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10 F.(20) 387

. closely arranged vanes is situated at the ex- DODGE v. F. A. D. ANDREA, Inc. treme periphery of the rotating wheel and (District Court, E. D. Pennsylvania. January causes the displaced air to escape around the

27, 1926.) whole of the periphery of the wheel in a uni

No. 11456. form manner and without shock, thus avoiding eddies and diminishing tangential pres- Sales Cw 120, 182(1)-Failure of number of

units to conform to sample did not warsure upon the main vanes."

rant rescission; whether proportion of deThere are a number of other prior patents

fective goods warranted rescission held for which incorporate the various features of the jury. Robinson patent, but we do not desire to take Under Pennsylvania Sales Act, $ 16 (Pa. St. upon us the labor of describing all of them. 1920, § 19664), as to implied warranty that We do call attention to one of them, how

bulk will conform to sample, in action by sell

er by sample of 20,000 radio cabinets, after ever. The Stewart (U. S.) patent, No. 1,724 rescission by buyer, where it was shown that (A. D. 1840). It was for a blower, but the lacquer finish on 107 of 11,000 cabinets depatentee called attention to the fact that the livered was defective and turned white, held principle of action was independent of any sample did not warrant rescission, unless it con

failure of that number of cabinets to conform to particular mode of gearing, or dimension of stituted a material breach, and, whether the parts. The drawing shows four long blades number of defective cabinets among those derearwardly inclined. They are arranged tan- livered was sufficiently large to warrant regentially to the hub, and two short peripheral scission was for the jury. blades are placed between the long blades.

At Law. Action by Kern Dodge, The effect of an examination of the prior receiver, against F. A. D. Andrea, Inc. On patents offered was to convince us that noth- defendant's motion for a new trial after vering unknown to the art was disclosed by diet for plaintiff. Motion denied. plaintiffs' patent claims. This finding is confirmed by an examination of chapter 13 Wayne P. Rambo and Robert T. Mcof “Heating and Ventilating Buildings,” by Cracken, both of Philadelphia, Pa., for R. C. Carpenter, published in 1902. The plaintiff. figures there shown disclose practically all

Allen S. Olmstead, II, Saul, Ewing, Refeatures of the patent. Pages 334–343.

mick & Saul, and Maurice Bower Saul, all In our judgment the patent in suit was

of Philadelphia, Pa., for defendant. not valid, in so far as the infringement al- Before THOMPSON and DICKINSON, leged in the instant action is concerned. This District Judges. conclusion requires a decree dismissing the bill.

THOMPSON, District Judge. Under the [3] Under the present condition of the proof contracts in suit, the plaintiff agreed to a similar decree would have been required for manufacture for the defendant some 20,000 another reason. As has been stated, the pat- cabinets for radio sets. The contracts conent has expired, and the only remedy pos- sisted of proposals and acceptances, which sible to plaintiffs was the recovery of dam- were followed by purchase orders accepted ages and profits. But to entitle him to prof- by the plaintiff, each containing in substance its and damages, it was incumbent upon him the following provision: "These cabinets to to show compliance with the requirements of have best quality lacquer finish equal to our section 4900, R. S., which, as a foundation sample. The color must be identical with to recovery, requires plaintiff to show, either

our sample.” that he has marked his device, “Patented,” Upon some of the cabinets white spots with the date of the patent, or that he has developed upon the lacquer finish after degiven defendant proper notice of his patent livery. After about 11,500 cabinets had been and its infringement, and that the latter has delivered, the defendant notified the plaincontinued his infringement after such notice. tiff: “We have concluded to cancel the orFranklin Brass Foundry Co. v. Shapiro & der and in future will accept no further Aronson (C. C. A.) 278 F. 435. The plain- cabinets from you." tiff has failed to comply with the provisions The letter set out as the grounds upon of section 4900, R. S. In view of our finding which the right to cancel was asserted the that the patent was invalid, this failure needs inferior quality of the cabinets manufacno further elaboration.

tured, and the receipt of complaints from Let a decree be drawn in accordance with customers, but no specific ground of inferithe foregoing opinion.

ority or complaint was stated. The sole de

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fense set up to establish the defendant's to be supplied, the same rule should apply right to cancel was the fact that the lacquer in an executory contract to manufacture and finish on many of the cabinets turned white. sell, and that, therefore, each unit manufacIn accordance with the terms of the con- tured and delivered must conform to the tract, the defendant had an inspector at the sample or model of the article to be manuplaintiff's plant during the entire period of factured, and that the failure of any number manufacture. At the trial, therefore, one of the units to correspond with that requireof the issues was the responsibility of the ment gives the right to the buyer to rescind. plaintiff for latent defects in the lacquer We are of the opinion that the rule apfinish which could not have been discovered plying to breach of warranty does not admit upon inspection. Prior to the attempted can- of the narrow construction for which the decellation 407 cabinets had been returned by fendant contends. While under the contracts the defendant to the plaintiff in accordance the cabinets were to be delivered and paid for with a condition of the contract, which reads: in installments as manufactured, there was “Any defective material will be returned for no evidence at the trial to show which of the credit, and transportation costs both ways cabinets defective in lacquer finish were part charged to you.”

of any particular installment so that the jury The plaintiff claimed as part of his dam- could not have found the materiality of the ages an item of $2,587.63 for the expense of breach under section 45 of the Pennsylvania refinishing the cabinets returned. That sum Sales Act (Pa. St. 1920, § 19693) as to any was included as a separate item in a state- one or more installment delivered. ment prepared by the attorney for the plain- As Mr. Justice Simpson said in Monroe tiff, which was, without objection, handed to v. Diamond, 279 Pa. 310, 123 A. 817: the jury as a calculation of damages claimed, "Obviously the question as to whether or totalling $70,415.06. The jury returned a not defendant was materially injured by verdict in favor of the plaintiff for $67,- plaintiff's breach, 'depends

(not 827.43, which was $2,587.63 (the exact only) on the terms of the contract, amount of the item for repairing and re (but also on) the circumstances of the case,' finishing the cabinets) less than the amount and this must be so in every broken conclaimed in the statement of the plaintiff's tract of sale. Hence, the law, which seeks damages.

to remedy the wrong actually done, now The defendant had offered testimony to wisely conditions the relief on the materiality show that about 3,500 cabinets were defec- of the breach, as thus determined, and not tive in the lacquer finish. It is apparent, merely on the form of the contract." therefore, that the jury found that the total The question for the jury, therefore, was number of cabinets defective in finish through whether there was a sufficient number of dethe fault of the plaintiff included only the fective cabinets out of the whole number de 407 cabinets returned, and that they did livered up to the time of the attempted cannot find as a fact, based on the defendant's cellation to constitute a material failure of testimony, the defective condition of some the bulk of the cabinets delivered to corre3,500 cabinets nor the plaintiff's responsibil- spond with the sample. The determination of ity therefor.

what constituted the bulk of the large numThe defendant now moves for a new trial ber delivered was a jury question. upon the ground that the trial judge erred in The definition of "bulk” in Webster and his instruction to the jury bearing upon the the Century Dictionaries is: “The main mass effect of section 16 of the Pennsylvania Sales or body; the largest or principal portion; Act (P. L. 1915, p. 547, Pa. St. 1920, § the majority, as the bulk of a debt." 19664). The applicable part of that section The jury were not instructed, however, is as follows:

that the right to cancel was dependent upon "In a case of a contract to sell or a sale by the question whether the largest or principal sample:

portion or majority of the cabinets was de“(a) There is an implied warranty that fective, but the thought followed by the trial the bulk shall correspond with the sample judge, in view of the circumstances of the in quality.”

case and the agreement that defective materi. The contention of the defendant is that, als should be returned for credit, was in inasmuch as in sales of grain, coal, or accordance with the theory of the defendant other merchandise sold in bulk, the bulk as expressed in its first point for charge, consists of the entire quantity of the article, which was affirmed, and is as follows: "If either in esse, after taking out the sample, or the jury believe that the plaintiff represented 10 F.(20) 389 itself to be a manufacturer qualified to pro- Loucks & Phister, of San Pedro, Cal., duce lacquer finish cabinets and contracted to for libelant. deliver cabinets with the best or highest grade C. W. Pendleton, of Los Angeles, Cal., lacquer finish, and if the jury further believe for respondents. that the methods and processes of the plaintiff were such that the lacquer finish on the McCORMICK, District' Judge. The cabinets manufactured by it were likely to briefs filed herein contain nothing that opturn white and blemish in the manner shown erates to modify the views of the court as in the defendant's exhibits, after the time expressed from the bench at the conclusion of delivery to the defendant, and if the jury of the evidence. The cases cited in the brief further believe that a large number of cabi- of proctor for libelant are not analogous to nets did so turn white from that cause and this case. The Emma B (D. C.) 140 F. 771, blemish as testified by the defendant's wit- and Metropolitan S. S. Co. v. Pacific-Alaska nesses, then the defendant was justified in Navigation Co. (D. C.) 260 F. 973, do not cancelling the contract.

concern partnerships, but relate to disputes The jury apparently found that 407 of between co-owners or part owners of vessels. the cabinets turned white from causes pro

Here, however, the dispute arises beduced by the plaintiff's workmanship, and tween partners owning unequal interests that the bulk of the cabinets manufactured in the ship Red Wing, and the main quesand delivered, over 11,000, were manufac- tions are whether or not a partnership in the tured in conformity with the sample. The ship exists between Kordich and Anton jury, no doubt, would have returned a differ- Zanich, and whether or not respondent Vinent verdict if they had found from the tes- cent Zanich purchased an interest in the timony that about 3,500 cabinets were defec- ship Red Wing with knowledge that the ship tive through the plaintiff's fault. And the

was partnership property of Kordich and jury might have found, as they were at lib- Anton Zanich. These questions present no erty to do, that 407 defective cabinets were

maritime issues cognizable by admiralty a sufficiently large number to so affect the

courts. bulk that it did not correspond with the

The issue presented by the libel, namely, sample, but they did not so find. The issues “that in consequence of diversity of opinion were for the jury, and, the trial judge having and interest in relation to the employment of charged in accordance with the defendant's said vessel, which is irreconcilable, the said: request, we perceive no sufficient reason for

owners are unable to agree upon any voyage reopening the case.

or business for said vessel,” is feigned, subMotion denied.

ordinate, and incidental to the main and real questions, and is not sufficient under the facts to confer jurisdiction upon this

court as an admiralty tribunal. THE RED WING.

The rule of law applicable to this cause (District Court, S. D. California, S. D.

is succinctly stated in Corpus Juris, volume December 19, 1925.)

1, page 1273, as follows: "Admiralty has

no jurisdiction of a contract of partnership No. 1936.

to engage in maritime commerce." And in Admiralty Ows 7-Questions of partnership in Ward v. Thompson, 22 How. 333, 16 L. Ed. ship held to present no marine issues cogniz- 249, the Supreme Court said: “A court of able by admiralty.

Neither dispute between partners owning admiralty takes cognizance of certain quesunequal interests in ship as to whether part- tions between part owners, as to the posnership in ship exists between two of parties, session and employment of the ship, but will and whether third party purchased interest in not assume jurisdiction in matters of acship with knowledge that it was partnership count between them.

It is not property of the first two, nor feigned, subordiDate, and incidental issue, that in consequence disputed that a contract of partnership in of irreconcilable diversity of opinion and in- the earnings of a ship comes within the terest in relation to employment of ship said same category. If the party desires an acowners are unable to agree on any voyage or business for it, is sufficient to give admiralty count, his remedy is in a court of chancery. jurisdiction.

If his complaint be for a breach of some in

dependent covenant, he should seek his remIn Admiralty. Libel by Anton Kordich edy in a court of common law." against the gasoline launch Red Wing and Inasmuch as Kordich and respondents others. Libel dismissed.

are not copartners or co-owners in the Red

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Wing in equal shares, the subject matter of Thorp, Bostwick, Stewart & Reed, of this proceeding is not within the purview Pittsburgh, Pa., for plaintiff. of admiralty, for the rule is generally and John D. Meyer, U. S. Atty., and W. J. uniformly established by the Supreme Court Aiken, Asst. U. S. Atty., both of Pittsburgh, that the jurisdiction of courts of admiralty Pa., for defendant. in cases of part owners having unequal in

Before THOMSON and SCHOONMAKterests is not and never has been applied to ER, District Judges. direct a sale upon any dispute as to the trade and navigation of the ship. The Steamboat

SCHOONMAKER, District Judge. [1] Orleans, 11 Pet. 182, 9 L. Ed. 677; Coyne v.

The defendant has filed an affidavit of deCaples (D. C.) 8 F. 638. Therefore, although I reluctantly so de

fense under the Pennsylvania Practice Act cide, under the facts of this case as found law. This affidavit is in lieu of demurrer un

(Pa. St. 1920, § 17200), raising questions of at the termination of the hearing, the libel must be dismissed, and the libelant relegated facts well pleaded in the statement of claim.

der the old Practice Act, and admits all the to the courts of competent jurisdiction for facts well pleaded in the statement of claim. the enforcement of his partnership and

The action is one of assumpsit, wherein property rights in the launch Red Wing.

the plaintiff, Cora B. Beatty, as executrix of the last will and testament of John W. Beatty, deceased, seeks to recover from D. B.

Heiner, collector of internal revenue of the BEATTY v. HEINER, Internal Revenue

Twenty-Third district of the United States, Collector.

an alleged overpayment of income tax for

the year 1920 in the sum of $572.49. This (District Court, W. D. Pennsylvania. Novem

sum is the computed tax on $5,000 returned ber 23, 1925.)

by John W. Beatty as income in the year No. 3275.

1920, being that portion of his purported in1. Pleading Om 160-Under Pennsylvania Prac

come for that year derived as an annuity untice Act, affidavit of defense, raising questions der the will of Andrew Carnegie. of law, admits facts well pleaded.

The plaintiff alleges that John W. BeatUnder the Pennsylvania Practice Act (Pa. ty erroneously included this $5,000 as income, St. 1920, $ 17200), affidavit of defense, raising when, as a matter of fact, it was a gift which questions of law, admits all facts well pleaded in statement of claim.

under the income tax law was exempt from

the federal income tax. It appears by the 2. Statutes em 245Doubt as to meaning of taxing statute resolved in favor of taxpayer. statement that Beatty filed a claim for refund

Courts in construing taxing statutes should of the said $572.49 with the Commissioner resolve doubts in favor of taxpayer.

of Internal Revenue in accordance with the 3. Internal revenue Em7--Annuity paid to lega- provisions of law, and at the same time filed tee under will held not taxable income.

an amended tax return for the year 1920, Where will devised to legatee a certain an

which omitted as income the $5,000 annuity nuity, and authorized executor or trustee to from the Carnegie estate. On the 24th of purchase such annuity from insurance com

October, 1924, the Commissioner rejected panies, or to set aside investments sufficient to allow a net income equivalent thereto and to

this claim for refund, and the plaintiff there be used in payment thereof, which latter course upon brought this suit. was adopted, held, under Revenue Act 1918, $8 The questions of law raised are:

(1) 210, 211, 212(a), 213 (Comp. St. Ann. Supp: Was this annuity gift received by John W. 1919, $8 633643e_6336%%ff), annuity so paid Beatty through the Carnegie will taxable inwas not taxable income in legatee's hands.

come under the taxing statutes of the United 4. Internal revenue Omw38-Income tax, voluntarily but erroneously paid, held recoverable.

States ? and (2) Can this tax, having been Income tax, voluntarily but erroneously voluntarily paid, now be recovered, even if paid, under Revenue Act 1918 (Comp. St. Ann. this annuity gift was not taxable? Supp. 1919, 8 633678a et seq.), on annuity re- The annuity gift involved was paid to ceived by tax payer under will of another, held Beatty as legatee under the Carnegie will. recoverable, in view of Revenue. Act 1924, & The provisions of that will, in so far as they 1014(a), being Comp. St. Supp. 1925, $ 5949.

are material to the issue here, are as follows: At Law. Action by Cora B. Beatty, ex- "5. I give to each of the persons hereinccutrix of the last will and testament of John after in this fifth article named an annuity W. Beatty, deceased, against D. B. Heiner, of the annual amount in this fifth article set Collector of Internal Revenue. Conditional after his or her name, to be paid semiannualjudgment for plaintiff.

ly during the annuitant's life, that is to say,



10 F.(20) 390 to [here follows a list of over thirty-five an- every individual. By section 212 (a), being nuitants, and one of them is 'Mr. Beatty, Art section 63361/8f, Comp. St. Ann. Supp. 1919, Department, wife succeeding, $5,000']." the net income was defined as follows:

“6. I direct my executor or trustee either "Section 212. (a) That, in the case of an to set apart, hold in trust, invest and keep individual the term 'net income' means the invested, in separate funds, one for each an- gross income as defined in section 213, less nuitant, sufficient sums to produce by the the deductions allowed by section 214." clear net interest and income thereof respec- By section 213 (Comp. St. Ann. Supp. tively, the several annuities provided in the 1919, § 63367/8ff), the term "gross income" fifth article of this will, taking into account is defined as follows: any changes in the list of annuitants which “Sec. 213. That for the purposes of this shall have been caused by death or by any title (except as otherwise provided in section codicil hereafter made by me and to pay the 233) the term “gross income'several annuities from the interest and in- “(a) Includes gains, profits, and income come of the respective funds in semiannual derived from salaries, wages, or compensapayments, or to purchase such annuities in tion for personal service

of whatlife insurance companies of good standing in ever kind and in whatever form paid, or from the city of New York or elsewhere. Upon the professions, vocations, trades, businesses, termination of each annuity the principal of commerce, or sales, or dealings in property, the fund held to produce such annuity shall whether real or personal, growing out of the be treated and disposed of as a part of my ownership or use of or interest in such propresiduary estate.

erty; also from interest, rent, dividends, se"8. (2) I authorize my said executor and curities, or the transaction of any business trustee, in its discretion, to retain for invest- carried on for gain or profit, or gains or ment of the principal of any of the trusts, profits and income derived from any source herein provided for, any of the securities left whatever. The amount of all such items shall by me.

be included in the gross income for the tax"I authorize it to sell any of the securi- able year in which received by the taxpayer, ties, or other property coming into its hands, unless, under methods of accounting perat public or private sale, and upon such terms mitted under subdivision (b) of section 212, as to time and manner of payment as it shall any such amounts are to be properly accountdeem best.

ed for as of a different period.” "I authorize it to make new investments By this section certain items are exempt of the moneys coming into its hands in such from taxation under this law. Among these securities as are sanctioned by the laws of the are the following found in section 213 (b) state of New York as proper investments for (3): savings banks [here follows the designation “(b)

(3) The value of properof certain investments approved by the dece- ty acquired by gift, bequest, devise, or dedent which provision is undoubtedly intended scent (but the income from such property to enlarge the rights of the executor and trus- shall be included in gross income).” tee with regard to the character of invest- [2] As we approach this statute for the purments they might make]."

pose of determining whether or not the anThe executor under the Carnegie will, the nuity gift is within the terms of the statute, Home Trust Company, elected not to pur- it must be noted first that in the construction chase annuities from life insurance compa- of taxing statutes, it is the duty of the court, nies as authorized by paragraph 6 of the will, in case of doubt as to the meaning of words, but instead elected, as authorized by para- to resolve that doubt against the government graph 8 of the will, to set aside certain 5 per and in favor of the taxpayer. United States cent. United States Steel Corporation bonds v. Merriam, 263 U. S. 179, 44 S. Ct. 69, 68 L. belonging to the estate, the income on which Ed. 240, 29 A. L. R. 1547. In that case, the was sufficient in amount to produce the an- Supreme Court held that a bequest made to nuity.

the executor in lieu of his commissions as exThe Income Tax Act in force at the time ecutor was not taxable income, but was exof the return by Beatty and the payment of empt from tax under the Income Tax Act of the income tax involved was the act of 1918 October 3, 1913 (38 Stat. 114), which (Comp. St. Ann. Supp. 1919, § 63361/ga et tained precisely the provisions of the act we seq.). By the provisions of section 210 and are now considering. section 211 of this act (Comp. St. Ann. On the other hand, the Supreme Court Supp. 1919, $$ 63361/8e, 63364gee), normal held, in the case of Irwin v. Gavit, 268 U. S. and sur tax are levied upon the net income of 161, 45 S. Ct. 475, 69 L. Ed. 897, decided


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