Schlafly v. United States

• Decision Date: 28 March 1925
• Docket Number: No. 6661.,6661.
• Citation: 4 F.2d 195
• Parties: SCHLAFLY v. UNITED STATES.
• Court: U.S. Court of Appeals — Eighth Circuit

4 F.2d 195 (1925)

SCHLAFLY v. UNITED STATES.

No. 6661.

Circuit Court of Appeals, Eighth Circuit.

February 17, 1925.

Rehearing Denied March 28, 1925.

COPYRIGHT MATERIAL OMITTED

Frank H. Sullivan, of St. Louis, Mo. (James C. Jones, Lon O. Hocker, and Eugene H. Angert, all of St. Louis, Mo., on the brief, and Julius M. Mayer, of New York City, amicus curiæ), for appellant.

Allen Curry, U. S. Atty., of St. Louis, Mo. (Theodore Rassieur, of St. Louis, Mo., amicus curiæ), for the United States.

Before KENYON, Circuit Judge, and TRIEBER and PHILLIPS, District Judges.

TRIEBER, District Judge (after stating the facts as above).

In the argument of counsel for the appellant, the principal ground relied on for a reversal is that the finding by the referee, approved by the learned District Judge, is not warranted by the evidence; that the evidence requires a finding that the lease of the Granite City plant was simulated and the rental paid thereunder a return of the purchase price.

At the outset we are confronted with the well-settled rule that, in a proceeding in equity — and this must be treated as such — the findings of the chancellor on disputed evidence have not the conclusive effect as the findings of a jury, or of the trial judge when a jury has been waived, in an action at law; but, unless it is clearly against the weight of the evidence or based on a mistaken view of the law, it will not be disturbed by an appellate court, especially if the finding has been made by a master, or in a bankruptcy proceeding by the referee, and approved by the court on a petition for review. Ohio Valley Bank Co. v. Mack, 163 F. 155, 158, 89 C. C. A. 605, 24 L. R. A. (N. S.) 184; Baker v. Bishop-Babcock-Becker Co., 220 F. 657, 136 C. C. A. 265.

In Ohio Valley Bank Co. v. Mack, Circuit Judge Lurton, later a Justice of the Supreme Court, speaking for the court, said: "If the finding is based upon conflicting evidence involving questions of credibility and the referee has heard the witnesses, much greater weight naturally attaches to his conclusion, and the weight of authority is that the District Judge, while scrutinizing with care his conclusions upon a review, should not disturb his finding unless there is most cogent evidence of a mistake and miscarriage of justice. * * * The conclusion he reached in favor of the validity of his debt has also passed the scrutiny of the District Judge. Under such circumstances this court is not warranted in overturning the conclusions of two courts upon anything less than a demonstration of plain mistake."

But it is claimed that this rule does not apply to the instant case, as the hearing before the referee was on depositions entirely, and he had no better opportunity to determine the credibility of the witnesses than this court has.

Prior to the promulgation of the present equity rules, the evidence in equity cases was entirely on depositions, yet the same rule of law was followed by the Supreme Court and all other national appellate courts.

In Newell v. Norton, 70 U. S. (3 Wall.) 257, 267 (18 L. Ed. 271), which was an admiralty case, in which the entire evidence was on depositions, it was held: "It is enough to say that we find ample testimony to support the decision, if believed; and that we again repeat, what we have often before decided, that in such cases parties should not appeal to this court with any expectation that we will reverse the decision of the courts below, because counsel can find in the mass of conflicting testimony enough to support the allegations of the appellant. * * * Parties ought not to expect this court to revise their decrees merely on a doubt raised in our minds as to the correctness of their judgment, on the credibility of witnesses, or the weight of conflicting testimony." And this court has uniformly so held. Dickey v. Dickey, 94 F. 231, 36 C. C. A. 211; Harrison v. Fite, 148 F. 781, 78 C. C. A. 447; Mastin v. Noble, 157 F. 506, 85 C. C. A. 98; United States v. Marshall, 210 F. 595, 127 C. C. A. 231; United States v. Grass Creek Oil & Gas Co., 236 F. 481, 149 C. C. A. 533; De Laval Separator Co. v. Iowa Dairy Separator Co., 194 F. 423, 114 C. C. A. 385, and authorities there cited. The error must be palpable to justify it. Babcock v. De Mott, 160 F. 882, 88 C. C. A. 64.

This applies with greater force, if two courts have reached the same conclusion. The Carib Prince, 170 U. S. 655, 18 S. Ct. 753, 42 L. Ed. 1181; Page v. Rogers, 211 U. S. 575, 29 S. Ct. 159, 53 L. Ed. 332; Princeton First National Bank v. Littlefield, 226 U. S. 110, 33 S. Ct. 78, 57 L. Ed. 145; United States v. State Inv. Co., 264 U. S. 206, 211, 44 S. Ct. 289, 68 L. Ed. 639. A careful review of the evidence fails to show that the transaction between the Products and the Clymer and Temtor Companies was not what it purports to be, a sale of the Granite City plant for $4,500,000, and the lease of the plant to the Products Company until October 1, 1920, at an aggregate rental of $1,245,000, payable in monthly installments.

The undisputed testimony establishes that under the decree of the District Court for the Southern District of New York in an anti-trust suit instituted by the United States against the Products Company, it was required to sell this plant. In all the negotiations between the parties the Products Company refused to take less than $4,500,000 for the plant, and a lease of the plant to the Products Company until October 1st of the succeeding year, or for one year. All offers of a less sum were refused by it, and several were made. It insisted on the lease in order to enable it to manufacture the products made in that plant, to fill contracts of sale for the product, then in force, and made that a condition of the sale. Before the sale could be completed, it was necessary to obtain the approval thereof by the District Court for the Southern District of New York, as was provided in the decree of that court in the anti-trust suit. The petition to that court, presented for its approval, stated the provisions of the agreement for the sale, and that the purchaser would continue the business, and was accompanied by an affidavit of Mr. Bedford, its president, that the price to be received for the plant was a fair one, taking into consideration the lease of the plant, although to reproduce it at that time it would cost more; that neither the Clymer, nor the new corporation to be formed, was in any way controlled by or affiliated with the Products Company or any of its affiliated corporations; that no stockholder of the Products Company has any substantial interest in the stock or securities of either of said corporations, nor any of its officers or directors any interest in common with them. The petition was by the court approved, and on January 2, 1920, the deed and lease for the plant were executed and delivered, reciting the consideration to be $4,500,000, and revenue stamps required for that sum affixed thereto.

Mr. Bedford testified that he considered that the plant should earn $2,500,000 annually, and therefore refused the offer of the purchasers to divide the profits of the plant with them. He considered the annual rental of $1,240,000 to be reasonable, including the other terms of the lease, namely, that the Products Company was to pay as additional rent all taxes and water rents, to keep the property insured in an amount not less than $2,750,000 for the benefit of the lessors, and that there should be no abatement of rent in case of fire or accidental destruction of the plant.

He further testified that, shortly before the...