Gambar halaman

on account of Hovland's acts connected with 15,700 shares of Inspiration, and that in lieu of the debit in said sum Hovland should be debited with $378,605.50.

[3] It appeared that in 1904 the company which owned the Arizona King group of claims failed to do the necessary assessment work and in January, 1905, two men, strangers to this litigation, located the claims. Thereupon Smith and the two locators agreed that Smith was to assure payment for doing necessary work and was to have a half interest in the claims. After the firm of Hovland & Smith was formed, the partnership bought some interests in the group, and eventually the claims were patented to the two strangers and Smith, and Smith conveyed all of his interest in the Arizona King group to the Union Mines Company, the entire capital stock of which was owned by Hovland & Smith. In 1912 the Union Mines Company sold its interest in the group for $100,000 which sum was applied to the payment of partnership debts. It appeared, however, that payment to the men who did the assessment work for 1904 was made by a partnership credit entered on the partnership books (which were kept in Smith's name) in March, 1906. The master did not overlook the bearing that the book entry might have as tending to support Hovland's testimony to the effect that before the partnership of Hovland & Smith was created Hovland told Smith he would join him in the purchase of the Arizona King group, but considering the fact that when the strangers made their location there was no partnership of Hovland & Smith, and that prior to March, 1905, the locators dealt with Smith alone, it was concluded that entry for doing the assessment work made upon the books was in reality a payment of Smith's individual obligation incurred in 1904 and should have been charged against Smith on the partnership books. It was further found that when the partnership was formed it became owner of a half interest in the group, title to which, however, was then involved in litigation. The master estimated the value of Smith's interest in the group when he turned it over to the partnership at $40,000, but because of the litigation over the titles he reduced the value to $30,000. We think there should be a modification of this credit, and that Smith's valuation of $40,000 should be accepted without reduction of the twenty-five per cent. This seems equitable in the light of the fact that the litigation failed to impair the titles.

The credit allowed Smith as the value of certain options and equities in certain properties rests upon evidence that Smith individually owned the options and equities before the partnership was formed, that the rights were very valuable, that he relinquished them in favor of the partnership and for its financial benefit. One of the principal matters concerning this credit was the partnership promotion and development of the Warren Realty & Development Company in which in 1905 the firm spent approximately $600,000 in buying certain properties, which in 1917 were sold for over $2,000,000. But back in 1903 many of the properties which went into the Warren Company were held by Smith under options to purchase. By such options, if availed of, Smith would have received about $130,000 in cash, and the partnership, by promotion of the Warren Company, was enabled to buy the properties less the commissions Smith was entitled to. The master thought it just to give Smith credits against the partnership as of March 1, 1905. Whether the value of Smith's rights in the options was worth the sum for which he was given credit was vigorously questioned, but there was ample evidence to support the finding, and it will not be disturbed.

With respect to certain shares and purchases of stock other than Live Oak included in an account submitted by Hovland to Smith in February, 1912, Hovland took the position that the stocks were bought as partnership property, whereas Smith contended that the purchases were Hovland's individual matters and therefore should be kept out of the partnership accounts. Much conflicting testimony was introduced. Smith testified that he never had possession of any of the shares involved, and the master, after sifting the mass of evidence, both oral and documentary, concluded that Hovland treated the stocks as his own and that they belonged to him. An attentive reading of the testimony leads to the view that the letters and acts of the partners were consistent with that conclusion, and that the finding was correct. ing as partnership stocks Parea Oil shares, The master, however, was right in treatwhich at Hovland's request were taken from his personal safety box to be sent to Hovland at Duluth, for it is clear that the partnership was interested in Parea Oil and that shares in that company were issued to each partner. Hovland was therefore correct in claiming credit for the value of such shares, and Smith was right in not disputing the credit.

11 F.(2d) 15

A large part of the conflicting evidence was addressed to what was the true date of the dissolution of the partnership, whether as of March 1, 1912, as Smith contended, or January 17, 1911, as Hovland stated. It is sufficient to say that the finding of the master and the court is amply sustained; hence the accounting was properly made with respect to March 1, 1912.

[4] Smith's contention that the master erred in charging interest against him on the unexpended balance of $100,000 he received on account of the sale of the Rough Rider group does not appeal to us. The sale was made for partnership purposes, and Smith received the money on April 7, 1917, five years after dissolution. The fact that Smith brought the action soon after he paid out certain sums in settlement of partnership debts, and that he expressed a willingness to account, ought not to relieve him of the duty to pay interest for moneys retained by him, which money belonged to the partnership. His testimony that he applied the money to debts due to him personally from the partnership, though true, does not put the case outside of the rule that where a partner after dissolution has retained the proceeds of a sale of firm property for more than a reasonable time he may be equitably charged with interest in an account between himself and his copartner. Rowley on Partnership, § 601.

[5] The last of the important items pertains to the Live Oak or Inspiration stock, which was partnership property, but which was sold by Hovland's creditor-pledgee to pay his personal debts-all as referred to in the statement of the findings of the master. We agree with the view expressed in the clear and comprehensive memorandum opinion filed by Judge Dooling, that upon dissolution either partner had the right to sell any of the partnership assets either to pay partnership debts or for closing the partnership, but that if either retained the proceeds of sale he should be charged interest thereon. Therefore Hovland, having a right to sell the Inspiration stock at the time he did sell it, should have used the proceeds to pay firm debts. The fact that he did not do so did not injure the partnership or his copartner, provided the sale was for the fair and reasonable value. The test is: Was the liability that he incurred greater than that fixed by the law of partnership? Upon this point Judge Dooling well said: "If, therefore, defendant, upon the sale of the Live Oak stock, or its later equivalent the Inspiration stock, had applied the proceeds to the

payment of the partnership debts, plaintiff would not now be in a position to complain of such sale. The legal injury to the partnership does not lie in the sale of the stock, which as a partner defendant had the right to make, but in the withholding of the proceeds for which he was bound to account. The rule is stated in a line by Rowley (section 601) as follows: 'If a partner after dissolution retains the proceeds from the sale of firm property for more than a reasonable time he may be chargeable with interest."

It is argued by Smith that the value of the Inspiration stock as found by the court was too little, but there is ample evidence that the sum realized was the fair market value at the time of the sale, March, 1914.

We are of the opinion that an accounting, made in accordance with the decree of the lower court when modified in respect to the credit for Smith's interest in the Arizona King group, will equitably adjust the accounts between the parties.

The decree will therefore be modified to conform to this opinion, and as so modified will stand affirmed without costs to either party.

Modified and affirmed.

DEMPSEY et al. v. DOWNING et al. (Circuit Court of Appeals, Fourth Circuit. January 12, 1926.)

No. 2364.

1. Shipping 42-Implied warranty of sea. worthiness held to attach to barges hired for storage of cargo pending repairs to ship, notwithstanding inspection of holds.

Hiring of barges for storage of cargo pendranty that barges were reasonably safe and ing repairs to ship held to carry implied warseaworthy, notwithstanding ship's representatives examined holds of barges to ascertain whether they were in clean condition. 2. Shipping ~58(2).

In absence of contrary showing, ship is presumed seaworthy for services undertaken. 3. Shipping 42-Shipowners, wishing to avoid implied warranty of seaworthiness, should do so in plain and unequivocal terms.

Shipowners, wishing to release their vessels from liability on implied warranty of seaworthiness for service undertaken, should do so in plain and unequivocal terms.

Appeal from the District Court of the United States for the Eastern District of Virginia, at Norfolk; D. Lawrence Groner, Judge.

Libel by W. E. Downing, master, bailee, and the Standard Oil Company of Brazil, owner of a certain cargo, against John J. Dempsey and others. Decree for libelants, and libelees appeal. Affirmed.

John W. Oast, Jr., of Norfolk, Va. (Oast, Kelsey & Jett, of Norfolk, Va., on the brief), for appellants.

H. H. Little, of Norfolk, Va. (Hughes,

Little & Seawell, of Norfolk, Va., on the brief), for appellees.

hold and from No. 4 between-decks, aggregating 8,605 cases, was transferred to the Experiment. Having loaded the gasoline, the barges were towed to Hampton Roads and anchored, awaiting completion of repairs the reloading began. When the hatches of to the steamship, and on the 26th day of May the first barge were broken open for the purpose of reloading the steamship, it was discovered that a large number of the cases, aggregating 7,400 in all in both barges, which had been loaded in the barges, were in a wet

Before WADDILL, ROSE, and PAR- and damaged condition, and all of these cases KER, Circuit Judges.

WADDILL, Circuit Judge. The libel in this case was filed by the appellees to recover damages to certain portions of cargo placed by appellees upon the barges Katherine Dempsey and Experiment, owned and operated by appellants, because of the alleged unseaworthiness of the barges. The case arose in this manner:

In the month of April, 1922, the British steamship Justin, loaded with a general cargo from New York to South America, via Hampton Roads for coaling, was in collision with the Coast Guard cutter Manning in the lower Chesapeake Bay, resulting in a large hole being torn in the Justin's starboard side in No. 4 hold. In No. 5 hold, and in between-decks of No. 4 hold, was stored a large quantity of gasoline in cases, and before repairs could be made to the ship it became necessary to remove this inflammable portion of the cargo. Acting through a stevedoring company, arrangements were made, on the ship's account, with Dempsey & Sons for the hire of their two barges Katherine Dempsey and Experiment for the transfer and removal of the portion of the cargo mentioned, and the barges were thus used upon which to store the gasoline cases, and in lightering and holding the cased gasoline, and barreled oil, out of the steamship at Norfolk, Va.

The damage to the Justin permitted water to flow into No. 4 lower hold, and at one time it rose to a foot or a foot and a half in No. 4 between-decks, but above that point in No. 4 and No. 5 holds no water came into contact with the cases. The two barges were at the time of their engagement lying idle in the harbor at Norfolk. They were brought alongside and their holds examined by the ship's representative, for the purpose of ascertaining whether they were in a clean condition to take the gasoline. 16,666 cases were taken from No. 5 hold and transferred to the Dempsey, and the remainder from that

were rejected by the representative of the owner of the oil then present. Subsequently, upon the appearance of the representative of the underwriters, 5,200 of the 7,400 damaged cases were reconditioned and forwarded, leaving the remaining 2,200 cases unfit for shipment. These last cases were left in the barges and sold for approximately 50 per cent. of their value, occasioning a loss of $4,701.46. For the recovery of this amount the libel herein was filed against the barges and their


The case was tried before a judge who had the advantage of an oral examination of the witnesses, upon issues joined, upon the pleadings, as to the barges' liability for the damages sued for. The court rendered its written opinion, holding that such liability existed, and that the loss was brought about because of the unseaworthiness of the barges and the failure of their owners and operators to perform the services undertaken by them within the spirit and meaning of the contract of hire. The court referred to a special master the question of the ascertainment of the amount of the damages. The special master, upon testimony submitted to him, concluded that the sum of $3,931.96 was the proper award, and his report as to the amount due was, after full consideration, approved by the court. It is from this decree that the present appeal is taken.

The merits of the appeal depend almost entirely upon the facts, as there are no legal questions of importance to be decided, having the facts definitely settled. The assignments of error mainly relate to whether the seaworthy condition of the barges was warranted. It is insisted by appellants that no warranty, express or implied, was made, that the evidence fails to sustain the commissioner's findings, respecting the amount assessed, and that the testimony relied upon was wholly insufficient to support his conclusion. It is likewise urged that the damages were so uncertain as not to be susceptible of judicial determination, and that the commission

11 F.(2d) 15

er improperly considered testimony that should not have been submitted to him. We can only say that there does not appear to have been any error in the action of the commissioner in considering the testimony submitted. The chief subject for consideration was whether there was an express or implied warranty of the barges' seaworthiness. From the testimony adduced, it seems to us that both the commissioner and the trial court were correct in the conclusions reached that there was such implied warranty. Certain it is that no case is made that would warrant this court in substituting its judgment for that of the commissioner and of the trial judge, who gave full and intelligent consideration to both subjects, reaching a result that in our judgment is correct. Indeed, it would be difficult to come to any other conclusion upon the testimony.

[1,2] Assuming that there was no express warranty given as to the seaworthiness of the barges, it cannot be doubted that an implied warranty was given-that is to say, that the barge owners believed and held out to the charterers, who were procuring the barges for a special and urgent purpose, that they were in such reasonably safe, sound, and seaworthy condition as would enable them to perform satisfactorily the contract undertaken. The fact of the seaworthiness of the ships for the service undertaken is presumed in the absence of a showing to the contrary. "Where the owner of a vessel charters her, or offers her for freight, he is bound to see that she is seaworthy and suitable for the service in which she is to be employed. If there be defects, known or not known, he is not excused. He is obliged to keep her in proper repair, unless prevented by perils of the sea or unavoidable accident. Such is the implied contract where the contrary does not appear." Work v. Leathers, 97 U. S. 379, 380 (24 L. Ed. 1012); Hubert v. Recknagel (D. C.) 13 F. 912.

"It is not shown or suggested that the contract of hiring was other than the usual one in such cases, and in the absence of special conditions or exceptions we deem it not open to doubt that it implied a warranty of the fitness of the scow for the work for which it was chartered. The rule of law is so well settled as not to need the aid of argument or citation." Arundel Sand & Gravel Co. v. Naylor & Co., 242 F. 494, 155 C. C. A. 270, an opinion of this court by Judge Knapp. 11 F. (2d)-2

"The ground of liability, in the absence of any evidence of negligence, is solely the implied warranty of seaworthiness, which exists whenever and wherever there is an undertaking to carry goods for hire, in a vessel and on navigable waters. The kind of carriage here contemplated was very humble; it consisted in lying still and acting as a warehouse; but still it was carriage, in the sense of sustaining on the water, and that is enough." The Jungshoved (C. C. A.) 290 F. 733, 1923 A. M. C. 630–632.

See, also, The New York (D. C.) 93 F. at page 496; The Presque Isle (D. C.) 140 F. 202, 203, 204; The Transit, 250 F. 71, 162 C. C. A. 243; The Folmina, 29 S. Ct. 363, 212 U. S. 354, 53 L. Ed. 546, 15 Ann. Cas. 748.

Counsel insist that, under the circumstances in this case, appellants should not be held liable for damages arising from the unseaworthiness of the barges, either upon the theory of an express or an implied warranty; their position being that the barges were accepted for the desired purpose by appellees, after full inspection on the part of competent persons in their behalf, which, in effect, waived a warranty of seaworthiness of the barges. Doubtless there may be cases in which this would be true; that is, where full inspection was made by those seeking to charter the vessels, with a view of and for the purpose of learning their condition, and the alleged defects or weaknesses were either patent or were especially called to such charterers' attention by the vessel owners; but it does not appear to the court that the facts here warrant the acceptance of that doctrine. Sanford & Brooks Co. v. Columbia Dredging Co., 177 F. 878, 101 C. C. A. 92; Portsmouth Fisheries Co. v. John L. Roper Lumber Co., 269 F. 586, 588-both decisions of this court.

[3] It seems entirely clear to this court that neither party, by doing what was done in this case, meant to depart from the usual terms of a contract of hire of the barges. When shipowners contemplate the release of their vessels from liability, as affects the implied warranty of seaworthiness for the service undertaken, they should do so in plain and unequivocal terms. Upon failure in this respect, the liability arising from unseaworthiness exists, and it is only just and reasonable that this should be so.

The decision of the District Court must. be affirmed.

cert denied

27/US664, 70 LED.


18/139, 46, Sup 11 FEDERAL REPORTER, 24 SERIES cf. 475.


(Circuit Court of Appeals, Fourth Circuit. January 12, 1926.)

1. Post office

No. 2371.

48(4)-Allegation that fraudulent scheme was to be effected by use of mails is unnecessary, in prosecution for vio. lation of statute against fraudulent use of mails (Penal Code, §§ 37, 215 [Comp. St. §§ 10201, 10385]).

In prosecution under Penal Code, § 215 (Comp. St. § 10385), for fraudulent use of mails in scheme for sale of worthless oil leases, allegation that fraudulent scheme was intended to be effected by use of mails held unnecessary; Penal Code, 8 37 (Comp. St. § 10201), being inapplicable.

2. Post office

48 (4)-Allegation or proof that matters sent through mails were calculated to carry out scheme to sell worthless oil ieases held unnecessary (Penal Code, § 215 [Comp. St. § 10385]).

In prosecution under Penal Code, § 215 (Comp. St. § 10385), for fraudulent use of mails in sale of worthless oil leases, allegation or proof that matters sent through mails were calculated to be effective in carrying out scheme held unnecessary.

3. Post office 48 (4)—Indictment charging defendants with scheme to defraud, describing scheme in detail and using mails in furtherance thereof, held sufficient to charge offense of fraudulent use of mails (Penal Code, 215 [Comp. St. § 10385]).

In prosecution under Penal Code, § 215 (Comp. § 10385), for fraudulent use of mails in sale of worthless oil leases, indictment charging defendants with having devised scheme to defraud, describing scheme in detail, and with using mails in furtherance thereof, describing specifically how mails were used, held sufficient. 4. Criminal law 371 (1)—Evidence of similar fraudulent transactions in prosecution for fraudulent use of mails in sale of worthless oil leases held admissible on question of intent (Penal Code, § 215 [Comp. St. § 10385]).

In prosecution under Penal Code, § 215 (Comp. St. § 10385), for fraudulent use of mails, with prima facie showing of fraudulent scheme to sell worthless oil leases, evidence as to similar fraudulent transactions at or about same time held admissible as bearing on question of intent.

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for fraudulent use of mails, being within limit prescribed by statute, held not "cruel and unusual punishment."

7. Criminal law 1159 (5)-Action of trial judge in imposing sentences within statutory limit is not reviewable, except for gross or palpable abuse.

Where sentences imposed are within limit prescribed by statute, action of trial judge will not be reviewed on appeal, except in case of gross or palpable abuse.

8. Criminal law 622(1), 911.

Granting of separate trials and refusing to set aside verdict of jury and grant new trial are matters within sound discretion of trial court. 9. Criminal law


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13. Post office 35-Government is not required to show defendants' fraudulent intent to effect fraudulent scheme by use of mails or that mails were to be used for communicating with person intended to be defrauded (Penal Code, § 215 [Comp. St. § 10385]).

In prosecution under Penal Code, § 215 (Comp. St. § 10385), for fraudulent use of mails in sale of worthless oil leases, government was not required to show defendants' intent to effect their fraudulent scheme by use of mails, or that mails were used for communicating with person intended to be defrauded.

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