Western Pac R.R. Corp. v. Western Pac. R. Co. Metzger v. Western Pac. R. Co.

994= mute, withholding night, suf- critical Findings-of he stood

whether the Fact alone, he, perhaps support ficient information he Conclusions to- Law, could furnish. and whether the evidence con- justify sufficient to the order of This The law otherwise settled.2 by the in the cause demnation entered supply say is not to that his silence could question.” Court track as complete say, proof. to failure It appellant say goes on to : was, though, proof it hav that with the as “I ask shall not undertake prove strong tendency at the least ' any pass weight forfeiture, case claimant’s failure trial, on the but shall evidence adduced any explanation incriminating offer was no undertake to show that there him. against circumstances taken could'be evidence which the Trial Court from appear judg- being It not -made to that the reasonably could the conclu- arrive.at erroneous, ment was affirmed. sions drawn him from the evidence adduced on the trial.” clear, position appellant, thus

His made

insisting findings judgment that the evidence, support

without devotes his what states to all setting brief to out he et al. WESTERN PAC. R.R. CORP. and, case significant evidence in the al. WESTERN PAC. R. et CO. claims, combing he vain WESTERN PAC. support METZGER et al. v. fact them. or facet which lends R. CO. et al. States, holding end up The United 12506. No. out, ample setting support findings the circumstances judgment, Appeals Court of United States relied, includ- whole in bits on which it Ninth Circuit. persistent portentous silence ing the 29, 1951. Oct. that, claimant, pieced together, insists Rehearing 1952. Denied Jan. presents evidence whole as a mosaic Opinion Dissenting 1952. Feb. requires supports, truth which indeed etc., Motion, to File Petition for Leave judg- findings on and conclusion July Denied ment rests. Supplemental Dissenting Opinion carefully listened Sept. 11,1952. We have par both arguments and read briefs of ties, and, examined the having light in their the conclusions he

findings judge them, agree find we ourselves

drew disagree all We do not at

ment with them. contention the evidence

with claimant’s entirely circumstantial to sustain

burden the United States was on libel to satisfaction of charges of its mean, however, does not the court. This convince, as would be proof- must particularly

required case. in a criminal can, that the with not mean claimant does stand, expect not to have taking the out that, against him the fact as evidence taken full in position he was to furnish the car on the use of

formation about the S., Pickup v. U. S., Cir., Ton Truck Ford Starkie 2. Kent v. U. % Evidence, p. 54; 140 F.2d One 1941 6 Cir.. Vol. Alger Pee, Judge, District dissented James petition original hearing and on denial of rehearing. Denman, J., C. dissented from decision power appellant losing has no rehearing banc. en Madi- Pillsbury, Everett Mathews A. Francisco, Cal., Sutro, A. son & all of San Tweed, Milbank, MacKinnon, W.

Donald Whitman, Shaw, Hope Hadley, & Forbes D. Ransom, Goetz, York & all of New Coulson City, Realty appellee Co. Western HEALY, FEE Judge, Before Circuit BYRNE, District Judges. BYRNE, Judge. District ' deny- appeals These judgment from a ing below, plaintiffs relief to seek- who are $17,000,000 approximately recover from the reorganized The Western Pacific Company, appellee.1 Railroad defendant and Appellants are The Rail- Western Pacific Corporation (hereinafter road sometimes receiver, “Corporation”), referred to as preferred stockholders, and three of its who Corporation’s intervened assert claims. Appellant Corporation, from until gave the events which rise to this litigation, capital owned all stock The West Harrison, Phleger, Herman Maurice E. Company, ern Pacific Railroad an operating Brobeck, Lasky, Phleger Moses & Har- company. railroad operating company The Francisco, rison, Cal., all C. of San Frank financially became distressed during Nicodemus, Jr., Perry Osborn, Norris A. “depression early thirties” and in Dickerson, Darrell Mahlon all of New 1935 filed a under Section 77 of Leroy Goodrich, Oakland, City, York R. Bankruptcy Act, 11 U.S.C.A. 205. The § Cal., appellant Corp. for Western R. Pac. R. court, in year, placed its affairs in the Harrison, Phleger, Herman Maurice E. hands of trustees. In 1939 the Interstate C, Lasky, Brobeck, Moses Har- Phleger & Commerce approved (233 Commission I. rison, Francisco, all Cal, appel- San 409) proposed plan for reorganization, C. Bayard, lant Alexis I. Receiver. duP. which was ap thereafter submitted to and proved the district court in 1940. In re Haudek, Levy, William E. New Julius Co., F.Supp. Western R. Pac. In City, York Webster Rogers Clark and & V. plan determined, was alia, inter Clark, San Cal., all of Francisco Pomer- capital subsidiary, stock owned antz, Levy, Haudek, Schreiber & New York equity Corporation, was without or value City, Friedenrich, Francisco, and David San participate and therefore entitled to Cal., appellants Metzger et al. plan. Appeals and, followed Matthew, Adams, Allan P. D. contrary court, Rob- holding James Lipman, ert Enersen, L. Burnham Supreme Walker rejected considered and Lowry Thomas, Matthew, Mc'Cutchen, Corporation the contention of that it should Greene, Francisco, Griffiths & all San participate plan in the be Cal., appellees Western Pac. R. R. Co. cause increased earnings the debtor et al. while in reorganization, and affirmed the appellees iaries”, plural 1. There are seven an number, who are used refers group. only affiliated Compa- The one The Western Pacific Railroad appellants a.money judgment ny whom seek and all other members of the affiliated Compa appellant “Corporation” group is The Western Pacific Railroad of which ny, parent. hereinafter sometimes referred to as “subsidiary”. term, “subsid- oper- group. members 15, 1945.2 There- affiliated court on March district company, management ating was sub- under plan reorganization after the trustees, net with the again made substantial accordance the creditors mitted to earnings but the loss sustained statutory requirement, U.S.C.A. approval, 'by e, Corporation reason of the declaration and, following their sub. operating by the worthlessness of its stock3 in was confirmed on October $75,- Corporation company (which 'had cost April court. On district 000,000) court, Corporation in the con- trans- was utilized as approval offset subsidiary to in a net solidated return thus resulted all its stock ferred this stock loss obligation committee and and no tax reorganization addition, part of the group. On December affiliated was later cancelled. properties a claim turned the railroad loss was “carried back” 19424and the trustees company, paid for refund of the taxes under con- reorganized over to Western, Company,appellee with the solidated was filed Pacific Railroad return March by Corporation Commissioner here. in 1945. A return behalf of consolidated dispute about litigation involves This 15, group the filed on affiliated was 1942, years June savings the taxes and tax 1945, Corporation by for the first four pe- 1944, of the four months 1943and first liability No months of 1944. tax was shown properties during the railroad which riod by “carry of the for- by this reason return operated by the trustees were controlled and portion the loss ward” of an unused bankruptcy court. of the worth- arising the declaration Corporation years in During which the subsidiary com- lessness of the stock the outstanding the stock the owner of all was Corporation. pany by owned Pa- pre-reorganization, Western validity loss offsets was stock years Company, including the cific Railroad questioned by the Commissioner of Internal bankruptcy court had the trustees of the Revenue, negotiations and settle- tax possession prop- of the railroad and control ment was made with the Commissioner on practice erties, Corporation followed whereby, August 13, 1947 consideration in income tax returns filing, consolidated of the withdrawal of the claim for refund earnings oper- reported which it taxes, accepted of 1942 the Commissioner ating company as well as other affiliated approved and the returns for the calendar companies. year 1943 and first four months of 1944. year com- operating 1942the During Except capital offset of stock pany, trus- the control of court’s under Corporation, the net earnings loss of May earnings. net On tees, had substantial subsidiaries for 1943 the first four return the cal- 15, 1943, a consolidated required months of liability tax year showing endar payment $17,000,000in income of some by Corporation $4,201,821.54, filed was profits excess taxes. group. of the affiliated all members behalf of equity This suit in was instituted October having had net earn- Corporation, not Corporation, 1946 by alleging “consoli- pay any part during did ings dated income returns were filed tax the tax. plaintiff its for itself and affiliates re- which ported 1'5, plaintiff a deductible loss July a consolidated income On profits an amount sufficient to eliminate tax return for calen- all taxable and excess income, group as whole” for showing income year 1943, no taxable dar question periods in and praying that by Corporation in of all behalf filed capital Corp., losses instead of losses thereto- Railroad v. Western Pacific 2. Ecker 87 L.Ed. 892. 63 S.Ct. fore. 318 U.S. 122(b) (1) of the Internal Reve- of the Revenue Act Section Section 1942 , By 23(g) (4). nue 26 U.S.Code. this subsec Code. 26 U.S.O. resulting tion, from worthlessness losses Eeve_ 122(b) (2) Qf tbe Internal 5. Section operating an affiliate became stock Code_ 26 U.S.Code. nue expenses and the their of the office rights plaintiff salaries and the and interests of im- jointly its paid; that because of defendants 'be fixed and determined. A poverished condition, Corporation complaint filed three financial intervention was incapable, paying Corporation April as of stockholders of on June expenses or and thereafter principal 1947. The between the salaries office difference complaint paid all of the salaries original complaint and the in- subsidiaries expenses. Appellants this as latter office allegations tervention is the refer “duality management” con- “duality” pertaining tp interlocking man- relationship and the agement parent fiduciary tend created a and “domination” Corpo- fairly subsidiary. duty subsidiaries’ to deal alleged It is that various with directors, Corpora- ration. officers and counsel of directors,

tion acted as officers and counsel Many by appel of the cases cited subsidiary that the the result trustees, agents lants with the duties of deal subsidiary Corpo- dominated controlled partners granting and with the of resti ; Corporation ration that said officerscaused Clarity tution for of their duties. violation file consolidated tax returns when Cor- of reasoning has suffered because poration duty obligation had “no whatso- failure to several distinguish between the Corporation so to do”. ever filed an answer fiduciaries, im varieties and the duties complaint intervention which it posed Although on each. all trustees denied “on its own behalf of behalf necessarily fiduciaries, all fiduciaries are not allegations officers directors all trustees. * * * of doinination and control of the person “A fiduciary in a relation an- plaintiff, its officers and directors” duty benefit other is under a to act affiliates, subsidiaries and six but months scope matters other as to within Corporation supplemental later a bill of filed Fiduciary include the relation. relations complaint “duality alleging a of control” among others the and relation trustee and, though falling short intervenors’ al- beneficiary, guardian ward, agent and legation “domination”, alleges it “at the * * principal, attorney client *. special request instance and of the defend- corporation and officers of a are directors reorganization ants and the trustees fiduciaries, receivers, also as are execu- proceedings acting for the defendants the scope tors and administrators. The plaintiff, however, filing consented to the on transactions relation and the affected * * * its behalf of consolidated tax re- imposed extent the duties are not iden- periods turns with defendants” for the tax * * fiduciary tical in all relations question. alleged plain- It is further that Restitution, Restatement of Section tiff conducting “does not aver that in so “a”, (emphasis added.) comment acting themselves” the officers cor- both As stated Professor Scott in 49 Harv- porations “were aware of wrong-doing or page ard Law Review at 521: some “In re- consciously disregarded the interests the fiduciary lations elementis more intense plaintiff”. There is no assertion of actual others; it peculiarly than intense specific or acts of deceit nor would fraud * * (emphasis case a trust add- support any the record Cor- assertion. ed.) poration’s appears claim to rest on construc- Appellants place great a measure of reli- presumed intercorporate tive fraud from the ance the case of Commercial National relationship deprived which it asserts it of Shreveport Parsons, Cir., Bank in v. independence its and caused it suffer -a distinguishable 236. That case is- loss. fiduciary from the case before us in that the appellants emphasize Corpora- relationship arose out of a contract which jointly its tion maintained offices with those imposed duties a trustee and the trustees in its subsidiaries New “new court decided the bank”. case on York; Corporation’s officers, who established rule that a trustee owes the transactions, tax were fidelity handled the also em- duty absolute the trust estate trustees, ployees profit by of the subsidiaries and dealing not may with it. We through know benefits their way point up of no the dis- derived better duty. tinction the court breach of than to use the words emphasized appellant’s cited and brief: rules relating But to the individ “The credit bank thus obtained the new not point ual do reach involved officers profit property was a the trust derived from in, this case. Here we must determine effectively paid as .if it had been corporation the subsidiary whether stood (emphasis much in cash.” added.) corpo fiduciary parent relation to the ways ration. There are trustees, several orthodox which deal Cases corporation in which may one become agents partners here controlling are not fiduciary in corpora relation to another subsidiary there is no contention that tion, g., may property e. hold it in trust for trustee, appel agent partner. was a or other, may agent it or become an for the subsidiary lants’ domin contention that the Fiduciary other. duties also arise where one Corporation through ated the dual officers. corporation the other. Consoli true, relationship fiduciary dominates If this be then a Bois, dated Rock Products Co. Du existed, imposed not but duties U.S. Al S.Ct. L.Ed. 982. those of a trustee. a trustee not While though presence of common officersand thereby with the trust estate make deal directors does not in itself create a domina profit, corporations usually affiliated or a fiduciary relationship tion between very purpo.se dealing associated for the corporations, subject dealings be does profit, manufactur g., with each other for e. judicial scrutiny tween them their as to companies; railroads and and sales fairness and reasonableness to ascertain if subsidiary companies. Even their short line exists,- so,, domination and if whether corporation which dominates its subsidi has which will fiduciary overreaching resulted ary, relation with the resultant .presumption raise a of constructive fraud. ship, pro properly deals with affiliate n There un long overreaching fit as there is no obviously interlocking existed an management Corporation between and the fairness. subsidiaries. But not -situation was relationship fiduciary Whether the, subsidiary’s making. of the On con- exists, im- the extent of the duties and trary, Corporation, -by it was created whose particular depends field posed, the stockholders elected its Direc- Board of We must law involved. substantive n tors, appointed who its officers. Since corporations deter- the law look to plaintiff Corporation owned the subsidiary in a whether the stood 100% mine subsidiary, stock of the it elected all of Corporation. The fiduciary relation to subsidiary, which, directors in and directors in com- mere fact of officers^ turn, appointed its After the officers. sub- fiduciary such a rela- mon create does sidiary reorganized it longer was no tionship. about nothing There is insidious by Corporation by controlled but the trus- management and control as duality of appointed bankruptcy tees court.6 . very in the It is common such. realm Corporation in continued office the same business, particularly the situation of who, turn, directors continued to em- subsidiary, At times parent and as here. ploy the same officers. This was not un- requires convenience such rela- business Corporation natural since continued to own tionship. The and directors who officers capital subsidiary all stock of the long position are this dual fiduciaries occupy it had been divested of control of duty loy- companies and owe a both subsidiary by reason the reorgani- they cannot favor the alty each. Thus zation. corporation while sacrific- interests of one it that betraying those of the other. If If be assumed the advent respond so, they into affiliation and they damag- must the in- trustees do prosperity subsidiary conduct or account creased their tortious result- for es approved by parties all the trustees was interested of one of The name 6. n bankruptcy proceeding. Corporation (cid:127) to the court submitted by the court other was selected May until extension of time Corpora- ranged an for the affairs ed in control March return. On the final to file fiduciary obligations, raise so as to tion Nicodemus, Jr., who subsidiary’s 23, C. F. scope extent time and Corporation at the with counsel fairly deal be to obligations pleadings and only appears act on the corporation can Corporation. A briefs appellants, counsel present follows this case agents. through officers Schumacher, Mr. suggested by letter7 to and unfair- domination if there was operating com- through one of the trustees the dual offi- exercised ness it was employ pany, that he authorized to obligations to Cor- their forsook cers who Ransom, Whitman, appointed, Coulson & Messrs. poration, by they were Goetz, subsidiary. experts, to advise him on tax tax purposes and served the matters. This was done. Polk of appellants Mr. Although arguments apparent firm continued to advise with the officers exceedingly general, periods particulars group through here they assign three wherein question. obligations their Mr. Polk reviewed the tax sit- dual officers failed in Curry Mr. Corporation, (1) in unfairness: uation with and Mr. Nicodemus resulting 20, 1943*, returns; they May prepared They and on (2) filed consolidated a detailed report9 agreement Curry from the written to Mr. failed to exact an sub- addressed payment money to circulated to Mr. Nico- sidiary requiring Schumacher Mr. Corporation their consent report condition to demus. reviewed the tax ad- returns; (3) to file consolidated vantages sug- returns consolidated resigned ap- that, gested possibility should have and allowed the under the re- pointment of successors who would enacted amendment cently Section agreement an (g) Code, exacted such from the sub- of the Internal Revenue sidiary. par- Corporation, upon We shall discuss three these loss of a determination ticulars seriatim. subsidiary its stock was worth- less, might constitute under a consoli- The consolidated returns filed return, dated offset income of other Corporation parent, as the for itself and its group members. A consolidated return re- Appellants subsidiaries. contend that porting Corporation an off- loss causedCorporation to file subsidiaries set group prepared income was duty consolidated returns when had “no joint office, signed New York Mr. Cur- obligation whatsoever so do”. The ry, July and filed him on 1944. The filing of these returns was in exact con- reported return owing. no tax Substan- formity practice with the since followed tially procedure the same was followed Beginning in 1927 Michael Cur- J. “carry back” claim refund ry, first February as treasurer and after 9, 1945, March as well the consolidated as 1, president Corporation, 1942 as of su- 1944, tax return for the first four months of pervised preparation of consolidated re- July which was filed 1945. turns, signed and filed them. year each the consolidated liability tax was distribut- hardly Corpo- It conceivable that seems pro ed rata to those members group of the complain ration could because consolidated who had taxable incomes without allocat- were returns filed. Not it only was in ac- ing any company tax to a showing a loss past practice cordance with group of the company paying tribute the tax supervision and Corporation’s under the “saved” the use of its in the re- president, loss years, as former but it was Curry supervised turns. Mr. preparation independ- done under the guidance of the of a tentative tax return for and on experts employed upon ent tax sug- the March signed and filed it ar- gestion of the General Counsel for Cor- Appellant 7. special request Intervenors attribute the the instance * *” * “causation” to “domination and control” defendants and the trustees Corporation (pleadings). the subsidiaries trustees, Corporation, whereas which de- (read page 544). record, Pl.Ex. into 8. 39B merely nies “domination and control” at- its consent to the filing “at it to tributes 9. PLEx. 50.

1002' the poration, represents on appellants in the menced October who after present on complaint court proceeding. filing As' the in intervention trial “ * * * was, 7, 1947; April made everybody no effort when that was stated10 case, to en complete- power the the to they acting invoke were matter, Corporation ly join con open in was the from nobody officers the the anyone else, tinuing the to have the Bureau concealing anything their efforts filed; accept deception, the of the kind consolidated returns of fraud or element * * to, nothing Polk’s you Ev- that was done to revoke that refer is absent *. power-of-attorney represent Corporation to erybody returns knew that consolidated * * Bureau; Everybody proceedings the that being *. before filed were Polk, Corporation, attorneys attorney-in-fact for being that these em- knew liability offer ployed made an of settlement of file this return. It tax to consolidated 1942, 1943 right At and the first open.” was done out in four all months May letter the Inter plaintiff ap- to of trial intervenors time Bureau; stipulation nal agree Revenue that peared with these observations (hereafter court,11 discussed) they was entered into be appeal but on this trial tween counsel in this case something approving there infer that sinister was n settlementof with the Govern about the the consolidated returns. returns filing ment; Corporation’s that Board of Direc It note the reactions interesting is adopted a approving tors resolution opin appellants to observations in August offer ratifying of settlement ion the trial effect court12 to that 1947. allowing erred Commissioner inescapable is The conclusion that They question. tax vehement deduction Corporation’s officers, when con filed ly argue consolidated filing that returns, any solidated did not violate ob plaintiff’s loss to and the use returns but, contrary, ligation were con proper un income was offset .defendant’s forming -policy with the regulations. law directions der the tax Corporation. compro that interesting also note the tax between Bureau mise of claim Appellants suggest Corporation was that Corporation act Revenue and Internal obligation under no file consolidated attorney-in-fact, through K. returns; have that could that James demanded Polk, this action was com occurred agreement subsidiaries into an enter Transcript. Page 970, holding principal court, trial we do taxpayer not share this view. A Transcript: Page Court: “The every himself means avail of tax de- you say there, Well, Mr. have all I proper applicable duction under stat- necessary Levy, that I think don’t questioned utes. Here the Commissioner argument carry forward now. taxpayer’s to the deduction they, Everybody knew, didn’t negotiation, and, after com- months being So. return was filed? consolidated disagreement promised company railroad the defendant taxpayer litigating in lieu of Tax it in the pay income tax? wouldn’t The tax Court. laws authorize the Com- filed, why it wasn’t it? That compromises to enter into and missioner your Yes, Levy: honor.” “Mr. they binding on the court in the court, particularly opinion the trial This filed fraud. is absence In the proceeding. E.Supp. 868, 874, appears D.C., the a collateral The set- true in undisputed expressed In- the Bureau of the claims is an view that tlement tax not have com- fact in this advantageous and or not it Revenue should case whether ternal government taxpayers promised to is of the the the tax claim recognized that in issue. The trial court have insisted the claimed not and should entirety. expression this view disallowed in their as dictum be the deductions “Obviously said, power, I the when it stated: the Court “If I had The court validity upon pass judgment n would aside tax' hesitate to set the cannot the not could, compromise Indeed, tax I I would the settlement. if settlement. of. paid final is cannot now closed. It to the is these taxes United order effectively dispose reopened except (empha- for fraud.” That would States. ' (cid:127) added.) agree the sis While we with cause.” re- consolidated unity” filing of for the money prerequisite pay as it a sum to Regula- incorrect. returns; is turns. This that such filing its consent in cases where procedure suggest exact such did not tions officers inasmuch group. affiliated subsidiary left the obliga- has their failed agreement, Thus, 23.12(e). Regulation 104, Section chargeable Corporation and are tion situa- specifically envision regulations the imputed to be omission an “unfair” unity shall cease economic tions where supposed subsidiary by the reason of to the re- consolidated yet filing of permit the domination. If, filed returns are by the the turns. time Rev the Internal 141(a) of Section exist, bene- any the affiliation has ceased to filing ¡privilege of the grants Code enue obviously subsidiary inure cannot fits to the condition the consolidated returns situa- precisely the ¡parent. to the That group the affiliated members of all that periods the the tax tion in case at bar. prescribed regulations consent group. involved there an affiliated authority the under the Commissioner When the the claim for re- returns and Reg same section. the (b) subsection filed, longer affiliation ex- fund provides that 23.12 104, Section ulation Therefore, the the con- isted. benefit of made return shall the consolidated solidated return could not accrue the Regu corporation. the parent Under parent corporation. If the assertion corporation agent lations, parent appellants that consolidated “are returns (except group, and un the entire permitted not benefit of the sub- dealings with the circumstances) all usual true, literally sidiaries” were then there parent. are handled Commissioner lawsuit would be no here because consol- Appellants argue that re- consolidated returns could filed idated not been solely designed bene- turns were first instance. parent corporation. argu- fit of the Regula- sound. The Code and ment not Appellants three decisions of cite recognize of con- that benefit tions Exchange Commission Securities corporations is for all solidated returns ¡support their the rationale view Any group. subsidiary group, in the requires tax benefits laws parent, prevent well the. fil- go from the tax laws resulting should filing returns if consolidated sup These not parent.13 decisions do contrary is detrimental interests appellants. port contention of These this corporation. Appellants assert approval companies were seeking saving that in the usual case the tax alteration the Commission to of inter-com subsidiary par- will effects inure to the pany agreements respecting taxes. income by way ent the value of its increasing All three show a decided view decisions by way stock or of dividends. This is point savings tax consolidat quite But true usual case. it does paid not ed returns shall over to the follow, not mean that this result must nor parent way if in any endanger that, it follow because value of a does position of the creditors of the sub subsidiary corporation parent’s equity in a sidiary. They also clear make that a com flowing is increased reason of benefits pany. whose loss for the was utilized bene subsidiary’s preferred stockholders group fit of does have a creditors, may receive the benefits compensation from those who benefited. direct, regardless rights of the sub- case, supra, In the Cities Service the Com “ sidiary’s stockholders, preferred creditors * * * said; we mission think minority common stockholders. be observed that ordinary should jntervenors appellants subsidiary case the fact that one con contrib particular require income that tax laws utes a deduction to tend “economic a 649; Matter S.E.C. In Matter Electric of Cities In the Consolidated Company Co., the Mat Cities Service Re Gas S.E.C. Service & fining Corporation, Holding Co. Act Electric Gas Co. ter of Consolidated Co., #5535, Islands Gas Electric Release' File and The 70-988.

lOOá paid on none en- of these occasions was tribute Consolidated return does not itself subsidiary to a title had a subsidiary that suffered loss. benefits of reduced deduc- would have been resulting taxes from the officers derelict duty their possible they the subsidiary tion. are to had failed Where reductions return, filing they duty to file consolidated a returns. to consolidated or- Their Corporation required dinarily only they that due of factors not to a number require sacrifice its interests and' did not contributed members of various them to among following exact tribute for group, including, oth- consolidated practice credits, past ers, twenty-five years. of the earnings, profits and excess tax Aft- er Corporation the transaction (empha- as well as income deductions.” ex- was actly position the same it that was in added.) be- sis fore subsidiary had effected the tax Regula- nothing in the There Code saving by the allowed tax laws. compels a tions that the conclusion that saving must or should inure to tax However, it is contended that the company parent or of the benefit subsidiary Corpo should notified have company which has loss that sustained the ration’s and directors of the stockholders possible saving. the tax makes filing of consolidated so that inde returns pendent directors and officers could have have, Assuming, that the subsidia- as we been put charge Corporation’s inter ry Corporation through control dominated bargain ests to make with the subsidiaries officers, did not its the dual it abuse compensation prerequisite obtain as a supposed position dominant because to consolidated filing returns. There are common to both cor- directors officers several things wrong argument. with this Corporation’s porations did sacrifice in- not The most obvious is that the entire trans subsidiary. to those of the When terests open action Many was and above board. Supreme Corpora- Court decided persons 'having an Corporation, interest in participate not tion could the increased including counsel, stockholders and company earnings operating while fully They aware the situation. chose reorganization, Corporation suffered a They preferred not apparently to act. to income, severe loss. Since it had no there permit stand, the transaction intending to possible way to for it achieve was bargain thereafter to for a share in the advantage tax to offset loss. its But They savings. tax made no effort to in affiliate did have loss and the use ject themselves into the tax settlement with entitled, law, group was under the tax government. But all this assumes that use of that means of tax to make sav- it proper Corporation been ings. dual owed fiduciary officers du- to 'have such bargain. made Corpo corporations promote both to ties ration the sole owner of the subsidia was of both and to obtain for each interests ry’s capital stock. As was such it under a what it entitled under the tax laws. duty fairly subsidiary to deal with the hav state of Under this these officers had facts ing regard full for' the interests of the duty positive use of the make loss creditors and holders of other securities. did, is, to offset income of Consolidated Rock DuBois, Products Co. v. group affiliated with de- members 312 U.S. 61 S.Ct. 85 L.Ed. losses of other members. If the ductible duty It owed a require not to its corporations were reversed positions subsidiary forego legitimate tax sav subsidiary par- had a loss and the and the bargain perform and could not its income, the officers ent had would have duty. parent company A acting in obliged to file been consolidated returns the best interests of subsidiary when Corporation make use of enable appropriate to itself an seeks advan Indeed, very thing had loss. occurred tage which the tax give laws the subsidiary. years previous of the affiliation and Cor- argues had effected substantial tax Plaintiff sav- poration was a 46) by "complete stranger” Ex. ings (Def. reason of filing con- to defendant when returns. The record is clear that the consolidated return filed solidated July

1005 claim, diminished the 1942 refund terminated on tion 1944, the affiliation because the entir-. proportion 1944, stockholdings were to the diminution 30, April when been to have saving, com- be deemed reorganization tax should transferred as the “paid plaintiff doc- is an historical to A tax return allowed and mittee. * * group past. agent This return relating to the ument affiliated con- order period (emphasis added.) pretrial ex- when the affiliation related to a respect stipulation. fiduciary with firmed the isted. All duties relationship arising during the matters for not make The trial court did up period, and during winding continue findings mal of fact conclusions be- sacred and inviolable as “as law, 52(a), F.R. section relied but expiration of its term”.14 fore the U.S.C., part: C.P., provides in 28 which fiduciary say be that a ridiculous “* * & opinion memorandum if an performs matters up an act winding who filed, if will be sufficient decision is period may which relate to affiliation of law findings of fact conclusions payment merely exact because the rela- ” * * * appear Findings therein. tionship If technically terminated. has are intended fact and conclusions of law Corporation required had tribute a con- appellate them affording aid courts cooperation, dition of its then it would have understanding clear of the basis of required with acting been than the less Findings ju decision below. are not a subsidiary’s standard of fairness to the requirement appeal risdictional which Equity permit creditors. will not a recov- may this court not waive. Even in cases ery bargain as a substitute for a findings, where there are no if record would have been unfair. so clear that the court does need them, The record barren may of evidence defect waive the on the support Corporation ground contention that that the error is not substantial subsidiary, dominated the particular case.15 any duty there was breach owed opin- In the instant case the trial court’s Corporation. stated, As the trial court ion adequately discloses the issues of fact control,’ “The so-called ‘duality of much which were before court’s emphasized, impor discussed and is not findings thereon. F.Supp. tant”. [85 875.] court, appended The trial in a note Appellants spe- contend that have a opinion, to its stated that “Inasmuch as They cial 1942 saving. claim to the tax there is dispute” opinion little factual rely upon pretrial stipulation and or- findings would serve fact and con proposed der. The of tax lia- settlement law, they wish, clusions “counsel, but if bility government provided * * findings submit par All the returns for 1943 and first four elected not to submit ties additional or approved months of 1944 were to except findings more detailed ap that the filed, and that the claim for 1942 refund of pellants proposed findings respect to .with rejected. ap- taxes was Intervenors stipulation pretrial order, the above plied the court below for an order re- and also a conclusion of law to the effect straining the consummation of the settle- plain that the defendant should pay to the theory rejection ment on the $3,385,290. tiff the These proposed sum might prejudicial 1942 claim refund conclusions, findings and which were in position Corporation in this liti- opin those consistent with embodied gation. parties stipu- entered into ion, rejected by the trial court. providing purposes litigá- lation that for Mayo Highlands Canning Comstock, Cir., 1903, v. Lakeland 121 Trice v. F. Co., 176; S.Ct. 309 U.S. 84 L.Ed. Uniform Part 61 L.R.A. Hurwitz, U.S.App.D. Cal.Corp. 774; Act, nership 30; Hurwitz v. 7 U.L.A. Sec. 226; 15030; 136 F.2d 148 A.L.R. C. on Trusts Code Sec. Scott Panagopoulos, App.D.C. Corpora Fletcher, (1939) Goodacre Sec. (Perm.Ed.) F.2d 716. Sec. 8174. tion 1006 corpora- below Appellants argue speculation that the court stock while the as parties liquidation the it should leave tion process

concluded that was in the Corporation trifling (page them and that where it found its “stock value” was of avails is the assumed therefore entitled to brief), irrelevant opening intervenors’ of the refund claim. Corporation reduced the is an en- to issues here. tity not it is and the issue is whether or stipulation pretrial order The $17,000,000 the from entitled to recover purpose of made into and for the entered subsidiary. successor of former If its Corporation in position protecting prevails stockholders are entitled to its only if it claims relation to refund reap benefit, they regardless of when the refund. found entitled should be to such, they “trifling” became or how a sum it. it zvas entitled to The court not found paid their stock. The rec- intervenors Appellants’ position stronger re- with ognized they this when filed their com- spect paid refund for 1942 to the taxes plaint Corpora- in intervention to assert respect to than it is with the subsidiaries claims. tion’s savings 1944 the subsidia- the 1943 and It is true that the re- other government ries. We have examined the authorities quires by appellants returns be filed in the cited and find nothing consolidated con parent trary Appellants are to here. cite holding name our refunds paid parent, Company but re- Southern Pacific Bogert, to where such parent 483, 492, paid, refund U.S. funds holds the 39 S.Ct. L.Ed. That agent as trustee for the benefit of the case not concerned was with question overpaid.16 fiduciary relationship which has between affiliate parent subsidiary. Rather, it was appellant-inter In their brief fiduciary 'bj1' duty concerned with the owed they allude losses sustained venors majority holders of the of the stock imply they as stockholders corporation of a the minority stock apart equitable right compensation parent holders. The case that a holds com Corporation. that of To believe this from pany fiduciary duty any minority has a misapprehend position. be to their subsidiary. stockholders legal entity separate A corporation is Also cited is North American Co. v. S. from stockholders and benefits distinct C., E. U.S. S.Ct. rights the latter flow from point L.Ed. 945. That case is not in corporation. this were these If not true either. court was not The concerned with hope gain intervenors could any question fiduciary relationships. proceeding they sustained no loss validity Rather it concerned Corporation being reason of barred “utility company 'holding so-called participation reorganization provision death sentence” of the Public pleadings, stipula plan. Their well as a Utility Act, Company Holding 15 U.S.C.A. suit, tion filed in this show that ac seq. 79 et quired Corporation’s their stock stock judgment is affirmed. subsidiary had been declared worth prove Defendants offered less. at FEE, ALGER Judge District JAMES purchased their stock that intervenors trial (dissenting). than one cent on less the dollar. The findings offered evidence fact properly sup- excluded as There are no fact, port judgment the trial irrelevant court. The if Trial Court or fact, present be a or all thereof the affirmance a majority of this Corporation acquired stockholders of Court.1 cause their should remanded for findings:. “Findings Trust Co. v. Florida East Plain- Fact. Bankers etc., Cir., proposed findings Coast, having tiff F.2d 450. of fact findings contained addition insufficiency patent findings 1. The opinion September Court’s filed herein support'the weight lower court object- having the defendant imposed ap-? superstructure now being thereto, and ed now satis- adopted opinion parent. order "the repudiat- expressly the settlement.5 was gives this alone.2 Trial Court reason this in by every party open in plaintiff: ed against two for decision reasons Court, the majority of this case. The first, escape” on was fraud that the “tax it. shows, rely upon not opinion does and, second, government, a re- the that covery de- reorganization would violate the ad- was subsidiary theory also A second any validity. cree. Neither has emphasis. The little vanced below inequitable said it would Trial Court portion opinion major of the plaintiff because recovery to to allow proposition Trial is to the devoted by subsidiary owned stock of the then escape” that “tax was fraud participation in either plaintiff was denied government,3 pro- and therefore earnings reorganiza- in or defendant, ac- given ceeds were an assets un- proceeding. This reason is as tion wrongdoer.4 position tive that there This plaintiff of The claim the first.6 given support by was stable as a fraud no company, original against of was not one agents government tax made who beneficially rights in interested necessary of those fied that all are facts decision plaintiff. have found opinion September The court should in found of guilty of 6, either 1949, adopts defendant was whether now reference all such of de- findings findings The belief or fraud. mistake in its formal of fact rights at cause, purposes officers as to fendant’s all as if the same filing returns is fully the consolidated time were set forth herein. Conclusions key facts in the case one of the of law. The Court concludes that findings. subject plaintiff nothing have been the should shall take herein judgment that the defendants shall have opinion forth is set The rationale of the in their favor for their costs of suit.” F.Supp. D.O., language. in colorful 52, Rule Federal Proce Rules of Civil array 868, able counsel “An 875: dure; 28 U.S.C.A. Interstate prodigious put both ingenious efforts, forth sides States, Circuit v. United 304 U.S. retain the one side to 1146; Kelley 58 S.Ct. 82 L.Ed. v. ‘escape,’and the other of the tax benefits Everglades District, 319 U.S. And all the time to obtain them. 63 S.Ct. 87 L.Ed. 1485. belong escaped reality to the in taxes opinion September 6, 1949, States 1 United 2. The thus to, appears taxes F.Supp. Court cannot cause these D.C., “The in referred paid, they paid, Insufficiency findings appears should be to be where S68. in important particulars the United States.” indicated below. findings illegal, There no as to the mechan- if the transaction were 4. Even right plaintiff. ics of use It is could result reached Trial Court any Barney not shown whether Saunders, resolutions were Cf. not stand. passed by the Board of Directors or 14 L.Ed. 57 U.S. How. plaintiff authorizing “They stockholders aver 1047: be allowed to cannot use for benefit of defendant. profits There is made on the trust funds that the finding gift put pockets, whether was in- be- in their own should attempt- or an gains, tended whether was there unlawful fear cause payment que ed of consideration. cestui that the conscience of the finding plaintiff by participation There is no that defiled trust should be reorganization party pro- indulge ever a To trustees in such them. ceeding. finding plain- holding conscience, There is no obliquity that any proceed- immunity had tiff connection with the for misconduct and an in- out ducement ing except prosecute speculate a claim for value with the trust stock, put peril.” which was disallowed. funds, them compromise finding nois There agents govern- 5. The fact that the government, with the settlement in which settlement, ment, agree did not who effected plaintiff participated and from ben- was a fraud there on the arose, to defendant efit connected United States shown United States contemporaneous reor- with or ganization proceeding. with the Rail- ex Roberts v. Western Pacific rel. Cir., 1951, road, 190 F.2d 243. found The court should have that de- honestly of the lower court was as- fendant believed that it was The error plaintiff suming seeking rightfully plain- an inter- entitled the loss use corporation consulting beneficially defendant instead est in the . tiff without interested those compensaton plaintiff property taken de- used the loss belonged disregard plaintiff. fraudulently fendant which deliberate judicata plaintiff res neither nor as reorganization. as to placed in Ev- which was rights property to its the loss of the shares eryone genesis of admits the Therefore,' appurtenances. the stock plaintiff later. occurred be barred claim would event the two to sus- grounds advanced Thus The lia- reorganization.7 the decree of judgment tain the fail. The cause should bility taxes government for was adequate be reversed failure to state Liability by barred that decree either. findings support to Find- judgment. plaintiff’s long use loss ings Ap- must be made in the Trial Court. reorganization proceed- the closure of pellate right courts have no such func- by for defendant ing to obtain a benefit majority attempts opinion tion. The to claim compromise existing still tax accomplish justification of result be- discharged affected could not be nor inferences, by drawing low deductions reorganization. right the decree in conclusions from evidence which for contractual furnished consideration claim to in find the record. liability as plaintiff between defendant possible judges up for other to set a dia- independent corporations. had Plaintiff a opposite metrically from which set facts shares right as owner these property judgment plaintiff might a in favor reorganization court had stock.8 The 52 very based. The reason re- that Rule power plaintiff deny in participation to the quires findings of fact is illustrated result, and, subsidiary, assets of its as a majority opinion. diffi- For the technical in all but nominal values the shares finding culties of a of fact for this basis subsidiary plaintiff lost. But was many. Indeed, judgment are difficul- such company reorganization not in itself.9 The ties are insurmountable. reorganization did not the stock own recovery denied, findings If is to be legally appur- and could not exercise the fact, upon which determination adverse property right tenant to file a consolidat- based, plaintiff is deal with the must reorganization ed return. court had allegations admitted facts and the jurisdiction plaintiff prop- or of these complaints plaintiff. of intervenors and rights. erty Thereby, these material claims must be attempting de- negatived. Decree of stroy property rights of in the stock owned In indicate must findings order to what by plaintiff reorgani- would be void. The claim, negative plaintiff’s be made to prop- zation does not deal with the decree phases of various thereof will be review erty rights in the stock and therefore First, plaintiff right made. had a property finding plaintiff gold Trial Court made no as be cited. If bad sold a mine right profit $75,000,000.00, to file nature consolidated for a of over returns, plaintiff only which subsidiary could ex- loss on the stock could (Reg. 104, 23.16(a) ), applied but which § ercise have been to offset taxes (Reg. 104, against plaintiff. event, it could refuse to exercise In that trus- 23.11(a) ). findings reorganization § Until tees in would have been made, judgment required pay against operat- there is no basis taxes denying participation ing company. used, power in benefit. Once officio, applying the loss would functus provided the decree is 7. The effect of plaintiff would have received en- Kelsey, f, sub. Tilt v. 205 U.S.C.A. tire benefit. 1, 52 28 S.Ct. L.Ed. 207 U.S. 95. gov Callaway Benton, the tax between the settlement v. Since 336 U.S. 69 S. corporation and the occurred ernment L.Ed. 553. The Ct. error this reorganization, proceeding, therefore, after the decree there was the failure to judicata. reorganize plaintiff be no res could Commissioner also. An illustrative Sunnen, parent reorganiza case, U.S. Internal- Revenue where seq., tion, reported opinions et 68 S.Ct. 92 L.Ed. in a series of States, Co., v. United U.S. Diaz re Portland Electric Power F.Supp. D.C., 32 S.Ct. 56 L.Ed. 500. 857-921. There during consolidated return was filed proceedings proof proposi- An incontrovertible appropriate and the benefits plaintiff duty apply had no tion that ly' distributed. for the benefit of loss defendant right appurtenant thereto to this loss re- use file consolidated or refuse to ñle away in return and to offset consolidated turns, given could neither be which earnings properties against made judicial- nor cut off without consideration Since, law, reorganization. under the Second, ly process. a trust due without corporations concerned must consent to these all apparently pay created to fund returns, court, of consolidated filing and no reorganization taxes clear, ma- contrary the statement in the vesting this order thereof been shown has duty jority opinion, plaintiff had no Third, by stipulation fund in defendant. defendant, trustee, depos- returns. Plaintiff requiring it file these plaintiff, court, legal had a to refuse to file. There has not fund ited trust property Fourth, independ- is fact finding neither distributed. been plaintiff right did not accrue nor a find- corporation, plaintiff, request ent at of de- subsidiary, vested in fendant, ing right that the the filed returns and consolidated States, in reorganization the trustees in de- United made a settlement with the fendant. from derived benefit. which defendant

Therefore, recovery plaintiff is entitled to contract, plaintiff, by It is found that for at least much as it was worth. transferred the stock in subsidia- former the Fifth, recovery much in of bare excess ry reorganization trustees, to the compensation doing for is fore- the acts right to file consolidated returns and Plaintiff not shadowed. has been found against have the benefit offsetting of losses fiduciary to be in a toward de- capacity trustees, operating by gains for in- fendant, and therefore the actual cash purposes, come tax had These accrued. by by defendant use of benefit obtained recognized property shares are thus plaintiff might compensated losses of well be rights. right There is no finding that the by equitable portion award of an of the tax to file or refrain filing from consolidated remission which the United States allowed returns was sold and transferred with the on account thereof. The findings made reorganization shares stock of trus- negative do not these contentions. tees. then, plaintiff by First was found might And here it be well deal Trial Court to been the owner have all of specious argument. one It seems to be as- company in the operating the stock when plaintiff sumed that the officers of could petition reorganization for was filed. give away the property right to file or The Interstate Commerce Commission held refuse to file consolidated returns either assets of company, operating voluntarily or acting the control under at the initiation the proceeding, reorganization defendant or the trustees. so shrunken that this was valueless stock doctrine. At strange This is the time of purpose participation either stock, rights the transfer of creditors or earnings reorganiza- assets plaintiff well as those of stockhold- Supreme tion. The affirmed the de- By ers were involved. the enactment of plaintiff nial for this re- Elizabeth, corporation an insolvent can- lief. Plaintiff thereby is found to have sus- hinder, delay or defraud its not creditors $75,000,000.00 tained a loss of There is no property despite.11 in their a transfer property that the finding right in the shares equitable considerations are stressed away plaintiff taken stock was from ei- by the Trial Court. The Chancellors have ther order or the decree of re- this universally held that a transfer of all the organization.10 ownership Because of this corporation, assets of at time not in- shares, plaintiff claims, of these under the solvent, be made even by cannot a ma- Congress, recent enactment of property petual. Portland Pow- See In re Electric 10. inconceivable that a re- decree of Co., D.C., F.Supp. 857, er organization prevents company, when tutelage, entering (cid:127)released from en- Glenn, Eliz. Act of c. gagements incurring Conveyances liabilities. Oth- Preferences Fraudulent reorganization e. erwise, per- 61d, (Rev.Ed.,1940.) would be §§ 10 JO compromise plaintiff nor of the interests of officers Neither the stock.12

jority of majority, formerly in the stock which it held. directors, without a vote case, it is of power.13 In this Second, plaintiff there awas trust claims plain- importance right stellar reorganization fund created that, upon appro- tiff its asset sole $7,100,000.00 pay- in the amount thereof, insolvent.14 it became priation taxes, ment of and that defendant added event, transfer must Specifically in $3,000,000.00to pur- the fund the same and not in adequate be for consideration claims, pose. Plaintiff 'since these funds it will be invalid as fraud creditors were saved filing action con- There thus against stockholders.15 making solidated a contract of returns findings equitable considerations government, settlement with the did not exclude.16 compensation is entitled to receive some conserving funds. plaintiff the trust claim This In a where stockholders suit valid as the fund initiated by de- intervene, findings that there there must corporation fendant itself. A has a adequate for the shares consideration up to set from its funds to meet appurtenant right fil reserves of stock and contingencies. money impounded But Otherwise, return. the District pay Bankruptcy the to Court taxes was the obliged be to aside re Court would set up made of in the hands of the grant to re funds re- organization decree in order organization trustees. There must plaintiff be a recapturing the lief assets finding that the Court decreed that this away.17 improvidently.given money property should become the of the argument upon is made based jury But a if defendant not used pay to taxes.- Oth- offer, prop- the Trial Court a bare which erwise, it constitutes a trust fund of un- present erly incompetent, that held reorganization.18 distributed assets plaintiff pay ade- did stockholders Third, plaintiff stipu for the stock. Suffice it to quate value defendant claims interests, $3,385,290.00 say which are lated that that should be treat James paid had plaintiff defendant ed -been to present stockholders of as if “ai windfall, placed apparent- agent” had in this latter this which will share trusl By extent fund in court ly acquired to some for distribution.19 stock Railway Company, Annuity Hutton West Cork Moines & v. Mid 12. Des Life Co. Chancery (1883) 654, 671, Co., D.C., 23 L.R. Div. Insurance 6 F.2d land 228. Delaware, 677; 1935, carry principle Revised Code statutes out the with 2097; plaintiff § Ch. § Ch. 6059 et As is a Del various limitations. seq. corporation, Del.Rev.Code, Cf. of Delaware Laws Ch. aware 1935, see 1.§ § c. 2097. below, 18. The Court Fletcher, Cyclopedia United States of the Law of Pri- 13. Corporations (Perm.Ed.) District Court the Northern Dis 1107. § vate California, Division, Southern trict theory applies. probably fund 14. The trust reorganization F.Supp. was the court. 34 Fletcher, Cyclopedia of the Law of See power had the 493. therefore set Corporations (Perm. Ed.) Private 7371. § reorganization, aside decree U. Cyclopedia Fletcher, (Z), (8), Pri- of the Law of §§ S.C.A. sub. a sub. Corporations (Perm.Ed.) administer this vate unadministered asset. Incidentally, escape and 1. the defendant cannot Fourth, go need not we far afield. seem, therefore, returns. would 21 control disregard If we the officers that, sufficient are shown so in an facts defendant, plaintiff by ownership claim, plaintiff on action should recov they aro, amazing Dazey, 1925, 500, the defendant with its v. 318 N.E. Ill. 149 success; plain- 495; Vonderheyden, 1922, and undeserved tax tiff, Theis v. N. 94 * * * reorganization as the J.Eq. 317, Id., N.J.Eq. 807, left 502, A. 139 94 it, in the In- without interest debtor.” 121 A. 927. restoring parties stead of quo status grounds trust, 22. Other constructive ante, affirmatively the Trial Court possible it for the trier of this fund to awarded defendant. But find evidence findings fact the basis of to sustain affirmative award are record, (Restatement present. fraud Temple Restitution, 166, b; § Comment 67, Rules 20. Rule Federal of Civil Proce Hollinshead, 620, 250 ton v. 119 Or. P. dure; 2041, 2042; Gov §§ 28 U.S.C.A. Restitution, 747), (Restatement mistake Georgia 310, Madrazo, v. 1 Pet. ernor 49, 170; Trusts, 468), Scott 3 on §§ § 73; 110, 121, 7 26 U.S. L.Ed. United misappropriation, conversion 183, Morgan, 393, 307 States v. U.S. 59 Mercury (Burke v. Grain Co. St. Paul In 795, 3211; v. 458; 83 L.Ed. Osborn S.Ct. demnity Co., Cir., 94 Pioneer 8 474, States, 479, U.S. L.Ed. Cir., United 91 23 Tyberg, Mining 501, v.Co. 215 F. 9 388. L.R.A.1915B, 442.) As noted in text following, a trust need not be worked 21. nature of As to the the confidential simpler probability in all since out theo corporations relationship involved, where recovery. serve for ries common, have see eases col- officers Lines, in 114 A.L.R. lected in annotation v. 23. Matarese Moore McCormack Cir., trust] where [a “It constructive arises 158 F.2d 170 A.L.R. 2 440 acquires property person note; Contracts, 1112; title to on one Corbin 1 § fiduciary Contracts, p. 115; an abuse a from another on § Williston Implied Costigan, relation between them confidential Contracts and Fact * * Restitution, Assent, 376; § Restatement 33 Harv.L.R. Mutual Bur Trusts, Co., 1898, Scott d. 3 on Burton Stock Car v. 171 Comment ton Cir., Umsted, 1029; Wayne, p. v. 2336. Johnson 50 N.E. Ft. Mass. C. 316; Clark, Haberkorn, 1896, v. Ind. 64 F.2d Johnson v. & R.L. Co. App. 479, 61 P.2d Duncan 44 N.E. Cal.2d (quantum meruit) as much as the there applying

er should another method of any Findings service was worth. as to remission the loss. specific.

affirmative defense should Finally, may be, as the Trial Court said, that there is overwhelming public sufficiently emerged If defendant had policy which reorganized dictates reorganization pay from attor- own company should alone 'be left as owner of neys service, $300,000.00for the it is same “amazing and undeserved tax” F. [85 reorganization difficult to see how the de- Supp. But, we, remission. before as 875] prevents compensat- cree defendants from Judges, remaining take this sole asset with- plaintiff at least what the services compensation out stockholders worth, which were rendered at its plaintiff, losses, give who bore request and which resulted benefit to it. surplus distribute to the stock- Fifth, it seems clear that definitive find- holders the reorganized company, we ings phases must be made other or- should out in specific set clear and find- deny plaintiff der to much broader re- ings steps fact the exact which we covery. argument plain- An made that accomplish such result. respects fiduciary tiff defendant. should be reversed in order to cause ¡provides plaintiff The tax statute could permit adequate findings to be made. $75,000,000.00 use its loss of to offset On Petitions earnings Rehearing reorganization trustees thereby obtain a remission taxes for of. reorganized company. . Without PER CURIAM. - plaintiff, loss to the statute petitions appellant's and inter- applied. plain- have Without consent of rehearing venors for á are denied. Insofar tiff, neither could consolidated returns petitions as the banc, seek a rehearing en been filed nor made. The settlement being are stricken authority without lay go tax statute does not farther and in law practice or in the rules or n down rule allocation benefits court. Kronberg Hale, Cir., See n obtainedfrom a remission of taxes. The F.2d 767. equity principles of should control divi- said, although sion.25 It is are no there FEE, Judge ALGER District JAMES findings, prior history that the consoli- of suggesting rehearing (dissenting and en course, controlling.26 returns dated Of banc of Judges). all Circuit probably plaintiff it cannot how shown disposition This cause the involves with consolidated return heretofore dealt $21,000,000. requires over solution a divorce there been from a had application statutory language af- novel subsidiary. realistically, If we at it look fecting the fields bankruptcy and taxes. plaintiff question little If but arises. expressed myself I have heretofore and defendant, the «till owner the stock feel that findings still of -thelower court $17,000,000.00 the allocation then support do not made determination defendant would be reflected the in- in tc judges panel two on the here. of its transfer creased value stock. The right left the stock untouched. I am agree unable either de- increase value de- Since stock rehearing nial of striking longer plaintiff, no is of avail fendant petitions which ask a rehearing for Assumpsit though 380; even

24. would lie 43 consult annotation Cal. 97 A.L.R. findings misappro Actions, Trial Court made C.J.S., and text 1 250 treatment priation, 50(b). and embezzlement conversion. Reynolds Cir., Co., Trust 1 v. New York Restatement, Restitution, 1, 81; 25. Phil §§ 611, Terry L.R.A.N.S., 391; 188 F. 39 lips-Jones Corporation Parmley, v. 302 U. 1890, Hunger, 161, N.E. v. 121 N.Y. 24 233, 197, S. S.Ct. 58 82 L.Ed. 221. 803; Am.St.Rep. 272, 216, L.R.A. 8 18 Conaway 1919, Del., 8, supra. Pepper, Boyce, See Note Evans, Roberts v. 108 A. HEALY, Judge. this Circuit Judges of complement of Circuit full Judges District Two en banc. Court 12,506, coming supra, upon its Case No. panel Judge constituted one Circuit court, regularly assigned at issue in this point- As has been heard case. which a court or hearing for determination to litiga- important out serious this ed judges comprising Circuit division of three respective- tion, Judges have, District three Fee and Judge Healy and District Judges views, widely divergent ly, expressed three Byrne. Subsequent and sub- argument Appeals Court of while member handed down mission of case the court merits. written a line on has opinion judg- an and order affirming Ap suggest I therefore court, Judge ment Fee dis- district all the Circuit peals rehearing banc of en peti- senting. appellants Thereafter precedent this For Judges. there this “rehearing rehearing tioned for en it, practice, understand Circuit.1 The as I banc,” January and the court on substantially accords with that Third petition, Judge again dis- denied the Fee Circuit,2 Inasmuch admirable. senting. petition sought a Insofar as the might the court of last resort this stricken rehearing in banc it was ordered case, it seems fairer have the issues this practice. unauthorized law or disposed Judges. of Circuit On March Pacific Western Supreme Court of the United States Corporation presented leave petition ap given permission once at least has caption. supporting In described pellant apply hearing court for a that it brief it asserts is its under the L. en banc. U.S. 62 S.Ct. rehearing law have its con- action, 1732.3 taking Ed. reference upon by sidered and acted all the circuit made to Mills Textile Securities Cor judges. majority On order of poration v. Commissioner of Internal Rev judges, circuit the court assembled has been enue, U.S. 86 L.Ed. S.Ct. purpose in banc announcing principles practice ap- law deems plicable respect hearings. of in banc Petition of In Re Pacific Railroad Western thought appropriate This course is order Corporation for Leave to a Mo- File litigants the bar advised tion Denominated “Motion To Vacate position only taken the court Appellant’s Order Striking Petition but the reasons it.1 Rehearing For En Banc and Reinstat- statutory Such Petition.” governing provision, 46(c), reads: U.S.C.A. § DENMAN, MATHEWS, Before STE- PHENS, “(c) Cases controversies shall HEALY, BONE, ORR, and and by a court POPE, heard determined Judges. Circuit Judges Judge, Judges Circuit and Mathews, one District Denman, Stephens 1. and and, upon suggestion Judges, of Hopper one of the States, Cir., in sat v. 9 United by Judges. en banc Judges was heard all Circuit Wilbur, 142 F.2d Den Healy man and sat in Crutchfield v. Unit Cir., Johnston, 3. v. See. Robinson 9 130 F. States, Cir., page ed 9 142 F.2d 170. At 2d 202. appears Judge 177 of 142 F.2d Circuit years 1. In has recent the cus become William motion for Denman’s a rehear tom of counsel almost as a matter of ing Hopper case, supra, en bane of the petition membership course to the full of wherein it is stated that the cause “now is rehearing banc, upon a the court for in pending petition rehearing in this suffering an adverse decision at the hands Accordingly, rehearing court”. the judges. hopeful of a court of three This Judges that case was banc before held en appears concept litigants of the Wilbur, Denman, Mathews, Garreelit, declarations to stem from in the dissent Stephens being Healy, all of the Cir ing opinion Independence in Lead Mines Judges Hopper cuit of this Court. v. Cir., Kingsbury, 9 F.2d v. 175 States, Cir., 142 United 181. F.2d page 992, at certiorari denied 338 U.S. Gallagher, Cir., States United 2. 249, 94 L.Ed. 70 S.Ct. by panel was a of two heard judges in a court or divi- effect that two tentatively than three calendars or mo-re the for the court are division of not up rehearing by made collabora- judges, hearing judge unless a or the in chief by tion with the court in banc ordered clerk. calendars before the On these judges the majority assigned hearing, a the circuit each case is and de- A are service. termination of three circuit who in active a court or division judges, court in banc shall of all active otherwise consist unless it has been named judges proposed circuit circuit.” ordered. is circu- calendar any desig- among judges, lated all the The obvious intendment may assignment nation or modified or perpetuate statute States United by majority. aside the cal- set a When judges Appeals Courts of as courts three approved by judges endar is their ac- in in all cases in which banc save those is uniformly by tion their initial- manifested majority by all or a hearing ordered same, ing the case of as is done in the court .Congress judges. of the circuit No doubt orders Thus as generally. the calendar courts,. fully that these alive the fact finally adopted, necessarily im- evidences or membership, despite increase in their plies at least the tentative determination of keep unable to abreast of to courts judges assigned that the cases judicial constantly growing busi volume of three are of such character as not ness in normal unless continued all heard before court being warrant their circumstances to function as courts of In at the three. instances in which banc. assignment agreed by it is all or time Important light prob- will be shed on the judges particular majority that a inquiry lem under we examine if cases, determined case should be heard and assignment pursued method prescribed banc, as some- practice 4.3 it is calendared such.4 as our Rule authority judges who are sion circuit of the circuit of three without deny pass upon or A court in banc shall rehear- active service. . judges judges. to all circuit consist of all active circuit the- addressed petitions of The numerous this nature circuit. disposed majority “(d) A of the number of been court or (1) judges ignoring division concerned either authorized constitute court provided para- application thereof, for in banc division action or graph petitions simply ordinary treating (c), quorum.” constitute shall petitions (2) striking rehearing, or 3. Rule subdivisions reads: they sought them insofar banc Hearing “Assigning of Causes for has action. The treatment “1. The calendars shallr discourage losing least counsel served up by be made the Clerk under the di- peti- growing or to of such stem tide subject Judge rection the Chief to the- tions. majority judges. approval of the part Judge “2. The The section enacted as Chief conference- Judges designate Code revision. In its en- the Circuit shall Judicial tirety assign judges reads as follows: who are to hear- Assignment judges; divisions; placed “§ causes the calendars of' court; hearings; quorum designation assign- judges “(a) shall sit on Circuit .the ment riiajority be modified set aside a- judges.” its divisions in such court and order as court directs. such times at in 4. Since the decision Textile Mills Se may “(b) the court au- In each circuit Corp. Commissioner, 1941, curities v. hearing arid determination thorize U.S. 62 S.Ct. 314 86 L.Ed. by separate cases and controversies of thirty approximately 249 in cases all-have- consisting judges. divisions, of each three in heard in banc this circuit. been .Nine sit at the times divisions shall and Such these, of about teen or two-thirds of the- places hear the cases and and controver- assigned whole, were to the court assigned as court sies directs. they originally at banc time were “(c) and controversies shall be Cases Perhaps more than half calendared. of’ by a court or and determined heard ion of not divi-. great public- were cases the consequence, such, nineteen unless, judges, more than three example, for as those- rehearing hearing in' or court a befo.re suspension growing during out the. by mrijofity ordered a banc is 1015 occurs, of a and at such as the court directs.” too, times times examination that regard If had mandate circuit be for this hearing, consider- preliminary case to or themselves, be judges may or judges not intrude argument, leads the ation it after compelled petition losing party it that aof assigned to whom to conclude it was intrude, upon on which a con- court or division appropriate for in banc is an cause been they sideration, order court indicate so directed to sit. a ma- remaining the latter or judges. If

jority reas- agree, all the case is then petition any such A for rehearing signed judges.5 hearing all the case, must wording, whatever its or form necessarily be as to- and No. treated addressed of Case If we examine status solely disposition 12,506 or practice, it court light be- of this assigned division to which case was apparent comes it was calendared and constituted, determination. If which in the court so heard one in court order as n banc members, majority or a of its denies requi- was not deemed consideration petition, that ends the matter so inquire whether far remains site. There If it Appeals. concerns the Court at this losing in the cause is party grants rehearing may it follow have its either juncture entitled as of may, (a) two it and in all ordi petition courses: rehearing considered ruled itself; nary does, composed situations rehear the case upon by all the circuit a court thought adequate or for reasons judges. (b) suggest judges the nonparticipating recalled, statute, will ought the case is one which to be reheard of not commits to a “court or division banc; majority if all power to hear judges” the more than three placed judges agree, the is then circuit case cases and controversies and determine the on the calendar for banc consideration.6 assigned Obviously its it. determination currently Adoption of the view any controversy is a such case or deci urged being would render tentative Appeals, merely sion of only decision, provisional of the court subject decisions to review final per cent or more of prescribed 1254. Cir 98 the cases by 28 U.S.C.A. § it. judges designated to come before On dissatis other than cuit those automatically party its decisions are not mem fied would sit on such court or division species subject appeal it, they play, to a and are of horizontal officially bers completely nullify prim'e which would play, part entitled to no deliberatioss statutory objective stage. effecting so clear a division at That this is is made above, judges 2 (a) the court’s work. other than see Note subdivision assigned those to whom"the cases had been sit on judges that “Circuit shall providing perforce required acquaint its divisions in such order Cir., 525; Olson, corpus 160 F.2d An 9 Los war of the writ of habeas Building Hawaii, geles law & Construction Trades the institution of martial Council v. LeBaron, Cir., involving 9 185 F.2d the forcible removal or cases v. Johnston, 405; Cir., Japanese 9 Price 159 F.2d the Pacific Coast Id., Cir., contempt F.2d 9 161 matters Others states. involving con- claimed violations of the Hopper the course This was followed in prohibition against self-incrim- stitutional v. United Cir., States, 181; F.2d ination. Guthrie, Cir., v. Pacific Co. Southern that we There criteria definite Cir., Id., 926; F.2d 186 Roche, 180 Evaporated F.2d by which determine what know Cir., Milk Ass’n banc for in considera- are suitable cases & and Pacific Gas Electric extraordinary However, causes of tion. Exchange Comm., v. Securities and Co. Cir., importance involving public or con- those Hopper case, In F.2d 298. belong questions probably stitutional degree supra, to a lesser Southern category. Guthrie, intraeircuit con Pacific Co. McCoy States, Cir., The resolved. other cases flicts were two v. United F.2d nondescript States, 776; Cir,, note were in this mat cited v. United Samuel Tee Ton Tribe v. ters. Hit division, problems judges participating in- not in a here

themselves with the issues and as six the seven such with- painstaking judges, manner are (a) volved in the same power petition and out litigant’s did had heard consider a associates who their initially, banc, this for rehearing, a en a (b) determined causes where having rehearing or en advantage rehearing without latter’s banc has been by division, Obviously, power he denied a unless are without argument. heard oral himself, banc, judge grant vote to a prepared stultify rehearing is en two of if petitions judges, for the division’s here but one would undertake to rule study judge, circuit not desire adequate and full do such a rehear- without rehearing appears ing. This investigation following merits. from lan- opinion: guage of the harmony On these considerations and in petition statutory rehearing any “A for such understanding with its case, scheme, wording, whatever its form or consistently retained must court has necessarily be treated as addressed to and to itself as a matter administrative by solely disposition for problem only court or di- and intramural concern vision to-which the case was for assigned or be given whether should any case constituted, determination. If court Accordingly, in so heard or reheard in banc. majority or a members, its exercise discretion denies of its uncontrolled petition, that the matter so as con- altogether has to enter- ends declined far Appeals. cerns the Court petitions hearings. grants If it litigants tain such rehearing may a that, apart it from follow either of two position The it takes is may, ordinary disqualification (a) courses: it and in all possible judge, the of a does, itself; situations rehear the case composition which a case or court to (b) may adequate for reasons thought assigned for determination is a suggest to nonparticipating judges wholly province of the matter outside the ought the case is one which parties. to be reheard banc; majority and if all or of the cir- by It has commen- been remarked some judges agree, cuit placed the case is then procedure by tators that the outlined Con- the calendar for in banc consideration. gress Appeals for the involves Courts ****** a distinct hazard of intracircuit conflicts. statute, “The hazard, think, may will easily recalled, be over- commits we 'court division of by is minimized the alertness not more than estimated. It judges’ power three to hear by informal and deter- counsel and and unofficial mine the cases and interchanges judges. assigned Where controversies among the Obviously remedy it. capable determination of conflicts occur controversy case is a by dupli- decision of the in banc action without wholesale Appeals, effort, Court of practice such is a our own as cation final decision, subject to review pre- ONLY experience have demonstrated. by scribed 28 U.S.C.A. 1254.” Thus petition for in this cause rehearing squarely power denied of the court already by authoritatively been denied has en banc review a division’s decision in the division to the cause as- * * * “rehearing banc en ordered file, ad- signed. for leave majority judges.” the circuit See 28 banc, the court is denied. dressed 46(c). U.S.C. § petitions, any, if this time forward From petitions, “From this time forward if in banc cases determined rehearing any, rehearing in. banc in cases de- judges will be con- of three divisions judges termined divisions three wilt disposed the latter as sidered disposed considered and the latter rehearing. ordinary petitions ordinary petitions for rehearing.” DENMAN, dissenting case Western Pacific Railroad Judge, Chief Corporation, Corporation, pe- hereafter the holding that the circuit court’s Emphasis appearing quoted supplied. hereafter matter

1017 well (as decision violates file A. The court’s leave to banc for the Court en titions deci- Court’s Supreme ignores) The rehearing en petition for a banc. a Robinson rel. establish, alia, that the States ex sion in latter inter seeks United. 650, 649, <52 Johnston, S.Ct. 316 which heard U.S. judgment of division v. 1732, 1301, a decision aimed therein con- L.Ed. main issue 86 case decided the circuit’s divi- in the prior division settle trary decision of a to the differences this court. sions. Corp. case, v. Com- con Mills in the instant The case of Textile The division 86 missioner, dis sisting and two 314 62 S.Ct. judge circuit U.S. one notwithstanding the peti a judges, “stricken” held that trict has ordered L.Ed. 212 title provision con judges three-judge the seven of section tion addressed to ed., appeals U.S.C., This order stituting the court en banc. 28 1940 a number strikings lawfuly greater precedent might follows a of similar consist of a petitions in the active circuit rehearings judges, banc that the five en n casesof Hale, Cir., might 181 F. sit in Kronberg judges v. 9 circuit of the third 767; Myers, appeal. 2d Fruehauf Trailer v. Co. banc for the determination of an Cir., Mut. 9 181 Northwestern F.2d Textile in v. The Third Circuit C.I.R. Cir., Gilbert, Ins. 9 182F.2d Co. v. page at Corp., 117 F.2d 62 Mills Securities Hale, has Kronberg judges v. the Clerk circuit holding Since its five rehearings banc, they petitions en otherwise (cid:127)distributed could sit en states that power dif non-participating judges. banc to the circuit would not have the' correct a fering judges From a casual remark of counsel in so- divisions views of the contact, Corporation’s Supreme (cid:127)cial learned of the court I such as occurring instant Fifth instructed Clerk in the Circuit describes judges Mut. Life Ins. Co. six circuit Hancock distribute John sitting Bartels, division. But for this casual 60 S.Ct. 308 U.S. (cid:127)discovery my suggestion that L.Ed. 176.2 Corpora- and determination of the

stature Supreme Mills Court in its Textile likely they tion’s counsel made it seek case, page page at at U.S. S.Ct. Supreme pe- Court, mandamus 277, in affirming the Third Circuit “striking” tition treat- would have had the overruling Lang’s Es our decision ment of the above cases. R., tate v. where C. I. opinion The court’s came after a con- where we held we en banc not sit could originally ference called for the considera- differed as to two divisions of the court adoption rehearings tion en controlling, the rule considered the law states of dissent, last in this which would have banc that: “ * ** Certainly, petitions made the the result reached burden we one n easily judicial makes more effective ad- could bear. ipgs. Ninth has had an Circuit- in- Following this the Textile Mills case population of six million in crease page states at 71 of 117 F.2d: «* * * years. year fiscal the' 1952 it Where, however, twelve there is docketings. On had 446 the national among judges upon difference in view docketings average judges for circuit question importance, of fundamental judges. Ninth should have ten especially Circuit in a case two of where judges but seven the Senate judges sitting It has the three in a case passed increasing judge- has bill contrary have a view to that the other Judiciary ships nine and the House judges court, three it is advisable agreed has are needed. Committee oppor- the whole court have the year will we have nine No doubt within tunity, necessary, if it thinks it to hear ” judges sitting * * * three divisions simul- question. and decide the taneously. say, is to we have That 56% docketings rehearings and will have more almost 3. What is said of the need again ap- number of half divisions in en then banc for the Third Circuit conflicting today plies hazard of exist the deci- Ninth a fortiori Cir- Textile referred to Mills sion Circuit in the fiscal cuit. Third year judges decisions. five had but docket- 1018 apply circuit hearing

ministration. Conflicts within a for before the en court banc. Finality Corp. will of decision See Textile Mills he avoided. v. Com- missioner, 326, 272, appeal in will be 314 the circuit 62 86 courts of U.S. S.Ct. * * *” promoted. [249], L.Ed. Those considerations especially important fact view of the in Corporation strongly urges The the above- judicial system in our federal these petition, contentions in all of its denied in courts are the courts of last resort ignored opinion. which is this court’s in ”* * * ordinary the run of cases. seeking Instead is said of the the leave In enacting 46(c) Congress petition, 28 to file the U.S.C. that consideration of decision, by any codified the the Re- such action judges Textile Mills of the circuit not. “pre- stating six) viser’s section (here opin- court’s comparable effort that the opinion The : states “ re- petitions for seeks with * ion to avoid * * Thus the calendar hearin'gs en banc. necessarily finally adopted evidences or stated, case has established a definite the' U.S.C. § conflicts mination The Jjc implies such assigned rehearings ^[*] heard before the Supreme though there are others. character as to ^[*] lawof 46(c). at of least the courts en banc Court in between the decisions It judges is the of tentative warrant provided three are the Textile court that only one there criterion for the cases predeter- their for in not of banc is be- Mills that maining two thousand two hundred whose vision after has the court en banc than one newspaper notoriety. for that hundred cases. to the court en banc. signed Mills In the case, extraordinary importance had wide to division over two purpose. per eleven an examination cent, Clerk In years have but advises, assigned them to di- In none nineteen they These were since been thousand we the Textile of the re- cases, less have assigned briefs cases cases two as- are cause for two the court’s divisions cor- considering D. to avoid Further By the law rehearing clearing en banc. authorities, poration’s contention banc, so for the en the circuit does 96.3% opinion misstates the source of decisions litigation in which this court’s rehearings contention banc are that en are final. divergence divi- to cure needed prevents Such en banc action the burden sions. Court, Supreme in the cer- on the such as On the source this contention question differing tification states, opinion “It has been re- court’s R., Cir., Lang’s Estate v. C. I. divisions pro- some commentators that marked Supreme a burden the 97 F.2d for the Courts Congress cedure outlined in its return Court later to assume refused Appeals a distinct involves hazard of U. S. ex rel. Robinson v. Johnston intracircuit conflicts.” our banc consideration of our divisions’ en divergencies. “Some ! what extent commentators” To ask, “How, question It is almost a rude men- go will the court in order to avoid name, judges en in heaven’s seven tioning that this hazard was stated first that tentatively know or otherwise banc to Textile the Third Circuit in the Mills case the case assign the division to which Court, Supreme appeal by and on its will thereafter it without conflict decide implicitly Supreme and later Court prior different with decision of a divi- a returning, S. rel. Robinson v. U. ex John- “How, phrase, in heaven’s sion”? The court ston to this because the difference name,” advisedly, for our is used tentative viewpoint our That divisions. require divine omniscience. decision would say, holdings on the criterion in such the Third and the Su- divergence, Circuit opinion states another criterion preme are no than com- more mere assigned to be to a whether the case di- mentators. ques- involving constitutional “one vision tions.” opinion seeks to minimize likeli- slightest reflection shows overruling hood division sub silentio a of a make tentative as- en banc could prior holding and this with division’s case to a division because of a signment certainty judges and of nine three divi- question only involving constitutional near The idea sions in the future.4 is that all the briefs all the by examination of acting, “by the division so judges in assigned determine whether cases to be interchanges” with informal unofficial is at issue. contention such a constitutional nonparticipating judges, will advise done, truly decision is variance what we have latter that the at Were judicial prior my volume division. seventeen involved 3, supra;'

4. See footnote * * * years bench have associate I had no “Such will not be so granted, act. confess his mistaken justice unless a who concurred in the judgment it, desires decision cited, An examination the three cases and majority of the court so deter- supra, Kromberg, Fruehauf Trailer and mines.” cases, Northwestern Mutual which the In the petitions years last seven rehearing for banc strick- there have been- en en, dissents, but 75 average an shows that two of them were founded of less than 11 per year. Probably judges- on such less than conflict third 11 divisions of and the per year join on important of F.2d would petitioning conflicts in court on for district decisions a. rehearing en banc. matters. Also the seven cases Bradley Boice, Cir., Mining Co. v. 9 194 189 In prospective view of our three divisions: 80; Cir., Kuniyuki, Acheson v. 9 likely and the need rehearings for such en 741, 897; Independence F.2d 190 Lead F.2d banc, an average petitions: of such eleven Mines Cir., Co. v. Kingsbury, 175 F.2d 9 would burden, not be an intolerable less- 983; Cir., States, Tanimura v. 195 United 9 than our submitted cases. It 4% 329; People F.2d of State of California substantially reduce the likelihood of con- States, Cir., v. United 9 181 F.2d Sun- flict between the divisions. beam Lighting Corp., Co. v. Sunbeam By requiring by first a rehearing di- Cir., F.2d and Zamloch v. United vision, the judges district bar- be would not States, Cir., 193 F.2d the division red from the reconsideration of a decision.. judges petition refused consideration The motion to file con- should been addressed to the prevented seven thus sidered on its granted. merits the court en banc considering from the con- Supplement tention in each opinion that the dissenting decision division’s of Chief' Judge DENMAN, with prior conflicted the decision of a di- July filed herein on vision. 1952. E. The court’s the bur- confessed fear of DENMAN, Judge. Chief den overwhelming an volume petitions such may my be Since the by writing opin- avoided dissenting amendment ion herein its rules. I have been advised Chief' Judge Stephens Harold M. of the United Against a flood of petitions such we can Appeals States Court for District of protect ourselves, Supreme Court, has the Columbia that that court has rendered a. by amending Rule our 25 as follows: of decisions in series cision conflict with the de- question court this “Rule 25. petition to consider a or motion for- “Rehearing rehearing by litigant in banc where made a single alone or a judge in the division petition “A rehearing of a deci- which has decided the case. sion a division may court be presented days appears within 30 It thus judg- that case this printed, ment. It must be character briefly in Rule 5(b) described subd. distinctly Supreme Court, state grounds, its The de- U.S.C. supported by Appeals certificate cisions District of Columbia Court of the- counsel judgment in his determining it is well interposed prac- founded and its tice there lowing are those contained delay. in the fol- Twenty printed copies communication me must be filed Chief Stephens: Judge with the clerk of this court. “Washington, D. C. “Where there has been denial of a September 11, 1952. rehearing division, a decision petition rehearing for a Denman Honorable William bank days. be filed within fifteen peti- Judge Chief tion shall be in the Appeals form above de- U. Court of S. ' scribed and with the same United States Post Office certificate and Courthouse- counsel. No will be Francisco enter- San tained, judges unless one of par- My Judge dear Denman: ticipating in that join decision shall response your inquiry regarding- In seeking rehearing.” practice respect the hearings Supreme similarly pro- Court has rehearings in banc and in banc- petitions tected itself on provisions for rehearing under the of Section of Title 4£ provision in its Rule Code, of the United U.S.C.A., 28 States wish I to ad- is;, pertinent portion of which the as follows: vise No. National Bank determining in cases sit Columbia C.,D. U.S.App.D.C., F.2d banc, have been followed methods two the Dis- Appeals United States Court of C., No. U.S. Citizens Bank v. D. namely: Circuit, Columbia trict of App.D.C., 195 any division judge Any judges or or /I/ No. D. v. Catholic Education C. a case may request of the court Press, U.S.App.D.C., -F.2d-. Such in banc. originally or reheard heard judge usually Very truly yours, the court judges or division Stephens M. Harold /s/ to all of a memorandum addresses Judge Chief of the United States why he indicating judges the active circuit Appeals for the District of Columbia either thinks the should case Circuit.” requests banc, heard or reheard their judge of notify the judges to chief opinion ordered above majority favor request. aIf on the votes printed part as a record in case that ef- hearing, order to in banc a properly copy certified sent fect case is entered scheduled Supreme United States rehearing. hearing banc part of the certiorari proceedings sought by Western Corporation. Pacific Railroad by written Any party case /2/ original that the petition request motion or held in banc. hearing rehearing or a petition submitted Such a motion or circuit active all of ruled circuit. judges rehearings in banc following cases In member request of one were on ordered originally which division of the case: heard 10446, Kephart Kephart, U.S. v. No. NATIONAL BOARD LABOR RELATIONS App.D.C., F.2d 677. CO., v. HIBRITEN CHAIR Inc. yet 11081, Quinn S. Not de- v. U. No. No. 6426. cided. Appeals Court of United States yet 10943, Emspak Not de- v. U. S. No. Fourth Circuit. cided. Argued June 1952. following rehearing banc In the case July 17, Decided 1952. judge request on ordered originally member of division the case: heard Overholser, 87 No. v. U.S. Stewart

App.D.C. 402, 186 F.2d 339. original following hear- In the cases request

ings in banc ordered on the original division: Thompson D. No. Co. v. C. Not

yet decided. Thompson D. C. v. Not No. Co.

yet decided. following original hearing case In request ordered banc was of one the court: member Boddie, No. Overholser U.S.

App.D.C. 186, 184 F.2d 21 A.L.R.2d following rehearings cases on the were ordered one of

banc the parties: Matter of No. W. John

Carter, U.S.App.D.C., notes any theory under it is since under bond interesting Court, in this where 16. An case pay against all claims the trustees. subsidiary for the was held liable un- par- property stipulation parties transfer of authorized 19. The was that subsidiary, paid by plaintiff an officer of the a fund was into ent Court . Company Lumber v. Mc- & Wilson and therefore it must returned be Clark Cir., plaintiff’s possession, Allister, affirma- unless some proof defendant was entitlt-d tive showed corpora plaintiff is a Delaware 17. Since “But, The Trial held: thereto. Court tion, the decisions of that state are cited parties, persuasion as between the general principle. as illustrative impels equity conscience or me to do oth- Pittsburgh Refining Robinson v. Oil Cor parties erwise than leave where poration, 14 Del.Ch. 126 A. appurtenant right to file trus the stock and stipulation, agent” plaintiff “as was fund, such, presence trust and, had returns and of a express trust tee prima proven cause of action was for a still a deposit the fund and ask the Trial Court parties facie22 rights all facts determination only sophomori thereto, interpleader. find. We need nature did as in the that, remind where affirmatively findings enough cal ourselves Plaintiff demanded one, special request feature, re at the instance Judge this the Trial another, does an act accrues stipulation and benefit par fused to them. A make request, legal who made deposited the one litigation ties to that a fund for centuries result is so standardized that give in court must is sufficient. Court the common paid has been stated one of affirmative directions the fund independ Here there counts.23 two proper party.20 judg to the were Before such corporations at set entered, ent findings ment are re time of fact liability. tlement tax were They ca quired. assigned It is error pable contracting with Nei each other. Judge findings Trial refused to make longer connected with the ther other. point. requires The Rule findings of Plaintiff, request long at the defendant is error requiring fact. This reversal. reorganization closed, had been against judgment plaintiff here did entered into a settlement United very not end the case. According States, whereby its losses used to us, record there before still a fund $17,000,000.00 obtain a benefit of for de Trial which has not been dis Plaintiff fendant. not bound to re tributed. the filing fuse consent to of consolidated so,

Notes

Notes that that in would be “to in- division * * * which, upon-a by. interpretation serves the established trude division on the Textile case.” have not Mills order of the court been directed to sit.” Prior Textile to this codification of the decision, was, conclude, Mills there was decided one How absurd it one must Supreme division this circuit case U. S. order Court to such an in- Cir., Johnston, ex rel. 9 118 trusion U. ex rel. Robinson Robinson v. S. v. John- 998, F.2d ston ! and later in of three a division judges, other the case of Crockett v. Unit- B. cavalier refrisal of States, Cir., 125 ed 9 F.2d 547. The two corpo- contentions consider n controlling law. divisions differed on petition. ration’s sought Certiorari Robinson case shabby litigant treatment of the before the was decided and Crockett case refusing his counsel' in consider their petition in, it was A rehearing denied. contentions and authorities comes after the Supreme was, Court denied. The court(s opinion gives claim that its consid- Crockett case was then called to the at- * * * principles eration to "the lawof petition tention of the court a second which applicable it deems to en banc hear- for rehearing which was granted. The ings.” order denying petition for certiorari No respecting sleeps self federal judge set aside and writ of certiorari comfortably he having is conscious of if granted. Certainly this action of the Su- opinion deciding rendered a. case in preme purposeful Court was and deliberate. purposely has he failed to consider a granting Supreme certiorari Court supported by substantial contention authori- in United rel. States ex Robinson v. John- ties submitted him and such evasion L;Ed. ston, 1301, 316 62 U.S. 86 S.Ct. ground has based directly his decision on a duty held it was of this court en opposed to the evaded contention. banc petition to entertain a for leave to file possible explanation A the silent banc, rehearing en for it va- litigant’s treatment of the contention and judgment cated our and remanded the case authorities this case is that U. S. ex rel. us, stating: Robinson v. was deemed irrelevant Johnston “ * * * In conflict of view the because decided before codification of among which has arisen views the Textile Mills case 46(c). U.S.C. § Ninth judges of the Circuit with re- absurd, however, That seems for the Su- spect (see decision in this case preme construction Court’s of a law before Johnston, Robinson v. U. S. ex rel. codification, here, applicable its exact and Crockett v. United F.2d Otherwise, why after codification. in 28 States, 549), F.2d United States Code Annotated are there Waley decision in this Court’s view of the thousands of citations sections of the Johnston, 315 U.S. S.Ct. Code, enacted in which cod- Judicial [1302], reversing Cir., L.Ed. then law and statutes? ifies the vacated, judgment opinion’s absurd is remanded to the C. misstatements the case Circuit re- specting assignment Appeals proceed- for further cases including petitioner leave to court’s divisions. ings,

Case Details

Case Name: Western Pac R.R. Corp. v. Western Pac. R. Co. Metzger v. Western Pac. R. Co.

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Sep 11, 1952

Citation: 197 F.2d 994

Docket Number: 12506_1

Court Abbreviation: 9th Cir.