author: HUTCHESON, District Judge.

text:
    POWELL et al. v. UNITED STATES.
    Civil Action No. 321.
    District Court, E. D. Virginia.
    March 24, 1945.

      W. R. C. Cocke, Thomas L. Preston, and F. S. Sargeant, all of Norfolk, Va., for plaintiffs.
    Francis M. Shea, Asst. Atty. Gen., Harry H. Holt, Jr., U. S. Atty., of Hampton, Va., Walkley E. Johnson, Asst. U. S. Atty., of Belle Haven, Va., Arnold Levy, Sp. .Asst, to Atty. Gen., and Hubert Margolies, Frederick Chait, Irvin M. Gottlieb, and Irving Brand, all of Washington, D. C., for -.the United States.
   HUTCHESON, District Judge.

This is a suit brought under Paragraph 20 of Section 24 of the Judicial Code of March 3, 1911, 36 Stat. 1093, as amended, 28 U.S.C.A. § 41(20), known as the Tucker Act.

The parties have entered into statements of agreed facts, respectively denominated “Stipulation of Facts” and “Supplemental Stipulation of Facts”, with certain exhibits attached thereto.

The claim sued upon is for unpaid transportation charges in the amount of $637.54, in respect of which the stipulation of facts reads as follows:

“During July, 1942, the Seaboard rendered its bill (PD-7-23) against the United States in the sum of $733.79 for freight charges on six carloads of wood pulp which had been transported by the Seaboard from Savannah, Georgia, to Norfolk, Virginia. The United States did not question the correctness of said charges, but deducted from the amount due the sum of $637.54, and on September 14, 1942, paid to the Seaboard the balance of $96.25. The sum of $96.25 was accepted by the Seaboard, but under protest and as part payment only. The Seaboard instituted this action to recover the balance due on said bill, to-wit, the sum of $637.54, and the United States has filed herein its counterclaim for the deduction made from said bill.”

The pertinent facts as to the counterclaim asserted by the United States, as shown by the stipulation of facts, are as follows:

During August, 1941, fifty-six (56) carloads of phosphate rock, property of the United States, were transported over the Seaboard from Brewster, Florida, to Tampa, Florida, consigned to the British Ministry of War Transport, an agency representative in the United States of His Majesty’s Government in the United Kingdom. The shipment moved for export, and was exported, to England under the Lend-Lease Program, Act of March 11, 1941, Public No. 11, 55 Stat. 31, 22 U.S.C.A. § 411 et seq., and Act of March 27, 1941, Public No. 23, 55 Stat. 53. In due course, upon bill rendered, the United States paid to the Seaboard for transportation of this shipment the sum of $2,608.70.

During the same month several shipments aggregating twenty-two (22) carloads of superphosphate, property of the United States, were transported over the Seaboard from Nichols, Florida, to Tampa, Florida, likewise consigned to the British Ministry of War Transport. These shipments also moved for export, and were exported, to England under the Lend-Lease Program. Upon bill rendered, the United States paid to the Seaboard for transportation of these shipments the sum of $546.17. On all shipments the Seaboard’s charge was computed at full commercial tariff rates for like services to the general public.

In August, 1942, upon post audit, the United States notified the Seaboard that it took exception to the bills for $2,608.70 and $546.17, both of which it had already, paid in full. It was claimed that the bills in question included overcharges in the respective amounts of $472.81 and $164.73, or a total overcharge of $637.54. Accordingly, this amount was deducted from the unpaid bill for $733.79 covering the shipment of wood pulp above mentioned, and the balance of $96.25 only was paid.

The exception taken by the United States to the bills rendered by the Seaboard for transportation of the phosphate rock and superphosphate shipments above described, was based upon the contention that these shipments constituted “military or naval property of the United States moving for military or naval and not for civil use”, within the meaning of Section 321(a) of the Transportation Act of 1940, 49 U.S.C.A. § 65(a). If this contention be sound, the shipments were entitled to move subject to so-called “land grant” deductions from the full commercial rates, as hereinafter explained. It is not disputed that the deduction made was accurately computed. But, as set forth in petitioners’ Reply to Counterclaim, “petitioners deny that said phosphate rock and superphosphate were military or naval property of- the United States moving for military or naval and not for civil use, and entitled to land-grant deductions”.

No controversy exists as to the validity of the claim sued upon independently of the foregoing counterclaim set up by way of defense. If the counterclaim asserted is valid, the suit should be dismissed, and if not valid, judgment should be rendered the plaintiffs in accordance with the prayer of the petition. This is agreed upon between the parties and so appears from the stipulation.

Reduced to simple terms, the question is whether the phosphate rock and superphosphate constituting the shipments involved constituted “military or naval property of the United States moving for military or naval and not for civil use” within the meaning of the Transportation Act of 1940.

The contentions of the respective parties have been ably presented by both oral argument and briefs.

In approaching the subject it is helpful to give some consideration to the history of both the Transportation Act and the Lend-Lease Act.

During the early years of expanding railroad development the United States granted public lands to numerous railroads, particularly in the West and to many in the South. The underlying policy of the Government was to encourage the building of railroads in unsettled or sparsely settled areas to facilitate the development of such areas and to ultimately afford additional markets and sources of produce to the more congested sections of the country and to provide a means of transporting troops and military equipment in time of need. Among the roads to which such grants were made were certain corporations which were predecessors in title of the Seaboard (the plaintiff here). This result in respect of the Seaboard was accomplished through grants directly to the State of Florida and by that State in turn to such corporations. The original grant was made for the construction of a main line of railroad from Fernandina to Tampa Bay and a branch line from Waldo to Cedar Key and contained the following condition:

“And the said railroad * * * shall be and remain a public highway for the use of the government of the United States, free from toll or other charges upon the transportation of any property or troops of the United States.” Act of May 17, 1856, Section 3, 11 Stat. 15.

Similar conditions were imposed by the terms of other grants.

In Lake Superior & M. R. Co. v. United States, 93 U.S. 442, 23 L.Ed. 965, decided in 1877, the Supreme Court construed the condition of such grant as reserving to the Government only the free use of the road bed as a highway but held that the railroad could not be required to transport over such road troops or property of the Government free of charge.

Following the foregoing decision the Court of Claims held, that by reason of the right of the Government as provided in the reservation to- use the road bed, a reduction of fifty per cent in rates should be allowed by the railroad in transporting such property. Thus the Government bore 50% of the total burden of such tranportation in the form of its right to use the road bed and the railroad was paid the remaining 50% as compensation for the use and operation of its equipment.

In 1924 an act was passed by Congress vesting in the Secretary of War authority to fix such rates for the transportation of property or troops of the United States over land grant roads as he deemed just and reasonable, but not exceeding 50% of the full amount of compensation for like transportation performed for the public at large. Act of June 7, 1924, c. 291, Title I, 43 Stat. 486, 10 U.S.C.A. § 1375. By virtue of the decisions cited and the Act of 1924, the railroads transported over those portions of their respective lines constituting the “land grant” portions, all property of the United States, as well as troops without limitation as to the nature of the property.

Attention is directed to the fact that the Secretary of War was the official designated under that Act to fix the lates. Such designation was probably due to the recognition by Congress of the fact that the bulk of railroad traffic in which the Government was interested was military property.

Being desirous of participating in the traffic, competing lines not subject to the so-called “land grant rates” entered into what has been designated as “equalization agreements” to meet the rates of the “land grant” roads. With such agreements the case at bar is not concerned except as suggesting the far reaching effects on the rate structure of the roads as applied to Government traffic.

Expanding governmental activities during the period following the passage of the Act of 1924 caused an unprecedented increase in the movement over these railroads of vast quantities of property of the United States and a corresponding increase in the travel of civilian employees charged .with the administration of these activities. All such traffic was entitled to move at 50% of the regular commercial rates. This traffic was excluded from the benefits of the reduced rates by the Transportation Act of 1940, enacted pursuant to recommendations of Committees appointed by the President and by the War Department.

In its brief the Government suggests that in enacting the Transportation Act of 1940 Congress had in mind the probable involvement of this Country in war in the near future, and it is contended that the words “military or naval property of the United States moving for military or naval and not for civil use” must be interpreted in the light of conditions then existing.

In March 1941, after eighteen months of hostilities in Europe and with German and Italian conquests expanding, Congress enacted legislation designed to “further * * promote the defense of the United States, and for other purposes”, known as the Lend-Lease Act. Public Law 11, 77th Congress, Chapter 11, First Session, H.R. 1776, 22 U.S.C.A. § 411 et seq. At that time England stood alone and concern regarding a realization of a Japanese threat to the United States mounted.

The Act confers upon the President almost unlimited discretionary powers and among others (Section 3) “to manufacture * * * or otherwise procure * * * any defense article for the government of any country whose defense the President deems vital to the defense of the United States”, and “To sell, transfer title to, exchange, lease, lend, or otherwise dispose of, to any such government any defense article * * * after consultation with the Chief of Staff of the Army or the Chief of Naval Operations of the Navy, or both. * * *” And “* * * to release for export any defense article disposed of in any way * * * to any such government.” The term “defense article” is defined as meaning, among other things, “any agricultural, industrial or other commodity or article for defense”. The term is further defined as including any article manufactured or procured pursuant to Section 3 or to which the United States or any foreign government had or thereafter acquired title, possession or control. Provision is made that the President shall transmit to Congress reports of operations under the Act.

This legislation has been supplemented from time to time by various acts appropriating necessary funds and as of September 25, 1944, seventeen reports of such operations had been submitted to Congress.

It is stipulated that the property involved in the instant case was being transported for the United States; that the property constituted “defense articles”, as defined in the Lend-Lease Act; that when requisition is made by any country the defense of which the President deems vital to the defense of the United States, such requisition is carefully considered and scrutinized and is issued, modified or rejected in accordance with the determination by the President or his properly authorized representative as to whether or not such shipment will promote the defense of the United States in accordance with the provisions of the Act. It is further stipulated that either party may refer to the official published reports made to Congress by the President as provided in the Act and to Rules of the Comptroller General without the formal introduction of such Reports and Rules.

To reach a determination of this case the Court must determine whether under the Transportation Act of 1940 the phosphate rock and superphosphate was, first, military or naval property of the United States, and second, moving for military or naval and not for civil use. Both queries require an affirmance in order to sustain the Government’s position.

The second question does not involve a consideration of the nation by which the property might be put to military or naval use. Such use of the property by a power other than the United States would seem to be such military or naval use as would be sufficient for the requiremént of the Act.

While phosphate rock and superphosphate may be used for various purposes, it is stipulated that the shipment here involved was destined for use as agricultural fertilizer supplied the farmer in Great Britain under the Lend-Lease Act and was moving over a land-grant railroad. The stipulation contains the following language :

“In 1941, at the times the requisitions for the materials involved in the counterclaim were made, approved and authorized, and the shipments moved, there was a serious food situation in Great Britain, by virtue of the fact that Great Britain, normally a heavy food importing nation, was cut off from many sources of supply. Imports were further restricted by shortage of shipping. Great Britain therefore found it necessary to revise her agricultural practices in order to intensify production of food for direct human consumption. It was necessary to put into production a large acreage of land normally not used for the production of food for direct human consumption, and phosphate fertilizers had to be imported and distributed to effectuate this revised agricultural program. The shipments of phosphate rock and super-phosphate comprised a part of that program. Great Britain instituted controls which resulted in the proper use and distribution of said materials to accomplish this purpose, for which they were requisitioned and authorized under the Lend-Lease Act.”

The Lend-Lease Act contains no language indicating an intention on the part of Congress to modify the terms of the Transportation Act nor does it define materials acquired thereunder as being intended or destined for military or naval use unless it be considered that the term “defense” as there employed necessarily implies such use. It is urged that in waging modern warfare all resources of a country are mobilized and articles heretofore considered as non-military assume such character in conducting what has been termed “total war”. England has been likened to a besieged fortress and it is contended that such assistance as was rendered that country was assistance in carrying on the war in a military sense. The contention of the Government is briefly summed up in the following quotations from its brief:

“In an integrated war economy, the supply of raw materials, the exploitation of the industrial plant, and the utilization of the land for food production are directly related to war. With modern science and changed methods of war transforming many substances once considered unimportant for a belligerent’s purposes into strategic military material, the general language ‘military property’ cannot be limited to the precise items which would have been embraced within it centuries ago.”

And further:

“It is not suggested that food stuffs, or phosphate are necessarily ‘military property’, as such. However, under the particular conditions of war or defense, they can become indispensable to military functioning. When owned by the United States, and devoted to a war or defense use, they take on a character of military property. Military and non-military articles can be classified only after appropriate consideration has been given to the pressures, the exigencies and the practice of the times. Thus, even when food was not considered to be contraband unless moving for direct army use, it was recognized that the proclamation of a warring government could impress it with the character of contraband.” Citing Balfour, Guthrie & Co. v. Portland and Asiatic S. S. Co., D.C., 167 F. 1010; Spiegel, Economics of Total War (1942), p. 287.

This line of reasoning, if followed to its logical conclusion, would obliterate any distinction between the civilian and the military in time of war.

In adopting the language of the Transportation Act, Congress recognized a distinction between military or naval property and other property of the Government and it recognized the distinction between military or naval property moving for military or naval use and such property moving for civil use. As has been pointed out, the Act was passed at a time when there existed a threat of involvement of this country in total war on a world-wide stage, the serious nature of which is realized when it is recalled that the threat resulted in an accomplished fact within less than fifteen months from the time Congress acted. The United States along with the world was a close observer of the methods of waging “total war” and Congress was fully aware that modern wars engage the full resources of belligerent nations. Nevertheless, the Act clearly recognizes the distinction between the civil and the military. Appropriate language might have been used basing the exception upon the existence of a state of war, but this was not done.

An examination of the reports made to Congress by the President of the operations under the Lend-Lease Act shows the nature of the property transferred to be almost as various as the property itself and as varied as the nations participating. For example, the report of August 24, 1944, lists 46 foreign countries as participating and the articles distributed embrace, among other things, ordnance and combat ships upon the one hand and dried beans and skimmed milk upon the other. Beginning in December 1941, 1,300,000 small children received a regular supply, of concentrated orange or black currant juice and of cod liver oil compound.

While the agencies employed in acquiring these varied articles are not specifically reflected in respect of each item, the Lend-Lease Act and the Defense and Supplemental Appropriation Act provide for authorization by the President in this connection of not only the Secretary of War and the Secretary of the Navy, but the head of any other department or agency of the Government.

In the several reports a distinction is drawn between military and non-military goods. For example, in the report of August 24, 1944, Table No. 3, appearing on page 11, is denominated: “Quantities of Non-Military Goods Transferred”, and among other items lists fertilizer — the article with which we are now concerned. Similar instances appear at many places in the various reports and innumerable illustrations of the transfer of articles strictly for use by civilians might be shown.

It would appear that Congress adopted or approved this interpretation. The President has repeatedly reported to Congress tne distribution of huge quantities of.nonmilitary and distinctly civilian goods and with these reports before it Congress has ■endorsed and approved this course by enabling its continuance by the enactment of the necessary appropriation acts.

The construction given to a statute by the Executive Department charged with its administration is entitled to great weight.

Fertilizer is an article of value defensively. That fact has been determined by the President and stipulated by the parties and the Court has no authority to review or inquire into such determination. But does the identity of an article as being of value or use in defense of the nation necessarily imply a military or naval and not civil use ? It may have a potential military value. Phosphate concededly does have value or use in the manufacture of munitions but that is not the use to which this particular shipment was moving.

Among other definitions, Funk and Wagnalls Standard Dictionary of the English Language defines “defense” as: “To defend; vindicate; fortify * * *”, and “defend” as: “To protect or shield from attack or violence; guard against threatened or offered harm; to make a stand for, or uphold by force or argument; maintain against attack, encroachment or opposition; maintain; vindicate, as "to defend the course of the administration * *

“Military” is defined as: “Of or pertaining to soldiers, arms or warfare * * soldierly, warlike; martial; done, supported, or carried on by force of arms; assigned to or occupied by troops”.-

“Civilian” is defined as: “One who follows civil pursuits as distinguished from -military, naval or clerical”.

“Civil” means: “Pertaining to a citizen in regard to ordinary affairs; opposed to ecclesiastical or military”.

Unless technically employed, language is to be given its ordinary meaning and from the definitions cited it follows that while the term “defense” may and often does carry with it the idea of force, it does not necessarily mean the use of physical force. Upon the contrary it may, and often does, mean the employment of efforts unrelated to physical force. Translated to terms of the individual it may mean the peaceful application to a court of law for protection against a threat to property. On the part of the state it may mean draining a swamp to defend the health of the citizens or the construction of housing projects to provide accommodations for civilians employed in industries producing war materials.

Between the terms “military” and “civil” there is a wide distinction. “Military use” or “martial use”, which may be considered for the present purpose as embracing “naval use”, suggests the thought of physical force with destruction as its exclusive ultimate aim. It does not carry with it the idea of even constructive force. The bridge erected by the engineers is not a bridge for use by those engaged in peaceful civilian pursuits, but is a mere temporary expedient to be utilized in advancing while seeking out the enemy to destroy him.

Among other agencies of the Government created for the specific purpose of aiding in the prosecution of the war are the Office of Price Administration and the War Production Board, the underlying purpose of both being to combat financial inflation and resulting confusion on the home front. In addition to agencies of such nature, the regular civilian establishments of the Government are charged with responsibilities essentially related to the war effort. For example, upon the United States Attorney rests among other duties those of prosecuting persons charged with evading service in the armed forces and acquiring sites for training those called to such service.

It could hardly be contended that a typewriter or other supplies for use of any of those agencies is military or naval property of the United States or that it is moving for military or naval and not civil use.

If such a construction should be placed upon the Transportation Act, the words “and not civil” would have no meaning, although those words were obviously intended to have a meaning and were employed at a time and under circumstances indicating danger of war.

I am unable to draw a distinction under the Transportation Act between the status of fertilizer moving for use by a farmer in Cornwall or a farmer in Haiti under the Lend-Lease Act, and fertilizer moving for use by a farmer in the middle west furnished by the Government under appropriate provisions of the Agricultural Adjustment Administration. All are engaged in the production of agricultural products essential for the successful prosecution of the war. All are producing with fertilizer which moved as' property of the United States; all are engaged in one of the most traditional of all civilian occupations, constituting the antithesis of destructive effort and as far removed from martial activities as can be imagined, and all are working to supply their respective markets with such surplus as may be available.

It is therefore my conclusion that the phosphate rock and superphosphate, within the meaning of the Transportation Act, was not military or naval property of the United States and was moving for civil use; that the counterclaim asserted by the Government should be dismissed and judgment should be rendered the plaintiffs in accordance with the prayer of the petitioner.

       “See. 321(a). Notwithstanding any other provision of law, * * * the full applicable commercial rates * * * shall be paid for transportation by any common carrier subject to the Act of any * * * property for the United States, or on its behalf, except that the foregoing provision shall not apply to the transportation of military or naval property of the United States moving for military or naval and not for civil use or to the transportation of members of the military or naval forces of the United States * * * when such members are traveling on official duty; * * *

       Atchison, T. & S. F. R. R. Co. v. United States, 15 Ct.Cl. 126.

       See House Document No. 583 of the 75th Congress, 3rd Session; Hearings, 76th Congress, House Committee on Interstate and Foreign Commerce, H.R. 2531, Vol. I, pp. 259-308, at pages 271, 272; Report of Hearings House Committee on Interstate and Foreign Commerce, 75th Congress, pp. 16, 17.

         In reconstructing the scene, passing reference may be made to some of the more important related legislative enactments of the period, with the respective dates. Alien Registration Act, 1940, 54 Stat. 673, June 28, 1940; Army Reserve and Retired Personnel Service Law of 1940, 54 Stat. 858, August 27, 1940, 50 U.S.C.A. Appendix § 401 et seq.; Selective Training and Service Act of 1940, 54 Stat. 885, Sept. 16, 1940, 50 U.S.C.A. Appendix § 301 et seq.; Alien Veterans’ Act, 54 Stat. 1149, Oct. 14, 1940, 8 U.S. C.A. § 723 et seq.; Soldiers and Sailors Civil Relief Act of 1940, 54 Stat. 1178, Oct. 17, 1940, -50 U.S.C.A. Appendix § 501 et seq. The Alien Agency Act, 52 Stat. 631, had been amended on August 7, 1939, 53 Stat. 1244, 22 U.S.C.A. § 611 et seq. The Neutrality Acts were the subject of Congressional action in 1940. Other references to contemporary occurrences might be made.

       United States v. Jackson, 280 U.S. 183, 50 S.Ct. 143, 74 L.Ed. 361; United States v. American Trucking Association, 310 U.S. 534, 60 S.Ct. 1059, 84 L.Ed. 1345; National Lead Co. v. United States, 252 U.S. 140, 40 S.Ct. 237, 64 L.Ed. 496.


source: Caselaw Access Project

author: DE VANE, District Judge.

license: Public Domain

text:
    SECURITIES AND EXCHANGE COMMISSION v. W. J. HOWEY CO. et al.
    Civil Action No. 220.
    District Court, S. D. Florida, Orlando Division.
    April 17, 1945.
    Wm. A. McClain, of Atlanta, Ga., for plaintiff.
    C. E. Duncan, of Tavares, Fla., and George C. Bedell, of Jacksonville, Fla., for defendants.
   DE VANE, District Judge.

There is no controversy with respect to the facts in this case. The parties, by written stipulation filed May 20, 1944, have agreed upon the principal facts. In addition, the parties offered oral and documentary evidence at a hearing subsequently held at the direction of the Court for the purpose of supplying certain additional information desired by the Court.

The record shows that the W. J. Howey Company, hereafter referred to as the Howey Company, is a corporation, organized under the laws of the State of Florida in 1922, with its principal place of business at Howey-in-the-Hills, Florida. Howey-inthe-Hills Service, Inc., hereafter referred to as the Service Company, is a corporation organized under the laws of the State of Florida in 1932, with its principal place of business at Howey-in-the-Hills, Florida. G. W.. Griffin is president and Dodge Taylor is vice president of both companies. The Howey Company and the Service Company share the same offices and utilize the same personnel and both companies are under direct common control.

The Howey Company is the owner of large tracts of land in Lake County, Florida, which it is now and for more than twenty years has been planting to citrus trees and selling at various stages of development, after the trees have reached one year old or older. The prices charged vary according to the number of years the land has been planted to citrus trees. The price generally received for land where the trees are one year old is $675 per acre; for two year old trees, $750 per acre; and bearing trees, five years or older, approximately $1,000 per acre.

The Service Company is now and since its organization has been engaged in the business of cultivating and caring for citrus groves sold by the Howey Company to others where its services were desired by the purchaser. It has, since 1935, used a standard form of service contract. In occasional instances modification of this contract is made to suit the requirements of a particular owner. By such service contract the Service Company undertakes to properly maintain, fertilize, spray, cultivate, and otherwise care for the citrus groves, for a specified service charge of $40 per acre per year for trees under five years old, and $30 per acre, per year, for bearing groves more than five years old.

In addition to the service charge the owner of the land agrees to pay for pruning, dusting and dusting material, spraying and spray material, special treatment, seed for cover crop, sowing of same, fertilizer, replacement of any trees which may die, and watering of trees when necessary. The Service Company acts as the agent of the owner of the property for the purpose of marketing the fruit, if that service is desired.

During the three year period ended May 31, 1943 — being the period involved in this case — the Howey Company sold fifty-one (51) parcels of land comprising 195.26 acres of grove property. Of the fifty-one purchasers forty-two entered into the service contract with the Service Company for the care of their properties. The contracts covered 166.54 acres, or 85% of the acreage sold by the Howey Company during that period.

' The Service Company is also engaged in the general business of servicing citrus groves and services many grove properties. It maintains 75 tractors, spray wagons, fertilizer trucks and other machinery used in the cultivation of citrus trees; a machine shop with mechanics and a force of about one man to each 100 acres of grove property. The record does not disclose the total acreage being cared for by the Service Company on May 31, 1943, but it does disclose that in March, 1944, it was servicing 2,487.36 acres of citrus grove. The 166.54 acres covered by the contracts mentioned above constitutes less than 7% of the total acreage under service agreements with the Service Company.

The citrus industry is an established industry in central and southern Florida and according to United States Census of 1940 there were 1721 farms reporting two (2) acres or more of citrus trees in Lake County, with more than one million trees of bearing age. It is a matter of common knowledge in the citrus section of Florida, and the record discloses, that the care of citrus groves requires equipment and a force beyond the means of the owner of a small tract of citrus property and there are numerous companies of good standing in the State, whose business is to service groves owned by others. There are at least seven such companies operating in the area in which the Service Company operates.

Plaintiff contends that the activities of the Howey Company and the Service Company in the sale of grove properties and in the care of same, constitute a violation of Section 5(a) of the Securities Act of 1933, 15 U.S.C.A. § 77e(a), and by this suit seeks to enjoin such acts and practices. The specific charge is that the entry into service contracts by the Service Company, with purchasers of land from the Howey Company, constitutes the sale of securities and as no registration statement with respect to such activities has been or is now in effect with the Securities and Exchange Commission, that the defendants should be enjoined from continuation of their present practices until registration statements have been filed and approved according to the requirements of the Securities Act of 1933.

In deciding this case I desire to let the record show that I adhere to the legal principle and interpretation of the Securities Act, as announced by Judge Strum, in Securities & Exchange Commission v. Bailey et al., D.C., 41 F.Supp. 647. I find from the testimony introduced in this case that this case does not fall within the same category as that case and under facts shown by the record in this case, the defendants are not selling securities as that word is defined in the Securities Act and that the Government is not entitled to the relief sought in this particular suit.

In Securities & Exchange Commission v. Bailey et al., supra, the two companies there involved were the owners of large tracts of land in Marion County, Florida, said to be peculiarly adapted for growing tung trees. These companies were engaged in selling these lands to the public in small tracts for development and cultivation of tung oil producing trees. Currently with or shortly after execution of a “sales” contract, a separate “development” contract was executed between the purchaser and development company, or an individual identified with the companies owning the land. An extensive advertising campaign was carried on and the raw land was sold, sight unseen, to the purchaser. The tung oil industry was a new untried and undeveloped industry in Florida. Little was known about it, but glowing pictures were painted of the prospects. The fact that the Securities Act reaches out to stop such activities is a blessing to our gullible and unsuspecting public.

As pointed out above, the citrus industry is an established industry in Florida. Its beginning antedates the building of railroads in the State and its progress has been such that it is the largest single farming activity in the State today. Moreover, the record in this case shows that not a single sale of citrus grove property was made by the Howey Company during the period involved in this suit, except to purchasers who actually inspected the property before purchasing the same. The record further discloses that no purchaser is required to engage the Service Company to care for his property and that of the fifty-one purchasers acquiring property during this period, only forty-two entered into contracts with the Service Company for the care of the property. The competition between service companies is keen. The services offered by the Howey Company through the Servicé Company to the purchasers of citrus properties from the Howey Company is more in the nature of a guarantee to such purchasers that their properties will be well cared for, than anything else. The Service Company could not long exist if it depended altogether upon the business secured from the sales made by the Howey Company. Moreover, the purchasers of these small tracts of citrus property could not safely acquire same unless they did, at the same time, secure the services of some reliable service company to care for their properties. The employment of the Service Company by the purchasers of property from the Howey Company in no way constitutes a violation of the Securities Act of 1933.

Findings of Fact and Conclusions of Law will be prepared in conformity with this Memorandum Opinion.