admissible evidence sufficient to convince the board that his appeal should be sustained." Again, commenting upon authorities cited that state the well-known general rule that, where the evidence in the trial court is conflicting, it will not be disturbed upon appeal, counsel say: "It is submitted that the foregoing decisions, involving appeals from federal District Courts, apply with even greater force to the present appeal from the decision of the Board of Tax Appeals in a case tried under the act of 1924. This by reason of the fact that the board was authorized to adopt its own rules of evidence, and did adopt a rule affording the widest range of discretion. The federal District Courts are bound by rules of evidence of narrower limitations than the limitations applicable to the board under the Revenue Act of 1924 and the rules of evidence adopted under the authority of that act."

[3] Of course, every trier of fact should decide cases upon a conviction reached from a consideration of the evidence, and clearly evidence that produces such conviction must be satisfactory and convincing; but it is a well-known rule of law that triers of fact must be satisfied and convinced, if the evidence adduced, fairly considered, preponderates for or against a given proposition. When the evidence before a trier of fact ought to be convincing, he may not say that it is not. Whether he is a judge or a commissioner, the facts must be fairly and judicially weighed, and a determination reached thereon.

We see nothing in the act which would authorize the board to adopt rules "affording the widest range of discretion." The board would have no right to adopt a rule that did not require the board to consider all the evidence and then to exercise a sound discretion in reaching its conclusions. Nor would it have a right to prescribe rules that would exclude evidence competent and material under the usual and ordinary rules of evidence applicable in the courts.

The board is an instrument of government, established to make inquiries and determinations between a citizen and his government in tax matters. In many cases, as in this case, the board is dealing with facts and conditions from 7 to 15 years in the past, and arising under laws that were passed and very imperfectly administered under war conditions. The difficulties of administering the law, on the part of the government, and of complying with it, on the part of the citizen, were and are very great. Some indication of this may be found in the fact that

it was in March, 1925, before the Commissioner arrived at a deficiency tax for 1917. [4] We are of opinion that there is nothing in the situation which either permits or requires hard or unusual rules to be made or applied by the Board of Tax Appeals, but that it was the intent and purpose of the law that the board should make a thorough and careful examination of all the facts, so as to reach a just conclusion between the taxpayer and his government. In article 165 of Treasury Regulations 69, it is said: "While the burden of proof must rest upon the taxpayer to sustain the deduction taken by him, such deductions must not be disallowed, unless shown by clear and convincing evidence to be unreasonable."

(a) In the Revenue Act of 1918 (40 Stat. pp. 1057, 1077, 1078 [Comp. St. § 6336pp]) it is provided:

"Sec. 234 (a). That in computing the net income of a corporation subject to the tax imposed by section 230 there shall be allowed as deductions:

"(5) Debts ascertained to be worthless and charged off within the taxable year."

The government contends for a construction of this section that would require, not only that the debt should be ascertained to be worthless, and that the determination to charge it off should be reached within the taxable year, but that, in the matter of auditing and accounting, the entries must actually be made within the taxable year. Despite the fact that it appears from the testimony of plaintiff's auditor Forward that he was in the army, in France, from August, 1917, until July, 1919, and had, and could have, no knowledge as to when the charging-off entries were actually made, counsel places great stress upon the fact that he said that the entries were not made until January or February, 1919. The only other witness testifying on that point said: "During the year 1918, we charged off something like $60,000; that is, at the expiration of 1918." [5] It seems that the uncontradicted evidence shows that the items charged off, to the extent to which they were allowed, were so bad in 1918 that rightfully they might have been charged off. The determination to do so was reached in 1918, and, fairly considered, we believe there is no contradiction of the testimony that they were charged off during the taxable year. We are of opinion that it was error to hold that they were not bad accounts and charged off within the taxable year 1918. Ordinarily it might make no difference whether the charge-off was allowed for one year or another, but in this case the

tax upon plaintiff in 1918 was 80 per cent., and in 1919 only 20 per cent.

(b) In Treasury Regulations 45, relating to the Revenue Act of 1918, dealing with deductions allowable to corporations under section 234a (7), it is said that they are the same as allowed to individuals, and reference is made to article 161, where it is said: "The proper allowance for such depreciation of any property used in the trade or business is that amount which should be set aside for the taxable year in accordance with a consistent plan by which the aggregate of such amounts for the useful life of the property in the business will suffice, with the salvage value, at the end of such useful life, and provide in place of the property its cost, or its value on March 1, 1913, if acquired by the taxpayer before that date."

Article 164 says: "In case of property acquired by the taxpayer prior to March 1, 1913, the capital sum to be replaced is the fair market value of the property as of that date. In the absence of proof to the contrary, it will be assumed that such value as of March 1, 1913, is the cost of the property less depreciation up to that date. To this sum should be added from time to time the cost of improvements, betterments, etc."

There is nothing to show the method pursued by the Commissioner in arriving at the value of the property to be depreciated, other than that which is disclosed in the opinion of the board. After saying that the Commissioner declined to approve the claim of plaintiff as to the values of March 1, 1913, it says: "Instead, he [the Commissioner] computed the allowance for exhaustion, wear and tear of the buildings, machinery and equipment upon the basis of undepreciated cost on March 1, 1913, plus the cost of additions since that time, as representing, in the absence of better evidence, the fair market price or values on March 1, 1913."

After making some reference to the evidence before the board, the opinion says: "No evidence of any character was submitted showing the fair market price or values of the properties in question on March 1, 1913, or as showing that the taxpayer's method of determining the value on March 1, 1913, upon the basis of cost of reproduction less depreciation in any way represented the fair market value on that date." That there was no such evidence is urged by the Commissioner.

In one decision by the board, cited by the Commissioner, it is said: "Value is what the property is worth. It is what it would bring in the open market, if offered for sale by an

owner willing, but not compelled, to sell to a purchaser willing, but not compelled, to buy. Value is frequently affected by things far removed from depreciation or cost.

Value results largely from demand

or earning power, which may or may not be the same thing. It is commonly affected by periods of prosperity or financial depression." Those expressions, taken in connection with the conclusion by the board that there was no evidence in this case of any character showing the fair market value as of March 1, 1913, indicate that the board disregarded competent and material evidence bearing upon the market value as of that date.

[6] Market value, speaking very generally, may be said to be the price which one, under no compulsion, is willing to take for property which he has for sale, and which another, under no compulsion, being desirous and able to buy, is willing to pay for the article. But market value is so dependent upon times, places, conditions, and people that that which is a good rule in one case may be no rule under other circumstances. For instance, staple articles of merchandise, such as fuel, clothing, or food, at most times and places have a well-known market value; but the market value of plants used for manufacturing purposes, or buildings equipped for special business or commercial purposes, are affected by many conditions. See Muser v. Magone, 155 U. S. 240, 15 S. Ct. 77, 39 L. Ed. 135.

In this case, the evidence shows that plaintiff was organized in 1892, and commenced operation in a comparatively small plant in the city of Chicago. During the years 1900 and 1904 it erected a building and equipment in Detroit, Mich., at an expense of $40,000. In 1905, it acquired a building in Grand Rapids, Mich., for $62,500, which was put in condition and then appraised at $130,000. In 1907 it acquired a plant at Marion, Ind., for $97,000, that was appraised in 1907 at $185,000. Those two plants were acquired from bankrupt institutions. In 1907 it erected a plant in Chicago at a cost of $353,338.57. In 1912, it acquired another bankrupt plant in Franklin, Pa., at a cost of $175,000, the major portion of which was destroyed by fire in 1913. During 1913 and 1914 a corrugated iron structure was erected at what is called a reproductive value of $163,000. There was also built, in 1913 and 1914, at Franklin, a brakebeam plant for $131,931.50.

It thus appears that in the 21 or 22 years from 1892 to 1914, plaintiff, from the operation of the small plant, costing $26,000

and since abandoned, built and acquired plants, the buildings and equipment of which cost it $736,951, and if there is added the difference between the cost to plaintiff of the Marion, Ind., and the Grand Rapids bankrupt plants, and the appraised value thereof, made shortly thereafter, the value, measured by the cost to construct, would be but little under $900,000-approximately $195,000 of which was put into the two Franklin plants in 1913 and 1914.

It is urged that there is no evidence to show whether the properties were operated profitably or otherwise in 1913. Plaintiff was buying and building new plants right up to and in the years 1912 and 1913. It does appear that they shipped annually, during the years 1914, 1915 and 1916, 125,000 tons of their manufactures. The business started in a small way, and the record shows that in December, 1917, it had capital invested $4,796,997.12. It had then a capital of nearly $2,500,000, and a surplus of over $1,356,000. A considerable income tax for 1916 is shown. Plaintiff was taxed, for 1917, on income, $120,000, and, for 1918, $145,000, and there is now claimed for those years $108,000 more. It is not disputed that they expended in 1912, 1913 and 1914 nearly $200,000 in new properties and buildings.

We are of opinion that those and other matters pretty conclusively show that the business must have been in successful operation in 1913. Assuming that it was the duty and the intention of the Commissioner to arrive at the value of plaintiff's property for the purpose of establishing the depreciation allowable because of exhaustion, we must also assume that inquiries were made concerning conditions on March 1, 1913. The schedules made by revenue agents and filed with the Commissioner's answer here, show that those agents made exhaustive investigations into plaintiff's business. It is not possible that in their investigation they remained ignorant of so many of the facts above herein recited, and, if so, they must have had, and the Commissioner must have had, evidence of market value on March 1, 1913.

[7] It is not necessary that a property shall be for sale before it can have a market value. Neither is it necessary that there shall be a known buyer for it. All the properties had, within 13 years, been purchased in the market. Two of them were purchased within about a year of March 1, 1913. These properties were a part of a prosperous and going concern, and were adapted to the purpose

for which they were used. We are of opinion that the board could not disregard the obvious, and say it had before it no evidence of March 1, 1913, value, and that the board erred in rejecting the evidence before it of a market value.

(c) Whether the depreciation rates applied were in any sense erroneous, unless possibly in the single instance of giving the corrugated iron building the same rate as the concrete, is doubtful. The witness Forward, who knew most about the rates, said the item scheduled as "power" had a normal useful life of 20 years, and machinery of 10 years, and they were given, respectively, a 5 per cent. and a 10 per cent. rate. He agreed to 20 per cent. for the automobiles. Unless there is something to contradict the Forward testimony as to the corrugated iron building, it would appear that should have a depreciation rate of 5 per cent. We do not think there should be an increase of 50 per cent. because of the additional operation of machinery during the years in question.

The case is reversed and remanded to the Board of Tax Appeals, with direction to take further evidence, if necessary, on any question, and to fix the market value as of March 1, 1913, and, further, to base the depreciation thereon in accordance herewith, and to allow the charge-off of bad accounts for the year 1918.

MISSION MARBLE WORKS v. ROBINSON TILE & MARBLE CO.

Circuit Court of Appeals, Ninth Circuit. June 27, 1927.

No. 5037.

1. Appeal and error 1008 (2)-Findings of fact, dependent on conflicting testimony, are not reviewable, where jury was waived.

Where a jury is waived and cause is tried before court, there can be no review of findings of fact dependent on conflicting testimony. 2. Appeal and error 850 (2)-Party waiving jury in writing and desiring to raise question of law should request special findings and reserve separate exceptions to unsatisfactory findings of fact or conclusions of law.

When party waives jury by written stipulation in trial court, and wishes to raise question of law on merits in court above, he should request special findings of fact by court and reserve exceptions thereto, if he deems them not wishes to except to conclusions of law drawn to be sustained by any evidence, and, if he from facts found, he should have them separately stated and excepted to.

rental value.

Ordinarily damage for delay in constructing a building is measured by its rental value for period of that delay. 5. Damages

189-Evidence held Insufficient to sustain counterclaim for damages for delay in furnishing materials under building subcontract.

In action to recover on building subcontract whereby plaintiff was to furnish certain materials to be installed in building, proof of damages suffered by owner through plaintiff's delay in furnishing materials held insufficient to sustain counterclaim for damages therefor. 6. Damages 184—Damages must be definitely proved.

Proof of damages must be reasonably defi

nite and certain. 7. Indemnity 11-Indemnitee must prove actual payment, to recover from indemnitor.

An indemnitee, to recover from indemnitor,

must prove actual payment, or that which the law considers the equivalent of actual payment; a mere liability to pay not being sufficient.

In Error to the District Court of the United States for the Northern Division of the Western District of Washington; Edward E. Cushman, Judge.

Action by the Mission Marble Works against the Robinson Tile & Marble Company, wherein defendant counterclaimed. Judgment for defendant, and plaintiff brings error. Reversed and remanded for a new trial.

The plaintiff in error was the plaintiff below in an action to recover from the defendant $7,290.32 upon a building subcontract of date January 25, 1924, by the terms of which the plaintiff was to furnish certain marble to be installed by the defendant in a bank building, for which the defendant was to receive the sum of $60,101, of which by the subcontract the plaintiff was to receive $46,000. The complaint alleged that the plaintiff furnished all the marble required under the contract, and that there was due and unpaid therefor the sum of $6,000, and that it furnished additional material and rendered additional labor of the reasonable value of $1,371.56.

The defendant in its answer set up counterclaims to an amount equal to that which

was demanded by the plaintiff; the principal counterclaim being that a portion of the marble furnished by the plaintiff was defective in color and otherwise and was not accepted or approved by the architect, and that by reason thereof and the plaintiff's failure to furnish marble in time to enable the defendant to faithfully and promptly fulfill its contract with the bank, the final completion of the bank building was delayed until February 28, 1925, and that the architect refused to approve the final payment of $6,000 due the defendant on its contract until said defective marble should be replaced and the bank's damages for delay paid, and the defendant demanded judgment that the plaintiff take nothing by the action. The allegations of the counterclaim were denied by the plaintiff's reply.

By written stipulation a jury was waived and the case was tried to the court. The plaintiff tendered to the court findings of fact which it requested on the material issues involved. The court found as facts that the

plaintiff furnished extra marble and material of the value of $657.92, that there was a balance due and unpaid upon its contract and extras in the sum of $6,576.68, that the plaintiff failed to furnish marble according to its contract and greatly delayed the defendant in performing its contract, that a portion of the marble was defective and not accord

ing to the contract, that the defendant was entitled to a counterclaim for damages caused by delay in furnishing the marble according

to contract in the sum of $4,500, for defects in marble $2,500, for extra work and labor, etc., $170, for wooden hand balustrade $25, making a total of $7,195, and the court adjudged that the defendant recover from the plaintiff $618.32, with interest and costs.

George Clark Sargent, of San Francisco, Cal., and Grosscup & Morrow, Chas. A. Wallace, and J. O. Davies, all of Seattle, Wash., for plaintiff in error.

H. A. P. Myers, of Seattle, Wash., for defendant in error.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

GILBERT, Circuit Judge (after stating the facts as above). [1,2] Error is assigned to certain of the findings of fact and the refusal of the trial court to make certain findings as requested by the plaintiff. The defendant denies the power of this court to review the findings of fact, and contends that where by a written stipulation a jury is waived and the cause is tried before the court

the only matters subject to review in an appellate court are the rulings upon the admission of evidence.

It is true that in such a case there can be no review of findings of fact which depend upon conflicting testimony. But the rule of practice applicable here is stated by Judge Taft in Humphreys v. Third Nat. Bank (C. C. A.) 75 F. 852, as follows: "When a party in the Circuit Court waives a jury, and agrees to submit his case to the court, it must be done in writing; and if he wishes to raise any question of law upon the merits in the court above he should request special findings of fact by the court, framed like a special verdict of a jury, and then reserve his exceptions to those special findings, if he deems them not to be sustained by any evidence; and if he wishes to except to the conclusions of law drawn by the court from the facts found he should have them separately stated and excepted to. In this way, and in this way only, is it possible for him to review completely the action of the court below upon the merits."

What was there said was reaffirmed in Fleischmann Co. v. United States, 270 U. S. 349, 356, 46 S. Ct. 284, 70 L. Ed. 624. The plaintiff in the instant case complied with the rule thus declared, and he thus brings for review findings of fact which he contends are unsustained by evidence.

We are not convinced that the trial court was in error in holding that the three-months provision of the plaintiff's contract for the installation of the marble began to run from the date of the first delivery of marble, which was April 26, 1926. We think that the contractual provisions are susceptible of that construction, especially in view of the interpretation placed thereon in the dealings and correspondence between the plaintiff and the defendant concerning the plaintiff's alleged delay in performing its contract.

[3, 4] We are of the opinion that there was lack of requisite pleading and proof to sustain the defendant's counterclaim for damages. The counterclaim contains no allegation that the bank suffered damage by reason of the plaintiff's delay in furnishing marble. It alleged only that the architect refused to approve the final payment of $6,000 due the defendant on its contract with the bank until the defective marble was replaced and the bank's damages for delay were paid. There was no evidence that the bank claimed damages for delay in construction.

Ordinarily the damage for delay in constructing a building is measured by its rental value for the period of that delay. 9 C. J.

790; 3 Sutherland Damages (4th Ed.) § 703; Hutchinson Mfg. Co. v. Pinch, 91 Mich. 156, 160, 51 N. W. 930, 30 Am. St. Rep. 463. "Where a builder delays the construction of a building, and the owner is thereby compelled to continue his occupancy of, and to pay rentals for, leased premises, the amount of such payments may well constitute the real injury arising from the breach of contract, and, if so, they would be properly recoverable. If it be shown that the continued occupancy of the leased premises resulted in savings to the defendants in the expenses of operating their business, such savings should be offset." Mazzotta v. Bornstein, 104 Conn. 430, 133 A. 677.

The architect estimated the damages through defective marble to be $2,500, and the damage through delay to be $4,500; the latter representing rent incurred by the bank for one month beyond the stipulated period of construction. But there was no evidence that the bank paid rent for quarters during that period, and no evidence of the rental value of the banking building per month. It is true that the opinion of the trial court mentions as an item of the damages which the bank sustained while being kept out of its rooms the injury resulting from conducting its business in unfinished quarters where workmen were still engaged.

[5-7] But there was no proof of any such damage, and no pleading to sustain it. In brief, there is no proof of damages suffered by the bank through delay, and the counterclaim therefor rests upon the architect's bare statement that, of the $6,000 which he withheld from the defendant, $4,500 was for the delay in the completion of the building. It is well settled that proof of damages must be reasonably definite and certain. The contract between the bank and the defendant did not vest power in the architect to determine any question of damages to the bank for delay or to withhold payment on account thereof. The architect's authority was limited to computing the amounts payable in installment in each month, the remainder to be paid upon his certificate that the work was satisfactorily completed and a showing that all bills and claims had been paid.

The evidence as to the defect in the marble was in the main that it failed to conform in color to the contract sample. By an agreement between the supervising architect and the defendant it was installed in the building, with an understanding that the defendant was later to take it out and put in the other corresponding with the sample. The supervising architect, on consulting with his as