If either question can rightly be answered in the affirmative, the warrant was lawful; otherwise, not.

[4] The search warrant now involved was issued upon an affidavit, the sufficiency of which must be tested by its statements of fact rather than by its conclusions. We therefore disregard the allegation made in terms that the premises were being used for business purposes and for the sale of intoxicating liquor, and look only to the circumstances expressly stated. These were, in brief, that the premises consisted of this house and a garage in the rear upon an alley. The garage opened through, so that automobiles drove into the back yard. Prohibition agents had watched the place for three days, and had seen four different automobiles, making two to five trips each per day, drive in and away after opportunity to load up in the garage, and also had seen men rolling out of the basement and into the yard or garage a large number of such half barrels as are commonly used for beer. Other details were stated, and all together fully justified a conclusion that beer was being manufactured in the basement on a scale which resulted in an output of several barrels per day, which output was being regularly hauled away to other parts of the city-in other words, that beer was being there manufactured upon a commercial scale for commercial purposes, and not merely for home use.

Coming to the search warrant statute (section 25, tit. 2, National Prohibition Act [Comp. St. § 10138/2m]), and disregarding any doubt whether the basement, by lease, had become so segregated as to lose its character as part of the dwelling, we see that the critical questions must be:

(1) Was this dwelling being used for "some business purpose such as a store, shop, saloon, etc."?

We pass the first question by without intimation of opinion, and go to the second. In our judgment the stated circumstances tended to show that the dwelling was being used for the sale of liquor, within a liberal but permissible scope of definition; and in defining the terms used in this statute it is not to be forgotten that section 3 of title 2 of the act (Comp. St. § 101382aa) directs that "all the provisions of this act shall be liberally construed, to the end that the use of intoxicating liquor as a beverage may be prevented."

We cannot assume that any sales were being completed in the dwelling as if over a counter, with simultaneous delivery and payment; but commercial sales regularly prosecuted involve, not only manufacture, but storage, ready for delivery to purchasers, as well as the soliciting of orders, the delivery from the storage place to the purchasers who call for it, or the carrying to another delivery point, and the maintenance of a headquarters for supervising the selling business. From the facts here stated it is fairly probable that the four automobile operators were buying at this brewery and delivering and reselling on their own account-at least as probable as that they were in the employ of the manufacturers. The yard and the premises just outside of the house were certainly being used for the delivery of the goods, either to the purchasers or on the way to the purchasers. The manufactured product was doubtless more or less in storage within the dwelling for the purpose of sale, whether title passed to purchasers within the dwelling or later. Under these circumstances we have no hesitation in concluding that it could be rightly said that the dwelling was being used for "the purpose of sale."

[5, 6] The search warrant was directed to (among others) the assistants and agents of the Commissioner of Internal Revenue. It was executed and returned by one who signed as "Federal Prohibition Agent." The service was sufficiently regular. We take judicial notice that a prohibition agent is an assistant and agent of the Commissioner of Internal Revenue in the enforcement of the National Prohibition Act, being Comp. St. § 101384 et seq. Crinnan v. U. S. (C. C. A.) 1 F. (2d) 643, 645.

We have assumed that the affidavit and the warrant are accurately described in the opin

RUDKIN, Circuit Judge. The steamships West Keats and Boston Maru came into collision at a point on the Columbia river opposite Columbia City in the early morning of October 26, 1924. As a result of the collision both vessels were injured. The owner of the West Keats libeled the Boston Maru to recover damages for injuries sustained by the filed a libel in personam against the United former, and the owner of the Boston Maru

Act March 3, 1899, § 15 (Comp. St. § 9920), making it unlawful to tie up or anchor vessels or other craft in navigable channels in such manner as to prevent or obstruct passage of other vessels, does not prohibit any and all anchorage in navigable channels, but only such as will prevent or obstruct passage of other vessels.

2. Collision 71(2)-Pilot held negligent In proceeding down river at full speed until withIn 1,000 feet of anchored vessel, with anchor lights burning brightly.

Pilot in charge of steamship on navigable stream held guilty of negligence in proceeding down river at full speed until coming within 1,000 feet of anchored vessel, with anchor lights burning brightly and visible for upwards of a mile and a half.

3. Admiralty 118-Lower court findings, Involving largely questions of fact, should not be lightly disregarded, where nearly all testimony was taken in court's presence.

Findings of lower court, involving largely questions of facts, should not be lightly disregarded, where nearly all of testimony was taken in presence of court.

Appeal from the District Court of the United States for the District of Oregon.

Separate libels by the United States against the Japanese steamer Boston Maru, her engines, etc., and by the Kokusai Kisen Kabushiki Kaisha, claimant of the Japanese steamer Boston Maru, her engines, etc., against the United States, as owner of the steamship West Keats; the two libels being consolidated for purpose of trial. From a decree dismissing the libel of the United States and for stipulated damages sustained by the Boston Maru, the United States appeals. Affirmed.

George Neuner, U. S. Atty., and MacCormac Snow, Sp. Counsel U. S. Shipping Board

damages for injuries sustained by the latter. The two libels were consolidated for the purposes of trial. On the final hearing the court below found that the West Keats was solely at fault, and a decree was thereupon entered for the stipulated damages sustained by the Boston Maru and dismissing the libel of the United States. From that decree this appeal is prosecuted.

On the afternoon of October 25, the Boston Maru left the Willamette river and proceeded down the Columbia to take on additional cargo at St. Helens, on the Willamette Slough, which branches off the main channel of the Columbia river a short distance above Columbia City. At that season of the year a vessel drawing upwards of 26 feet of water, as did the Boston Maru could not reach St. Helens except at flood tide. The Boston Maru therefore dropped down the main channel of the Columbia to a point abreast of Columbia City and anchored until she could return to St. Helens on the incoming tide a few hours later. She came to anchor at about 8:30 in the evening. The customary anchor lights were then placed in position and the bearings of the vessel were taken by reference to three lights on shore. At that point in the river the 30-foot channel is about 1,250 feet in width, and when brought to anchor the vessel was headed upstream about mid-channel. Later and toward midnight the incoming tide swung the stern toward the Oregon shore and she remained in that position until the time of the collision.

On the same night the West Keats entered the Columbia river from the Willamette about midnight and proceeded down the river at full speed, estimated at from 8 to 10 knots per hour, until within about one minute before the collision. She then attempted to turn

her bow toward the Oregon shore, but by reason of the suction caused by the nearness of the bank, or for some other cause, the vessel refused to respond to her helm, the stern continued to hug the shore and the bow turned toward midstream. As a result, the vessels collided, the hawse pipe about 5 feet back of the bow on the starboard side of the West Keats, striking the starboard quarter aft of the Boston Maru a glancing blow.

[1] Practically the only ground of negligence charged against the Boston Maru was improper anchorage. It is contended that her anchorage violated the Act of March 3, 1899 (30 Stat. 1152) § 15 (Comp. St. § 9920), providing that it shall be unlawful to tie up or anchor vessels or other craft in navigable channels in such a manner as to prevent or obstruct the passage of other vessels or craft. It is further contended that the anchorage violated a local custom. But the statute does not prohibit any and all anchorage in navigable channels. It only prohibits such as will prevent or obstruct the passage of other vessels, and the court below found that the anchorage in question did not fall within that prohibition. The court likewise found that there was no established anchorage ground at that place, and this finding would seem to cover an anchorage ground established by custom as well as an anchorage ground established by law. While there was testimony tending to show that a number of pilots anchored their vessels lower down the river and over near the Washington shore, there was also testimony to the contrary, and we agree with the court below that the testimony failed to establish any such certain and uniform custom as would justify the pilot in charge of the West Keats in proceeding down the river at full speed under the assumption that anchor lights directly in front of him were over near the Washington coast, leaving several hundred feet of open river before him on the Oregon side.

When the vessel was placed at anchor it was impossible to tell which way she would swing, if moved by the wind or tide. She was anchored perhaps nearer to the Washington than to the Oregon side of the deep water channel, and as near to the Washington shore as was deemed safe in view of the presence of

a gravel bar in the river at that point. From her position it would not seem that she would obstruct the passage of other vessels whichever way she might swing, and we are by no means satisfied that she did swing far enough to obstruct or impede such passage. The testimony is somewhat uncertain as to the distance between the stern of the Boston Maru and the Oregon shore, as darkness and the shadow of the bank obscured the vision; but the testimony tends to show that the incoming tide would move the Boston Maru forward on her anchor chain until her bow was substantially above the anchor and that the vessel would then swing slowly on a radius little greater than her length. If such was the movement here, there was left upwards of 600 feet of deep water on the Washington side, and at least 200 feet of deep water on the Oregon side. This would seem ample to permit of the safe passage of the West Keats at either side if navigated at a moderate rate of speed and with due care. The testimony further shows that she would in all probability have passed in entire safety if she had responded to the movement of her helm, and that the suction from the bank was the cause of such failure. An experienced navigator should have anticipated this.

[2] On the whole therefore we are of opinion that the court below was amply justified in finding that the pilot in charge of the West Keats was guilty of negligence in proceeding down the river at full speed, until he came within 1,000 feet of an anchored vessel directly in his path, with anchor lights burning brightly and visible for upwards of a mile and a half. Indeed it would be difficult to reach any other conclusion. [3] We are likewise of opinion that the finding that such negligence was the sole causeof the collision should not be disturbed. The applicable rules of navigation are well understood, and the questions involved are largely questions of fact. Nearly all of the testimony was taken in the presence of the court below and its findings should not be lightly disre garded.

We find that the decree is supported by the findings and the findings are supported by the testimony.

The decree is therefore affirmed.

FLYNN, Collector of Internal Revenue, v. HAAS BROS.

Circuit Court of Appeals, Ninth Circuit. June 27, 1927.

No. 5102.

1. Internal revenue ~7(10), 9(27)—In determining income and profit taxes, amount of profits depends on amount of "invested capital," not including borrowed money or property (Act March 3, 1917, § 202 [39 Stat. 1001]; Comp. St. § 6336h).

In determining income and profit taxes, amount of profits depends in measure on amount of "invested capital," which means average invested capital for year, averaged monthly, under Act Oct. 3, 1917, § 207 (Comp. St. § 6336% h), and in case of corporations includes actual cash paid in, actual cash value of assets other than cash paid in, and paid in or earned surplus and undivided profits used in business, but does not include property borrowed by corporation in view of Act March 3, 1917, § 202, 39 Stat. 1001.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Capital Invested.

2. Corporations

152-Declaration of dividend sets apart portion of profits for distribution to stockholders and creates debt against corporation.

Declaration of dividend by corporation sets apart portion of profits for distribution among stockholders and creates debt against corporation in favor of stockholder, so that dividend properly declared and payable in cash cannot be revoked by subsequent action of corporation. 3. Internal revenue ~7(10), 9(27)-Dividend declared by corporation held still part of "in vested capital" for taxing purposes, where money was never distributed and never available for distribution.

Amount of dividend declared by resolution of corporation held still a part of "invested capital," so far as income and profit taxes are concerned, where money was never distributed, and was never available for distribution, but was used in business, and resolution declaring dividend was made to follow precedent of previ

ous years.

4. Internal revenue 7(10), 9(27)—In com

puting taxes, corporation is not estopped by its records to show that amount of dividend declared continued to be invested capital.

Corporation held not estopped by its own records to show that amount of dividend declared did not cease to be part of invested capi

tal, in computing income and profit taxes, since government is not estopped by corporation's records, and every estoppel must be mutual. 5. Internal revenue

7(6), 9(27)-Where amount of dividend declared continued to be part of invested capital, in computing income and profit taxes, there was no declaration of

dividend.

Where amount of dividend declared by corporation continued to be part of invested capital, there was in effect no declaration of dividend, so far as computation of income and profit

taxes was concerned, until subsequent resolution under which dividend was distributed. Dietrich, Circuit Judge, dissenting.

In Error to the District Court of the United States for the Southern Division of the Northern District of California.

Action by Haas Bros. against John L. Flynn, as Collector of Internal Revenue for the First District of California. Judgment for plaintiff, and defendant brings error. Affirmed.

George J. Hatfield, U. S. Atty., and T. J. Sheridan, Asst. U. S. Atty., both of San Francisco, Cal., for plaintiff in error.

I. I. Brown, George E. Stoker, and Thomas, Beedy, Presley & Paramore, all of San Francisco, Cal., for defendant in error.

Before HUNT, RUDKIN, and DIETRICH, Circuit Judges.

RUDKIN, Circuit Judge. This was an action at law by Haas Bros., a corporation, to recover certain additional income and profit taxes imposed by the Commissioner of Internal Revenue. A jury was waived by written stipulation of the parties, and the case has been brought here for review on the special findings made by the court below, from which it appears:

That the plaintiff is a corporation organized under the laws of the state of California, engaged in the wholesale grocery business in the city and county of San Francisco, and is and always has been a close family corporation; that until his death, May 31, 1916, Wilhead of the corporation; that on January 1, liam Haas was the president and dominant 1917, and during the year 1917, the capital stock of the corporation was $600,000, divided in 600 shares of the par value of $1,000 each, owned by members of the Haas family, and that during the calendar year 1916 the corporation earned a profit of $290,216.87 in the conduct of its business. That on January 8, 1917, the directors of the corporation adopted the following resolutions:

"Resolved, that the amount of $288,000 be credited to the reserve account and that $2,216.87 be carried forward to the profit and loss account of this corporation."

"Resolved, that this corporation does declare a cash dividend from the reserve account of $480 per share payable immediately to the stockholders of record on January 1, 1917, as they are respectively entitled thereto."

That the resolution declaring a dividend of $288,000 did not express the true intention of the board of directors; that in adopting

the resolution they merely followed a precedent in form and language, established in previous years, believing that this was the proper action to take; that they then understood and believed that a dividend was declared, when actually paid out of cash on hand available for that purpose, and not before; that they knew that the plaintiff had no funds out of which to pay dividends, and did not know or believe that the resolution thus adopted would impose any obligation upon the plaintiff, nor did they intend that it should; that neither the whole nor any part of the dividend of $288,000, as declared by the resolution, was ever actually distributed to the stockholders or set apart for their benefit; that the plaintiff did not at the time the resolution was adopted, or at any time prior to May 21, 1917, have any cash available with which to pay the dividend; that the earned profits of $290,216.87, out of which the dividend was declared by the resolution, consisted of merchandise on hand and accounts due from customers, and no physical division or allocation of such property was ever made to the several stockholders; and that no part of the profits or surplus was at the time of the adoption of the resolution, or at any time prior to May 21, 1917, capable of distribution or division, if the corporation was to continue to function as a growing business concern. That on May 21, 1917, the directors adopted the following resolution:

"That the surplus of this corporation be increased from two hundred thousand dollars ($200,000.00) to four hundred thousand dollars ($400,000.00).

"This additional amount to be raised by subscription of three hundred thirty-three 3100 dollars ($333.33) per share by the stockholders of record on this date, according to the number of shares held by each."

That on the same day, without further resolution of the directors, dividends amounting to the sum of $88,000 were paid to the stockholders on their proportionate shares, out of cash then on hand; that interest at the rate of 6 per cent. per annum was paid to stockholders from January 1, 1917, to May 21, 1917, on the entire sum of $288,000; that the entries in the books of the plaintiff crediting the stockholders with their proportionate shares of the sum of $288,000, declared as a dividend by the above resolution, were technical bookkeeping entries and were not a record of any actual transaction; that the payment of interest to the stockholders on their proportionate shares was unauthorized, and such payments were made by mistake, and

that the sum of $288,000, declared as a dividend by the aforesaid resolution did not thereby or otherwise become capital borrowed by the plaintiff from its stockholders, but, on the contrary, the whole thereof was a part of the invested capital of the plaintiff, used by it in its business at all times from January 1, 1917, to May 21, 1917. Upon the audit of the income and profit tax return of the plaintiff for the year 1917, the Commissioner of Internal Revenue reduced its invested capital from January 1, 1917, to May 21, 1917, by the sum of $288,000, and imposed an additional tax in the sum of $13,042.88; that the additional tax was paid under protest, and that a demand for a refund was rejected.

As conclusion of law the court found that the reduction of the invested capital of the plaintiff from January 1, 1917, to May 21, 1917, by the sum of $288,000, and the imposition of the additional assessment was unauthorized and unlawful. On these findings judgment was entered in favor of the plaintiff for the amount of the additional tax so imposed, with interest and costs. [1] The amount of profits depends in a measure on the amount of the invested capital. The term "invested capital" for any year, means the average invested capital for the year, averaged monthly. 40 Stat. 306, § 207 (Comp. St. § 63363%h). In the case of corporations, it means (1) actual cash paid in; (2) the actual cash value, at the time of payment, of assets other than cash paid in; and (3) paid in or earned surplus and undivided profits used or employed in the business; but does not include money or other property borrowed by the corporation. 39 Stat. 1001, § 202.

[2, 3] The question before us is: Did the amount of the dividend declared by the resolution of January 7 cease to be a part of the invested capital of the defendant in error from and after the date of the resolution and until the adoption of the second resolution on May 21 Taken at its face value, the resolution would seem to have that effect.

"The declaration of a dividend is the act of the corporation in setting apart a portion of its net or surplus profits for distribution among the stockholders according to their respective interests." 14 C. J. 806.

"The declaration of a dividend creates a debt against the corporation in favor of each stockholder to the amount due him as to his pro rata share, and this is true although the dividend is made payable at a future date, or 'at the pleasure of the company,' or 'such time as may be directed by the board." " Id. 815.