plicant should have a permit. The character and extent of the review is definitely stated by the Supreme Court in these words: "On the other hand, it is clear that Congress, in providing that an adverse decision of the Commissioner might be reviewed in a court of equity, did not undertake to vest in the court the administrative function of determining whether or not the permit should be granted; but that this provision is to be construed, in the light of the well established rule in analogous cases, as merely giving the court authority to determine whether, upon the facts and law, the action of the Commissioner is based upon an error of law, or is wholly unsupported by the evidence or clearly arbitrary or capricious," citing Silberschein v. United States, supra, the law of which we have already quoted with reference to the character of the discretion reposed in the Commissioner. [5] On such a review, with power under the statute to "affirm, modify or reverse" the action of the Commissioner, it is manifest there must be something before the court to review. This of course should be the record below. That record may in part consist of the testimony before the Hearer but in addition it must certainly contain the action of the Commissioner-the subject-matter of the review. If his action consists of nothing beyond a flat refusal of the application-the grounds for his action being nowhere shown -the court may, when opposed by a favorable showing on the part of the applicant, regard the Commissioner's action as unsupported by evidence and therefore arbitrary. This is a risk the Commissioner runs if throughout the proceeding he acts in silence, for manifestly when the law reposes in him great power to be wielded through the exercise of his discretion and then affords a review of his action thus exercised, it contemplates that he should in some way give the reviewing tribunal some grounds on which to rest a judgment that he has not abused his discretion and that his decision is not arbitrary. He must somehow supply the court with a record of what he did and why he did it. Without being informed of the reasons for the Commissioner's action, a reviewing court cannot perform the function which the statute has placed upon it of affirming, modifying or reversing what he has done. If he stands mute throughout and supplies the court with no grounds for his action-that is, no evidence of a proper exercise of his discretion-then the court will be driven to the applicant's case as made in the record. In such a situation the court may, on the appli cant's case alone, find an abuse of discretion and reverse the Commissioner; or, if the applicant's case itself shows a situation which would not justify the grant of a permit, the court may, notwithstanding the Commissioner's silence, affirm his action. And to precisely that point we now come on the merits of the case at bar. [6] Disregarding the applicant's two affidavits and the Commissioner's one affidavit filed in the District Court as matters originally introduced there and hence no part of the record taken up for review, we look to the record as it validly exists to find whether it supports the Commissioner's administrative order denying the application for a permit and supports the court's judicial decree sustaining his action, within the rule affecting each as laid down in the Ma-King Case. The record consists of the bill of review and accompanying exhibits including the application for a permit and certain business letters; the Commissioner's first disapproval of the application "for the reason that (the applicant was) unable to furnish sufficient evidence to warrant approval of same"; the testimony taken at the hearing; the report of the Hearer, containing findings from the evidence that at no time prior to filing his application had the applicant used alcohol in curing tobacco; that there is no evidence of the necessity for its use for that purpose or any purpose connected with his business and that there is no evidence to indicate in just what way, if at all, the product of the applicant would be improved by its use. The Hearer might also have referred to the testimony of the applicant that although he had never used alcohol in curing, flavoring and stripping tobacco, he intended to use it for that purpose on an estimated output of around 150 cases a month, each case containing not more than 350 pounds, and that, as a matter of common observation, a monthly withdrawal of 5,000 wine gallons of denatured alcohol for such a purpose is greatly in excess of its possible use in spraying and curing the hoped for or expected monthly output of tobacco. The Hearer concludes his report with a finding that the applicant failed to meet the burden of establishing a right to a permit to use alcohol for the industrial purpose named and recommended its disapproval. There followed an approval of the recommendation by the legal advisor of the Commissioner and the Commissioner's concurrence with the Hearer's recommendation. We are of opinion that the case as made by the applicant himself contains evidence 25 F.(2d) 85 of lack of business need for alcohol in the quantities he demanded, that the great disparity between what he asked for and what on his own showing would be used in his expected business raised such a doubt as to the lawful use to which the remainder might be put as to justify the Commissioner in finding against the application. Therefore, notwithstanding what in ordinary cases would be dangerous silence of the Commissioner, the applicant has by his own showing supplied enough evidence to support the Commissioner's finding against him and enough to sustain the decree of the District Court that the Commissioner did not abuse his discretion. The District Court entered a decree dismissing the bill of review. This was in effect an affirmance of the Commissioner's order refusing the permit. As it was in accord with the authority conferred on the court by section 5 of the Act, namely: to "affirm, modify, or reverse the finding of the Commissioner," it conformed to the law, and the question, academic in this case, as to what kind of order should be made in another case where a District Court finds against the Administrator does not call for decision. The decree is affirmed. MUDD v. PERRY et al. Circuit Court of Appeals, Eighth Circuit. February 21, 1928. No. 7637. 1. Courts 284-Federal court has jurisdiction of suit involving construction and appli cation of federal statute; “arising under laws of United States." Where the principal issue in a suit involves the construction and application of a federal statute, it is one arising under a law of the United States of which a federal court has jurisdiction. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, AriseArising.] 2. Appeal and error 161-Party accepting part of property claimed by him and awarded by judgment is not estopped from appealing. A party, by accepting part of property claimed by him and awarded by judgment is not estopped to prosecute appeal. 3. Indians 28-Action of county court of Oklahoma in probated estate of deceased Osage allottee is subject to law of state providing for appeals (Osage Act, § 3). By Act April 18, 1912, § 3, 37 Stat. 86, providing that property of deceased Osage allottees "shall in probate matters be subject to the jurisdiction of the county courts of the state of For opinion, below, see 14 F. (2d).430. O. L. Rider, of Vinita, Okl. (John Barry and W. R. Bleakmore, both of Oklahoma City, Okl., on the brief), for appellant. N. E. McNeill and Charles B. Rogers, both of Tulsa, Okl., for appellees. Before VAN VALKENBURGH, Circuit Judge, and REEVES and OTIS, District Judges. and appellees were plaintiff and defendants, REEVES, District Judge. Appellant respectively, in the trial court, and will be so styled in this opinion. Plaintiff filed a bill in equity for the removal of a cloud upon the title to certain real estate claimed by him in the state of Oklahoma. For special relief pending the suit, he asked that the defendants be restrained from asserting title to said property. There are no facts in controversy. When the issues were joined upon motion of the defendants, the trial court entered a decree upon the pleadings for them. The pleadings disclose that plaintiff belonged to the Osage Tribe of Indians, and that he was a brother of Lucy Lotson Perry, also a member of said tribe. Lucy Lotson Perry died about May 30, 1922, without issue and the only surviving blood relatives of said defendant were plaintiff and a niece, who was the daughter of a deceased brother. The law of the state of Oklahoma controls the descent and distribution of the estates of deceased Osage Indians. Moreover, the Congress had provided "that the property of deceased Osage Tribe, allottees of the shall in probate matters, be subject to the jurisdiction of the county courts of the state of Oklahoma." 37 Stat. 86. The plaintiff and his niece, Maude Lee Mudd, on March 23, 1923, filed their petition in the county court of Craig county, Okl., wherein they prayed for distribution of the estate to them as the "sole legal heirs of the said decedent." Each claimed an undivided one-half interest therein. On April 19, 1923, the defendant Samuel were granted jurisdiction "in probate matA. Perry appeared in court with a cross- ters" over the estates of deceased allottees petition, wherein he asked for distribution of the Osage Tribe of Indians. In construof an undivided one-half of said estate to ing and applying the act, plaintiff contends him, upon the ground that he was the com- the county courts became mere ministerial mon-law husband of the deceased. federal agents, and that their decisions became conclusive and final. This construction and application is challenged by the defendants. Therefore the decision of the case depends upon the construction and application of said statute. It becomes in that view a case arising under the laws of the United States (South Covington Ry. Co. v. Newport, 259 U. S. 97, 42 S. Ct. 418, 66 L. Ed. 842), and confers jurisdiction upon the federal court. The county court disallowed the claim of Perry, whereupon he prosecuted an appeal to the district court. In the district court, Perry secured a reversal of the judgment of the county court, and obtained a recognition of his rights as the common-law husband of the said Lucy Lotson Perry. From the judgment of the district court, plaintiff and his niece prosecuted an appeal to the Supreme Court of Oklahoma. 108 Okl. 168, 235 P. 479. After the appeal was lodged in the Supreme Court, Maude Lee Mudd, the niece, procured an order from the court dismissing her appeal. Upon a review of the case, the judgment of the district court was affirmed. The contention of the defendant Perry being sustained, he was awarded an undivided onehalf interest in the estate of the decedent, including the real estate here involved. The court, however, awarded to plaintiff and his niece each an undivided one-fourth interest. The county court obeyed the mandate of the Supreme Court, and made distribution in accordance therewith. The plaintiff has accepted and receipted for the part awarded to him by the final judgment of the Supreme Court. He still asserts, however, that instead of a one-fourth interest he is entitled to a one-half interest. The primary and main contention in this court is that the district court and Supreme Court never acquired jurisdiction of said cause on appeal, and in consequence the final judgment is a nullity and beclouds plaintiff's title. The defendant Charles B. Rogers is an assignee of an interest in the estate from the defendant Perry. The defendants challenge the jurisdiction of the federal court, but, even conceding such jurisdiction, they maintain the validity of the final state court judgment. These contentions will be noted and discussed. [1] 1. At the threshold, it becomes the duty of the court to determine the question of jurisdiction. Concededly, there was not a diversity of citizenship. Plaintiff, however, asserts a federal question. The construction and application of section 3 of the Act of Congress, approved April 18, 1912 (37 Stat. 86), relating to the Osage Tribe of Indians, is brought in question. By this provision the county courts of the state of Oklahoma 2. The defendants asserted in the trial court that the plaintiff had no right to maintain in the federal court an action to quiet title to land not in his possession. Such a right, it was admitted, is vouchsafed to the plaintiff under the laws of Oklahoma. An examination of the pleadings shows that it is not in fact an action to quiet title. This is conceded by the appellees. Moreover, the objection urged in the trial court is not pressed here, though noticed and discussed in the briefs. Both parties are out of possession as it appears from the pleadings, and the relief sought is injunctive, involving, among other things, the cancellation of the judgment affirmed by the Supreme Court of Oklahoma. The rule of the federal court against the maintenance of an action to quiet title or for possession of real estate by a complainant out of possession against a defendant in possession is not applicable nor is it invoked. The proceeding in the instant case, as stated, is not to quiet title or obtain possession, but its sole purpose is to secure an annulment of a judgment which it is claimed beclouds the title. [2] 3. Because plaintiff accepted the award made to him under the mandate of the Supreme Court of Oklahoma, the defendants insist that his case should be dismissed. It is claimed that he is estopped to prosecute this action. The final judgment of the Oklahoma court gave plaintiff one-fourth of the estate, whereas he asserts title to one-half. Plaintiff has only received the uncontroverted part of his claim, and by the acceptance of such part he does not waive his right to prosecute his appeal as to the other onefourth claimed by him. 2 R. C. L. 61-63. [3] 4. This brings us to the chief point in controversy. The congressional act under observation provided that the property of the deceased allottees of the Osage Tribe of In 25 F.(2d) 87 dians "shall, in probate matters, be subject to the jurisdiction of the county courts of the state of Oklahoma." (37 Stat. 86.) This was a devolution by the Congress of judicial authority upon the county courts of Oklahoma to determine judicially, among other things, who were rightful claimants to the estate of deceased allottees of the Osage Indian Tribe. It was more than a mere selection of the county court for the performance of a ministerial or executive duty. It involved, as Congress must have intended, a judicial inquiry. The county courts of Oklahoma were not designated as agents or final arbiters in such matters, but it was provided that such estates "shall, in probate matters, be subject to the jurisdiction of the county courts." It was expressly held, in Levin v. United States (C. C. A.) 128 F. 826, in an opinion by Judge Sanborn of this circuit, that the Congress had authority under the Constitution to confer "judicial power upon other courts, or upon executives or other officers, in other cases, where, in its opinion, the devolution of such power is either necessary or convenient in the execution of the authority granted to the legislative or to the executive department of the government through the Constitution." It is the law that the authority to hear and determine a cause includes jurisdiction to try and decide all the questions involved in the controversy. In re Antigo Screen Door Co. (C. C. A.) 123 F. 249; Shull v. Boyd, 251 Mo. 452, 158 S. W. 313. Moreover, where jurisdiction over a new subject is conferred on a court of general jurisdiction, the jurisdiction conferred is to be exercised by it as such a court. 15 C. J. 815. The Constitution of Oklahoma (article 7, §13) confers probate jurisdiction upon the county courts of that state in the following language: "The county court shall have the general jurisdiction of a probate court. It shall transact all business appertaining to the estates of deceased persons, including the tion of the estates thereof." distribu It will be observed that the Congress therefore conferred upon a court of general jurisdiction in probate matters a special jurisdiction over the estates of deceased allottees of the Osage Indians, with authority to exercise its general jurisdiction in such individual cases. The Constitution of Oklahoma (art. 7, § 16) further provided that, "in all cases arising under the probate jurisdiction of the county court, appeals may be taken from the judgments of the county court to the district court of the county." The principal function of an appellate tribunal is the exercise of supervision over the subordinate courts and the correction of errors which the latter courts have committed. In caring for the estates of deceased Indian allottees, the Congress brought to its aid the judicial authority of the state of Oklahoma in probate matters. In determining the rights of claimants, the identical procedure would necessarily obtain as in all other estates within this jurisdiction. It cannot be maintained that the Congress intended that the decision of the county court in such Indian cases became conclusive and final without right of review. In conferring jurisdiction upon the county courts, it must have done so with the right of review appertaining to the judgments of those courts. Such has been the uniform construction placed upon the statute by the courts of Oklahoma. Plaintiff himself, in prosecuting an appeal from the decision of the district court to the Supreme Court of Oklahoma, thus construed the statute. All the decisions involving the construction of similar statutes are in harmony with this conclusion. The decree of the trial court is correct, and should be affirmed. It is so ordered. KOSMERL v. COMMISSIONER OF INTER- Circuit Court of Appeals, Seventh Circuit. 1. Internal revenue7(11)-Profits in pay- Gains, income, or profits, in payment of installment notes for price of mining property at maturity are taxable under Revenue Act 1921, § 213 (a) being Comp. St. § 6336%ff, defining such gains, etc., as those derived from "dealings ing out of the ownership or use or interest in in property, whether real or personal, grow such property" or "from any source whatever." 2. Internal revenue 7(11)—Payment of notes for mining property at maturity held taxable profit to extent of difference between face and actual value on their date (Revenue Act 1921, § 202 [a] [b], par. 1, § 212 [a], and § 213 [a], being Comp. St. §§ 63368bb, 6336f, 6336ff). In payment of installment notes for price of mining property at maturity, there was gain, profit or income, taxable under Revenue Act 1921, § 202 (a) (b), par. 1, section 212 (a), and section 213 (a), being Comp. St. §§ 6336% bb, 6336% f, 6336%ff, to extent of differ: ence between face value and actual worth of notes on their date, though they were then capital assets of taxpayer. 3. Internal revenue 7(11)-Plain unam biguous contract to sell mining property for cash and notes should not be regarded as executory until payment of price in ascertain ing taxable profit in payment of notes (Revenue Act 1921, § 202 [a] [b], par. 1, § 212 [a], and section 213 [a], being Comp. St. § 6336bb, 6336f, 6336ff). Plain unambiguous contract, executed in good faith before enactment of income tax laws, to terminate mining lease and make absolute sale of property to lessee for consideration partly in cash and partly in well secured negotiable notes, should not be regarded as executory until payment of price for purpose of ascertaining taxable profit in payment of notes at maturity under Revenue Act 1921, § 202 (a) (b), par. 1, section 212 (a), and section 213 (a), being Comp. St. §§ 6336% bb, 6336f, 6336% ff. ner specified, and afterwards ascertained to be 12,700,000 tons, making a gross sale price of $4,445,000, from which amount there was deducted the advance payment which had been made, and the minimum royalties that had theretofore been paid under the lease. The balance was divided into 41 equal installments, one of which was paid when the papers passed, the remainder to be payable in 40 equal annual installments, evidenced by promissory notes of the purchaser, without interest, all secured by mortgage on the property; payment of the notes being further secured by guaranty of the United States Steel Corporation, which indirectly owned the stock of the purchasing corporation. The owners received of the notes in proportion to their respective interests in the property, petitioner receiving 40, each of $38,990.85, due serially in yearly intervals. The Commissioner held that, in the payment of the two notes in question, at their Petition for Review of Order of United maturity in 1921 and 1922, there was a profit States Board of Tax Appeals. Petition by Francis S. Kosmerl to review an order of the United States Board of Tax Appeals sustaining an assessment of taxes by the Commissioner of Internal Revenue. Order affirmed. to the taxpayer, and upon this profit as ascertained by the Commissioner the taxes in question were assessed, and afterwards sustained by the Board of Tax Appeals. For petitioner it is contended that no gain or profit is represented in the payment of the notes; that the notes, when received, became a capital asset of the taxpayer, in lieu of his prior interest in the property; that the consideration which passed from the petitioner for the notes was more valuable than the face Before ALSCHULER, EVANS, and of the notes, and that the note transaction PAGE, Circuit Judges. Guy Chase, of St. Paul, Minn., for peti tioner. M. N. Fisher, of Washington, D. C., for respondent. ALSCHULER, Circuit Judge. Review of order of Board of Tax Appeals sustaining assessment of taxes against petitioner for 1921 and 1922. In 1903 the fee owners of the Kosmerl iron mine property made a lease of it for a term of 51 years, whereby the compensation to the lessors was to be a royalty of 35 cents per ton of ore mined, with minimum royalty of $17,500 for the first year, $35,000 for the second, and $52,500 for each of the succeeding years of the term. There was paid in advance a royalty of $230,000, to be applied at the rate of 10 cents per ton on the first 2,300,000 tons mined. The lessee removed no ore under the lease, but made all the stipulated minimum payments to December 31, 1912. January 1, 1913, the owners entered into a contract with the lessee for sale to it of the property, the agreed price paid therefor to be the entire tonnage of the property at 35 cents per ton, the tonnage to be estimated in man shows no profit; also that there is no stat- Revenue Act of 1921, & 212 (a), being "That in the case of an individual the term 'net income' means the gross income as defined in section 213, less the deductions allowed by section 214." Section 213 (Comp. St. § 6336%ff): "For the purposes of this title (except as otherwise provided in section 233) the term 'gross income'— "(a) Includes gains, profits, and income derived from salaries, wages, or compensation for personal service (* *), of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or prof |