text:
This suit was upon a bond taken by a circuit court of the United States from its clerk to secure the proper performance of his duties, and the circuit court could take cognizance of it, independently of the citizenship of the real parties in interest, as it was a suit arising under the laws of the United States, of which the circuit court was entitled to take original cognizance, concurrently with the courts of the state, even if the parties had been citizens of the same state; and, although the petition shows a case of diverse citizenship, jurisdiction was not dependent upon such citizenship.
That the clerk of the court was authorized, with the sanction or by order of the court, to receive money paid into court in a pending cause, is clearly to. be implied from the legislation of Congress referred to in the opinion of the court.
Congress, by the statutes referred to in the opinion of the court, intended the bond of a clerk of a circuit court should be for the protection of all suitors, public or private.
As the clerk had the right to receive the money in question; as he failed, to the injury of the suitor from whom he received it, with the sanction of the court in a pending cause, to deposit it as required by law, and appropriated it to his own use, and as his bond was for the protection of private suitors as well as for the government, there is no sound reason why the plaintiff could not enforce his rights by a suit in the name of the United States for his benefit.
from the circuit court of appeals? Has a clerk of a circuit court of the United States authority to receive money brought into court by a private suitor, and is he responsible upon his bond if he does not deposit it as required by statute and appropriates it to his own use? Is the bond of the clerk for the protection of private suitors, as well as of the United States? Has a private suitor the right, without express statutory authority, to sue on the bond of the clerk in the name of the United States for his benefit?
On the 3d day of March, 1887, Warren Watson was duly appointed clerk of the Circuit Court of the United States for the Western Division of the Western District of Missouri, and on the same day he executed, and the court approved, his bond to the United States in the penalty of $20,000.
He died March 24th, 1892, while acting as clerk, and an administrator of his estate was appointed April 2, 1892. Notices, as required by the local law, having been previously given for the presentation of claims, the administration of the estate was closed and the administrator discharged on the 11th day of September, 1894. At no time did the United States or the relator, Stewart, exhibit or present any claim against Watson's estate.
Stewart instituted, February 6, 1891, in the Circuit Court of the United States, a suit at law against Henry County, Missouri, upon three bonds of the county, two for $1,000 each and one for $500. His petition contained three counts. In the first count, he asked for judgment for $1,010, with interest from September 1, 1887, as the amount due on the first bond of $1,000. The second count was upon the other bond for $1,000, the third upon the $500 bond.
"at all times been ready and willing to pay plaintiff said sum of $1,010 in full payment of said bond and unpaid interest, and now here again tenders to plaintiff said sum of $1,010 in full payment of said bond and unpaid interest due thereon, on September 6 , 1887, and now brings the said sum into court. "
The answer to the second and third counts was exactly the same, except that as to the third count the amount named was $505, instead of $1,010.
"This day comes defendant by its attorney and files answer and tenders to the plaintiff and deposits with the clerk the sum of $2,525 in payment and satisfaction of his cause of action in the petition set forth. Thereupon a stipulation waiving a trial by jury is filed herein."
On June 27, 1891, Stewart, the plaintiff in that suit, filed a reply, which was a general denial of the facts alleged in the answer.
"This day come the parties by their attorneys, the plaintiff by Karnes, Holmes & Krauthoff, and the defendant by M. A. Fyke, and a stipulation waiving a jury having been heretofore filed herein, the hearing of this cause is proceeded with before the court. Thereupon evidence is heard and the case is submitted to the court and by the court taken under advisement, with leave to the parties to file briefs."
issues as follows, to-wit: on the first count of the petition, the court finds that the principal and interest on bond No. 204 was duly tendered by defendant at the place of payment on the first day of September, 1887, and that, after the plaintiff instituted this action in this court, and at the filing of the answer herein, the defendant duly paid said sum into court for the use and benefit of plaintiff, and that plaintiff is entitled to judgment therefor on the first count of the petition in the sum of $1,010."
The findings on the other counts differed only as to amounts.
"It is therefore ordered and adjudged by the court that the plaintiff have judgment for the recovery of the sum of twenty-five hundred and twenty-five dollars ($2,525), the aggregate amount found to be owing to him under the three counts of the petition, and that plaintiff pay the costs of this action, and that execution issue therefor. And it further appearing to the court that the said sum of $2,525, so paid into court as aforesaid, was paid to and received by Warren Watson, the then clerk of this court, who has since departed this life without having accounted for said sum of money so received by him as said clerk, and that said money has never been turned over to his successor in office, the present clerk of this court, nor has the same been otherwise accounted for by said Warren Watson as clerk, or otherwise, it is found and adjudged by the court that the plaintiff is entitled to have and recover said money so received by said Warren Watson as clerk aforesaid, and plaintiff is authorized to proceed therefor on the bond of said Warren Watson given as clerk as aforesaid."
No order or direction as to this money was ever made except as indicated in the order of February 11, 1895.
neither party took any steps for an order in relation to the money, other than was actually made as above stated, nor made any objection to the method in which the money was received. Stewart, however, had no knowledge of the acts of Watson.
The present action was brought October 19, 1895, against the sureties in Watson's bond, in the name of the United States at the relation and to the use of David D. Stewart. One of the sureties, McDonald, pleaded his discharge in bankruptcy, and that plea was sustained. Judgment was entered against the sureties (except McDonald) for the sum of $2,525, with interest at six percent from the commencement of this suit, making total of $3,057.77. 93 F. 719. That judgment was affirmed in the circuit court of appeals. 102 F. 77.
In all cases in which the judgments of a circuit court of appeals are not made final by the Act of March 3, 1891, c. 517, there is of right an appeal or writ of error to this Court where the matter in controversy exceeds $1,000 in value besides costs. 26 Stat. 826, 828.
Among the cases in which the judgments or decrees of the circuit courts of appeals are made final are those in which the jurisdiction of the circuit court "is dependent entirely upon the opposite parties to the suit or controversy being aliens and citizens of the United States or citizens of different states." 6 Stat. 828, § 6.
jurisdiction. Browne v. Strode, 5 Cranch 303; McNutt v. Bland, 2 How. 9; Maryland v. Baldwin, 112 U. S. 490 .
But does it not appear from the petition itself that the case was one of which the circuit court could take cognizance independently of the citizenship of the real parties in interest? This question must receive an affirmative answer. The suit was directly upon a bond taken by the circuit court in conformity with the statutes of the United States, and the case depends upon the scope and effect of that bond and the meaning of those statutes. It was therefore a suit arising under the laws of the United States, of which the circuit court (concurrently with the courts of the state) was entitled to take original cognizance, even if the parties had been citizens of the same state. 25 Stat. 434, c. 866. This Court has heretofore decided that a suit upon a bond of a marshal of the United States was one arising under the laws of the United States. Feibelman v. Packard, 109 U. S. 421 , 109 U. S. 423 ; Bachrack v. Norton, 132 U. S. 337 ; Reagan v. Aiken, 138 U. S. 109 ; Bock v. Perkins, 139 U. S. 628 , 139 U. S. 630 . The same principle must be held to be applicable to suits upon the bond of a clerk of a court of the United States. It could not be that a suit upon the bond of a marshal was one arising under the laws of the United States, and that a suit upon the bond of a clerk of a court of the United States was not of that class.
the duties of his office, and seasonably to record the decrees, judgments, and determinations of the court of which he is clerk, and a new bond may be required whenever the court deems it proper that such bond should be given. A copy of every bond given by a clerk shall be entered on the journal of the court for which he is appointed, and the bond shall be deposited for safe keeping as the court may direct. A certified copy of such entry shall be prima facie proof of the execution of such bond and of the contents thereof."
The conditions of the bond, as set forth in this section, were the same as those prescribed by the Judiciary Act of 1789, 1 Stat. 76, c. 20.
"in the sum of not less than five and not more than twenty thousand dollars, to be determined and regulated by the Attorney General of the United States."
And the same act authorized the Attorney General to require a bond in a sum not to exceed $40,000 whenever the business of the courts should make it necessary.
order was equivalent to one expressly stating that the money was paid by direction of the court to Watson as clerk.
"for more than a century, the clerks of the circuit courts of the United States have been receiving and paying out the moneys of suitors in those courts in the usual and customary manner, and during that time. neither the clerks nor the suitors nor the court ever dreamed that they were performing this service as private individuals, and were not officially responsible for the moneys they were receiving as such clerks."
That the clerk was authorized, with the sanction or by order of court, to receive money paid into court in a pending cause is clearly to be implied from the legislation of Congress. It will be well to trace the history of this question through the statutes enacted from time to time.
Mr. Justice Story to be properly paid over to the clerk, and that he was entitled to commissions under the statute. That practice, he held, was of great importance for the "security of suitors." The Avery, (1814) 2 Gall. 308, 311. See also Blake v. Hawkins, 19 F. 204; In re Goodrich, 4 Dill. 230; Smith v. Morgan City, 39 F. 572. In Fagan v. Cullen, 28 F. 843, 844, Mr. Justice Brown held that moneys received by the marshal should, under sections 995 and 996 of the Revised Statutes, either be immediately deposited by him " or paid to the clerk and by him deposited."
By an act approved April 18, 1814, c. 62, it was provided that, upon the payment of money into a district or circuit court, to abide the order of the court, the same should be deposited in an incorporated bank to be designated by the court, there to remain until it was decided to whom it of right belonged. If there was no such bank, then the court could "direct" the money to be deposited according to its discretion. 3 Stat. 127. Could not such direction have been given to the clerk?
The act of 1814 was supplemented by one approved March 3, 1817, c. 108, making it the duty of circuit and district courts "to cause and direct" all moneys remaining in such courts, and all moneys subject to their order, to be deposited in a branch of the Bank of the United States, in the name and to the credit of the court. § 1. The same direction was given by the act as to all moneys thereafter paid into said courts, "or received by the officers thereof." § 2. All payments out of such moneys were to be entered of record by the clerk. § 3. It was further provided that, if any "clerk of such court," or other officer thereof, "receiving any such moneys," should refuse or neglect to obey the order of the court for depositing the same, such clerk or other officer was liable to be forthwith proceeded against by attachment for contempt. § 4. The same act imposed upon the clerk the duty of presenting an account at each session of court of all moneys remaining therein. § 5. 3 Stat. 395.
the act of 1871 retained substantially all the provisions of the two former acts, and added others. That act provided, among other things, that all moneys in the registry of any court of the United States, or "in the hands or under the control of any officer of such court, which were received in any cause pending or adjudicated in such court," should within thirty days after the passage of the act be deposited with the Treasurer, an assistant treasurer, or a designated depositary of the United States, in the name and to the credit of such court; that all such moneys which were thereafter paid into such courts, "or received by the officers thereof," should be forthwith deposited in like manner; that if any clerk or other officer of a court of the United States deposited any money belonging in the registry of the court in violation of that act, or should retain or convert it to his own use, or to the use of any other person, he should be deemed guilty of embezzlement, and on conviction be punished by a fine of not less than $500 and not more than the amount embezzled, or by imprisonment for a term of not less than one year nor more than ten years, or both, at the discretion of the court, and that if any person should knowingly receive from a clerk or other officer of a court of the United States any money belonging in the registry of the court as a deposit, loan, or otherwise, in violation of the act, he should be deemed guilty of embezzlement, and be punished as therein provided.
"§ 798. At each regular session of any court of the United States, the clerk shall present to the court an account of all moneys remaining therein, or subject to its order, stating in detail in what causes they are deposited, and in what causes payments have been made, and said account and the vouchers thereof shall be filed in the court."
the delivery of any such money upon security, according to agreement of parties, under the direction of the court."
"§ 996. No money deposited as aforesaid shall be withdrawn except by order of the judge or judges of said courts respectively, in term or in vacation, to be signed by such judge or judges, and to be entered and certified of record by the clerk, and every such order shall state the cause in or on account of which it is drawn."
"§ 5504. Every clerk or other officer of a court of the United States who fails forthwith to deposit any money belonging in the registry of the court, or hereafter paid into court or received by the officers thereof, with the Treasurer [and] assistant treasurer, or [of] a designated depositary of the United States, in the name and to the credit of such court, or who retains or converts to his own use or to the use of another any such money, is guilty of embezzlement, and shall be punished by fine not less than five hundred dollars, and not more than the amount embezzled, or by imprisonment not less than one year, nor more than ten years, or by both such fine and imprisonment; but nothing herein shall be held to prevent the delivery of any such money upon security, according to agreement, of parties under the direction of the court."
"§ 5505. Every person who knowingly receives, from a clerk or other officer of a court of the United States, any money belonging in the registry of such court as a deposit, loan, or otherwise, is guilty of embezzlement, and shall be punished as prescribed in the preceding section."
The statutory provisions to which we have referred, taken in connection with section 828 of the Revised Statutes, giving commissions to clerks for receiving, keeping, and paying out money in pursuance of any statute or order of court, show the relation in which clerks of district and circuit courts have always stood to moneys paid into court in pending causes. They manifestly proceed on the ground that money paid into court, under its sanction, may be received by a clerk, his duty upon receiving it being forthwith to deposit the amount with the Treasurer, assistant treasurer, or designated depositary of the United States, in the name and to the credit of the court.
As soon as he receives the money be becomes responsible for it under his bond, and that responsibility does not cease until he deposits it as required by law. If after receiving the money he appropriates it to his own use, or, which is the same thing, if he deposits it in bank to his individual credit, he becomes liable on his bond for the amount so misappropriated.
when the courts of the United States were established and provision made for the appointment of clerks who should be entitled to receive the moneys of suitors when paid into court under its sanction or pursuant to any statute.
the satisfaction of final judgment, are recorded and preserved, and where a clerk for the performance of this duty is specially provided, it is otherwise. In these courts, payments of money are never made to the judge, but the uniform practice in this state has always been to make them to his clerk, to whose custody and care the files, records, and whatsoever else relates to cases in court are confided. And this practice, so universal, although not positively directed by any act of the legislature, conflicts with none, and, as we have shown, is recognized by and in perfect harmony with several."
These observations are strikingly applicable in the present case.
Two cases often cited in support of the contrary view are Commonwealth v. Hatch, 5 Mass.191, and Crocker v. Fales, 13 Mass. 260. These cases will be found upon examination to rest upon grounds not applicable here.
Commonwealth v. Hatch was a suit upon a bond given by an inspector of beef for the faithful performance of his duties. The suit was brought in the name of the commonwealth for the benefit of one alleged to have been injured by the unfaithfulness of the inspector in his office. It was held that the action could not be sustained, the decision being placed, in part, upon the ground that it appeared "by the statute directing the bond, and by the bond, that it was given for the sole use of the commonwealth." Surely it cannot be said that it appears by the statutes and by the bond in the present case that it was given for the sole use of the United States.
"the statute makes such an appropriation of the sum which may be recovered by the treasurer on a suit as is wholly inconsistent with the supposition that an individual has an interest in the bond. "
Of course these things cannot be predicated of the statutory provisions relating to the bonds of clerks of federal courts, and therefore the case cited is not in point here.
The suggestion that the amount of the bond was insufficient to protect both the United States and private suitors is not controlling, for, by the Act of March 3, 1863, 12 Stat. 768, c. 93, reproduced in section 795 of the Revised Statutes, the court could fix the amount of the bond, and require a new one whenever it deemed proper, and by the Act of February 22, 1875, 18 Stat. 333, c. 95, the Attorney General could require a bond for as much as forty thousand dollars.
the drawing of lotteries for effecting any important [public] improvement in the city which the ordinary funds or revenue thereof will not accomplish; provided, that the amount to be raised in each year shall not exceed the sum of ten thousand dollars, and provided also that the object for which the money is intended to be raised shall be first submitted to the President of the United States, and shall be approved of by him."
"They [the proprietors of the ticket] had undoubtedly 'a right to apply to the corporation to direct the suit, and the corporation could not, consistently with their duty, have refused such application,' if the purpose of the bond was to secure the fortunate adventurers in the lottery, not to protect the corporation itself. But the propriety of bringing such suit was a subject on which the obligees had themselves a right to judge. If the proprietors of one prize ticket had an interest in this bond, the proprietors of every other prize ticket had the same interest, and it could not be in the power of the first bold adventurer who should seize and sue upon it to appropriate it to his own use and to force the obligees to appear in court as plaintiffs against their own will. No person who is not the proprietor of an obligation can have a legal right to put it in suit unless such right be given by the legislature, and no person can be authorized to use the name of another without his assent given in fact or by legal intendment. "
making important public improvements. It was to secure the accomplishment of that object that the managers were required to execute bond. It was not unreasonable to suppose that, in taking such a bond, the corporation had in mind to protect itself in making the public improvements which it was authorized to undertake. In the present case, courts of the United States were established in order that its jurisdiction might be invoked by all entitled to do so, and the requirement that the clerk should execute a bond for the faithful discharge of his duties and for the seasonable recording of the judgments, decrees, and determinations of the court -- no distinction being made between public and private suitors -- was an assurance to all suitors that, within the limit of the penalty of any bond taken from him by the government, their rights would be protected against any act or omission on his part resulting to their injury. By the terms of the statute, a clerk's bond remained in the custody or subject to the order of the court. In our opinion, Congress intended that the required bond should protect private suitors as well as the United States, and therefore, no statute forbidding it, a private suitor may bring an action thereon for his benefit in the name of the obligee, the United States. Such must be held to be the legal intendment of existing statutory provisions. The United States, or rather the court which had custody of the bond, is to be regarded as a trustee for any party injured by a breach of its conditions.
although there was in the statute which prescribed the bond no specific provision for making the bond payable to the state, or for giving the party interested the right to sue upon it. The court adds, however, that"
"there is no doubt that it is incumbent on the party suing on the bond to show that he has an interest in it before he could recover in a regular trial prosecuted to verdict."
"The rationale of official bonds is well expressed by the court in this case:"
"The laws which provide for the execution of bonds similar to the one before us do not require them for the purpose of protecting the rights of the state alone. They are also designed to secure the faithful performance of official duties, in the discharge of which individuals and corporations have a deep interest, and therefore they should have the privilege of suing [on] such bonds for injuries sustained by them, through the negligence and malconduct of the officers."
"Many bonds of a strictly official character are executed by persons in places of public trust, prescribed by statute, and made payable to the 'state,' 'people,' or 'commonwealth,' or else to the governor, president, or other chief officer, which are designed not only to secure public interests, but to redress wrongs to individuals. Actions on such bonds must, of course, be brought in the name of the obligee, whether the object of the suit be to enforce the rights of the state or to protect private interests. In the latter case, it is usual to bring the suit as by the obligee, 'at the relation' or 'for the use' of the real party in interest."
clerks, did not intend that private suits should be maintained upon their bonds. We are of opinion that this argument, although not without force, ought not to prevail against the legal intendment of the statutory provisions relating to clerks, who hold a peculiar relation to the courts appointing them, as well as to the public.

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Next Post: IS LARRY RAY SWEARINGEN GUILTY OF CAPITAL MURDER?
Last October we posted a blog entitled “The Judicial Wars Invoked by Crack Sentencing” (Oct. 24, 2008). The blog focused on a judicial tiff between the U.S. Supreme Court and the Eighth Circuit Court of Appeals in the case of James Eric Moore. We are pleased to report that the Supreme Court has finally put this issue to bed in two cases this Term.
This judicial controversy actually began on January 12, 2005 when the Supreme Court issued a controversial ruling that federal district courts were not required to impose precise sentences recommended by the U.S. Sentencing Guidelines. See: United States v. Booker, 543 U.S. 220 (2005). The Court said the Guidelines were advisory in nature, and not mandatory sentencing requirements. Id., at 245-46.
Judge Reade’s sentencing decision was contrary to the Booker rationale. But she was not alone in her judicial reasoning. Many other federal judges shared her judicial sentiment. In fact, a little more than a year later an en banc Eighth Circuit Court of Appeals upheld the judicial reasoning of Judge Reade in the case of Steven Spears by saying that neither Booker nor the sentencing mandate of 28 U.S.C. § 3553(a) authorized federal district court judges to “reject” the 100:1 crack/power cocaine ratio set forth in the Guidelines. See: United States v. Spears, 469 F.3d 1166, 1178 (8th Cir. Dec. 5, 2006)[Remanding a district court’s decision that categorically rejected the 100:1 crack/powder cocaine ratio and instead utilized a 20:1 ratio to impose a 240-month sentence for possession of crack and powder cocaine].
The en banc Spears precedent paved the way the following week, December 13, 2006, for the Eighth Circuit to uphold Judge Reade’s sentencing decision in the James Eric Moore case. See: United States v. Moore, 470 F.3d 767, 770 (8th Cir. 2006).
Both Spears and Moore applied to the U.S. Supreme Court for writs of certiorari challenging the Eighth Circuit rulings in their cases. They based their appeals on the Booker rationale. While their requests for certiorari review were pending, the Supreme Court on December 10, 2007 handed down Kimbrough v. United States which overruled the longstanding legal premise employed by Judge Reade that federal district courts had to apply provisions of the Guidelines that made one gram of crack cocaine the equivalent of 100 grams of powder cocaine (more commonly known as the “100:1 ratio”) for sentencing purposes. See: 128 S.Ct. 558, 575, 169 L.Ed.2d 481 (207).
In the wake of Kimbrough, the Supreme Court on January 7, 2008 granted both Spears’ and Moore’s certiorari applications with the same identical language: “On petition for writ of certiorari to the United States Court of Appeals for the Eighth Circuit. Motion of petitioner for leave to proceed in forma pauperis and petition for writ of certiorari granted. Judgment vacated, and case remanded to the United States Court of Appeals for the Eighth Circuit for further consideration in light of Kimbrough v. United States …” See: Spears v. United States, 128 S.Ct. 858, 169 L.Ed.2d 709 (2008); Moore v. United States, 128 S.Ct. 858, 169 L.Ed.2d 709 (2008).
Two months after the Supreme Court’s remand, the Eighth Circuit, on March 6, 2008, once again upheld Judge Reade’s sentencing decision in the James Eric Moore case, without any new briefing on the Kimbrough implications, saying that “[a]s there was then no circuit authority to the contrary, we presume the district court was aware that Booker granted it discretion to vary downward [from the Guidelines] based upon the impact of the crack guidelines on this defendant, but elected not to exercise its discretion.” See: United States v. Moore, 518 F.3d 577, 580 (8th Cir. 2008).
Slightly more than three months after the Eighth Circuit upheld Moore’s sentence for the second time, the appeals court on June 23, 2008 handed down a second en banc decision in the Steven Spears case that paid some judicial homage to Kimbrough by rejecting its previous precedent holding that the 100:1 crack/powder cocaine ratio was mandatory despite Booker and holding that this particular Guideline, like all the Guidelines, are “advisory only.” But appeals court nonetheless concluded that the district court had incorrectly varied from the 100:1 ratio when it substituted a 20:1 ratio to sentence Spears because the sentence was not based on an individualized, case-specific evaluation of the facts or the defendant pursuant to § 3553(a). The appeals court held that while a district court had the authority to determine the 100:1 ratio could result in a sentence harsher than necessary, it could not categorically reject the ratio as set forth by the Guidelines. See: United States v. Spears, 533 F.3d 715, 717 (8th Cir. 2008) [Spears II].
“When the District Court said that “[i]t isn’t the judges but Congress that ‘looks at the [G]uidelines and decides whether or not they should be put … in force,’ the court showed that it did not think it had the discretion later upheld by Kimbrough. The Eight Circuit’s first decision recognized this, describing the District Court as ‘concluding’ [correctly under circuit precedent] that it was not ‘authorized … to reject’ the crack/powder disparity. In light of the District Court’s comments at sentencing, the Court of Appeals should have remanded the case to the District Court for resentencing under Kimbrough. We express no views on how the District Court should exercise its discretion at resentencing.” See: Moore v. United States, 129 S.Ct. 4, 5, 92 L.Ed.2d 1 (2008).
“On remand, the Eight Circuit again reversed Spears’ sentence and remanded for resentencing. It concluded, again, that the District Court ‘may not categorically reject the ratio set forth by the Guidelines,’ and ‘impermissibly varied by replacing the 100:1 radio quantity ratio inherent in the advisory Guidelines range with a 20:1 quantity ratio.’ Spears again petitioned for a writ of certiorari. Because the Eighth Circuit’s decision on remand conflicts with our decision in Kimbrough, we grant the petition for certiorari and reverse.
present no occasion for elaborative discussion of this matter because those Guidelines do not exemplify the Commission’s exercise of its characteristic institutional role.’ Kimbrough thus holds that with respect to the crack cocaine Guidelines, a categorical disagreement with and variance from the Guidelines is not suspect.
“That was indeed the point of Kimbrough: a recognition of district courts’ authority to vary from the crack cocaine Guidelines based on policy disagreement with them, and not simply based on an individualized determination that they yield an excessive sentence in a particular case. The latter position was already established pre-Kimbrough [Booker], and the Government conceded as much in Kimbrough. That the Government did not prevail in Kimbrough proves that its concession – ‘that a district court may vary from the 100:1 ratio if it does so based on the individualized circumstances of a particular case’ – understated the extent of the district courts’ sentencing discretion.
“This says that it was ‘appropriate’ for the District Court in Kimbrough not to specify what ratio it was using, but merely to proceed with § 3353(a) analysis. The Eighth Circuit read that to mean that district courts, in the course of their individual determinations, may not categorically disagree with the Guidelines radio, and (consequently) may not substitute their own ratio for that of the Guidelines. If it meant that, our vacating of the Eighth Circuit’s judgment in Spears I would have been inexplicable, because that supposedly impermissible disagreement and substitution was precisely the reasons for Spears I’s reversal of the District Court. As a logical matter, of course, rejection of the 100:1 ratio, explicitly approved by Kimbrough, necessarily implies an adoption of some other ratio to govern the mine-run case. A sentencing judge who is given the power to reject the disparity created by the crack-to-powder ratio must also possess the power to apply a different ratio which, in his judgment, corrects the disparity. Put simply, the ability to reduce a mine-run defendant’s sentence permits the adoption of a replacement ratio.
“The alternative approach – adopted by the Eighth Circuit – would likely yield one of two results. Either district courts would treat the Guidelines’ policy embodied in the crack-to-powder ratio as mandatory, believing that they are not entitled to vary based on ‘categorical’ policy disagreements with the Guidelines, or they would continue to vary, masking their categorical policy disagreements as ‘individualized determinations.’ The latter is institutionalized subterfuge. The former contradicts our holding in Kimbrough. Neither is an acceptable sentencing practice.” Id., at LEXIS 4-9 (Emphasis Original) [Internal Citations Omitted].
Moore and Spears made one thing crystal clear: a district court has unfettered discretion to reject the 100:1 crack/powder cocaine ratio for any reason it deems appropriate. That message was certainly delivered to the Eighth Circuit in no uncertain terms.


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All lawsuits have one thing in common — they begin when a plaintiff files a summons and complaint. While petitioners typically devote substantial effort toward crafting complaints that will survive a motion to dismiss, they spend arguably less time fretting over the substance of their summonses. Recently, however, in Studentowicz v. Queen’s Park Oval Asset Holding Trust, 2019 IL App (1st) 181182, the appellate court of Illinois reminded practitioners that a misnomer-related mistake in a summons can be just as detrimental to a lawsuit as an insufficiently pled complaint.
Wojciech Studentowicz filed suit against Queens Park Oval Asset Holding Trust after he slipped and fell on property held by the trust in Midlothian, Illinois. 2019 IL App (1st) 181182 at ¶1. Studentowicz sought to recover damages to cover his medical bills, pain and suffering, loss of normal life, and permanency. 2019 IL App (1st) 181182 at ¶3.
A copy of Studentowicz’s summons, which was captioned “Studentowicz Wojciech v. Queen’s Park,” and a copy of his complaint were served on a duly authorized agent of the trust on March 24, 2015. 2019 IL App (1st) 181182 at ¶2. Following service, Studentowicz and trust staff members exchanged e-mails regarding the lawsuit and the complaint. 2019 IL App (1st) 181182 at ¶6. One trust staff member even requested an electronic copy of the complaint. Id. Despite this discourse, the record suggests that the trust did not respond to the summons or complaint due to negligence or administrative error. 2019 IL App (1st) 181182 at ¶5. On June 19, 2015, the Circuit Court of Cook County entered an order of default against “Queen’s Park Oval Asset Holding Trust” and set the matter for a prove-up hearing. 2019 IL App (1st) 181182 at ¶3. The prove-up hearing was held on May 28, 2016, when the circuit court entered judgment against the trust in the amount of $699,032. Id.
On January 4, 2018, the trust filed a petition pursuant to §2-1401 of the Code of Civil Procedure, 735 ILCS 5/1-101, et seq., seeking to vacate both the default order and the prove-up order, alleging that “Queen’s Park” was a nonexistent entity. 2019 IL App (1st) 181182 at ¶5. See also 735 ILCS 5/2-1401. The trust alleged that the summons did not properly identify the trust and that such a defect in service rendered both judgments against it void ab initio. Id. Over the plaintiff’s arguments that the trust had actual notice of the pending lawsuit and had used the name “Queen’s Park” in other judicial proceedings, the circuit court entered and order granting defendant’s §2-1401 petition. 2019 IL App (1st) 181182 at ¶7.
On appeal, the plaintiff argued that (1) the defendant had actual notice of the underlying lawsuit, (2) the defendant was actually served, (3) the defendant was clearly the party intended to be sued, and (4) “affirmance would establish a bad precedent under which parties with full knowledge of a lawsuit could ignore a summons and vacate default judgment years after the fact.” 2019 IL App (1st) 181182 at ¶8. Relying on Theodorakakis v. Kogut, 194 Ill.App.3d 586, 551 N.E.2d 261, 262,141 Ill.Dec. 268 (1st Dist. 1990), in which the court affirmed a circuit court order vacating a default judgment because the summons was directed to trust number 44289 even though the complaint caption and body correctly identified trust number 4289, the appellate court of Illinois upheld the circuit court’s order granting the trust’s §2-1401 motion to vacate. 2019 IL App (1st) 181182 at ¶¶14, 21.
While the Studentowicz court was quick to point out that it was not adopting “a rule that requires summonses to name parties with utmost precision,” petitioners must be must more careful in the future when identifying defendants in their lawsuits. 2019 IL App (1st) 181182 at ¶16. In particular, a plaintiff must name a defendant in the summons with enough precision to avoid confusion. 2019 IL App (1st) 181182 at ¶15. For example, it would be prudent to take excess caution when serving a summons on an entity or businesses with either a common name, lengthy title, or colloquial abbreviation. Id. That being said, the Illinois “Misnomer Rule” provides that misnomer is not grounds for dismissal, and that “the name of any party may be corrected at any time, before or after judgment, on motion.” 735 ILCS 5/2-401(b). Keep in mind, however, that this rule applies only when the action and summons are “served upon a party intended to be made a defendant.” Zito v. Gonzalez, 291 Ill.App.3d 389, 683 N.E.2d 1280, 1283, 225 Ill.Dec. 617 (1st Dist. 1997).
Generally speaking, practitioners can avoid the issues raised in Studentowicz if they approach a summons with the same precision and carefulness they approach a complaint, taking time to thoroughly research and accurately name the parties.
For more information about civil litigation, see PREMISES LIABILITY QUICKGUIDE — 2017 EDITION. Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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text:
M.S Gaur, Rajbir Kaur, Lalith Suresh P., Vijay Laxmi, Security and Communication Networks journal, Wiley Publications, 2012.
Lalith Suresh, Julius Schulz-Zander, Ruben Merz, Anja Feldmann, Teresa Vazao. In proc. Hot Topics in Software Defined Networking (HotSDN) 2012, Helsinki, Finland. August, 2012.
Lalith Suresh P., Ruben Merz. In Proc. of the 4th International ICST Conference on Simulation Tools and Techniques, Barcelona, Spain. March, 2011.
Lalith Suresh P., Navaneeth Rameshan, M.S. Gaur, Mark Zwolinksi, V. Laxmi. In Proc. of IEEE 6th International Symposium on Electronic Design, Test and Application. Queenstown, New Zealand. January, 2011.
Lalith Suresh P., Rajbir Kaur, M. S. Gaur, V. Laxmi. In Proc. of IFIP/IEEE Wireless Days 2010. Venice, Italy. October,2010.
Lalith Suresh P, Kaur, R., Gaur, M. S., and Laxmi, V. In Proc. of the 3rd international Conference on Security of information and Networks (SIN ’10). Taganrog, Russian Federation.September, 2010.
Roberto Riggio, Cigdem Sengul, Lalith Suresh, Julius Schulz-Zander, Anja Feldmann. IEEE INFOCOM 2013 demo. Turin, Italy. 2013.
Lalith Suresh, Julius Schulz-Zander, Ruben Merz, Anja Feldmann. SIGCOMM 2012 demo. Helsinki, Finland. August 2012.
Lalith Suresh P., Navaneeth Rameshan, Ashwin Narayan, Mark Zwolinski, M. S. Gaur, V. Laxmi,Virendra Singh. Designing for Embedded Parallel Computing Platforms: Architectures, Design Tools, and Applications; Design Automation and Test in Europe (DATE). Dresden, Germany. March, 2010.
M.S Gaur, V. Laxmi, Lalith Suresh P., R. Navaneeth, Ashwin Narayan. IBM-India Research Labs Collaborative Academia Research Exchange (I-CARE). October, 2009.
Rajbir Kaur, M.S Gaur, Lalith Suresh P., V. Laxmi. Cyber Security, Cyber Crime and Cyber Forensics: Applications and Perspectives. IGI Global. 2011.
Lalith Suresh, Masters thesis, European Master in Distributed Computing (EMDC) 2012.

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§ 32-3 Delegation of authority.
§ 32-4 Prudence; proper judgment and care.
§ 32-7 Designation of depositories.
§ 32-8 Collateralizing of deposits.
§ 32-9 Safekeeping and collateralization.
§ 32-10 Permitted investments; payment and redemption.
This chapter applies to all moneys and other financial resources available for investment on its own behalf or on behalf of any other entity or individual.
The governing board's responsibility for administration of the investment program is delegated to the Treasurer, who shall establish written procedures for the operation of the investment program consistent with these investment guidelines. Such procedures shall include an adequate internal control structure to provide a satisfactory level of accountability based on a data base or records incorporating description and amounts on investments, transaction dates and other relevant information and regulate the activities of subordinate employees.
All participants in the investment process shall seek to act responsibly as custodians of the public trust and shall avoid any transaction that might impair public confidence in the Village of Tivoli to govern effectively.
Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the safety of the principal, as well as the probable income to be derived.
It is the policy of the Village of Tivoli to diversify its deposits and investments by financial institution, by investment instrument and by maturity scheduling.
It is the policy of the Village of Tivoli for all moneys collected by any officer or employee of the government to transfer those funds to the Treasurer with five business days of deposit or within the time period specified in law, whichever is shorter.
The Treasurer is responsible for establishing and maintaining an internal control structure to provide reasonable, but not absolute, assurance that deposits and investments are safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management's authorization and recorded properly and are managed in compliance with applicable laws and regulations.
First National Bank of the Hudson Valley.
By a pledge of eligible securities with an aggregate market value, as provided by General Municipal Law § 10, equal to the aggregate amount of deposits from the categories designated in Appendix A to this chapter.
Editor's Note: Appendix A is on file in the Village offices.
By an eligible irrevocable letter of credit issued by a qualified bank, other than the bank with the deposits, in favor of the government, for a term not to exceed 90 days, with an aggregate value equal to 140% of the aggregate amount of deposits and the agreed upon interest, if any. A "qualified bank" is one whose commercial paper and other unsecured short-term debt obligations are rated in one of the three highest rating categories by at least one nationally recognized statistical rating organization or by a bank that is in compliance with applicable federal minimum risk-based capital requirements.
Eligible securities used for collateralizing deposits shall be held by M & T Bank, or the trust and investment bank or trust company subject to security and custodial agreements.
The security agreement shall provide that eligible securities are being pledged to secure local government deposits, together with agreed upon interest, if any, and any costs or expenses arising out of the collection of such deposits upon default. It shall also provide the conditions under which the securities may be sold, presented for payment, substituted or released and the events which will enable the local government to exercise its rights against the pledged securities. In the event that the securities are not registered or inscribed in the name of the local government, such securities shall be delivered in a form suitable for transfer or with an assignment in blank to the Village of Tivoli or its custodial bank.
The custodial agreement shall provide that securities held by the bank or trust company, or agent of and custodian for the local government, will be kept separate and apart from the general assets of the custodial bank or trust company and will not, in any circumstances, be commingled with or become part of the backing for any other deposit or other liabilities. The agreement should also describe that the custodian shall confirm the receipt, substitution or release of the securities. The agreement shall provide for the frequency or revaluation of eligible securities and for the substitution of securities when a change in the rating of a security may cause ineligibility. Such agreement shall include all provisions necessary to provide the local government a perfected interest in the securities.
Obligations of this local government, but only with any moneys in a reserve fund established pursuant to General Municipal Law §§ 6-c, 6-d, 6-e, 6-g, 6-h, 6-j, 6-k, 6-l, 6-m, or 6-n.
All investment obligations shall be payable or redeemable at the option of the Village of Tivoli within such times as the proceeds will be needed to meet expenditures for purposes for which the moneys were provided and, in the case of obligations purchased with the proceeds of bonds or notes, shall be payable or redeemable at the option of the Village of Tivoli within two years of the date of purchase.


text:
United States v. De Leon, Jr.
Homero Garcia-Reyes v. Eric Holder, Jr.
Davis, et al. v. Signal Int'l Texas GP, L.L.C., et al.
Cantrell, et al. v. Briggs & Veselka Co.
Pilgrim's Pride Corp. v. Agerton, et al.
Gregory Athayde v. Eric Holder, Jr.
Elvis Mota-Sanchez v. Eric Holder, Jr.
Kefa Mose v. Eric Holder, Jr.
Benjamin Asfaw v. Eric Holder, Jr.
Rosa Cerna-De Sandoval, et al v. Eric Holder, Jr.
USA v. Martin Ortega, Jr.
United States, ex rel. Leslie Steury v. Cardinal Health, Inc., et al.
United States v. Lawrence, et al.
Dennis Price, et al v. PCS Nitrogen Fertilizer, L.
USA v. Hilario Vasquez, Jr.
USA v. Jesus Davila, Jr.
Tu Nguyen v. Bank of America, N.A.
Ransom, et al. v. M. Patel Enterprises, Inc., et al.
Fnu Sugiharto, et al v. Eric Holder, Jr.
Yosief Gebregergish v. Eric Holder, Jr.
Fateh Judhani, et al v. Eric Holder, Jr.
Edgardo Montes-Sanchez v. Eric Holder, Jr.
Hall, et al. v. Variable Annuity Life Ins. Co., et al.
Frankie Sims, et al v. Carrington Mtge Svc, L.L.C.
Eric Kirmer v. Goodyear Tire & Rubber Co.
Ernewayn v. Home Depot USA, Inc.
Ricardo Tirado Carreno v. Eric Holder, Jr.
Miller, et al. v. BAC Home Loans Servicing, L.P., et al.
Shirley v. Precision Castparts Corp., et al.
Edward Hall, et al v. El Dorado Chem Co., Inc.
Whitley v. Hanna, et al.
Mohamad Chehab v. Eric Holder, Jr.
Jose Silos v. Eric Holder, Jr.
Dwayne Bent v. Eric Holder, Jr.
SEC v. Halek Energy, L.L.C.
Acceptance Loan Co., Inc. v. S. White Transp., Inc.
United States v. Reagan, et al.
Cimarex Energy Company v. Harold Chastant, Jr.
Kong Ni v. Eric Holder, Jr.
Robina Tariq v. Eric Holder, Jr.
USA v. Abdon Requejo, Jr.
David Oladokun v. Eric Holder, Jr.
United States v. Lightfoot, Jr.
Morgan, et al. v. Plano Indep. Sch. Dist.
Stanley Nwosuocha v. Eric Holder, Jr.
Diego Castillo-Baltazar v. Eric Holder, Jr.
Manuel Diaz v. Eric Holder, Jr.
Yunxing Lian v. Eric Holder, Jr.
United States, et al. v. Citgo Petroleum Corp.
Companion Property and Casualty Co. v. Palermo, et al.
Asadi v. G.E. Energy (USA), L.L.C.
United States v. Daniels, et al.
Oaks of Mid City Resident Council v. Sebelius, et al.
Haverda v. Hays County, et al.
Sheikh Ali v. Eric Holder, Jr.
Alvaro Hernandez-Dominguez v. Eric Holder, Jr.
Chandrakantbhai Jansari v. Eric Holder, Jr.
United States v. Brown, et al.
Hogan v. City of Corpus Christi, TX, et al.

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Before :- S.S. Sudhalkar, J.
For the Appellant :- Mr. G.S. Bal, Advocate.
For the Respondent No. 1 :- Mr. P.K. Gupta, Advocate.
Harbans Lal v. Bhim Sain etc., 1977 P.L.J. 259.
Ishwardas v. State of Madhya Pradesh, (sic) 1975 S.C. 551.
Gurdip Singh v. Arjan Singh, 1992(2) RRR 402 (P&H).
Konga Ramaswami Iyer v. Ponnuswami alias Thumbayasami Manigarar, A.I.R. 1922 Madras 452.
Buta, Mangu, Malkiat Singh, Tirath Ram, Wife Sheelo, Rangu-widow Chando, Parsini, Chinti, Vidya.
2. Sheelo had filed a suit for separate possession by way of partition of one half share in the house in dispute. Sheelo claims to be the testamentary heir of Chando and has relied on the will made by Chando in her favour and contends that she is having half share as per the will. The suit was contested by the appellant-respondent No. 1 Tirath Ram, who is husband of Sheelo and seems to be not interested in contesting the suit. It is contended by the appellant- defendant No. 1 that Rango was never the co-owner of the house in dispute and he had separated during the life time of his father from his brother Mango and has started living separately in a separate house. The will was also challenged. The trial court dismissed the suit. Upon appeal filed by Sheelo, the suit was decreed by allowing the appeal. Hence defendant No. 1 has come in the second appeal challenging the order of learned District Judge Hoshiarpur.
4. The first contention put forth by Mr. Bal, learned counsel for the appellant is that the will is not proved and, therefore, Sheelo had no right to file the suit. He has also argued that the suit could not be filed by Chando also because the property was already partitioned by Rango. Regarding the first point, he has argued that the original will has not been produced and certified copy has been produced and will has not been proved in the way as required by law. The lower appellate court held the will to be proved. Learned counsel also argued that the certified copy of the will has been produced late in the case and referred to the application dated 17.2.1994 given before the trial court in which the pleading, written statement and judgment in another suit were sought to be produced on record. The trial court allowed the said document to be produced on record. Considering all the contentions of the parties, the will has been held to be proved. The question now is whether when the original will is not before the court and when the attesting witnesses are examined, can the will be held to be proved. The learned counsel for the respondent relied on the judgment of an earlier case being case No. 573 of 1977 titled Santokho and others v. Tirath Ram and others, a copy of which has been produced in the trial court. In the said case defendants were Tirath Ram, Malkiat Singh sons of Mangoo, Smt. Sheela wife of Tirath Ram, Parshini daughter of Chando, Bhim Singh son of Vidya daughter of Chando. In that case, the validity of the will has been upheld.
5. Learned counsel for the appellant argued that the appellant was not served in that case and, therefore findings in that judgment are not binding on him. Whether the appellant was served or not would be a different question. One thing is clear that Parshini daughter of Chando, Bhim Singh son of Vidya daughter of Chando were the defendants in that case. If the will is held to be not proved, then the appellant does not get benefit of the same because he cannot be said to be the natural heir of Chando in view of his relation with Chando as per the pedigree table above. If the will is not proved, daughters of Chando would have been the heir and not the appellant. Therefore, the will having been proved in earlier case, the judgment in that case certainly will help the respondents in this case. In other words, even the will is held to be not proved the appellant does not inherit the property of Chando and, therefore this argument of learned counsel for the appellant cannot be accepted. Even if the certified copy of the will is ignored, the earlier judgment in which Chando and her heirs were parties can be said to be conclusive proof, so far as its execution is concerned.
6. Learned counsel for the appellant has cited before me the case of Harbans Lal v. Bhim Sain etc., 1977 P.L.J. 259. It is held in that case that when there was no cross-examination of the witness on a particular point of his examination-in-chief, it showed that other party accepted that part. However, that question need not be gone into at this stage in view of the above findings.
7. Learned counsel for the respondent has cited the cases of Ishwardas v. State of Madhya Pradesh, (sic) 1975 SC 551, Gurdip Singh v. Arjan Singh, 1992 PLJ 110 : 1992(2) RRR 402 (P&H), and Konga Ramaswami Iyer v. Ponnuswami alias Thumbayasami Maniggarar, AIR 1922 Madras 452. These authorities are on the point of res judicata. In the case of Ishwardas v. State of M.P. (supra) it has been held by the Supreme Court that once the questions at issue in the two suits are found to be the same, the fact that the material which led to the decision in the earlier suit was not again placed before the Court in the second suit cannot make the slightest difference. In the case of Gurdip Singh v. Arjan Singh (supra) it has been held that when in the earlier suit between the parties a specific issue is framed and the validity of the will was contested, it operated as res judicata. In the case of Konga Ramswami Iyer v. Ponnuswami (supra), it has been held that decision of a case between co-defendants is res judicata in later suit between co-defedants.
8. The present is not a suit between co-defendant Sheelo or her daughters or her natural heirs but Malkiat Singh appellant was co-defendant. It is tried to be stressed by learned counsel for the appellant that it was for the respondent to show that the appellant was served with the notice of the earlier suit. I may not enter into discussion on this point because, as mentioned above, the factum of will has been proved in between Sheelo and natural heir of Chando in the earlier suit and the present appellant has no right to challenge the will because even if he succeeds in challenging the will, he would not have got the share of Sheelo. Moreover as stated above, natural heirs of Chando are not challenging the will. Moreover, the earlier suit will be operated as res judicata in between Sheelo and natural heir of Chando.
9. The next point that comes up for my discussion is that whether because of alleged separation of Rango from the appellant as contended by him whether Chando or Sheelo had no right to ask for partition. It has been argued specifically that during the life time of his father, Rango separated from him in the partition between Malkiat and Tirath respondent. The house fell in the share of Malkiat Singh. However, even if Rango had separated from Buta during the life time to Buta, the interest of Buta was heritable and Rango as a natural heir could claim interest in it and Chando being his wife and Sheelo being testamentary heir of Chando had also rightly asked for her share.
10. In view of the above discussion, this appeal is without merit and is dismissed.

matches: v. v. v. v. v. v. v. v. v. v. v. v.


IRS Announces that Identity Theft Victims Can Get Copy of Fraudulently Filed Returns.
The IRS has announced that it has changed its policy of not allowing defrauded taxpayers to see the tax return that had been fraudulently filed using the taxpayer's stolen identity number and name. Now, a defrauded taxpayer will be able to see the fraudulently filed tax return, subject to certain redacted information (apparently so that the IRS can protect the identity of the defrauding party). Requests to see the fraudulently filed return can be made for returns filed within the prior six tax years. A request letter can be obtained at https://www.irs.gov/Individuals/Instructions-for-Requesting-Copy-of-Fraudulent-Retuns.
Expired Contract Has Value For Tax Purposes.
The petitioner bought a business and along with the purchase came a contract giving the petitioner an exclusive right to tow cars for a local police department. The petitioner amortized the contract over 15 years. However, the contract expired after five years and the petitioner wrote off the unamortized amount. The IRS claimed that value remained and that the unamortized amount, therefore, could not be written off. The court agreed because it found that the petitioner retained the rights to tow and store vehicle even after the contract expired and until a new contract was entered into. The court also determined that the willing-buyer/willing-seller test of Treas. Reg. Sec. 20.2031-1(b) did not result in the contract having no value. Steinberg v. Comr., T.C. Memo. 2015-222.
Gratuitous Bailee Did Not Convert Bailed Property.
The plaintiff was friends with the defendant's father and stored property on the father's acreage. The plaintiff stored items on the property, including cars, an old motor home and other automotive and recreational vehicle parts. The father died, and the executor allowed the plaintiff to continue to store his property there. Ultimately, the defendant acquired title to the property and advised the plaintiff that he needed to remove his items from the property or buy the acreage for $50,000. The plaintiff declined the purchase offer, and the plaintiff did not get his items removed before the winter. In the spring of the following year (more than a year after the father died), the defendant notified the plaintiff that he owed $350 for the storage of the items ($50/month for seven months) to be paid to the defendant's lawyer within a week and that he should make arrangements to remove the items. The storage fee wasn't paid and the items weren't removed. Five months later, the plaintiff sued for conversion after seeing that at least some of his items were no longer on the acreage. The defendant claimed that the plaintiff had abandoned the items, and sought damages for a reasonable storage fee and costs incurred in removing the property. The trial court determined that the defendant removed the property in violation of Iowa Code Sec. 556B.1 for failure to give the proper notice, and entered judgment for the plaintiff of $10,800 (the value of the property less the reasonable storage fee and an adjustment for a skid loader). On appeal, the court reversed. The court noted that the defendant was a constructive or gratuitous bailee of the plaintiff's property and, as such, was only liable to the plaintiff if the property was lost or damaged through the defendant's gross negligence. Here, the court noted, the defendant had stored the items for almost a year and stored them for more than six months after asking the plaintiff to remove the items, and didn't dispose of them until receiving a court order from the estate that any items on the property were property of the estate that he inherited. Accordingly, the defendant did not illegally convert the plaintiff's property. Theis v. Kalvelage, No. 14-1568 (Iowa Ct. App. Nov. 25, 2015).
"Fix and Flip" Cow Operation Not Entitled To Business Interruption Damages or Punitive Damages for Defective Feed.
The plaintiffs buy bred heifers sell the cows as soon as possible after calving and then feed the calves for a while before selling the calves, hopefully at a profit. The calves were not kept for breeding purposes, and the plaintiffs would simply start the process over the next year. The plaintiffs ordered "creep feed" mixed with Rumensin from the defendant that was placed in creep feeders with the calves. The calves showed signs of respiratory distress with numerous calves eventually dying. The toxicology report on two of the calves showed toxic levels of Rumensin. In total, 23 calves died. The plaintiffs weaned and fed out the remaining 170 calves and sold them at auction with a disclaimer that they had been fed excess Rumensin and were sold "as is." The plaintiffs then sued the defendant for negligence, breach of implied warranty of fitness for a particular purpose, and breach of a voluntarily assumed duty. The plaintiffs also claimed that the defendant was strictly liable for the resulting damages from a hazardous and dangerous feed condition. The trial court rejected all of the plaintiffs' claims except that based on breach of implied warranty and awarded damages of $164,072.54. The court also denied the plaintiffs an award of attorney fees. The plaintiffs appealed on the basis that the award was insufficient to make them whole for failure to award business interruption damages based on lost profits. However, the appellate court refused to award such damages, noting that in order to recover lost profits on such a theory, there must first be an on-going business with an established sales record and a proven ability to realize profits at the established rate with proof of actual profits for a reasonable time before the breach. Here, the appellate court determined that the plaintiffs were merely speculating in the calf market and did not have a cattle operation analogous to the swine operation in Ballard v. Amana Society, 526 N.W.2d 558 (Iowa 1995). The appellate court also denied punitive damages on the basis that the defendant's conduct was not willful and wanton and was without malice, but that errors occurred due to extenuating, non-malicious factors. The appellate court also upheld the trial court's denial of attorney fees for lack of wanton conduct on the defendant's part. The court also denied additional damages based on an alleged mistake in the damages calculation because the claim was not raised in the plaintiffs' post-trial motion. Swanson v. R & B Feeds, L.L.C., No. 14-1823 (Iowa Ct. App. Nov. 25, 2015).
Repair Regulation Deminimis Safe Harbor Raised.
Sports Memorabilia Activity Not Engaged in With Profit Intent.
The petitioner operated a sports memorabilia activity that he claimed occupied 12 hours of his time daily, seven days a week. The court didn't believe him because he had a different full-time job. The court also noted that the petitioner didn't have any expertise in the sports memorabilia business. Similarly, the petitioner did not follow accepted business practices, did not insure his inventory and didn't operate the activity in a business-like manner. Akey v. Comr., T.C. Memo. 2015-227.
The Peril In Using IRA Funds To Start A New Business.
In this private ruling from the IRS, the taxpayer sought to use his IRA funds to buy a partnership interest. The paperwork was prepared and the partnership interest was purchased with the IRA funds, with the result that the IRA held the partnership interest. However, the advisor that prepared the paperwork failed to realize that the custodian could not hold the partnership interest (while other custodians could), and the IRA custodian reported a distribution by issuing Form 1099-R. The taxpayer sought relief from the 60-day rollover provision based on the bad advice received. The IRS denied relief on the basis that the IRA funds were used to start a business venture rather than being rolled-over exclusively for retirement purposes. Thus, a taxable distribution occurred along with any earnings on the distributed amount. Priv. Ltr. Rul. 201547010 (Aug. 26, 2015).
Petition for Issuance of Letters of Administration of Estate Filed Seven Months After Death Not Barred by Nonclaim Statute of Limitations.
The decedent died in early 2014 survived by three children. Seven months after their mother's death, a daughter filed a petition for issuance of letters of administration (for which no statute of limitations applied) claiming that her mother died intestate and the value of her estate was approximately $250,000. A brother objected, asserting that his sister's petition was basically a claim against the estate that was barred by the 6-month nonclaim statute of limitations contained in Kan. Stat. Ann. Sec. 59-2239. The brother also asserted that the mother's estate did not have any substantial assets because the mother's real estate had been deeded to him before death and the remaining bank accounts had passed to him via payable-on-death designations established before death, and the remaining tangible personal property had been split between the three children. The trial court denied the daughter's petitioner largely on the basis of its finding that the estate did not have any substantial assets. On appeal, the court reversed. The appellate court noted that the daughter's action was one seeking authority to marshal the estate's assets, if any, which did not trigger the nonclaim statute. Furthermore, by waiting more than six months to file her petition, the daughter eliminated the need to notify creditors as well as the chance for creditors to file a claim against the estate. The court also noted that the brother's claims could not be verified unless an administrator was appointed. A dissenting opinion confused the need to administer the estate to verify the brother's claims (for which no statute of limitations applies) with a claim against the estate (for which the 6-month statute would apply) and asserted that there were no substantial assets in the estate. In re Estate of Brenner, No. 113,288, 2015 Kan. App. LEXIS 81 (Kan. Ct. App. Nov. 20, 2015).
No Tax Credit Because Vehicle Not Timely Placed in Service.
In these companion cases, the taxpayers sought to acquire a low-speed electric vehicle (LSEV) by the end of 2009 to be able to offset it's cost with the credit then available through 2009 under I.R.C. Sec. 30D. The taxpayers ordered and paid for a LSEV by the end of 2009, and title passed to them in 2009. However, neither taxpayer actually received delivery of the LSEV until mid-2010. I.R.C. Sec. 30D required that, to get the credit, the LSEV must have been placed in service by the end of 2009. The court held that because the actual date of production occurred after 2009 and the taxpayers didn't actually take delivery of the vehicles under after 2009, that the credit was not available because the vehicles had not been placed in service as they were not available for the taxpayers' personal use by the end of 2009. Trout v. Comr., T.C. Sum. Op. 2015-66 and Podraza v. Comr., T.C. Sum. Op. 2015-67.
Income Tax Refunds Are Included in Decedent’s Estate.
The decedent’ died in early 2012 and shortly thereafter, the estate filed the decedent’s 2011 individual income tax return which showed a tax liability of $495,096 and total tax payments of $924,411 which resulted in an overpayment of $429,315 for 2011. According to the return, $25,000 was to be applied to the decedent’s estimated 2012 taxes with the balance of $404,315 to be refunded to the decedent’s estate. On Form 706, the estate did not include the value of the tax refund in the gross estate or the value of the $14,126 individual income tax refund for 2012. The IRS claimed that the individual income tax refunds should have been included in the gross estate value based on I.R.C. Sec. 2033, and assessed a deficiency of estate tax of $146,454. The estate claimed that under state (KY) law, the refunds were not in existence as of the date the estate tax was due and was, therefore, only a mere possibility or expectancy and that no property interest existed until the time the IRS determined entitlement to the refund. The court agreed with the IRS on the basis that I.R.C. Sec. 6402(c) specifies that, absent an offsetting liability, the IRS “shall” refund overpaid taxes to the taxpayer. As such, the refund was not merely an expectancy but was estate property. Estate of Badgett v. Comr., T.C. Memo. 2015-226.
Advances to Family Business That Fails Do Not Result in Bad Debt Deduction.
The petitioner made advances during the year in issue totaling $808,000 to a family-owned business that the petitioner was a part owner of. The petitioner later claimed a bad debt deduction of $808,000 upon not being repaid. The note called for 10 percent interest, but no collateral was required and the line of credit remained unsecured. The Tax Court determined that the petitioner failed to prove that the advances were loans. There was no proof of repayment expectation or an intent to enforce collection. In addition, there was no documentation of the business's credit worthiness. The petitioner's conduct was inconsistent with that of an outside third party lender. Also, the petitioner did not prove that the advances were worthless in 2009, the year for which the deduction was claimed. The business had not filed bankruptcy even by mid-2011. Thus, no default occurred in 2009 and the court denied the bad debt deduction. On appeal the court affirmed. Shaw v. Comr., No. 13-73687, 2015 U.S. App. LEXIS 20563 (9th Cir. Nov. 18, 2015), aff'g., T.C. Memo. 2013-70.
Contract Did Not Allow For Unilateral Termination.
The plaintiff is an energy company that owns numerous oil and gas leases. The defendant entered into a contract with the plaintiff to buy numerous of the plaintiff's leases for $35 million plus wells, pipelines and related property. The defendant placed $3.5 million in escrow. The plaintiff provided the defendant with a list of assets and title limitations related to the leases, and the defendant found title defects in 40 percent of the leases that they claimed lowered the value of the leases being purchased by 55 percent. The defendant did not seek dispute resolution as specified in the contract and unilaterally terminated the contract. The plaintiff attempted to invoke the dispute resolution process, but the defendant didn't respond. The plaintiff sued and the trial court awarded the plaintiff the escrow funds, plus interest. On appeal, the court affirmed noting that the parties were sophisticated and that the contract did not provide for unilateral termination based on the defendant's own determination of title defects and impact on lease value. Broad St. Energy Co. v. Endeavor Ohio, LLC, No. 14-4278, 2015 U.S. App. LEXIS 19751 (6th Cir Nov. 13, 2015).
Trial Court Property Granted Summary Judgment on Breach of Contract and Abuse of Process Claims.
The parties were neighbors in a subdivision with a homeowner’s association. To live in the subdivision, the parties had to sign a waiver stating that they would not take any action to contest or interfere with any development in the community “so long as such development is consistent with the Land Use Approvals.” The plaintiff challenged a decision from the local development review board granting the defendants a permit to build a pole barn on their property. The plaintiff also filed a civil action against the defendants, contesting their building of the pole barn. The defendants filed counterclaims alleging breach of contract, abuse of process, and other torts. Specifically, the defendants argued that the plaintiff had violated the association’s waiver by challenging the construction of their pole barn. The trial court granted summary judgment in favor of the plaintiff on the counterclaims, and the appellate court affirmed. The court ruled that a waiver of a right to participate in a municipal land use permit proceeding would have to be “unmistakable,” a standard that this waiver did not meet. Plaintiff was not given full notice of its meaning. The court also found that judgment was properly entered on the abuse of process claim because there was no evidence supporting the claim. Free and uninhibited access to the courts was an important right for all citizens, and the fact that the plaintiff was an attorney did not lessen her rights. Weinstein v. Leonard, No. 15-075, 2015 VT 136, 2015 Vt. LEXIS 114 (Vt. Sup. Ct. Nov. 13, 2015).
EPA Registration of Insecticides Toxic to Honey Bees Vacated.
The Environmental Protection Agency (EPA), in 2010, unconditionally approved the registration of sulfoxaflor in accordance with the Federal Insecticide, Fungicide, and Rodenticide Act which bars the sales of pesticides that haven’t been approved and registered by the EPA. The plaintiffs, commercial bee keepers and bee keeping organizations, challenged the approval based on studies which showed that sulfoxaflor was highly toxic to bees. The court determined that the EPA’s approval was not supported by substantial evidence and that the approval posed the potential for more environmental harm than vacating the approval. Pollinator Stewardship Council, et al. v. United States Environmental Protection Agency, No. 13-72346, 2015 U.S. App. LEXIS 19945 (9th Cir. Nov. 12, 2015).
Farmland Transferred to Wife by Husband After Divorce Proceedings Began Became Separate Property of Wife.
After nearly 40 years of marriage, the wife filed a dissolution action against the husband. During the parties’ marriage, the wife’s mother had given her and the husband title to a farm. During the pendency of the divorce, the wife asked the husband to transfer ownership of the farm to her via quitclaim deed. He complied with her request, but later sought to claim a portion of the property as marital property. He argued that the wife had committed fraud by falsely promising to attend counseling in exchange for the deed. He also argued that because of their confidential relationship, she had unduly influenced him to deed the property to her. The trial court ruled that the transfer of the farm from the husband to the wife was a gift, and the appellate court affirmed. Accordingly, the court classified the farm as the wife’s separate property. The appellate court did remand the case, however, for reconsideration as to whether the husband’s contribution to the separate property during the marriage should have resulted in his receiving a larger share of the marital estate. Draper v. Draper, No. E2014-02224-COA-R3-CV, 2015 Tenn. App. LEXIS 905 (Tenn. Ct. App. Nov. 12, 2015).
Court Says IRS Wrong on Numerous Points Concerning Passive Loss Rules.
The IRS, in this case, reclassified a significant portion of the taxpayers' (a married couple) income from non-passive to passive resulting in an increase in the taxpayers' tax liability of over $120,000 for the two years at issue - 2009 and 2010. The husband had practiced law, but then started working full-time as President of a property management company. He was working half-time at the company during the tax years in issue. He also was President of a company that provided telecommunications services to the properties that the property management company managed. The couple had minority ownership interests in business entities that owned or operated the rental properties and adjoining golf courses that the property management company managed, and directly owned two rental properties, two percent of a third rental property and interests in 88 (in 2010) and 90 (in 2009) additional entities via a family trust. They reported all of their income and losses from the various entities as non-passive, Schedule E income on the basis that the husband was a real estate professional under I.R.C. Sec. 469(c)(7) and that they had appropriately grouped their real estate and business activities. The IRS claimed that the husband was not a 5 percent owner of the property management company, thus his services as an employee did not constitute material participation. IRS also claimed that the husband was not a real estate professional and that the activities were not appropriately grouped. The court agreed with the taxpayers, determining that the husband was a real estate professional on the basis that he owned at least 5 percent of the stock of the property management company. The court determined that he had adequately substantiated his stock ownership and he performed more than 750 hours of services for the property management company - a company in the real property business. The court also determined that the taxpayers had appropriately grouped their rental activities, rejecting the IRS argument that real estate professional couldn't group rental activities with non-rental activities to determine income and loss. The court held that that Treas. Reg. Sec. 1.469-9(e)(3)(i) only governs grouping for purposes of determining material participation, and doesn't bar real estate professional from grouping rental activity with non-rental activity when determining income and loss (as the IRS argued). Accordingly, the taxpayers had appropriately grouped their renal activity with the activities of the telecommunications company and the adjacent golf courses as an appropriate economic unit. As such, the grouped non-rental activities were not substantial when compared to the aggregated rental activity. The activities were under common control and, under Treas. Reg. Sec. 1.469-9(e)(3)(ii), the husband could count as material participation everything that he did in managing his own real estate interests - his work for the management company could count as work performed managing his real estate interests. Note - in CCA 201427016 (Apr. 28, 2014), the IRS said that the aggregation election under Treas. Reg. Sec. 1.469-9(g) has no bearing on the issue of whether a taxpayer qualifies as a real estate professional and the 750-hour test is not applied as to each separate activity. This was not involved in the case. Stanley v. United States, No. 5:14-CV-05236, 2015 U.S. Dist. LEXIS 153166 (W.D. Ark. Nov. 12, 2015).
Permissive Use Defeated Adverse Possession Claim.
The plaintiff and defendant were brothers who owned adjacent family properties that had once belonged to their parents. The plaintiff owned the farm house and one acre of property. The defendant and his wife owned the surrounding farmland. In 1996, the plaintiff, with the defendant’s permission, razed a barn on the defendant’s property and replaced it with a pole shed for his own use. A water well on the defendant’s property also serviced the plaintiff’s property. After 2010, a dispute arose between the brothers when the plaintiff refused to allow the defendant to drive his large manure tanker on a blacktop driveway the plaintiff had constructed between the two properties. In response to the dispute, the plaintiff filed an action against the defendant and his wife, arguing that he was entitled to approximately one-half acre of the defendants’ property under an adverse possession theory. The trial court entered judgment for the plaintiff, but the appellate court reversed. The court ruled that the plaintiff had failed to prove by clear and convincing evidence that the common law elements of adverse possession had been established. The court ruled that because the plaintiff had used the property with the permission of his brother, his claim was defeated. Moreover, the plaintiff had not used all of the contested property for the 20-year period required by state (WI) law. Rudnick v. Rudnick, No. 2014AP2893, 2015 Wisc. App. LEXIS 796 (Wis. Ct. App. Nov. 10, 2015).
Offer-In-Compromise Properly Rejected Where Taxpayer Dissipated Assets.
No Deductions Due to Lack of Documentation.
The petitioner claimed deductions for meals and entertainment, parking fees, tolls and transportation-related expenses, cost-of-goods sold for solar panels and a home office. As for the solar panels, the only documentation provided was a quote for 1,000 units. Concerning the home office, the only substantiation was the petitioner's testimony and the floor plan and area used for the office. No business interest deduction was allowed because there was no evidence that the use of the loan proceeds was for something other than personal purposes. The court agreed with the IRS position on the deductibility of the expenses (some were allowed, but most denied). Smith v. Comr., T.C. Memo. 2015-214.
IRS Calculation of Business Use Upheld.
The petitioner was a surgeon that had a private practice in one location and also was an “on-call” surgeon at a hospital about 25 miles away from his private practice location. At the hospital he had to work a 24-hour period three days monthly and had to be available during emergencies. He had various medical conditions and bought a motor home that he could park near the hospital that he could use for rest and sleep during the 24-hour shifts. He reviewed patient charts in the motor home and referred to his medical books and other information while in the motor home. He did maintain mileage logs that separated out the business and personal use of the motor home. On audit, the IRS allocated the allowable depreciation (including expense method) between his business and personal use. The petitioner claimed that he used the motor home for business purposes 85% of the time during his 24-hour work days. The court upheld the IRS position, noting that the motor home was used only 27 days for business in 2008 and 36 days in 2009. The petitioner’s own logs showed that his business use was approximately 20 percent for the two tax years in issue. Cartwright v. Comr., T.C. Memo. 2016-212.
Delivery to IRS of Notice of Non-Judicial Sales is No Good.
In the facts of this ruling, the question arose as to whether notices of a non-judicial sale could be delivered to the IRS by private delivery services such as United Parcel Service (UPS) or FedEx. The IRS noted that under I.R.C. §7425(c), the notice of sale must be given in writing, by registered or certified mail or by personal service, not less than 25 days prior to sale. The fact that the IRS actually received the documents does not matter. Delivery by private delivery service such as FedEx or UPS didn’t count. C.C.A. 201545025 (Jun. 12, 2015).
Real Estate Professional Rules Not Satisfied and Rental Losses Disallowed.
The petitioner was a licensed real estate appraiser and director of real estate valuation at two national CPA firms, but did not own an equity interest in either businesses. After getting married, the petitioner had three condominiums that he and his wife rented out. He claimed that he put in more than 750 hours in managing the rental activities and that he spent most of his time on rental activities, but did not provide any log to document his time. His wife had some notes, but nothing that carefully substantiated the time she spent on rental activities. However, she did construct an activity log after the IRS selected their return for audit. For the year at issue, the petitioner and spouse claimed about $40,000 in losses from the rental activity. The IRS denied the losses due to failure to satisfy the real estate professional exception to rents being passive. The court agreed, and noted that the petitioner's work for the CPA firms did not count toward the750-hr test because he didn't have an ownership interest in those businesses. The evidence also did not support the argument that petitioner's wife met the 750-hr requirement. The court upheld the imposition of an accuracy-related penalty. Calvanico v. Comr., T.C. Sum. Op. 2015-64.
Oral Modification of Lease Not Established and Landlord Entitled to Unharvested Crops.
The plaintiff leased land from the defendant, a company that his father owned and operated. A one-year lease was signed in 2003 for rice and soybean and crawfishing rights. Another one year lease was signed for 2004. The plaintiff claimed that he made improvements to the property in 2004 in exchange for the promise of a new five-year lease. A five-year lease was never drafted, but one year leases were drafted for 2005, 2006 and 2007, but were never signed. The plaintiff was evicted from the land in 2006, before the 2007 crawfish harvest. The plaintiff sued for damages and the defendant sought damages for the plaintiff's failure to pay fees for rice storage and drying, fuel expenses, off-loading expenses and rental expenses. The trial court dismissed the claims and the plaintiff appealed, claiming that a five-year lease began in 2004 via the oral modification and that he was entitled to the 2007 crawfish harvest. On appeal, the court affirmed. The court noted that there was no ambiguity in the parties' intent to create an annual lease and that the failure to agree to a lease term meant that the lease was for one year under state (LA) law. Once the tenant was properly evicted from the property, the tenant lost any ability to claim entitlement to an unharvested crop such as the crawfish. McCraine v. Voyellesland Farms, Inc., No. 15-396, 2015 La. App. LEXIS 2165 (La. Ct. App. Nov. 4, 2015).
Charitable Deduction of Trust Not Limited To Adjusted Basis in Donated Property.
The settlors created a dynasty trust in 1993 with terms authorizing the trustee to make charitable distributions out of the trust's gross income at the trustee's discretion. The trust wholly owned a single-member LLC and in 2004, the LLC donated properties that it had purchased to three charities. Each property had a fair market value that exceeded basis. The LLC received the funds to buy the properties from a limited partnership's distribution to the trust in which the trust was a 99 percent limited partner. The limited partnership owned and operated most of the Hobby-Lobby stores in the U.S. The IRS claimed that the trust could not take a charitable deduction equal to the full fair market value, but should be limited to the trust's basis in each property. The trust claimed a charitable deduction in excess of $20 million on Form 1041 for 2004, and later filed an amended Form 1041 increasing the claimed charitable deduction to just shy of $30 million, and seeking a tax refund of over $3 million. The IRS denied the refund, claiming that the charitable deduction was limited to cost basis. The trust paid the deficiency and sued for a refund. On the trust's motion for summary judgment, the parties agreed that the donated properties were acquired by the trust with funds coming from gross income from a pre-2004 tax year. Thus, according to the trust, I.R.C. Sec. 642(c)(1) allowed the charitable deduction to be computed based on the donated property's fair market value. The court agreed, noting that I.R.C. Sec. 642(c)(1) allowed a deduction without limitation contrary to the basis limitation contained in I.R.C. Sec. 170, and that charitable deduction provisions are to be construed liberally in the taxpayer's favor. The court noted that the donated properties were all acquired with distributions from the limited partnership to the trust, and each distribution was part of the LLC's gross income for the year of distribution. Thus, the donated properties were clearly bought with funds traceable to the trust's gross income and were donated under the terms of the trust. The court noted that the IRS admitted that there was no caselaw or other substantial authority that supported the government's position. The court granted summary judgment for the trust. Green v. United States, No. CIV-13-1237-D, 2015 U.S. Dist. LEXIS 151539 (W.D. Okla. Nov. 4, 2015).
Court Refuses To Impose Liability For Gender-Based Dangerousness of Ram.
The parties are friends and neighbors and are both farmers. The plaintiff has raised various types of livestock, but the summer of 2012 was his first time raising sheep. The defendant had bred sheep for over 30 years. On occasion, the plaintiff allowed the defendant to keep livestock on the plaintiff's property. In the summer of 2012, the parties went together to a livestock yard where the defendant bought a lamb ram to replace his existing ram. The ram showed no vicious tendencies. After ewes had been put in the pasture with the ram, the plaintiff was butted repeatedly by the ram as he attempted to turn on sprinklers in the pasture. At the time of the incident, the plaintiff was 82 years old. He suffered a concussion, five broken ribs, a broken sternum and a broken shoulder. The plaintiff was hospitalized for 16 days. The plaintiff sued based solely on a theory of gender based strict liability irrespective of whether or not the defendant knew the ram was abnormally dangerous. The trial court granted summary judgment for the defendant. On appeal, the court affirmed. The appellate court noted that the standard of care under state (WA) law is ordinary care if the animal is not inclined to commit mischief, unless it is shown that the animal's owner knew that the animal had vicious tendencies. In that event, strict liability is the rule. The court noted that this approach was consistent with Restatement (Second) of Torts Secs. 509 and 518. Under Restatement (Second) of Torts Sec. 509 comment e, rams have not historically been regarded as being inherently dangerous animals, but comment 23 of the Restatement (Third) of Torts propose a possible gender-or-breed-based modification of the general rule treating domestic animals as not excessively dangerous. The court, however, referenced the policy reasons for not holding owners of male domestic livestock to a strict liability standard. In addition, the court noted that the legislature could modify the law and had already done so with respect to dogs in certain situations. Rhodes v. MacHugh, No. 32509-1-III, 2015 Wash. App. LEXIS 2687 (Wash. Ct. App. Nov. 3, 2015).


Justia › US Law › US Case Law › US Supreme Court › Volume 329 › United States v. Seatrain Lines, Inc.
United States v. Seatrain Lines, Inc.
Pursuant to Part III of the Interstate Commerce Act, the Interstate Commerce Commission issued to a common carrier by water, whose vessels had special facilities for carrying loaded railroad cars and tank space for liquid cargoes in bulk, a certificate of public convenience and necessity authorizing it to carry "commodities generally" between certain ports subject "to such terms, conditions, and limitations as are now, or may hereafter be, attached to the exercise of such authority by the Commission." Later, the Commission, on its own motion and over the protest of the carrier, reopened the proceedings and issued an order directing the cancellation of the original certificate and the issuance of a new one, which deprived the carrier of its right to carry "commodities generally" and limited it to carrying liquid cargoes in bulk, empty railroad cars, and property loaded in freight cars received from and delivered to rail carriers.
1. The Commission had no authority to cancel the original certificate. Pp. 329 U. S. 428-433.
2. It is apparent from the record in this case that the proceedings were not reopened to correct a clerical mistake in the issuance of the original certificate, but to execute a subsequently adopted policy of holding that a certificate to carry "commodities generally" did not authorize water carriage of freight cars. Pp. 329 U. S. 428-429.
3. The Commission has no express authority to revoke a certificate of public convenience and necessity issued to water carriers under Part III of the Act. Pp. 329 U. S. 429-431.
4. The order was not within the Commission's authority under § 309(d) to fix "terms, conditions and limitations" for water carrier certificate holders. Pp. 329 U. S. 431-432.
5. Nor was it within the Commission's authority under § 315(c) to "suspend, modify, or set aside its orders," since the Act makes a clear distinction between "orders" and "certificates." P. 329 U. S. 432.
and the time fixed for rehearing has passed, it is not subject to revocation in whole or in part, except as specifically authorized by Congress. Pp. 329 U. S. 432-433.
64 F. Supp. 156, affirmed.
Having issued a certificate of public convenience and necessity to a water carrier under Part III of the Interstate Commerce Act, the Interstate Commerce Commission subsequently ordered its cancellation and the issuance of a new certificate substantially curtailing the rights granted. 260 I.C.C. 430. The District Court set aside the Commission's order. 64 F.Supp. 156. Affirmed, p. 329 U. S. 433.
Part III of the Interstate Commerce Act, 54 Stat. 929, 49 U.S.C. § 901 et seq., subjected water carriers to the jurisdiction of the Interstate Commerce Commission. Section 309(a) of that Act required them to obtain certificates of public convenience and necessity from the Commission. The same section contains a proviso commonly referred to as the grandfather clause. It provides that any water carrier, with an exception not here material, which was in bona fide operation as a common carrier by water on January 1, 1940, shall be entitled to a certificate to continue operations over the route or routes which it had been serving previous to that date without determination by the Commission of the question of public convenience and necessity.
Mexico" was accordingly issued to Seatrain. By its terms, it became effective August 10, 1942, subject "to such terms, conditions, and limitations as are now or may hereafter be attached to the exercise of such authority by the Commission."
"as a common carrier by the 'Seatrain' type of vessel, in interstate or foreign commerce, in the transportation of liquid cargoes and bulks, of empty railroad cars, and of property loaded in freight cars received from and delivered to rail carriers and transported without transfer from freight cars between the ports of New York, N.Y., New Orleans, Louisiana, and Texas City, Texas."
and altering the certificate. The District Court further held that, even if the Commission would have had power under different circumstances to alter a certificate, it should not have done so in this case, where, as the Court found from evidence before it but which had not been before the Commission, Seatrain had expended large sums of money in reliance upon the complete validity of its certificate. 64 F.Supp. 156. We need not consider the Commission's objection to the District Court's admission of evidence not heard by the Commission, since we agree with the District Court that the Commission was without authority to cancel this certificate.
In altering Seatrain's certificate, the Commission held that a certificate authorizing the carriage of "commodities generally" does not embrace the right to carry loaded or unloaded railroad cars; that, consequently, the original certificate granted Seatrain actually deprived it of any future right to carry railroad cars -- its chief business; that issuance of the original certificate to carry commodities generally was consequently an inadvertent error, patent on the face of the record, which the Commission has the right and power to change at any time the matter comes to its attention. But Seatrain argues that, far from restoring the right to which it was entitled under the original proceedings, the new order actually results in a drastic limitation on the nature of the equipment and service Seatrain is privileged to employ in loading and carrying freight, and could bar delivery or receipt of freight to or from any consignees except railroads.
cannot revoke such a certificate under its general statutory power to alter orders previously made. Smith Bros. Revocation of Order, 33 M.C.C. 465.
"That no terms, conditions, or limitations shall restrict the right of the carrier to add to its equipment, facilities, or service within the scope of such certificate, as the development of the business and the demands of the public shall require. . . ."
respect [Footnote 5] are not controlling as to the Commission's power to regulate the details of the service of water carriers. We can find no authority for alteration of Seatrain's certificate from the Commission's power to fix "terms and conditions."
For a description of Seatrain equipment, see Investigation of Seatrain Lines, Inc., 195 I.C.C. 215, 218-222.
See Investigation of Seatrain Lines, Inc., supra; Seatrain Lines, Inc. v. Akron C. & Y. Ry., 226 I.C.C. 7; Hoboken Manufacturers R. v. Abilene & So. Ry. Co., 248 I.C.C. 109, but see Commissioner Patterson, dissenting, id. at 120.
24 Stat. 379, as amended, 49 U.S.C. § 1 et seq., (railroads); 49 Stat. 543, 54 Stat. 919, 49 U.S.C. § 301 et seq., (motor carriers); 54 Stat. 929, 49 U.S.C. § 901 et seq. (water carriers).
"This bill leaves section 212(a) unchanged, and has no corresponding provision in the new part III. While there is room for argument, we are inclined to believe that provision for the revocation or suspension of water carrier certificates is not essential if adequate penalty provisions are provided for violation of part III. Revocation or suspension, in the case of motor carriers, is believed to be the most effective means of enforcement, since there are so many such carriers, and the operations of the great majority are so small, that enforcement through penal actions in courts presents many practical difficulties, but this is not true of water carriers."
Chicago, St. P., M. & O. R. v. United States, 322 U. S. 1; Crescent Express Lines v. United States, 320 U. S. 401: Noble v. United States, 319 U. S. 88. See also Smith Bros. Revocation of Certificate, 33 M.C.C. 465; Quaker City Bus Co., 38 M.C.C. 603.
And §§ 316 and 317 of the Act pointedly treat an order as one thing, and a certificate as another.