never notified of any abandonment of the business of the Corporation Audit Company; that he continued to conduct his business as usual with the Audit Company uninterruptedly until the latter part of the month of December, 1941. The auditing business was continued at all times in the same offices in the Rust Building, with the corporate name displayed on the window. Plaintiff also produced and offered in evidence paid bills in the name of the Corporation Audit Company for services rendered Cafritz during the entire year of 1941. In this state of the evidence I am of the opinion that the Audit Company is estopped from claiming that it had discontinued its business as alleged.

For the foregoing reasons, and in further compliance with Rule 52(a) of the Rules of Civil Procedure, I state separately my conclusions of law as follows:

Conclusions of Law.

1. The defendant Corporation Audit Company, a District of Columbia corporation, and Barney Robins, its general manager, during the year 1941, bore a fiduciary relationship toward the plaintiff.

2. It was the duty of said defendant Corporation Audit Company to deposit in bank to the credit of the Cafritz-controlled corporations the five checks aggregating the sum of $36,134.75, entrusted to the said defendant for that specific purpose, and it was the further duty of said defendant to enter said checks in plaintiff’s personal ledger and in the books of records of his corporations.

3. Having failed so to deposit the said checks, and the same having been paid by the Bank of Commerce & Savings from funds on deposit to the credit of the plaintiff, it became the duty of the Corporation Audit Company and Barney Robins to disclose to plaintiff, when requested, what disposition had been made of the proceeds of said checks and to account for same.

4. Having failed to make appropriate record entries, and having failed, upon demand, to disclose what disposition had been made of the proceeds of said checks, or to account to the plaintiff, for the same, plaintiff is entitled to a final judgment against the defendant Corporation Audit Company for the full sum of $36,134.75, with interest from October 25, 1941, together with costs of suit.

5. Barney Robins having actively participated in all of the transactions aforesaid, his estate is likewise liable for said sum, with interest and costs; but final judgment against Mrs. Robins, administratrix of said estate, will not be entered herein until plaintiff has complied with the provisions of Title 20, section 502 of the District of Columbia Code (1940 Edition) and jurisdiction of this cause is retained for the purpose of enabling the plaintiff to comply with said law, and for the purpose of entering a final judgment against the administratrix pursuant thereto.

6. The defendant Corporation Finance Company, a corporation organized under the laws of Delaware, is liable to the plaintiff for the sum of $8,400, being the proceeds of one of the aforesaid checks, because it actively participated in the cashing of same, with full knowledge on the part of the officers of said corporation of the purpose for which the check had been delivered by plaintiff to said Audit Company.

7. The assets of the Corporation Audit Company constituted a trust fund for the benefit of its creditors, including plaintiff.

8. Mrs. Rose Robins, in her individual capacity, holds in trust for plaintiff the sum of $2,889, being the amount personally received and collected by her during the year 1943 from the proceeds of the sale of all of the assets of the Audit Company, she' being at said time an officer and stockholder of the Audit Company; and plaintiff is accordingly entitled to judgment against Mrs. Robins for said sum.

9. The plaintiff shall receive and collect from .all of the said defendants not more than the full sum of Thirty-six Thousand One Hundred Thirty-Four Dollars Seventy-Five Cents ($36,134.75), with interest and costs, and that upon the payment of the sum aforesaid the judgments against all of the defendants shall be deemed to be settled in full.

The entry of appropriate judgment will be accordingly directed by proper order.


source: Caselaw Access Project

author: MADDEN, Judge.

license: Public Domain

text:
    MASSMAN CONST. CO. v. UNITED STATES.
    No. 45765.
    Court of Claims.
    Jan. 8, 1945.
    Writ of Certiorari Denied May 28, 1945.
    See 65 S.Ct. 1403.

      Temple W. Seay, of Washington, D. C. (Phil D. Morelock, of Washington, D. C., on the brief), for plaintiff.
    Grover C. Sherrod, of Washington, D. C., and Francis M. Shea, Asst. Atty. Gen., for defendant.
    Before WHALEY, Chief Justice, and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
   MADDEN, Judge.

The plaintiff sues for $88,000 which, it claims, should be added to the price written in a formal contract which it made with the United States, because the plaintiff, by mistake, omitted an item of $88,000 when it computed its bid for the contract.

On October 23, 1940, the United States Engineer Office, New Orleans, Louisiana, advertised for bids for repairing the rubble-mound East jetty at Calcasieu Pass, Louisiana. Bids were to be opened November 7, at 2 P. M. Alternate (b) of the invitation was the one on which the contract here in question was awarded and it provided, as shown in finding 2, for furnishing all labor and materials except stone, which was to be furnished by the Government, for repairing and extending the jetty.

The-plaintiff’s home office was in Kansas City, Missouri. It had been in the contracting business for 25 years, and for 15 years its work had been principally on contracts with the Army Engineers, the contracts having amounted to some $60,000,000. When the plaintiff learned of the advertisement for the jetty project, it was about to complete other work where it had equipment suitable for the jetty job. George E. Owens, its general superintendent and chief estimator was away from Kansas City and returned there about November 4. It was decided that a bid would be made on the jetty job, and that Owens should go to New Orleans and there, after inquiry about local wage rates, fuel costs, freight rates, etc., prepare the bid.

Owens arrived in New Orleans on the morning of November 6, the day before the opening of bids. Since he needed no additional information about the value of the use of the plaintiff’s own equipment on the job, he first listed on an estimate sheet the items of equipment, the value of the use of each piece per month, and the number of months it would be used. From these figures he computed and recorded on the sheet the value of the use of the machinery and equipment for the job as $88,000. This sheet is copied in finding 7. Owens spent the rest of November 6 gathering local information, and he then on a second sheet estimated the costs of labor in placing stone, supervision, fuel, insurance, and other miscellaneous matters. On a third sheet he estimated the labor costs of towing and unloading. He finished these sheets after midnight on November 6 and gathered up his scattered papers and put them in a brief case, intending to make up his final estimate and the plaintiff’s formal bid on the next morning.

On the morning of November 7, Owens, in taking the papers out of his brief case to complete his work, failed to take out the first sheet prepared by him the day before, on which sheet he had set down the items of value of the use of equipment amounting to $88,000. He therefore, in his final computation, as shown in finding 9, omitted that amount from consideration, and the bid which he submitted was lower by that amount than it would have been but for that omission. He filed the bid shortly before 2 P. M. on November 7, and it and three other bids were opened and read at that hour, as was the Government’s own estimate of the cost of the work.

The bids and the Government’s estimate are shown in finding 12. As explained in that finding, the Government’s estimate included items which would not have been included in a contractor’s bid, so its estimate, on a basis comparable to that of the bidders, would have been about $400,000, as against the plaintiff’s bid of $367,000. The three bids by other contractors were much higher, being $620,400, $798,600, and $935,-000. The District Engineer and his assistant, who were in charge of the opening of bids, had no thought that plaintiff’s bid involved a mistake. They talked to Owens about when the work would be started, whether plaintiff’s equipment was adequate and other relevant matters. Owens felt that for some reason his bid was too low, but thought he had used poor judgment in his estimates. He said nothing to the Governmental officials, however, about his feeling that there might have been a mistake.

The way in which the mistake in the bid had been made was not discovered by the plaintiff until November 18. The manner of its discovery is recited in finding 15. Upon its discovery the plaintiff wrote the Engineer Office at New Orleans. See finding 16. It requested that its bid be increased by $88,000, or be rejected without any liability on the bid bond. The District Engineer merely acknowledged this letter, on November 25, and on December 18 wrote the plaintiff accepting its bid as made, denying its request to change its bid and saying:

“You are advised that you have the right to file a claim with the District Engineer for submission through channels to the Comptroller General for further consideration.”

The contract and bonds were enclosed for signature by the plaintiff.

The plaintiff considered the advisability of refusing to sign the contract. One of the principal reasons why it did not refuse was that refusal might affect its future relations with the Government agencies with which, as we have seen, most of its business had been done for some years past. Another reason was the fact that it had put up a bond guaranteeing its bid. It was also hopeful that if it filed a claim, as tfie District Engineer had written that it might, the claim would be allowed.

About December 28, 1940, the plaintiff signed the contract, furnished the requisite bond, and forwarded these to the District Engineer, together with a protest, the text of which is quoted in finding 19, and a letter to the Comptroller General. The contract was approved by the Division Engineer January 8, 1941. The plaintiff’s let•ter to the Comptroller General recited the facts concerning the mistake substantially as we have found them, and asked that it be compensated for the use of its equipment, the value of which use it had not included in its bid.

The plaintiff’s officials had conferences with officials of the Corps of Engineers, and submitted affidavits and information to them. The Corps of Engineers forwarded the plaintiff’s letter to the Comptroller General on June 13, 1941 with a letter, a part of which is quoted in finding 20, saying there was doubt whether a mistake had been made, and that the estimate was prepared “in an extremely careless manner.” It further said:

“It is thought that it would not be unconscionable to require the contractor to perform the work at its bid price. The present record does not establish that the contractor would incur a loss in performing at the contract price. It is recommended that the claim be disallowed.”

The Comptroller General disallowed the claim. The plaintiff performed the contract and was paid the contract price, except $100 which has not been paid because of the plaintiff’s refusal to sign the final voucher.

The plaintiff urges here that its contract with the Government should be reformed and enforced as reformed because of either (1) mistake of fact on its part and unconscionable conduct on the part of the Government, or (2) mutual mistake of fact.

At the time the contract was awarded to the plaintiff, pursuant to its bid, and at the time it signed the contract, the plaintiff was not mistaken. It had become aware of the mistake in its bid, and faced the problem of whether it was willing to sign a contract for the figure which it had, by mistake since discovered, bid. The Government was also aware of the plaintiff’s claim that it had made a mistake in its bid. There was not, then, at the time of signing the contract, any lack of knowledge, either mutual or unilateral, which caused either of them to make the contract which they did make, when in fact they intended to make a different contract. That being so, if we should reform the contract as the plaintiff requests, we would be making for the parties the very contract which one of them, the Government, expressly refused to make at that time, though requested to do so by the plaintiff.

The plaintiff’s contention, to have any merit at all, must relate to the events preceding the signing of the contract. It must relate to the situation after the plaintiff had made its mistaken bid, and had later discovered the mistake and asked, without avail, that its bid be either modified or rejected. If the plaintiff’s bid had been an ordinary revocable offer, it would, upon the discovery of its mistake before acceptance of its offer, have been completely free to revoke its offer and escape a burdensome contract. If, instead of revoking, it had advised the offeree' of the mistake and asked him to give it a contract for a higher price than the one offered, and the offeree had refused to do so, the plaintiff might have been in about the same dilemma it was in here. If the offeree was its best customer, the plaintiff might have concluded to stand by the mistaken offer and kept the customer’s good will, even though it was free to revoke. If it did let the mistaken offer stand, and made a contract in accordance with it, it could not later claim that that contract should be reformed. It could not be said that it was unconscionable for the offeree to refuse to contract to pay more than he was willing to pay, just because that refusal put the .plaintiff in the embarrassing situation of having to choose whether it would go back on its offer, or stand by its word, even to its immediate harm, in order to keep the good opinion of a customer.

The plaintiff’s situation here differs from the one discussed above only in the respect that the plaintiff’s offer, or bid, was, in terms, irrevocable, and was accompanied by a bond so that the revocation of the bid would have subjected the plaintiff to a liability, unless the mistake which was involved in the bid would have constituted a defense to enforcement of the bond. There was at least a serious possibility of liability on the bond. Was this potential liability, which was one of the factors which the plaintiff considered in deciding to sign the contract, coercive in the sense that it can be said that the contract was signed under duress ? It should be said that this factor was not, apparently, the dominant one in arriving at the decision to sign. The dominant factor, it may be inferred from the testimony of the plaintiff’s official, was the desire of the plaintiff to keep the good will of its best customer. But to whatever extent the liability on the bid bond was coercive, was it unfairly or unconscionably so ?

The Government is required by law to award certain of its contracts on the basis of competitive bids, after advertisement. To make the system work without undue delays and without the opening of the bids being used unfairly to obtain a disclosure of what competitors are offering, it is necessary that the bids be firm bids, backed by a guaranteed willingness to sign a contract at the bid price. To have a set of bids discarded after they are opened and each bidder has learned his competitor’s price is a serious matter, and it should not be permitted except for cogent reasons. We seriously doubt whether the plaintiff’s estimator, Owens, exercised the care in preparing and presenting the plaintiff’s bid which was called for by the important problem with which he was dealing. If not, the plaintiff would not and should not have been released from liability upon its bid bond, since one of the purposes of the bond was to cause bidders to exercise due care. But if the plaintiff, in the circumstances, did not have the right, or if the District Engineer reasonably thought the plaintiff did not have the right to be released without penalty from its bid bond, it was not improperly coercive, or unconscionable, conduct on his part to refuse to voluntarily release the plaintiff. He had the right, and probably the duty, to insist upon what he, reasonably, thought were the Government’s rights. That this insistence put the plaintiff in the position where it had to make up its mind whether it would be wiser to refuse to sign the contract and contest by litigation its liability on the bond, or to sign the contract, keep its reputation clear with the Government and seek relief through the discretionary action of higher officials, did not make the insistence unconscionable.

This case differs from the case of Edmund J. Rappoli Co. v. United States, 98 Ct.Cl. 499, in the respect that in that case the court found that, concurrently with the signing of the contract, the Government’s agents promised the contractor that, upon the fulfillment of certain conditions that were found by the court to have been fulfilled, the mistake would be corrected. Here no such promise was made.

The plaintiff’s contract was not made by mistake, nor because of duress or coercion. The petition will be dismissed. It is so ordered.

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

LITTLETON, Judge, dissents.

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


author: WHITAKER, Judge.

text:
    J. C. RIDNOUR CO. v. UNITED STATES.
    No. 44741.
    Court of Claims.
    June 4, 1945.
    David A. Fegan, of Washington, D. C. (Morris, Kix-Miller & Baar, of Washington, D. C., on the brief), for plaintiff.
    James J. Sweeney, of Washington, D. C., and Francis M. Shea, Asst. Atty. Gen., for defendant.

      Before WHALEY, C. J., and MADDEN, LITTLETON, JONES, and WHITAKER, JJ.
   WHITAKER, Judge.

Plaintiff sues for liquidated damages deducted for delays in furnishing blue denim working jumpers. Plaintiff says they were unlawfully deducted because the delays were caused, first, by a delay in the delivery to it of the material out of which the jumpers were to be made, and that this was caused by an ice storm, which it says was one of the “unforeseeable” causes of delay for which the contractor was not to be charged with liquidated damages; and, second, by orders of the defendant’s inspector on the job, changing the specifications, which caused the jumpers to be rejected.

With reference to the first cause of the delay plaintiff says the truck which was delivering to it the material for the manufacture of the jumpers was wrecked, due to ice on the road. The Commissioner has found that “such ice and temperature, * * * although not continuous, were not infrequent in the area at that time of the year.” No exception is taken to this finding. However, although the plaintiff might have foreseen that there might be ice on the roads at that time of the year, do we not think that plaintiff could have foreseen that its truck would stall on the ice and that another truck would skid into it. We are of the opinion that plaintiff should not have been charged with liquidated damages for this five days’ delay.

With reference to the second cause of the delay, the Commissioner has found:

“There is no satisfactory evidence to support plaintiff’s contention that the defendant’s inspector at plaintiffs plant, Mr. William Nonnast, ordered changes in plaintiff’s process of manufacture, i.e., in the method of marking the location of pockets, the construction of the front center openings, the method of making the collars, and the delivery of jumpers with skipped stitches in the passover seams under the arms, and that in obedience to such orders plaintiff changed its process of manufacture with the result that plaintiff was delayed in the manufacture of the jumpers and that when plaintiff did deliver them they were rejected because of said changes in process and skipped seams, thus causing most of the first item and all of the second, third, and fourth items of plaintiff’s claim set out in finding 10. Moreover, the reports which Mr. Nonnast made to defendant from time to time while he was the defendant’s inspector at plaintiff’s plant were also signed by plaintiff and contained a note that:

“ ‘Inspector has no authority to issue orders.

“ ‘His statements must be considered as advice only.’ ”

We have carefully examined plaintiff’s exceptions to this finding, and we find that they are not supported by the evidence.

Plaintiff also claims damages for the delays it says were caused by the inspector’s orders changing the specifications. Plaintiff is not entitled to recover these damages for the reason set out above.

Plaintiff is entitled to recover the amount of liquidated damages deducted which were attributable to the five days it was delayed by the wreckage of its truck. This amounts to $197.58. Judgment for this amount will be rendered. It is so ordered.

WHALEY, C. J., and MADDEN and LITTLETON, JJ., concur.

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


author: LEAVY, District Judge

text:
    UNITED STATES v. ANDERSON.
    No. 15711.
    District Court, W. D. Washington, S. D.
    June 8, 1945.
    J. Charles Dennis, U. S. Atty., and Harry Sager, Asst. U. S. Atty., both of Tacoma, Wash., for plaintiff.
    John H. Binns, of Tacoma, Wash., for defendant (appointed by Court).
   LEAVY, District Judge

This defendant, Sheldon Maurice Anderson, was indicted by a Grand Jury in this District and Division, the charging part of the indictment being as follows:

“That Sheldon Maurice Anderson, * * on or about the 18th day of April, 1945, at Fort Lewis, in Pierce County, State of Washington, then and there being, did knowingly fail, neglect and refuse to perform a.duty required of him under the Selective Training and Service Act of 1940 and the Rules and Regulations issued thereunder, in that he * did then and there refuse to submit to induction and to be inducted into the Armed Forces of the United States as directed and ordered so to do by Spokane City Local Draft Board No. 2 of Spokane, Washington, the said Local Board then and there having authority to malee such order and direction; ”

After the defendant was brought into court for arraignment, he being an impecunious person and unable to secure counsel, the Court appointed John H. Binns, Esq., a member of the Tacoma bar, to represent the defendant. Mr. Binns thereafter filed a demurrer to the indictment, challenging it upon two grounds, to-wit:

1. That it does not state facts sufficient to constitute a crime.

2. That the above entitled court has no jurisdiction of the defendant or the subject matter of the action.

This matter is now before the court for disposition on the defendant’s demurrer, and the first ground thereof is overruled, but the challenge as to the jurisdiction of this court of the offense charged must be sustained.

Specifically, the charge contained in the indictment is that the defendant refused to submit to induction into the Armed Forces of the United States, as directed and ordered so to do by the Spokane City Local Draft Board No. 2, of Spokane, Washington.

During the course of the argument on the demurrer, it was developed that the defendant actually responded to the order of induction by the Spokane Local Draft Board, and accompanied a group of draftees from Spokane, Washington, to Fort Lewis, Washington. The court takes judicial notice of the fact that Spokane is not within its jurisdiction, but is located within the jurisdiction of the United States District Court for the Eastern District of Washington. Fort Lewis is located within the jurisdiction of this court. While at the Fort and undergoing the final steps of his induction, the defendant declined to take the oath, unless he were given the assurance that Army regulations concerning vaccination would be waived as to him. Such assurances were denied and he was permitted to return to Spokane, Washington. Subsequently he was indicted in this Judicial District.

It is the contention of the Government that the defendant’s failure to submit to induction into the Armed Forces after his arrival within this Judicial District fixed the venue and jurisdiction of the offense herein.

Taking the language of the indictment at its face, the precise question presented is: Of what offense is the defendant accused? The Government admits that the defendant is charged with refusing to submit to induction as ordered and directed to do by his Draft Board and then further contends that “induction” is made up of a number of separate steps, and that the final steps necessary to complete it in this case happen to be in this Judicial District by reason of the fact that Fort Lewis is located herein, and that, therefore, this Court has jurisdiction of the offense charged. A careful reading of the Selective Training and Service Act of 1940, and the Amendments thereto, Title SO U.S.C.A.Appendix § 301 et seq., together with the regulations promulgated under the provisions of the Act, does not sustain this contention. On the contrary, it clearly fixes the jurisdiction of the courts in reference to violations such as here involved, as being in the place where the local draft board is located.

Passing upon this demurrer naturally calls for a construction of the constitutional rights of the defendant under the 6th Amendment providing for trial “by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law,” and to give application to this constitutional provision calls for a construction of the Selective Training and Service Act and the Regulations in reference to jurisdiction.

The demurrer to the indictment presents an issue of .far-reaching importance because it is elementary in criminal law that if the court is without jurisdiction of the .subject matter its proceeding is a nullity. Even the consent of the accused can not confer jurisdiction, and it is an issue that can be made at any stage of the proceedings, or raised after conviction and execution of judgment by way of Writ of Habeas Corpus. It is not only a matter of great importance to the individual here involved, but might readily involve a great number of prosecutions that arise by reason of the criminal provisions of the Selective Training and Service Act and Regulations, which call for an interpretation of them in reference to the jurisdictional question here presented. It is for this reason that I have endeavored to examine Carefully the provisions of the Act, itself, and the Regulations to ascertain the intent of Congress in its enactment, and, likewise, the intent of the executive department that promulgated the Regulations, in reference to fixing jurisdiction.

Congress, in enacting this legislation and providing for the penalties, in Section 311, with great particularity provided: “The district court of the United States having jurisdiction thereof,” would be the tribunal to try offenses, and that “no person shall be tried by any military or naval court martial in any case arising under this Act unless such person has been actually inducted for the training and service prescribed under this Act.”

When we turn to the Regulations, we find Section 601.5, which says:

“A delinquent is a man liable for training and service under the provisions of the Selective Training and Service Act of 1940, as amended, who fails or neglects to perform any duty required of him under the provisions of the Selective Training and Service Act of 1940, as amended, and the Regulations made pursuant thereto.”

Section 601.8 provides:

“The term ‘induction station’ refers to any camp, post, ship or station at which selected men are received by the military authorities, and, if found acceptable, are inducted into the military service.”

Section 613.14 reads:

“The local board for the area in which the residence of the registrant is located, will always have jurisdiction of the registrant.” (Emphasis added)

Then the Regulations in Sec. 613.21 make the further provision concerning recalcitrants :

“If he is still refractory, his name and the names of the witnesses should be noted and the case immediately reported to the Chairman of the local board, who may report the case to the United States District Attorney.”

To me this clearly implies that such report can be made only to the United States Attorney for the district in which the local board is located.

In Regulation 614.47, provision is made for jurisdiction where a person registers more than once, and it is therein provided that unless the registrant has selected one of the local boards for jurisdiction, the registrant shall be subject to the jurisdiction of each local board .having a registration card of such registrant.

Section 629.22 of the Regulations dealing with the forwarding of registrants for pre-induction physical examination provides in Sub-section (e) that:

“The local board shall instruct all registrants in the group that it is their duty to obey the instructions ■ of the leader or assistant leaders during the time they are going to and returning from the induction station; that they will be met by proper representatives of the armed forces when they arrive at the induction station; that while they are at the induction station, they will be subject to and must obey the orders of the representatives of the armed forces; that they must present themselves for and submit to such examination as the commanding officer of the induction station shall direct; that they will be returned to the local board when the examination is completed.”

Sec. 633.22, which concerns forwarding registrants for induction, and is directly in point in the instant situation, provides in Subdivision (4) as follows:

“The local board shall instruct all registrants in the group that it is their duty to obey the instructions of the leader or assistant leaders during the time they are going to the place of induction; that they will be met by proper representatives of the armed forces at the place of induction; that while they are at the place of induction they will be subject to and must obey the orders of the representatives of the armed forces; that they must present themselves for and submit to induction; that if they are rejected, the representatives of the armed forces will, to the extent prescribed by the regulations of the armed forces, provide transportation and subsistence for their return trip.” (Emphasis added.)

Then Sec. 642.41 outlines the duties of the local board in reference to the failure of any of its registrants to submit to its orders, and those duties are:

“Every registrant who has heretofore or who hereafter fails to comply with an order for induction * * shall be reported promptly to the United States Attorney on a Delinquent Registrant Report; provided, that if the local board believes that by reasonable effort it may be able to locate the registrant and secure his compliance, it may delay the mailing of such Delinquent Registrant Report.”

Section 642.42 fixes the duties of the United States District Attorney when such Report is made, and Section 642.44 requires that the local board keep a record of delinquents.

From the foregoing quotations of the Regulations, it is clear that this defendant is still within the jurisdiction of his local board in Spokane, Washington, and subject to its further orders and directions, and it follows logically that the “United States District Attorney” referred to in the Regulations can be none other than the United States District Attorney of the judicial district wherein the local board is located.

. There have been numerous decisions interpreting and construing the Selective Training and Service Act and Regulations. I shall refer to only a few of them, as they seem to bear, either directly or inferentially, on this question of jurisdiction.

In Falbo v. United States, 320 U.S. 549, 553, 64 S.Ct. 346, 348, 88 L.Ed. 305, the Court uses the following language:

“In each case the registrant is under the same obligation to obey the order.

But in neither case is the order to report the equivalent of acceptance for service. Completion of the functions of the local boards and appellate agencies, important as are these functions, is not the end of the selective service process. The selectee may still be rejected at the induction center and the conscientious objector who is opposed to noncombatant duty may be rejected at the civilian public service camp. The connected series of steps into the national service which begins with registration with the local board does not end until the registrant is accepted by the army, navy, or civilian public service camp. Thus a board order to report is no more than a necessary intermediate step in a united and continuous process designed to raise an army speedily and efficiently.”

This decision has been followed by the more recent case of Billings v. Truesdell, 321 U.S. 542, 64 S.Ct. 737, 88 L.Ed. 917, wherein it quoted the Falbo case to the effect that induction is one continuous process for the selection of men for national service, and then the court said (321 U.S. at page 547, 64 S.Ct. at page 741, 88 L.Ed. 917):

“The examination of men at induction centers and their acceptance or rejection are parts of that process. Induction marks its end. But prior to that time a selectee is still subject to the Act and not yet a soldier. A case involving his rights or duties as a selectee prior to that event is a case arising under the Act. The civil authorities not the military are charged with the duties of enforcement at that stage of the process. That necessarily means that the measure of a selectee’s rights and duties is to be found in the Act, * *

In United States v. Collura, 2 Cir., 139 F.2d 345, Second Circuit, we have a case where the inductee assumed an attitude identical with that of the defendant in this case in that he refused to be inducted unless the regulation concerning vaccination would be waived as to him, and while the issue of jurisdiction was not presented, the Court, in passing upon the reasons given by the defendant for not submitting to induction, had this to say:

“The district judge refused to consider the validity of the Army Regulations regarding vaccination and rightly restricted the issue to whether or not the appellant reported at the induction center prepared to be inducted into the army without qualification. * * * The selectee must not only appear but must be ready to go through the process which constitutes induction into the army.” (Emphasis added.)

The Government cites among authorities that it relies upon the case of United States v. Van Den Berg, 7 Cir., 139 F.2d 654. This case is not directly in point, but it would seem to sustain the position of the defendant rather than that of the Government, because the accused insisted that jurisdiction was in the district of his residence, rather than in the district where he had registered, and the court held that he could not divest the court of jurisdiction in the district where his omission to act cpnstituted a crime.

When we apply the language of the Act and Regulations, and the judicial interpretations, it is clearly established: First, that this defendant is still a civilian; second, he continues to be a registrant of the Spokane City Local Draft Board No. 2 of Spokane, Washington; third, that Board alone has the power to order his induction or further consider his classification; and, fourth, the offense with which he is charged is a failure to obey the order of induction of that Board. Therefore, the offense was committed, if at all, within the Eastern District of Washington. The United States District Court for the Eastern District of Washington alone has jurisdiction, and it is there that the defendant must be proceeded against.

An order sustaining the demurrer mav be submitted, and an exception will be allowed to the plaintiff.


author: GIBSON, District Judge.

text:
    BOWLES, Price Administrator, Office of Price Administration of United States, v. ROCKS et al.
    Civ. A. No. 4133.
    District Court, W. D. Pennsylvania.
    May 25, 1945.

      John A. Metz, Jr., District Enforcement Atty. Pittsburgh District Office, William S. Doty, Chief Attorney Pittsburgh Defense-Rental Area, and Robert B. Greer, Rent Enforcement Atty., Pittsburgh District Office, all of Pittsburgh, Pa., for plaintiff.
    Anthony Cavalcante, of Uniontown, Pa., for defendants.
   GIBSON, District Judge.

And now, May 25, 1945, after hearing, and pursuant to oral stipulation at the hearing upon motion for preliminary injunction that the case shall be treated as though upon final hearing, from the record and oral admissions of counsel at the hearing, the court finds the facts as follows:

1. The tenants, Fred Bergman and Lulu Bergman, have regularly paid the rent to which the landlord, Thomas A. Rocks, is entitled, and have tendered all rent owing, as it fell due, to wit, $2.36 rent from March 23 to March 25, 1945, and $40 rent from March 25 to April 25, 1945, and $1.34 rent from April 25 to April 26, 1945, which tender has been refused by Thomas A. Rocks, landlord. Said tenants were willing at any time to pay said rent to said landlord as soon as he complied with section 7 (b) of the Rent Regulation for Housing, and tendered a receipt for the same.

2. Under date of December 21, 1944, defendant Thomas A. Rocks served upon the tenants, Fred and Lulu Bergman, a written notice to vacate the premises by March 24, 1945, stating as his only reason that he had sold the property to one David Marasco. A copy thereof was sent to the Area Rent Office.

3. Under date of December 30, 1944, the Area Rent Office replied, explaining that the notice was defective under the Rent Regulation for Housing, for the reason that a Certificate Relating to Eviction is required where property is purchased for residence purposes after October 20, 1942, and enclosing therewith forms of petition and required affidavits, and full instructions. A copy of the said acknowledgment was sent to the tenants.

4. On March 2, 1945, defendant Thomas A. Rocks duly filed proper petition and affidavits, as required by the Rent Regulation for Housing, and under date of March 19, 1945, certificate was granted, as required by section 6 (b) (2) of the Rent Regulation for Housing, permitting said Thomas A. Rocks to pursue his remedies under local law for eviction of said tenants for the purpose of occupancy by David Marasco at the expiration of three months from March 2, 1945, the date of filing the petition.

5. With no notice whatsoever of any kind, either to the tenants or to the Area Rent Office, defendant Thomas A. Rocks on or about April 1, 1945, caused a judgment by confession in eviction to be entered against said tenants, in the Court of Common Pleas of Fayette County, Pennsylvania, at No. 236 March Term, 1945, based exclusively on the grounds of expiration of the term, and nonpayment of $2.36 rent, which amount had been tendered and refused, plus $.24 attorney’s commission for collection thereof, and hence entered judgment not only for possession, but for said $2.60, including tendered rent and attorney’s commission. Said judgment was entered March 30, 1945.

6. Concurrently, and with no notice to the Area Rent Office of the commencement of the action, said Thomas A. Rocks caused execution to be issued thereon at No. 5 March Term, 1945, E. D., and placed in the hands of defendant Jacob N. Echard, Sheriff of Fayette County, Pennsylvania, pursuant to which execution said Sheriff levied upon the goods of said tenants, for said $2.60 plus costs, and threatened to advertise and to sell the same, and to proceed with the eviction under said writ.

From said Findings of Fact, and as constituting the grounds of its action, the Court makes the following Conclusions of Law:

1. The notice of December 21, 1944, purporting to require the tenants to vacate the premises by March 24, 1945, for the reason that defendant Thomas A. Rocks had sold the property to David Marasco, was unlawful and void under Section 6 (a) (6) of the Rent Regulation for Housing, since a certificate relating to eviction was required, to be granted under proper petition to the Area Rent Office, as to property acquired after October 19, 1942.

2. The certificate relating to eviction, granted on petition of said Thomas A. Rocks filed March 2, 1945, was required by law under section 6 (b) (2) of the Rent Regulation for Housing to be limited to authorizing pursuit of local remedies at the expiration of three months after the date of filing the petition, and was in all respects proper and lawful, including the three months’ waiting period, expiring June 2, 1945, which waiting period was binding on said Thomas A. Rocks as to any action seeking possession of the property as a residence for the purchaser.

3. The action of defendant Thomas A. Rocks in attempting to evict the said tenants for occupancy by the purchaser, David Marasco, prior to the expiration of the three months’ waiting period required by the certificate relating to eviction, and by section 6 (b) (2) of the Rent Regulation for Housing was in violation of law.

4. The entry of the judgment by confession on the ground of expiration of the term of the lease was in violation of section 6 (a) of the Rent Regulation for Housing, forbidding evictions, by confession of judgment or otherwise, based on the mere ground of expiration of the term of a lease.

5. The entry of said judgment by confession based upon alleged nonpayment of $2.36 rent which it was admitted at the hearing had previously been tendered to the landlord and refused was unlawful.

6. Said judgment by confession is void on its face for failure to show of record compliance with the condition precedent to its validity of the giving of the preliminary notice to the tenant and to the Area Rent Office required by section 6 (d) (1) of the Rent Regulation for Housing, stating an intention to bring an eviction action, and stating the ground under section 6 of the Regulation under which possession would be sought.

7. Said judgment by confession is unlawful because of the failure of the plaintiff to give the preliminary notice required by section 6 (d) (1) of the Rent Regulation for Housing.

8. Said judgment by confession is unlawful on account of the violation by defendant Thomas A. Rocks of the requirement of section 6 (d) (2) of the Rent Regulation for Housing that at the time of commencing any action to remove or evict a tenant, including an action based upon nonpayment of rent, the landlord shall give written notice thereof to the Area Rent Office stating the title of the case, the number of the case where that is possible, the court in which it is filed, the name and address of the tenant, and the ground under section 6 of the Regulation on which removal or eviction is sought.

9. The issuance of the execution based upon said void judgment was unlawful.

10. The defendants, their officers, deputies, agents, servants, employees, attorneys, and all persons in active concert or participation with defendants, should be enjoined from further proceedings upon said execution upon said void judgment, or upon any other execution based upon said judgment.

11. The defendants, their officers, deputies, agents, servants, employees, attorneys, and all'persons in active concert or participation with defendants, should be enjoined from further interference with the goods, chattels, and other possessions of Fred and Lulu Bergman, by court process or otherwise, in violation of the Emergency Price Control Act of 1942, as amended and supplemented, 50 U.S.C.A.Appendix § 901 et seq., or in violation of the Rent Regulation for Housing, or in violation of any regulation or order adopted pursuant to said Act of Congress.

12. Defendant, Thomas A. Rocks, should be required forthwith to move the Court of Common Pleas of Fayette County, Pennsylvania, to strike from the record, at his costs, the unlawful and void judgment at No. 236 March Term, 1945.

13. Defendant, Thomas A. Rocks, should be required to pay the costs of this case.

The Office of Price Administration, through its local representatives, moved for a preliminary injunction upon Thomas A. Rocks, vendor of a certain house, to restrain him from proceeding with a writ of habere facias possessionem issued by the Court of Common Pleas of Fayette County, Pennsylvania. The Sheriff, Jacob H. Echard, who had served the writ, was also included in the complaint as a defendant. Upon hearing upon application for the preliminary injunction it was agreed by the parties that the matter should be finally heard.

The Findings of Fact and Conclusions of Law, supra, Set forth the essentials upon which the action was brought. They disclose a premature attempt of the defendant Rocks to evict the occupants of the property in dispute, as the certificate required by Section 6 (2b)i was filed on March 2, 1945, and the Regulation requires a delay of three months between the date of the certificate and' eviction proceedings in the state court.

The action, in so far as it affects the occupants of the dwelling who were under the protection of the Price Administrator, has become partially moot since the hearing, as they have delivered possession to the defendant Thomas A. Rocks. However, the costs of the habere facias possessionem writ have been assessed against them. Let a decree be presented by which the defendant Thomas A. Rocks is ordered, in substance, to discontinue the proceeding in the Court of Common Pleas and pay the costs thereof, and to pay the costs of the proceeding in this court.


author: LINDLEY, District Judge.

text:
    RANDALL v. BECKER, Warden, etc.
    Civil Action No. 397-D.
    District Court, E. D. Illinois.
    May 15, 1945.
    Carl Randall, pro se.
    No appearance for the State.
   LINDLEY, District Judge.

The relator as a poor person prays leave to file a petition for writ of habeas corpus. He has addressed this to Judge Wham, who has referred it to me with request that I dispose of it. For the purpose of disposition, I must determine whether the averments state a case for a writ. If they do not, the petition must be dismissed.

The relator avers that in April, 1944, he applied to the Circuit Court of Cook County, Illinois, whence he had been committed to the state penitentiary, for a writ of habeas corpus; that the petition was eventually dismissed; that he filed a second petition in the same court in November 1944, which, too, was dismissed and that in December 1944, he filed still another petition in the Supreme Court of Illinois, which that court “refused to entertain.” He does not aver that he has ever applied to a state court of competent jurisdiction in the county where he is now confined, as he has a right to do in Illinois. Nor has he applied to the Supreme Court of the United States for certiorari to review any of the decisions of the courts of Illinois. Consequently it is clear that he has not exhausted his remedies in the state courts. In re Hawk v. U. S., 321 U.S. 114, 64 S.Ct. 448, 88 L.Ed. 572, and cases there cited.

The lastest word from the Supreme Court concerning such situations as that which now confronts me - appears in White v. Ragan, 323 U.S. —, 65 S.Ct. 978, 981, decided April 23, 1945. From this it appears that where the decision of the state court is “that the remedy of habeas corpus is not available under the state practice, or its decision is based upon some other adequate non-federal ground, it is unnecessary for the petitioner to ask” the Supreme “Court for certiorari in order to exhaust his state remedies” and that the Supreme Court of Illinois has announced that it will not consider any petition for a writ of habeas corpus which raises issues of fact, inasmuch as that court “does not try questions of fact”; that this means that the Supreme Court of Illinois will not entertain original applications for habeas corpus “save on a record which excludes on its face the possibility of any trial in that court of an issue of fact” and that where the record fails so to disclose the United States Supreme Court can not assume that a federal question was involved in the proceeding in the Supreme Court of Illinois and will be compelled, under such circumstances, to deny certiorari.

But this decision, even though it means relator could not obtain a review of the decision of the Illinois Supreme Court, does not relieve him from pursuing his other state remedies. White v. Ragan, supra. As I have suggested, these include his right to apply to the state court in the county where he is imprisoned.

Furthermore in the White case the Supreme Court suggests that inasmuch as the denial of habeas corpus by the lower state courts in Illinois appears not to be reviewable by the Illinois Supreme Court (People v. McAnally, 221 Ill. 66, 77 N.E. 544, 5 Ann.Cas. 590; People v. Siman, 284 Ill. 28, 119 N.E. 940), it follows that, for purposes of review in the Supreme Court of the United States under Section 237 of the Judicial Code, 28 U.S.C., § 344, 28 U.S.C.A. § 344, the denial of habeas corpus by one of the lower courts of Illinois, not reviewable in any other state court, is a decision by the highest court of the state in which a decision could be had, Betts v. Brady, 316 U.S. 455, 62 S.Ct. 1252, 86 L.Ed. 1595; Largent v. Texas, 318 U.S. 418, 63 S.Ct. 667, 87 L.Ed. 873, and that it follows further from the lack of a remedy in the Illinois Supreme Court in such a case that an original application to that court for the writ is not prerequisite to review here of the decision of the lower state court. Tenner v. Dullea, 314 U.S. 692, 62 S.Ct. 364, 86 L.Ed. 554.

Under this reasoning, it is incumbent upon the relator not only to exhaust his remedies in the lower state courts, but, in view of the fact that a denial on the facts in those courts is not reviewable, he has a right to apply for certiorari from the decisions of the lower state courts to the Supreme Court of the United States. Until these remedies have been exhausted, in the absence of the unusual showing required to supply a case of exception to the rule, this court is without jurisdiction to entertain his petition.

The petition for leave to present the application here as a poor person is granted; the petition for a writ of habeas corpus is denied.


author: KENNERLY, District Judge.

text:
    SCHAVRDA et al. v. GULF, C. & S. F. RY. CO.
    No. 1674.
    District Court, S. D. Texas, Houston Division.
    April 25, 1945.
    George S, King and Maurice M. Davis, both of Houston, Tex., for plaintiffs.
    E. A. Kelly, of Houston, Tex., and Terry, Cavin & Mills and J. G. Howard, all of Galveston, Tex., for defendant.
   KENNERLY, District Judge.

This is a suit under the Employers’ Liability Act, 45 U.S.C.A. §§ 51 to 60, and a hearing on defendant’s motion to dismiss, because, as defendant says, the suit should have been brought in the Galveston Division instead of this, the Houston Division of this court.

Plaintiffs, residents of Austin County, in the Galveston Division of this court, are alleged to be the legal representatives of Albert E. Schavrda, deceased, and defendant is alleged to be a railway corporation, engaged in Interstate Commerce. It is alleged that deceased met his death while working as a brakeman on defendant’s train as a result of the derailment and overturning of one of defendant’s locomotives and some of its cars in Wharton County, in the Galveston Division of this court. The plaintiffs charge defendant with negligence, etc., and sue for damages.

Standing upon Section 114, 28 U.S.C.A. the defendant has moved to dismiss upon the ground that defendant resides in the Galveston Division of this court, and that the suit should have been brought there, instead of in the Houston Division.

1. When such Liability Act was first passed 35 Stat. pg. 65, it contained no provision regulating the district in which suits were required to be filed, and the general venue statute (now Section 112, Title 28, of the Code) was controlling. Baltimore & Ohio R. Co. v. Kepner, 314 U.S. 44, 62 S.Ct. 6, 86 L.Ed. 28, 136 A.L.R. 1222. On April 5, 1910, Congress passed an act, 36 Stat. pg. 291, 45 U.S.C.A. § 56, requiring that such suits under such Liability Act be brought either in the district of the residence of the defendant or the district in which the cause of action arose, or the district 'in which defendant “shall be doing business at the time of commencing such action.”

There was, however, no provision either in the original Liability Act or the 1910 amendment with respect to the division in which such a suit was required to be brought, and so far as I have been able to find, there was no general provision until the Judicial Code of 1911, 36 Stat. p. 1087, et seq., 28 U.S.C.A. § 1 et seq. There is to be found there Section 53, a part of which is now Section 114, 28 U.S.C.A. It seems clear, therefore, that Section 114 is controlling as to the division in which a suit must be brought under such Liability Act, and that this suit should have been brought in the Galveston Division.

In Baltimore & Ohio R. Co. v. Kepner, supra, on which plaintiffs stand, a very liberal construction is given the Liability Act and the 1910 amendment with respect to the district in which such a suit may be brought, but the question of the division in which it must be brought is neither presented nor decided. In Southern Pacific Co. v. Klinge, 10 Cir., 65 F.2d 85, also upon which plaintiffs stand, the question of the division in which the suit must be brought is presented, but not the identical question we have here. There, the question was whether the suit should have been brought in the Northern Division or the Central Division of the District of Utah, and it is held that the suit could have properly been brought in either division, since the railroad was doing business in both divisions. But it is pointed out that Section 114 of 28 U.S.C.A., is neither applicable nor controlling there, because the defendant did not “reside” either in the Northern or the Central Division. Here, under its charter, defendant resides in the Galveston Division. Galveston, H. & S. A. R. Co. v. Gonzales, 151 U.S. 496, 498, 14 S.Ct. 401, 38 L.Ed. 248. Seaboard Rice Milling Co. v. Chicago R. Co., 270 U.S. 363, 365, 46 S.Ct. 247, 70 L.Ed. 633.

2. In defendant’s motion to dismiss, it says: “In the event this defendant is not entitled to a dismissal of the action, then in the alternative it moves the Court to transfer the cause to the Galveston Division, which is the Division of defendant’s residence and also the residence of plaintiffs.”

Unquestionably, it would be reasonable, in order to save time, energy and expense, to transfer the case to the Galveston Division, but defendant points to no statute so authorizing. The parties may by May 1, 1945, file a stipulation that the case be transferred to the Galveston Division; otherwise an order will enter, dismissing it.

       The applicable portion of Section 114, 28 U.S.G.A., is as follows: “Sec. 114. (Judicial Code, section 53.) Districts containing more than one division; transfer of criminal cases. When a district contains more than one division, every suit not of a local nature against a single defendant must be brought in the division where he resides; but if there are two or more defendants residing in different divisions of the district it may be brought in either division. All mesne and final process subject to the provisions of this section may be served and executed in any or all of the divisions of the district, or if the State contains more than one district, then in any of such districts, as provided in section 113 of this title.”

       The applicable portion of Section 112, 28 U.S.C.A., is as follows: “See. 112. (a) Except as provided in sections 113 to 117 of this title, no person shall be arrested in one district for trial in another in any civil action before a district court; and, except as provided in sections 113 to 118 of this title, no civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant; but where the jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant.”

       The applicable portion, is now Section 56, 45 U.S.O.A., as follows:
      “Sec. 56. Actions; limitation; concurrent jurisdiction of courts; removal of case in State court
      “No action shall be maintained under this chapter unless commenced within three years from the day the cause of action accrued.
      “Under this chapter an action may be brought in a district court of the United States, in tbe district of the residence of tbe defendant, or in which tbe cause of action arose, or in which the defendant shall be doing business at tbe time of commencing such action. Tbe jurisdiction of tbe courts of the United States under this chapter shall be concurrent with that of the courts of the several States, and no case arising under this chapter and brought in any State court of competent jurisdiction shall be removed to any court of the United States.”


author: WYZANSKI, District Judge.

text:
    FALK v. LEVINE et al.
    No. 3377.
    District Court, D. Massachusetts.
    May 17, 1945.
    Titiev & Greenman and Magnus Green-man, all of Boston, Mass., for plaintiff.
    Samuel M. Salny, of Fitchburg, Mass., for defendants.
   WYZANSKI, District Judge.

The defendants move to dismiss the complaint for failure to state a cause of action. They do not press at this stage their suggestion that the complaint must fail for laches and because of the statute of limitation.

The gist of the complaint is that the plaintiff and the individual defendants entered into a contract for the exploitation of a machine process for manufacturing plastics; that induced by the fraud of the individual defendants the plaintiff in consideration of $2,000 executed releases in favor of the individual defendants and the corporate defendant; and that these releases should be set aside and the contract performed. Obviously at this juncture the question is not whether there is the slightest evidence to support these charges but only whether, if the charges were capable of being supported by evidence, they would justify judicial action.

Looked at more carefully, the complaint opens with allegations of diversity of citizenship between the parties and a statement of the amount in controversy. Par. 1. Paragraph 2 asserts that in 1933 the individual defendants owned all the 100 shares of common stock of the corporate defendant. Paragraph 3 incorporates by reference a contract of May 7, 1935, between plaintiff and the individual defendants. This contract provided that: (I) the individual defendants would (a) make a $5,000 loan to the corporation, (b) rent certain property to the corporation first free and .later at a designated rent, (c) handle the corporation’s sales first free and later at certain charges, and (d) raise funds for further development; (II) the corporation is to issue a total of (a) 100 shares of no par voting non-dividend paying common stock, one-half to the plaintiff and the other half to the individual defendants, and (b) 100 shares of no par non-voting dividend paying preferred stock, one-third to the plaintiff and one-third to each of the two individual defendants; (III) the plaintiff would give the corporate defendant his knowledge and information for producing plastics and also would secure a competent engineer at the corporation’s expense; (IV) all parties agree not to disclose their knowledge about plastics until a certain period has elapsed; and (V) articles sold to New England Novelty, another company owned by the individual defendants, should not be sold without a reasonable profit. Paragraph 4 of the complaint alleges the plaintiff performed his part of the agreement. Paragraph 5 asserts that the individual defendants fraudulently represented that the plastic machine designed according to information given by the plaintiff could not operate. Paragraph 6 states that “the defendants” (apparently including the corporate defendant) arranged for a demonstration of the ■machine but in furtherance of their scheme .caused it to fail to operate properly. Paragraph 7 charges that later the individual defendants fraudulently represented that the business of the corporation was unsuccessful but that if the plaintiff would surrender all his rights against the (three) defendants and execute releases in favor of the defendants that “they” would pay the plaintiff $2,000. Paragraph 8 alleges that the corporate business had in fact been successful. Paragraph 9 asserts that in reliance on the misrepresentations of the individual defendants the plaintiff executed releases in favor of all the defendants for $2,000. Paragraph 10 says that the misrepresentations were deliberate and with the object of defrauding the plaintiff. , Paragraph 11 affirms that upon learning of the fraud he tendered back to the defendants the $2,000. In Paragraph 12 the. plaintiff says “he is entitled to a rescission” of the releases, he is entitled to “his stock and to a restoration of all rights as a shareholder,” and he offers to return the $2,000. The threefold prayer demands that: (1) upon receiving back the $2,000 defendants deliver his stock in the company; (2) defendants be ordered to account for all profits made by reason of their acquisition of that stock; and (3) “the plaintiff have such other and further relief as is just.”

The complaint is perhaps not a model of legal artistry and it seems to conclude with a prayer embodying a transparently false assumption that the plaintiff once had and later surrendered stock in the corporate defendant. But despite these defects the complaint is not demurrable.

Reduced to simple terms the complaint charges that through the fraud of the individual defendants who owned and controlled all the stock of the defendant Commonwealth Plastic Company the plaintiff was induced for $2,000 to execute releases in favor of the individual defendants and the corporate defendant. From the complaint it is not clear whether the "they” who agreed to pay the $2,000 were the three defendants or the individual defendants. See paragraph 2, second sentence, especially first three words and the last clause. Nor is it clear who actually did pay the $2,000. Par. 9. But in any event if the releases were procured by the fraud of the individual defendants the plaintiff is entitled to have a rescission of the releases as against not only the individuals but also the corporate defendant which acted through those individuals. Reed v. A. E. Little Co., 256 Mass. 442, 448, 450, 152 N.E. 918; Buckman v. Elm Hill Realty Co., 312 Mass. 10, 16, 42 N.E.2d 814; Am.Law Inst., Restatement of Agency, § 259. Reed’s case offers a clear parallel. A bill in equity charged that the president of a corporation by fraud induced an inventor who had contracts with the corporation regarding patents on his inventions to release rights under those contracts. Upon demurrer to the bill, it was held that there had been stated a good cause of action against the corporation for rescission of the release. “By accepting the benefits of a fraudulent trans-' action”, the Massachusetts Supreme Judicial Court said, “the principal adopts his agent’s fraud and becomes liable.” 256 Mass, at page 448, 152 N.E. at page 920. The relief of rescission which was sought and held available in Reed’s case would be appropriate if the allegations of the complaint in this case are proved.

Moreover, if there has been fraud, and if a rescission of the releases is appropriate, then, upon the allegations of the complaint, the plaintiff may be entitled to even further relief. Of course, he would not, as his first prayer asks, receive a restoration of “his shares of stock” because he never had any shares in the corporate defendant. But it is not true as the defendants contend that the plaintiff would be entitled to nothing whatsoever beyond the formality of a rescission of their releases because, in' their view, the contract of May 7, 1935, was illegal. The defendants’ contention that the contract of May 7, 1935, was illegal is based on their assertions that the contract contemplated the issuance of classes of stock for which the corporation did not then have authority; that there was no assurance that the shareholders would vote to amend their charter, or the Commissioner of Corporations would approve an amendment, so as to permit the creation of new classes of stock or the issue of stock for the trade secrets, services, lease and other assets involved in the contract of May 7, 1935; and that there is no existing authority under the general laws of Massachusetts for the creation of a class of common stock which does not pay dividends.

I do not agree with the defendants’ contention that these considerations stand in the way of further relief.

If for the moment we assume that the contract of May 7, 1935, cannot be carried out as written and cannot be reformed, it does not follow that, after a rescission of the releases, the plaintiff would be without any rights on account of what he had contributed (in the form of knowledge concerning the manufacture of ‘plastics or in other forms) to the defendants. If the contract was impossible of fulfillment because of legal barriers, it was nonetheless not a contract to do an act which was a crime or which was immoral. At worst it was an ultra vires agreement which could not be fully performed without the sanction of outside persons, such as corporate officers and the Commissioner of Corporations, and perhaps without a special legislative act authorizing a particular corporation to issue a novel kind of stock. A party to such an ultra vires agreement has a quasi-contractual right to recover the benefits he has conferred. McLean Co. v. Sidebottom, 277 Mass. 158, 159, 160, 178 N.E. 284; Nims v. Mount Hermon Boys’ School, 160 Mass. 177, 179, 180, 35 N.E. 776, 22 L.R.A. 364, 39 Am.St.Rep. 467; Eastern Expanded Metal Co. v. Webb Granite & Co., 195 Mass. 356, 81 N.E. 251, 11 Ann.Cas. 631; Standard Button Fastening Co. v. Harney, 155 Mass. 507, 29 N.E. 1148. See Herbert v. Sullivan, 1 Cir., 123 F.2d 477, 478; Am.Law Inst., Restatement of Contracts, § 604; Am.Law Inst. Restatement of Restitution, § 108(e); Williston Contracts, 2d Ed., §§ 1630, 1631. And this right of recovery exists not only against the other party to the contract if he is the one who receives the benefits, but also against any third person who has received the benefits without giving value therefor or changing his-position. L’Herbette v. Pittsfield National Bank, 162 Mass. 137, 38 N.E. 368, 44 Am.St.Rep. 354, as explained in National Shawmut Bank v. Citizens’ Nat. Bank, 287 Mass. 329 at page 337, 191 N.E. 647. Compare Nowell v. Equitable Trust Co., 249 Mass. 585, 603, 144 N.E. 749. Am.Law Inst.Restatement of Restitution, §§ 17, 157, 204, 205. As applied to this case, these principles mean that if the releases are set aside and if the contract of May 7, 1935, is incapable of performance or reformation, the plaintiff is entitled either (a) to recover from the defendant corporation his secret processes and the profits attributable to them (See Restatement of Restitution, § 205) and to be protected by an injunction against the further use or disclosure of these processes, or, in the alternative, (b) to compensation on a quasi contractual basis on the usual principles of a quantum valebant.

But it should not be supposed that I regard the contract of May 7, 1935, as being so plainly vitiated by the lack of power of Commonwealth Plastic Company to issue the type of common and preferred shares contemplated in that contract that (once the releases are set aside) the plaintiff’s only remedy would be to seek a quasi contractual restitution of the benefits he has conferred upon the individual defendants and the transferee whom they selected. In my opinion the plaintiff would be free to seek -as an alternative remedy reformation of the agreément of May 7, 1935, by a court of equity.

The plaintiff may be able to show (1) that the nub of the agreement of the parties was that (a) the plaintiff would give to a joint enterprise his know-how in the plastic field, (b) the defendants would lend $5,000 and arrange for rent, sales service and further capital investment, and (c) the enterprise as a whole would be so conducted that the plaintiff would have one-half of the control and one-third of the profits; that in connection with the third factor of their agreement the parties, under a mutual mistake of law, provided for an issue by Commonwealth Plastic Company of certain types of stock which had not been and perhaps could not be authorized; and (2) that any lawful device (such as, for example, a voting trust of the outstanding 100 shares of common stock under an agreement that the plaintiff should nominate one-half the trastees and receive one-third of the dividends) which gave the plaintiff one-half the control and one-third of the profits would carry out the intended transaction.

If the plaintiff can show evidence of that character it may well be that he comes within the rule that courts of equity will reform a written contract where, owing to mutual mistake, the language used therein did not fully or accurately express the agreement and intention of the parties. Canedy et al. v. Marcy, 13 Gray 373, 377; Stockbridge Iron Co. v. Hudson Iron Co., 107 Mass. 290, 319, 320; Franz v. Franz, 308 Mass. 262, 265, 266, 32 N.E.2d 205, 135 A.L.R. 1448; Philippine Sugar Estate’s Development Co. v. Government of Philippine Islands, 247 U.S. 385, 389, 38 S.Ct. 513, 62 L.Ed. 1177; Griswold v. Hazard, 141 U.S. 260, 283, 284, 11 S.Ct. 972, 35 L.Ed. 678. Am.L.Inst.Restatement of Contracts, §§ 504, 511. Williston Contracts, 2d Ed., § 1587, especially p. 4429, first full paragraph. In Franz’s case, for example, where a husband and wife had the intention in the deed to them to acquire equal shares in certain real estate, but the deed used language prepared by a scrivener which failed to achieve that purpose, the wife was held to be entitled to reformation of the deed. That holding might furnish a precedent not too far removed from the case at bar. However, no such point needs to be decided now. It is enough to say that .•since the plaintiff could not secure reformation of the contract of May 7, 1935, without first securing a cancellation of the releases he has given the defendants, his attempt to secure that cancellation is not a vain act, as counsel for the defendants contended in his oral argument.

Another claim put forward by defendants to show that there is no valid cause of action is that the plaintiff has alleged that before bringing suit he has made tender of only $2,000, not including interest. Where fraud by the defendants is charged the plaintiff is under no obligation, at least before bringing a suit in equity, to tender back a sum of money he has received, much less interest upon that sum. Reed v. A. E. Little Co., 256 Mass. 442, 450, 152 N.E. 918; J. C. Penney Co. v. Schulte Real Estate Co., 292 Mass. 42, 45, 197 N.E. 458; In re Meiselman, 2 Cir., 105 F.2d 995, 999-1000; Am.L.Inst., Restatement of Contracts, § 480(2) (c); § 481; Am.L.Inst., Restatement of Restitution, § 65F; Williston, Contracts, 2d Ed., § 1530. This is not to imply that in a final decree, the equity court may not properly consider the question of interest in ordering a restoration of a status quo. Thomas v. Beals, 154 Mass. 51, 54, par. 2, 27 N.E. 1004. Compare J. C. Penney Co. v. Schulte Real Estate Co., supra; In re Meiselman, supra, 105 F.2d at page 1000, lines 27-30.

In conclusion, it should be noted that in this discussion I have considered various types of relief to which the plaintiff might be entitled but which he omitted to mention specifically in his prayers for relief. This omission does not count against the plaintiff under the present Federal Rules of Civil Procedure, 28 U. S.C.A. following section 723c, see especially Rules 8(a) and 54(c). Under these rules, while it is the duty of the plaintiff to give a short and plain statement of his claim and also to demand judgment for the relief to which he deems himself entitled, the test of the complaint upon a motion to dismiss lies in the claim not in the demand. The only issue is whether the claim stated would give the plaintiff a right to any relief, not to the particular relief he demands. Keiser v. Walsh, 73 App.D.C. 167, 118 F.2d 13, 14; Gay v. E. H. Moore Inc., D.C.E.D.Okl., 26 F.Supp. 749, 751, col. 2. See Moore’s Federal Practice, vol. I, § 808, p. 557, and 1944 supplement to that page. Measured by that standard this complaint is not demurrable.

Motions to dismiss denied.