zation and review fixing the amount of income tax payable by complainant for the fiscal year ending July 31, 1920, which amount was finally paid as set forth in the bill of complaint, and disregarding the pendency of the above-entitled cause, and without any power or authority to do so, arbitrarily and illegally certified that the complainant was and still is owing to the government of Porto Rico the sum of $474,877.52 as income tax for said fiscal year, and upon the said certificate or assessment and at the instigation and request of the defendant herein, the Attorney General of Porto Rico filed a complaint in the District Court for the Judicial District of San Juan, in the name of the people of Porto Rico, against the plaintiff, demanding judgment of said amount, which cause is still pending in the said District Court for the Judicial District of San Juan." A permanent injunction was prayed for, restraining the auditor from making any investigation as to income taxes due, or claimed to be due, from the Sugar Company for the year ended July 31, 1920. In answer to this petition, the Attorney General of Porto Rico stated that the auditor of Porto Rico had certified to the Attorney General that the Fajardo Sugar Company and its affiliated companies owed the people of Porto Rico the sum of $474,877.52 as income tax for the fiscal year ended July 31, 1920, and admitted that the auditor of Porto Rico had requested the Attorney General to take such legal action as might be necessary to collect this amount, and that a civil action had been filed in the District Court of San Juan for the collection of said taxes. The answer denied that the opinion of this court directed the granting of a permanent injunction as prayed for. The answer especially denied any intention of assessing or collecting taxes against the complainant, and stated that the purpose for which a "subpoena duces tecum" had been issued to the complainant was to use the books of the complainant in the course of an investigation of the acts of the bureau of income tax of the treasury department of Porto Rico, and disavowed any intention of using said books for any assessment or collection of taxes against the complainant; it alleged that the people of Porto Rico are not a party to the instant suit, and that the civil suit brought for the collection of taxes in the District Court of San Juan has no connection whatsoever with the present suit; and the answer also consented that the per manent injunction be issued directed to the auditor of Porto Rico, forbidding him from assessing or collecting any taxes against the complainant for the fiscal year ended July 31, 1920. It is contended by the auditor that the powers conferred upon him have been materially changed by the Act of Congress of March 4, 1927 (44 Stat. 1418), which was not before this court when the case was previously here, and that, if it had been, its conclusion, expressed in its opinion in relation to the power of the auditor of Porto Rico to review the decision of the board of equalization and review, would have been different. The final decree entered by the court was as follows: "That the defendant, Frederick G. Holcomb, as auditor of Porto Rico, his servants, agents, employees, and all other persons acting under his or their authority, be perpetually enjoined from holding any hearing or taking any evidence or making any investigations as to the amount of income taxes due or claimed from complainant for its fiscal year ended July 31, 1920, and from disregarding or attempting to evade the decision of the board of review and equalization fixing the amount of said taxes and from auditing and settling or attempting to audit and settle the account of complainant with the people of Porto Rico and/or the treasurer of Porto Rico for 1920 income taxes, and from placing on his books of account or records any charges against the complainant or its affiliated companies for amounts consisting of or arising out of 1920 income taxes or from continuing on his books of account or records any such charges placed thereon subsequent to the filing of the bill of complaint, and from further interference with the functions of the treasurer of Porto Rico and the board of review and equalization and any member, official, or employee thereof, in connection with the assessment and collection of the 1920 income taxes of the complainant, and from summoning any officer, agent, or employee of the complainant as a witness in any hearing or investigation regarding such 1920 income taxes of complainant, and from attempting to examine or take possession of any books, papers, or documents of complainant in connection therewith, and from disclosing any data or divulging any information in respect to the 1920 income taxes, or income tax returns, of the complainant, and from taking, beginning, instigating, or causing to be begun or continuing any proceedings, either civil or criminal, against 27 F.(2d) 13 complainant or any of its officers or employees for or on account of or in connection with complainant's 1920 income taxes, or in connection with the subpoenas referred to in the bill of complaint, and from molesting or interfering in any manner whatsoever with the complainant or its business or its officers or employees in connection with said 1920 income tax, and from requesting the Attorney General to institute proceedings for the collection of 1920 income taxes or transmitting to the Attorney General any statement or copies or certificates purporting in any manner to be a basis for a civil proceeding to collect 1920 income taxes; and in the event such a request has been made since the filing of the bill of complaint or such statements, copies, or certificates have been transmitted by the auditor to the Attorney General, from permitting such request, statements, copies, or certificates to remain a matter of record in the office of the Attorney General, or in custody of any tribunal in which a proceeding has commenced, and from prosecuting, participating in, or continuing any proceeding pursuant to the provisions of section 126 of the Political Code of Porto Rico, the Attorney General of Porto Rico being deemed an agent or person acting under the authority of the defendant in relation to such a proceeding; said defendant, his servants, agents, or employees, and all persons acting under his or their authority, being perpetually enjoined from prosecuting any proceeding, civil or criminal, commenced since the time of the filing of the bill of complaint in this case, by said defendant, his servants, agents, or employees, or by any person or persons acting under his or their authority, relating to any further or additional assessment for income taxes for the said year 1920, or in any wise connected with the said 1920 income taxes." A motion to modify this decree, to conform to the opinion of this court entered November 23, 1926, was denied. It is contended by the auditor of Porto Rico that his powers were enlarged by the Act of March 4, 1927, which was an amendment of section 20 of the Organic Act of Porto Rico. Section 20 of the Organic Act was amended by inserting the words "adjust" and "decide," so that as amended it reads: "The auditor shall examine, adjust, decide, audit, and settle all accounts and claims pertaining to the revenues and receipts from whatever source of the government of Porto Rico." 44 Stat. 1419, § 3 (48 USCA § 786). The auditor contends that by this amend ment power was conferred upon him to review the decisions of the board of equalization and review. Section 47 of the Income Tax Law of 1921 is in no way changed by it. Under the Organic Act as it stood before the amendment, the auditor had power "to examine, audit and settle all accounts and claims pertaining to the revenues and receipts from whatever source of the government of Porto Rico," and the words "adjust" and "decide" do not confer any additional power to that conferred by the word "settle." The power to levy and assess taxes has been expressly conferred upon the people of Porto Rico by the Organic Act, and the method of levying and assessing the same, so long as not in contravention of the Organic Act, is to be determined by the people of Porto Rico, acting through its Legislature, and this amendment does not disclose any purpose on the part of Congress to confer upon the auditor the power to levy or assess taxes or to revise the decision of the board of equalization and review created for the purpose of reviewing and revising the action of the treasurer of Porto Rico in levying and assessing taxes. It also The final decree entered by the District Court, and which it refused to modify, is much broader than authorized by the opinion of this court in Fajardo Sugar Company v. Holcomb, supra. It enjoins the people of Porto Rico from maintaining a suit for the collection of a tax, the Attorney General from instituting such a suit, alleging that in doing so he is acting as the agent of the auditor, and the auditor from giving any information in regard to the result of investigations made by him. The Attorney General is an officer appointed by the President, and discharges the duties of his office entirely independently of the auditor. enjoins the auditor "from summoning any officer or employee of the complainant as a witness in any hearing or investigation regarding such 1920 income taxes of complainant, and from attempting to examine or take possession of any books, papers, or documents of complainant in connection therewith." This is not in accordance with the opinion of this court, which held the auditor had the right to investigate complainant's books and records for the "purpose of obtaining information relative to the scope and, interpretation of the tax statutes, or as to the competency and efficiency of the tax administering officials." The opinion held that the auditor did not constitute any part of the machinery for the assessment of taxes, or revising tax assessments, and that the power was not conferred upon him by the Organic Act to review and revise the decrees of the board of equalization and review; but his power to obtain "pertinent information relative to the scope and interpretation of the tax statutes, or as to the competency and efficiency of the tax administering officials," was recognized and sustained. The final decree, so far as it enjoins the auditor from the performance of this duty, is not in accordance with the opinion rendered. The decree of the District Court is reversed, and the suit is remanded to that court for further action not inconsistent with this opinion; no costs to either party. STACK et al. v. UNITED STATES. Circuit Court of Appeals, Ninth Circuit. June 25, 1928. No. 5433. 1. Conspiracy 47-Evidence held sufficient to support conviction of owner and cashier of café for conspiracy to possess and sell liquor and maintain common nuisance (Pen. Code, § 37 [18 USCA § 88]; National Prohibition Act [27 USCA]). Evidence held sufficient to support conviction for violating Penal Code, § 37 (18 USCA § 88), in entering into conspiracy to possess and sell intoxicating liquor and to maintain common nuisance, in violation of National Prohibition Act (27 USCA), as to defendants, who were owner and cashier of café where liquor was sold. 2. Conspiracy ~47-Evidence held insufficient to support conviction of cook in café for conspiracy to possess and sell liquor and maintain nuisance (Pen. Code, § 37 [18 USCA § 88]; National Prohibition Act [27 USCA]). Evidence held insufficient to support conviction for violating Penal Code, § 37 (18 USCA §88), in entering conspiracy to possess and sell intoxicating liquor and maintain common nuisance, in violation of National Prohibition Act (27 USCA) as to defendant who was cook in café where liquor was sold. 3. Conspiracy 24-Formal agreement is un 6. Conspiracy 47-Rule that evidence of conspiracy must show something further than mere participation in offense is inapplicable, where evidence shows defendant's deliberate and intentional course of action. Rule that evidence to warrant conviction of conspiracy must show something further than merely participating in offense which is object of conspiracy is inapplicable to case in which of action during considerable period, in which all persons accused of conspiracy are actuated by common purpose and assist one another in carrying on business in violation of law. evidence shows deliberate and intentional course In Error to the District Court of the United States for the Northern Division of the Western District of Washington; Jeremiah Neterer, Judge. John J. Stack and others were convicted of conspiracy to possess and sell intoxicating liquor and to maintain common nuisance, in violation of National Prohibition Act, and they bring error. Reversed, with directions as to defendant Joseph Gallati; otherwise, affirmed. Charles H. Miller, of Seattle, Wash., for plaintiffs in error. Anthony Savage, U. S. Atty., and Jeffrey Heiman, Asst. U. S. Atty., both of Seattle, Wash. Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges. GILBERT, Circuit Judge. The plaintiffs in error, hereinafter named the defendants, were convicted of violation of section 37 of the Penal Code (18 USCA § 88) in entering into a conspiracy to possess and sell intoxicating liquor and to maintain a common nuisance in violation of the National Prohibition Act (27 USCA). It is assigned as error that the trial court refused to instruct the jury that they should not consider the testimony concerning the possession and sales of liquor, for the reason that the evidence did not connect the defendants with any unlawful agreement, combination, confederation, or conspiracy; also that the court denied the defendants' motion for a directed verdict of acquittal. necessary to constitute unlawful conspiracy. [1,2] There was testimony that the defend No formal agreement is necessary to constitute unlawful conspiracy. 4. Conspiracy 47-Conspiracy may be proved by overt acts. Conspiracy may be and often is proven by overt acts. ant Marcell was the owner of the Venice Café and that Stack was his cashier and Galletti was his cook. There was testimony that the prohibition officer, Purvis, bought in the café two cups of moonshine, described as "coffee royal," from the defendant Marcell, and saw him put the money in the cash register and ring it up, and that in the following month the witness was in the café, standing 27 F.(2d) 17 by the cash register, and saw the prohibition agents, Bell and Bywater, go into one of the booths behind green curtains and saw the waiter bring them two cups. Bell testified that, accompanied by Bywater, he went into the café and asked Stack for liquor, and that the latter caused the liquor to be brought by Galletti after they had been placed in a booth, and that the money for the drinks was paid to Stack, who placed the same in the cash register and rang it up. Bell testified further that on another occasion he bought a bottle of liquor from Stack in the presence of the other two defendants, and that the liquor was handed to Stack by one of the other defendants. The testimony tended to show that all of the defendants participated in the sale of intoxicating liquors in the Venice Café at different times during the months of February and March, 1927. [3,4] The defendants insist that there was no evidence of an agreement or conspiracy between them, either to sell intoxicating liquors, or to commit the acts which would constitute the maintenance of a nuisance. But it is well settled that no formal agreement is necessary to constitute an unlawful conspiracy. "In fact, the agreement is almost always a matter of inference, deduced from the acts of the persons accused, which are done in pursuance of an apparent criminal purpose." 5 R. C. L. 1065; 12 C. J. 632. A conspiracy may be and often is proven by the overt acts. Said the court in Fisher v. United States (C. C. A.) 2 F. (2d) 843, 846; "The fact that two men are found together breaking into a bank is indubitable proof that they had agreed to commit the burglary." It is sufficient if the evidence shows such a concerted action in the commission of an unlawful act, or other facts and circumstances from which the inference naturally arises that the unlawful overt act was in furtherance of a common design, intent and purpose of the alleged conspirators. Calcutt v. Gerig (C. C. A.) 271 F. 220, 27 A. L. R. 543; Davidson v. United States (C. C. A.) 274 F. 285; Keith v. United States (C. C. A.) 11 F. (2d) 933. [5,6] Circumstantial evidence is always admissible to prove conspiracy. Shook v. United States (C. C. A.) 10 F. (2d) 151. The defendants cite authorities to the proposition that in order to warrant conviction of conspiracy, the evidence must show something further than merely participating in the offense which is the object of the conspiracy, and we may concede that the proposition is sustainable as applied to cases in which 27 F.(2d)-2 the participation falls short of affirmatively and expressly aiding and abetting in the commission of the offense, or cases in which the participation is susceptible of a construction consistent with the innocence of the accused. But it cannot be said to apply to a case in which the evidence shows a deliberate and intentional course of action during a considerable period of time, in which all the persons accused of conspiracy are actuated by a common purpose and assist one another in carrying on a business in violation of the law. In Allen v. United States (C. C. A.) 4 F. (2d) 688, 691, it was said: "A conspiracy may be established by circumstantial evidence or by deduction from facts. The common design is the essence of the crime, and this may be made to appear when the parties steadily pursue the same object, whether acting separately or together, by common or different means, but ever leading to the same unlawful result." We think that the evidence was sufficient to go to the jury on the charge of conspiracy as to the defendants Marcell and Stack. As to the defendant Galletti, we think it is too meager to justify belief beyond a reasonable doubt that he was a party to the unlawful enterprise. Accordingly, as to him the judgment is reversed, with directions to grant a new trial; as to the other two, it is affirmed. LASSEN LUMBER & BOX CO. v. BLAIR, Commissioner of Internal Revenue.* Circuit Court of Appeals, Ninth Circuit. June 25, 1928. No. 5331. 1. Internal revenue 7 (22)-Deduction from corporation's income tax for anticipated depreciation of property cannot be allowed, unless depreciation is reasonably certain (Comp. St. § 6336 pp). Under Act Feb. 24, 1919, § 234 (Comp. St. § 6336%pp), providing for a reasonable allowance for obsolescence and wear and tear of property in computing corporation's net income, no deduction can be demanded for anticipated depreciation until there is reasonable certainty that it will take place, and questions of ob solescence depend on particular facts of case, and are ordinarily subject to exercise of sound judgment. 2. Internal revenue 25-Corporate taxpayer, demanding allowance for obsolescence of plant in advance, had burden to establish with reasonable certainty that depreciation would occur (Comp. St. § 6336pp). Corporation, claiming allowance on net income for anticipated obsolescence of lumber plant 10 years in advance of time when it might actually occur, under Act Feb. 24, 1919, § 234 *Rehearing denied August 20, 1928. (Comp. St. § 6336%pp), had burden to establish with reasonable degree of certainty that the depreciation contemplated would actually occur. 3. Internal revenue 25-Corporate taxpayer, operating mill under 10-year logging contract with government, held not entitled, under evidence, to deduction for anticipated obsolescence at end of contract period (Comp. St. 63368 pp). Corporation, engaged in logging business under 10-year contract with government covering stumpage in national forest, held not entitled to allowance for depreciation and obsolescence of mill plant in computing net income under Act Feb. 24, 1919, § 234 (Comp. St. § 6336pp), by virtue of limited operating period of contract and anticipated obsolescence of plant at end of contract period, in view of Treasury Regulations permitting subsequent deductions, where it did not appear certain that the taxpayer would not be able to use the mill at the end of the contract period. In Error to the United States Board of Tax Appeals. Proceeding before the United States Board of Tax Appeals for determination of income tax liability by the Lassen Lumber & Box Company, opposed by D. H. Blair, Commissioner of Internal Revenue. From an adverse decision, the taxpayer brings error. Affirmed. O. K. Cushing, Charles S. Cushing and Walter Slack, all of San Francisco, Cal., for plaintiff in error. Mabel Walker Willebrandt, Asst. Atty. Gen., C. M. Charest, Gen. Counsel Bureau of Internal Revenue, and Annabel Matthews, Sp. Atty. Bureau of Internal Revenue, all of Washington, D. C. (Sewall Key and Morton P. Fisher, Sp. Asst. Attys. Gen., of counsel), for defendant in error. tract being at the time estimated at 233,200,000 feet, B. M. Unless an extension of time was later granted, or the amounts were reduced by the forester, appellant was to cut at least 10,000,000 feet prior to July 1, 1919, 76,000,000 feet prior to July 1, 1922, 145,000,000 feet prior to July 1, 1925, 213,000,000 feet prior to July 1, 1928, and the balance, if any, not later than July 1, 1929. Upon the execution of the contract appellant proceeded to construct its mill, using in the main second-hand machinery and equipment, which in part was later replaced with new units. Upon the evidence adduced the Board found the physical life of portions of the plant to be 10 years or less, of other portions, 15 years, and of the remainder 20 years. With these findings both parties are apparently content. Appellant, however, insists that, regardless of the physical life, the only useful purpose of the plant is to handle the timber resources provided by the contract, that under the contract the operating period is limited contract the plant will have only a salvage to 11 years, that upon the completion of the value, and that subject to the deduction of such salvage value, which is said to be almost negligible, the cost of the plant is to be spread over the 11-year period, with an allowance against gross income of oneeleventh thereof for each income tax year. Even under this theory the plant in part, at least, would seem to have a possible economic life extending beyond the 11-year period provided for the cutting and removal of the logs, for such time as may be required for their manufacture into lumber and boxes and marketing the products. But that considera Before GILBERT, RUDKIN, and DIE- tion is of only minor importance. TRICH, Circuit Judges. DIETRICH, Circuit Judge. This is an appeal from a determination by the United States Board of Tax Appeals of the appellant's income tax liability for the years 1919 and 1920, and the single question submitted is of the proper credit to be allowed for plant depreciation, in the nature of obsolescence, for those years. Appellant was and is engaged in logging, converting the logs into lumber, manufacturing boxes, and marketing its products. For that purpose it has a sawmill, together with logging and other equipment near Susanville, Cal. Its principal vested timber resource was acquired through a contract with the government, executed in June, 1918, by which it purchased the right to log 26,000 acres of the adjacent National Forest, the available stumpage upon the [1] The pertinent statutory provision is: |