and the seller would convey them upon the payment of purchase money. The taxes for a year prior to the sale were held to be valid, and, not having been paid, the county treasurer advertised and sold the lands, the county bidding in the property. Later a trustee and representative of the purchaser, relying upon the validity of the tax, paid the same, without protest, to the county treasurer, out of the moneys belonging to the purchaser, and he received a tax certificate therefor, which he took in his own name. The statute provided that the nonredemption of lands within three years from the date of the sale permitted the treasurer, on presentation of the certificate, to execute a deed to the purchaser or refund the amount paid therefor, if he discovered for any reason that there was an error or irregularity, and that the lands ought not to be conveyed. The court decided that the lands were not taxable, and the purchaser, at the tax sale, offered to return the tax certificate to the county treasurer, and demanded that the moneys paid by him be refunded. The court held that payments made by the agent, who could not be regarded as a purchaser, not having been made through fraud, or mistake of fact, or duress, were voluntary, and would defeat his action, and

said:

law.

"Mistake, in order to be a ground of recovery, must be a mistake of fact, and not of A voluntary payment, made with a full knowledge of all the facts and circumstances of the case, though made under a mistaken view of the law, cannot be revoked, and the money so paid cannot be recovered back."

The indebtedness of Duisberg, Hess, and Mann to the appellee is sought to be proven by the book entries of the appellee company and inferences which are drawn from the contractual relations between the parties. There is no proof in the record showing other than a voluntary payment. Indeed, it is not contended that fraud or duress was practiced, nor was there a mistake of fact. The law, therefore, did not raise an implied promise to pay such overpayments, if they were made.

[2] It also appears that Duisberg, Hess, and Mann were the only stockholders of the appellee, and, both by reason of such stock ownership and the contractual relations referred to above, they were equitably entitled to the earnings of the corporation. It is conceded that the corporation owed no other creditors, and the payments made to them were out of the profits and surplus. This is

established by the books of the appellee. The master found:

"That the evidence shows that substantially all the profits of the plaintiff company over and above its just debts and expenses were paid each year during the years 19131917 to Duisberg, Hess, and Mann, the owners of the entire capital stock of the company."

And further:

"That the plaintiff company, although an exceedingly prosperous company and making large profits during the years 1913-1917, inclusive, declared only one dividend during said years, and that in 1916, and in the sum of three thousand ($3,000) dollars only." [3] Since the moneys paid were out of the profits and surplus, Duisberg, Hess, and Mann, under the contractual relationship, were entitled to 75 per cent. of the receipts of the company for each year after payment of the liabilities and expenses for the year, and as sole stockholders they were entitled to be paid as dividends, when declared from the balance of the surplus. Since it appears that the appellee paid all its debts before the payments were made to Duisberg, Hess, and Mann, such payments came from the surplus of the company, as the master found. The fact that the payments were entered on the books of the company as made on the contract would not affect the rights which Duisberg, Hess, and Mann had, as stockholders, to payment of the profits in the form of dividends. If money had been paid through a mistake of fact, as the cases hold, the payee nevertheless, if equitably entitled to the money, is charged with no implied promise to repay the same for such promise does not arise. The basis of the claim of money had and received is founded upon an implied promise to repay. In view of the fact that there were no unpaid debts, and no rights of other stockholders were impaired, this corporation's profits paid to the stockholders, even without a declaration of dividends, may not be recovered by the corporation. Speneer v. Lowe (C. C. A.) 198 F. 961; Hartley v. Pioneer Works, 181 N. Y. 73, 73 N. E. 576; Fitchett v. Murphy, 46 App. Div. 181, 61 N. Y. S. 182; People's Trust Co. v. O'Meara, 204 App. Div. 268, 197 N. Y. S. 795.

On June 28, 1918, the board of directors passed a resolution, which was. later canceled, and by this resolution $229,985.45, the surplus earnings of the company for the year 1917, were passed to the credit of Duisberg, Hess, and Mann. After the sale of the stock

to the Sterling Products Company, and shortly before the stock was actually transferred to the Sterling Products Company, the resolution was canceled. It would appear that this resolution, as originally passed, showed a distribution of the profits among the stockholders. After the sale of the stock, cancellation increased the claimed indebtedness of Duisberg, Hess, and Mann to the amount of the credit given under the original resolution. The sale by the Alien Property Custodian was made on December 19, 1919,

when the resolution was in full force and effect. This resolution by the stockholders, at the time it was passed, clearly indicated that it was the intent of the appellee's managing board that the remittances of the entire profits of the company, after payment of its debts, was to be made to the only stockholders of the company, and the distribution of these earnings, either under the contract or stockholder obligation, was to those entitled to receive them, even though it lacked the formality of a declaration of dividends. In any event, it established a voluntary payment, free from mistake of fact, fraud, or duress, and may not be recovered by the corporation.

V.

[4] The claim that, because the order of reference was entered by consent, the findings of fact and conclusions of law by the special master are binding upon the District Court, or this court, is erroneous. Davis Schwartz, 155 U. S. 636, 15 S. Ct. 237, 39 L. Ed. 289; Budd Mfg. Co. v. Wilson Body Co. (D. C.) 7 F. (2d) 746. The suit is in equity, and under rule 22 of this court the requirement that the specification of errors should state as particularly as may be in what

the decree or order is alleged to be erroneous has been sufficiently complied with. Decree reversed.

EATON, Collector of Internal Revenue, v. PHOENIX SECURITIES CO. Circuit Court of Appeals, Second Circuit. November 14, 1927.

No. 51.

Internal revenue 9 (26)-Corporation holding stock for another corporation held not "engaged in business," rendering it subject to capital stock tax (Revenue Act 1918, § 1000, subd. [c], being Comp. St. § 5980n). Corporation organized for sole purpose of holding shares for another corporation, and having no independent office, rent, or salaries,

22 F. (2d)-32

although its holdings were increased either by purchase or increases in capital stock, held not "engaged in business," within Revenue Act 1918, § 1000, subd. (c), being Comp. St. § 5980n, rendering it subject to capital stock tax.

[Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Engage.]

In Error to the District Court of the United States for the District of Connecticut.

Action for recovery of taxes by the Phoenix Securities Company against Robert O. Eaton, Collector of Internal Revenue, District of Connecticut. Judgment for plainAffirmed. tiff, and defendant brings error.

The plaintiff was a corporation organized under the laws of Connecticut, against which a capital stock tax had been assessed for the two fiscal years, July 1, 1921, to June 30, 1922, and July 1, 1922, to June 30, 1923. Having paid under protest the taxes levied on these assessments, it brought suit to recover the payments, on the theory that it had not been "engaged in business," within the meaning of the statute.

The facts in this regard, as stipulated, were as follows: The Phoenix Insurance Company, a Connecticut corporation engaged in the business of underwriting fire losses, became the owner of the shares of certain other insurance companies, over which it thus got control. Being forbidden in some states to carry these shares as part of its assets, it organized the plaintiff in 1913, for the sole purpose of holding them, itself receiving in exchange all the plaintiff's shares, except had no independent office, paid no rent and enough to qualify directors. The plaintiff except one were officers and directors of the no salaries, and all its officers and directors Phoenix Insurance Company. During the first year it held shares in three subsidiary companies, in which its holdings were increased either by purchase or by increases in the capital stock. During the second year its holdings in these three were further increased, and it acquired shares in a fourth subsidiary. Its practice was to pick up shares as they came upon the market, but it sold none, though authorized by its charter so to do. Before either of the years in question it had invested a small surplus of its funds in 100 shares of a company, not a subsidiary, whose character did not appear. This was all its actual business, except that it received the dividends declared upon the shares it owned, declared its own dividends out of the proceeds, and kept a trifling bank deposit.

Inc.

John Buckley, U. S. Atty., of Hartford, Conn., and Alexander W. Gregg and L. H. Baylies, both of Washington, D. C., for plaintiff in error.

Edward M. Day and Allan K. Smith, both of Hartford, Conn., for defendant in

error.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

PER CURIAM. We do not think that anything will be gained by an extended discussion of the decisions on this tangled subEdwards v. Chile Copper Co., 270 ject. U. S. 452, 46 S. Ct. 345, 70 L. Ed. 678, recognized the continued authority of McCoach v. Minehill R. R. Co., 228 U. S. 295, 33 S. Ct. 419, 57 L. Ed. 842, and U. S. v. Emery-BirdThayer Realty Co., 237 U. S. 28, 35 S. Ct. 499, 59 L. Ed. 825, to which we may add Zonne v. Minneapolis Syndicate, 220 U. S. 187, 31 S. Ct. 361, 55 L. Ed. 428. We cannot believe that it makes any difference whether the property held be corporate shares or realty, or whether the income be dividends or rent. Had it not been for the new accessions, the plaintiff would have been as bare a holding company as could be contrived. We do not believe that such a company is "engaged in business" during the year when it first receives its property and never thereafter. The venture is single, though at the outset it may show more activity; if there is business then, there is the same business always. Therefore we think that it made no difference that property continued to drop into the corporate lap from time to time, even though that were due to its own action. The alternatives were not business or death; a minimum of activity is necessary to the persistence of even the lowest organisms. Edwards v. Chile Copper Co., supra, is so plainly different on the facts that we may pass it. Phillips v. International Salt Co., 274 U. S. 47 S. Ct.

589, 71 L. Ed. -, is indeed closer, and may perhaps be the forerunner of a stricter rule. However, the holding company there actually aided in financing the operating company, as well as borrowed money from it. Whether these turned the scale, or the transactions in its bonds, or both together, we cannot tell. So far as we can see, it had no effect upon the cases on which we rely. Judgment affirmed.

Circuit Court of Appeals, Second Circuit. November 5, 1927.

No. 143.

Patents 295-Injunction pendente lite

should be granted only when patent is unquestionably valid and infringed.

An injunction pendente lite in a patent suit should not be granted, except when patent is beyond question valid and infringed.

2. Patents 295-Preliminary injunction held improperly granted, in view of evidence of anticipation.

Injunction pendente lite in patent infringement suit held improperly granted, in view of evidence tending to show anticipation. 3. Patents

121-Parts of pattern, broken from its whole, do not always become patentable.

Every part of any pattern does not become patentable when broken from its whole.

4. Patents 313-Dismissal of bill for infringement will be granted only in clear cases.

Dismissal of bill for patent infringement is a drastic remedy, granted only in clear cases.

Suit by Simson Bros., Inc., against Blancard & Co., Inc. From an interlocutory decree of injunction pendente lite, defendant appeals. Reversed.

Appeal from an interlocutory decree pendente lite of the District Court for the Southern District of New York, enjoining the defendant from infringing design patent 70,242, for a jewelry setting.

The patent, which is for a square setting for jewelry, was applied for on November 27, 1925, and was granted on May 25, 1926. It is as follows:

Arthur C. Fraser and Fraser, Myers & Manley, all of New York City (Henry Van Arsdale, of New York City, of counsel), for appellant.

Samuel E. Darby, Jr., and Darby & Darby, all of New York City, for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge. [1,2] We have often said that an injunction pendente lite in a patent suit should not go except when the patent is beyond question valid and infringed. Newhall v. McCabe, etc., Co., 125 F. 919; Hildreth v. Norton, 159 F. 428; Cutter Co. v. Metropolitan Co., 275 F. 158; A. B. Dick Co. v. Barnett, 277 F. 423. The case at bar is far from being such. Felger's ring, if adequately proved, would be a complete anticipation. That appearing in the Boston Jewelry Manufacturing Company's catalogue and Belais' are anticipations, when viewed in plane. It would take much proof to satisfy us that the difference in elevation between these and the design in suit would be observable to the ordinary eye, though the issue is theoretically open. All questions of the adequacy of the proof of anticipation, as of that of carrying back, must await trial. It is enough now that the outcome is patently doubtful. We omit Rosenthal & Kaplan's ring only because there is no competent proof of it. If it be proved sufficiently, Exhibit 7 leaves nothing for invention; the same is probably true of Exhibit 6 (certainly if the original figure of the disclosure be a limitation upon the claim).

Of the Patent Office art, Soman is likewise sufficient in plane to anticipate, unless the patentee can carry back of it. In elevation we repeat what we said as to Belais and the Boston Jewelry Manufacturing Company's catalogue. Foster, being later than Soman, we pass. As to Heusch, it makes not the slightest difference whether it was used for paste gems or real. In plane it is not so clear an anticipation as those just mentioned, but the issue lies in pais. As it shows no elevation, and apparently has none, the defendant will have to show that in such cases the elevation does not count, as perhaps it does

not.

[3] We cannot agree to the argument that these disclosures are not enough, because all but Heusch are of settings in combination with rings. The notion seems to us not to deserve discussion that a new design is created by cutting off the setting from the shank.

Surely every part of any pattern does not become patentable when broken from its whole. At any rate, the contention is plainly untenable in a case where by far the greatest use of the design is in combination with a ring.

[4] The motion to dismiss the bill on this record we deny; it is a drastic remedy, proper only in clear cases. True, the probabilities are against the patent. Apparently, the design appeared shortly after the need arose, and, if the first at all, was at once followed by a number of independent replicas. Such a history of the art makes a poor showing for invention, and history is our chief reliance. The plaintiff may be able to carry back of the proved prior art and of the patent to Soman. Possibly he may distinguish as against Heusch and such of the rest as he cannot anticipate. Novelty, like infringement, is largely a trade question in design patents, and we are disposed to leave to the plaintiff the benefit of the doubt.

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

In the matter of Henry A. Taylor, bankrupt. Genevieve Holdroyd Elder appeals from order extending time of bankrupt to apply for discharge. Order reversed, and petition for extension denied.

The adjudication was on April 11, 1925, and on June 15, 1926, the bankrupt filed an unverified petition, alleging that he did not know that he was required to file his petition "within 13 months from said 11th day of April, 1925, and for that reason did not file it before November of that year; that in November he went to Florida for the purpose of attending to some business matters and has just now returned." On June 23,

1926, the judge granted the prayer of this petition by an order which on July 31, 1926, the appellant, a creditor, moved to vacate by rule nisi. While the rule was pending the bankrupt filed a second unverified petition on September 1, 1926, amending the first, and alleging that he had employed an attorney in Connecticut "to file his bankruptcy schedules, and to take whatever action might be necessary to obtain an adjudication and a final discharge, and thereafter relied entire ly upon said attorney. Said attorney failed and neglected to file a petition for discharge within the time required by the federal statute. He had no knowledge that said petition had not been filed until advised of the fact by said attorney on June 15, 1926.”

On February 21, 1927, the judge set aside the order granting the prayer of the first petition, but granted the extension prayed for in the amended petition. This was the order appealed from.

Thomas G. Prioleau, of New York City, for appellant.

Omar W. Platt, of Milford, Conn. (Sidney R. Lash, of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge (after stating the facts as above). For the first time, so far as we can find, the bare negligence of the bankrupt's attorney is put forward as "unavoidably preventing" him from filing hist petition. In re Churchill (D. C.) 197 F. 111, was not such a case, for the attorneys had misunderstood the bankrupt's directions. We do not mean to say that this in our judgment was excuse enough, but it distinguishes the case from that at bar. In Re Waller, 249 F. 187 (C. C. A. 7), the attorney had been sick for the last three months of the year,

an

excuse which we held sufficient in the bankrupt's mouth, though the sickness was only for the last three weeks. In re La Rosa (C. C. A.) 15 F. (2d) 373. These are the nearest decisions, and neither will serve this bankrupt. Our own decisions in In re MacLauchlan, 9 F.(2d) 534, and In re Lansley, 15 F. (2d) 471, while they rested upon different facts, declared our purpose to apply the section as it was written, and not to allow it to be worn away by trivial excuses.

Congress might, of course, have taken as a test in such cases the prejudice to creditors arising from the delay. It did not, but made the extension depend upon the bankrupt's

excuse for his neglect, and while the measure of that excuse may be severe, we have no right to abate its severity. Taking, therefore, the words as they read, we cannot see how a client may say that his attorney's misprision prevents his performance, to say nothing of unavoidably preventing it. His reliance upon the attorney's diligence may indeed be the cause of his failure himself to perform, but that reliance is his own act; there is nothing to prevent his choosing a diligent attorney, or following up a dilatory one, if he happen to choose such. So to extend the section seems to us a perversion of its words.

Moreover, if we were to accept the excuse, few instances would be left which it did not cover. It is true that some bankrupts will fail without excuse to direct their attorneys to apply for a discharge and these would still lose their right. But in most cases a bankrupt leaves the whole proceedings to his attorney at once, and the time slips by because the attorney is slack. No one acquainted with the actual administration of the act can for a moment doubt that the excuse here proffered would in substance repeal the provision.

Order reversed; petition for extension denied.

KNICKERBOCKER FUEL CO. v. MELLON, Director General of Railroads, etc. Circuit Court of Appeals, Second Circuit. November 14, 1927.

No. 54.

1. Railroads 512 (40)-Claim for demurrage paid Director General is one against United States.

Claim for demurrage, collected by the Director General of Railroads and paid to him by claimant, is one against the United States. 2. Railroads 51⁄2 (44)—Limitation of action against agent of President held not "statute of limitations," and is not tolled by mistake (Transportation Act 1920, § 206 [a], being 49 USCA § 74 [a]).

Transportation Act 1920, § 206(a), being 49 USCA § 74(a), Comp. St. & 100711⁄4ce(a), authorizing an action against Agent of the President within a certain time, constituting suits against itself arising from federal control the only consent given by the United States to after passage of the act, is strictly confined to its language, and does not, properly speaking, constitute a "statute of limitations," so that mutual mistake does not toll its operation.

[Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Limitation of Actions.]