DAVIS, Director General of Railroads, v. Collision 1925.) 145-Apportionment of damages between ships at fault for collision with another does not extend to counsel fees and disbursement. Right to apportionment between two ships, at fault for collision of one of them with a third, of the damages therefrom to the third is a substantive right of admiralty law, not standing on subrogation, nor resting on principles of indemnity between parties primarily tween joint debtors, but arising directly from and secondarily liable, or of contribution bethe tort, as one of its consequences, and, whether enforced by way of petition, under admiralty rule 59 in the original suit, or by suit over, is limited to division of the damages recovered, and does not extend to counsel fees and disbursements. The court is entirely convinced that the two witnesses here concerned are willfully withholding information which it is their (District Court, S. D. New York. May 29, duty to furnish, and that in doing so they are actuated by dishonest motives. They apparently think that their attitude of bland ignorance will deceive the court and permit them to cover up an unlawful disposal of the property of the creditors of the bankrupt. While these persons might hesitate to openly obtain these goods by violence and intimidation, in which they would expose themselves to bodily danger and to the risk of immediate arrest and punishment, they must learn that the less direct and to their minds, safer way of dishonestly acquiring the property of others adopted by them is not entirely beyond the reach of the law. The judgment of the court will be that the bankrupt, Nathan Stein, is guilty of contempt, and shall be committed to the county jail of the city and county of San Francisco for a period of 3 months from this date. If, after 30 days of such imprisonment, he wishes to have an opportunity to be again examined, the marshal will be directed to take him before the referee for re examination, and, if, upon such examination, he shall make a full and satisfactory disclosure of all the material facts in the case within his knowledge, an application may be made to the court for a discharge from imprisonment; but, if he declines to submit to such examination, or if, having applied for it, he is guilty of the same evasions and duplicity which characterized the ones already had, such imprisonment shall continue for the term already stated. In re Rosenblum (D. C.) 268 F. 381, 383. The judgment of the court will be further that Jake Aurabach is guilty of contempt, and shall be committed to the county jail of the city and county of San Francisco for a period of one month from this date. If, after 15 days of such imprisonment, he wishes to have an opportunity to be again examined, the marshal will be directed to take him before the referee for re-examination, and if, upon such examination, he shall make a full and satisfactory disclosure of all the material facts in the case within his knowledge, an application may be made to the court for a discharge from imprisonment; but, if he declines to submit to such examination, or if, having applied for it, he is guilty of the same evasions and duplicity which characterized the ones already had, such imprisonment shall continue for the term already stated. In Admiralty. Suit by James C. Davis, Director General of Railroads, against William Molyneaux, owner of the George Chambers. On exceptions to Commissioner's report. Exceptions overruled, and decree in accordance with report. The respondent's boat, the George Cham- cessfully defending the suit brought against Burlingham, Veeder, Masten & Fearey, of 7 F.(2d) 172 Macklin, Brown & Van Wyck, of New York City (Horace L. Cheyney, of New York City, of counsel), for respondent. THACHER, District Judge (after stating the facts as above). No authority has been cited in which counsel fees and disbursements incurred in the unsuccessful defense of one of two offending vessels have been divided in a suit to recover half damages against the other vessel in fault, nor has the court been able to find any such authority. As the learned commissioner states in his report, the case seems to be one of first impression in the admiralty courts. The right upon which recovery in this action must depend is defined by substantive admiralty law as a right to have the damages divided or apportioned between the vessels through whose fault the tort occurred. It does not stand upon subrogation, but arises directly from the tort, and as one of the consequences of the joint tort. It is dependent upon the admiralty doctrine that the burden of injuries resulting from common fault shall be equally borne by those responsible. The division and apportionment allowed is a division of the damages resulting from the tort. As between the vessels at fault, the right is one of substance, and not a mere incident of a form of pro cedure. Erie R. Co. v. Erie & Western Transportation Co., 204 U. S. 220, 27 S. Ct. 246, 51 L. Ed. 450; The Ira M. Hedges, 218 U. S. 264, 31 S. Ct. 17, 54 L. Ed. 1039, 20 Ann. Cas. 1235; The North Star, 106 U. S. 17, 1 S. Ct. 41, 27 L. Ed. 91. That the matter is one of substantive right as between two offending vessels is pointedly illustrated by the decision of this court in The Hudson, 15 F. 162, where it was held that in an action brought to recover damages resulting from a collision the court, in the exercise of its inherent power, solely upon the petition of the vessel sued, could award its further process for the arrest of another vessel claimed to be at fault to answer for its share of the damage. The opinion of Brown, J., defines the right to an apportionment of the damages between vessels liable to a third party as a "legal right in admiralty of the several vessels, liable for the same collision, to have the entire loss in damages apportioned equally among them." After pointing out the well-settled recognition and enforcement of this right in cases where the two offending parties were before the court, Judge Brown quite emphatically held that the enforcement of such a right could not depend upon the failure of the injured party to bring both parties before the court, and in this connection said: "The same sense of justice and the same considerations of policy which led to the adoption of this rule [namely, the apportionment of damages] and which carefully enforce it whenever the parties are present, require that if all the necessary parties are not before the court, either a separate suit for contribution should be allowed, or else that the absent party should in some way be brought into the cause, so that this 'better distribution of justice' may be effected." Judge Brown's decision in The Hudson was announced February 7, 1883, and on March 26, 1883, rule 59 in admiralty (since renumbered in amended form as rule 56) was promulgated by the Supreme Court. The rule of practice thus confirmed the legal right theretofore recognized as existing in admiralty, and approved the procedure adopted by Judge Brown in The Hudson for its enforcement. Whether the procedure for the enforcement of this right be by way of petition in the original suit under the fiftysixth rule or by way of a suit over after recovery by the injured party against one of the vessels at fault, either in an action in a suit in admiralty, as in the case at bar, at law, as in The Ira M. Hedges, supra, or the right which the court is called upon to enforce is the same, and is nothing more nor less than a right to a division or an appor tionment of the damages recovered by the injured party. In Erie Railroad Co. v. Erie Transportation Co., supra, where the injured party was the owner of cargo on board one of two vessels equally at fault, Mr. Justice Holmes said: "And it is established, as it logically follows, that the division of damages extends to what one of the parties pays to the owners of cargo on board the other," citing The Chattahoochee, 173 U. S. 540, 19 S. Ct. 491, 43 L. Ed. 801. I can find neither authority nor reason for extending it further. The right to a division or apportionment of damages between the vessels at fault does not rest upon the principles of indemnity between parties primarily and secondarily liable, or of contribution between joint debtors and cosureties, and, in the language of Mr. Justice Holmes in the opinion referred to above, "does not stand on subrogation but arises directly from the tort." While, in the enforcement of the right, the admiralty courts may and have followed the analogies of common law and equitable principles, these analogies do not limit or extend the right. It may, however, be said that even upon these analogies the exceptions would be overruled, because, as the learned commissioner has pointed out, the libelant's defense to the original suit, if successful, would not have relieved the respondent in this suit from liability. Lowell v. Boston & Lowell R. Corporation, 23 Pick. (Mass.) 24, 34 Am. Dec. 33. Indeed, it appears from the pleadings in the original suit, as in most collision cases, that the defense relied upon was that the damage sustained by the Red Rose was caused solely by the negligence of the owner of The Chambers, the respondent in the present suit. It does not appear that the respondent was ever notified or had any knowledge of the pendency of the original suit. The inequity of permitting the libelant to recover from the respondent half of the expenses incurred in an effort to charge the respondent with full responsibility is sufficiently obvious. The exceptions to the commissioner's report are overruled, and a decree in accordance with his report may be entered. PAINE et al. v. TRUSTEES OF MACALESTER COLLEGE et al. (District Court, D. Minnesota, Third Division. May 27, 1925. Judgment Amended June 30, 1925.) 1. Principal and agent 178(1)—Notice to custodian of securities held not notice to their owner. A trust company was custodian of securities owned by a college, acted as its agent in collection of interest thereon, and from time to time sold securities to it. The trustees of the college ordered the purchase of certain bonds listed for sale by the trust company and paid for them, supposing them to be owned by the company. They were in fact owned by plaintiffs, but the trust company was authorized to sell them, and on notice of their sale they were delivered to it by messenger, who received in payment a cashier's check, good when given, but which was not presented for payment until two days later, and after the trust company had been closed. The bonds were deposited by the trust company with the other securities of the college. Held, that the trust company was merely a ministerial agent of the college, and that the college was not charged with notice of the transaction by which the bonds were purchased by the company, or of any infirmity in the check given in payment therefor, which affected its title to the bonds. 2. Principal and agent 178(1)—When notice to agent is notice to principal stated. In order that notice to an agent shall constitute notice to the principal, it must be of facts within the scope of the agency, so that it JOHN B. SANBORN, District Judge. [1] The plaintiffs, Paine, Webber & Co., are and were a partnership engaged in selling securities. The Capital Trust & Savings Bank is a trust company of Minnesota, and was, up to May 3d of last year, at which time it was closed by the superintend ent of banks, engaged in business as such. The Trustees of Macalester College is and was a corporation engaged in maintaining an educational institution, and will be referred to as "the college." For a considerable length of time prior to May 1, 1924, the col lege had been purchasing securities from the trust company and depositing them with it as custodian. At one time John R. Mitchell was treasurer of Macalester College and also chairman of the board of directors of the trust company. He resigned in 1921, and Mr. Everett Kirk succeeded him. While Mr. Mitchell was treasurer, he found it convenient to have the trust department of the trust company assist in the collection of interest on the investments made for the college, and to have the securities deposited in the safe deposit vaults of the trust company, where they would be readily accessible. When Mr. Kirk became treasurer, he made relative to the care of the securities. continued the arrangement Mr. Mitchell had The college paid for the rent of the boxes in which its securities were kept. Mr. Willis Otis was the trust officer of the trust company. He and his secretary did the necessary work in connection with the listing and safe-keeping of the securities, cutting and collecting interest coupons, and depositing the moneys received in the Capital National Bank to the credit of the college. For convenience, the securities were finally moved out of the safe deposit boxes and kept in a separate compartment in the bank vault on the floor above. 7 F.(2d) 174 Aside from the collection of interest upon the securities, records of such securities were kept, and Mr. Otis had authority to sign checks for Mr. Kirk for the purchase of investments selected by the trustees of the college. The greater part of the securities had been purchased from the trust company, and its compensation consisted in the difference between what it had paid for such securities and the amount it sold them for to the college. From time to time the college had funds for investment, but instead of purchasing securities it turned over the money to the trust company and took "interim certificates." These, in effect, stated that money had been deposited and that the college might select later on such securities as it desired, and that the securities, when so selected, should bear interest from the date of the interim certificate. On the 1st day of May, 1924, the college had $24,000 of these interim certificates. During the month of April there had been discussion by its trustees as to the advisability of the college carrying these interim certificates, and it was suggested that they were not proper investments for its endowment fund. Mr. Bigelow, the president of the board of the college, knew that the trust company was heavily loaded down with farm mortgages, which were not salable and many of which were in default, and that it would require shortly a considerable amount of money to enable it to continue to do business. He suggested to Mr. Kirk, the treasurer, that the interim certificates be turned into actual securities. Mr. Kirk went to the trust company the morning of May 1st and got its bond list. Upon this list were $12,000 of Redwood county bonds, payable to bearer, and $12,000 of Northern States Power Company bonds. The list was submitted to Mr. Bigelow, and he advised the purchase of the Redwood county bonds and the Northern States Power Company bonds. Mr. Kirk notified the bond department of the trust company that the college would take these bonds, and would surrender its interim certificates. On the afternoon of May 1st the certificates were surrendered, and the trust company delivered to Mr. Otis, its trust of ficer, $12,000 of Redwood county bonds for the college, and these bonds were placed in the vault with its other securities. The college supposed that these bonds belonged to the trust company, and had no reason to believe otherwise. The bonds actually belonged, at the time they were ordered by the college, to Paine, Webber & Co. As soon as the college had selected these bonds, Mr. Matteson, head of the bond department of the trust company, notified Paine, Webber & Co. that the trust company would buy the bonds. Between 2 and 3 o'clock in the afternoon of May 1st, the bonds were delivered to the trust company by a messenger of Paine, Webber & Co., and he received in payment therefor a cashier's check. The check was not cashed at the bank, as might have been done, but he took it to Minneapolis and delivered it to Paine, Webber & Co. It was deposited in due course, and would have been paid on Saturday, May 3d, but for the fact that the superintendent of banks of the state of Minnesota had taken charge of the trust company and closed its doors. After the closing of the trust company, Paine, Webber & Co. ascertained what had become of the Redwood county bonds and made a demand therefor upon the college, which was refused. This action was commenced to determine who was entitled to their possession. At the close of the plaintiffs' case, the action was dismissed as to the Capital Trust & Savings Bank and the superintendent of banks. At the close of the testimony the Trustees of Macalester College made a motion for a directed verdict, which was denied. The jury brought in a verdict for the plaintiffs. This verdict, in effect, determined that the trust company was such an agent for the defendant that its knowledge that the bonds were purchased with a check which might not be paid was chargeable to the college, and that therefore the college was not a bona fide owner and holder of these bonds for value without notice, and that the title to them was in the plaintiffs. The The verdict cannot be sustained. trust company was nothing more than a mere custodian and bookkeeper for the college. The acts which it performed were ministerial in character. It was not at liberty to exercise any discretion with reference to the investments of the college. It could not either buy or sell securities for it. When securities were delivered to Mr. Otis for the college for record and safe-keeping, they were delivered to the college as fully and completely as though delivered to Mr. Kirk and removed from the premises. The relation between the college and the trust company, so far as the purchase of these bonds were concerned, was that of vendor and vendee. After the purchase was made, the bonds were left with the trust company in the usual way. There was no obligation on the part of the custodian to advise the college that the bonds had not in fact been owned by the trust company, but had been purchased from Paine, Webber & Co, and that a cashier's check had been given therefor, and no such information was given. So far as the record shows, the check given in payment of the bonds was good when issued, and would have been paid any time up to the morning the bank closed. It is not necessary in this case to determine whether or not there was any infirmity in the title of the Capital Trust & Savings Bank to the bonds in question. [2] The theory of the plaintiff that the trust company was such an agent that notice to it was notice to the college is not tenable. If the college had authorized the trust company to purchase bonds for it, the question would be a different one; but its only authority was in connection with the listing and safe-keeping of the bonds in question. Paine, Webber & Co. delivered these nego tiable bonds to the trust company to dispose of in any way it saw fit. The trust company sold and delivered them to the college. The college had no knowledge that they had not been paid for, and no reason to believe that at any time they had belonged to any one other than the trust company. To require the college to return these bonds, under the circumstances, would be to deprive it unjustly of the advantage of its own foresight. In connection with this matter, it must be kept in mind that notice to an agent, in order to be notice to the principal, must relate to facts so material for the purpose of the agency as to make it the agent's duty to communicate notice to his principal. 2 C. J. 866. "Notice to the agent, when it is the duty of the agent to act upon such notice, or to communicate it to his principal for the proper discharge of his duty as agent, is notice to the principal, and applies to agents of corporations as well as of others." Langenheim v. Anschutz-Bradberry Co., 2 Pa. Super. Ct. 285, 291. "The general rule is that notice to an agent is notice to his principal, but the rule does not apply where the agent is acting in a merely ministerial capacity. When so acting, the agent does not act as a substitute for the principal, nor is there imposed upon the agent the duty of communicating to his principal the knowledge thus ac quired." Royle Mining Co., v. Fidelity, etc., Co., 161 Mo. App. 185, 142 S. W. 438. "If notice to an agent is relied upon, it must be to an agent who is acting within the scope of his authority, and must concern some matter which it is his duty to communicate to his principal." Robertson Lumber Co. v. Anderson, 96 Minn. 527, 105 N. W. 972. Perhaps the best statement is found in Trentor v. Pothen, 46 Minn. 298, 49 N. W. 129, 24 Am. St. Rep. 225, in which the court said: "The rule which imputes to the principal the knowledge possessed by the agent applies only to cases where the knowledge is possessed by an agent within the scope of whose authority the subject-matter lies; in other words, the knowledge or notice must come to an agent who has authority to deal in reference to those matters which the knowledge or notice affects. The facts of which the agent had notice must be within the scope of the agency, so that it becomes his duty to act upon them or communicate them to his principal. As it is the rule that whether the principal is bound by contracts entered into by the agent depends upon the nature and extent of the agency, so does the effect upon the principal of notice to the agent depend upon the same conditions. Hence, in order to determine whether the knowledge of the agent should be imputed to the principal, it becomes of primary importance to ascertain the exact scope and extent of the agency." The situation here would have been the same if the college had paid cash to the trust company for the bonds in question, and Mr. Kirk had taken them and put them in his own office safe. There was no duty on the part of the trust company to impart to the college the information which it had with reference to the purchase of these bonds by it of Paine, Webber & Co., and no reason to expect that it would do so. The college was the bona fide owner and holder of these bonds, under the undisputed evidence in this case. After hearing the arguments of counsel, and upon due consideration, it is ordered that said motion for judgment be and the same is hereby granted. A stay for the period of 30 days is granted to plaintiffs for the purpose of perfecting an appeal. Order Amending Order for Judgment. The order heretofore entered on the 27th day of May, 1925, in the above-entitled |