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The following diagrammatic drawings in evidence of models in evidence show the grooves and the cutting tool in the three instances and will save much verbal description:

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NANSWERS UCTIONEL
nor-WITIM PONT
W LONER MAST RAUTION

Fig.5

ATTWS VORM
ULEIUTED OUT

DINGRAMATIC VIEW OF LATERAL CUT GROOVE

lig.1

PLAN VIEW

Fig.2.

VATICAL LAN SUTUOINIL SACTION

BOTTOM

LINE

ZIG ZAG

TRANSVERSE STOW. STYLES CUTTING POINT SWUNS TO THE LETTNano SIL OF GROOVE

fig. .

MANSVERSE SC Taw.
SMUS UUTTINS ONT
SONG TO THE RANT
MUND VEL Ormand

The Jones undulations are lateral-i. e., confined structurally and operably to the side walls-and do not extend to the bottom of the groove, and are necessarily of uniform depth, because, as plaintiff's expert stated, "what we mean ordinarily by a laterally vibrating tool is one which cuts a groove of substantially uniform depth; the two thoughts go together.' Such is not the case with the Emerson groove.

The Jones lateral undulations are in both sides of the groove alike and undulate in absolute parallelism. In the Emerson groove, according to the testimony of Prof. Morris, a highly skilled microscopist, on behalf of plaintiff, "there is a correspondence” between either side with the other side, or either side with the bottom, but "there is no exact parallelism." It is but fair to add that Prof. Morris characterized the lines as coswerving; "that is to say, all swung toward the inner part of the disc or all toward the outer part of the disc together; they were not parallel but they were according.”

With these important physical differences (1) in position of cutting tool, and (2) in appearance of the grooves under the microscope, came the battle of the experts. It is impracticable to go into the many contentions in detail. Both experts, Mr. Wadsworth and Mr. Dyer, have lived with the art, and are frank as well as able. Their testimony represents their sincere convictions, and I have no doubt that a court of scientists would be quite as much at variance as they are.

I am disposed to conclude, however, that the Emerson groove oscillates vertically to the same extent as it oscillates laterally, and that the Emerson tool vibrates, not in a straight vertical line, nor in a straight horizontal line, but in a single straight oblique line, incidentally lowered and raised while swinging from side to side. When, however, it stops at any point of the oblique line of its travel, it stops completely, and does not swerve to the side.

The vertical, or “hill and dale," undulations of Emerson are therefore real, and do perform an active and useful function. Whether this conclusion is correct or not, it is at least apparent that the burden of proving infringement has not been sustained by plaintiff, and the situation is, as matter of law, very much like that discussed in General Electric v. Sundh, 251 Fed. at page 286, —- C. C. A. —

I have given little consideration to the experiment (the good faith of which is not questioned) of the “buffed” matrix and the comparison with the “unbuffed” matrix. Such experiments occasionally nayı be reliable, but, generally speaking, they are full of uncertainties. The moment there is departure from the precise device, the controversy is diverted. To add to or subtract from a device—especially where we are dealing with infinitesimal variations-leads surely to doubt and confusion.

Finally, it is an important, outstanding, and emphatic fact in this case that, whether well or badly done, the Emerson record may be played on either a hill and dale or zigzag type of phonograph-a result which was never before commercially attempted.

The bill is dismissed, with costs.

SMITH V. POWERS.
In re RUDDY & SAUNDERS CONST. CO.

(District Court, N. D. New York. February 3, 1919.) 1. BANKRUPTCY 166(4)-PREFERENCE~"REASONABLE CAUSE TO BELIEVE."

“Reasonable cause to believe" a debtor insolvent, and that payments received from him will effect a preference, is not a mere suspicion or surmise, but knowledge of facts of a character calculated to induce a belief in the mind of an ordinarily intelligent and prudent business man.

[Ed. Note.-For other definitions, see Words and Phrases, First and

Second Series, Reasonable Cause.] 2. BANKRUPTCY Ow166(4)—PREFERENCE-REASONABLE CAUSE TO BELIEVE.

If a debtor is actually insolvent, and means of knowledge of such in. solvency are at hand, and facts are known to a creditor receiving payment, which clearly ought to put a prudent business man of intelligence

on inquiry, he is charged with reasonable cause to believe. 3. BANKRUPTCY Ow150 FRAUDULENT TRANSFER OF PROPERTY.

Where a corporation, which was hopelessly insolvent, within four months prior to bankruptcy, sold practically all its property and assets, disabling itself from continuing its business, and with the proceeds paid certain creditors in full, knowing such act would make it impossible for the unpaid creditors to ever get anything on their claims, and intending to accomplish that result, such payments constituted transfers with intent to hinder, delay, and defraud creditors, and under Bankruptcy

Act, 8 670 (Comp. St. § 9651), are recoverable by its trustee. 4. BANKRUPTCY O 181(1)→VOIDABLE TRANSFERS OF PROPERTY—PREFERENCE

BY INSOLVENT CORPORATION.

Under Stock Corporation Law N. Y. § 66, providing that no payment made by an insolvent corporation with intent to prefer a creditor shall be valid, and Bankruptcy Act, 8 67e (Comp. St. & 9651), providing that all transfers by an insolvent within four months prior to bankruptcy, which are null and void under the laws of the state, shall be null and void, payments made to certain creditors in full of their claims by an insolvent

corporation are void, and recoverable by its trustee. 5. CORPORATIONS (543—UNLAWFUL TRANSFER BY INSOLVENT CORPORATION

Bona FIDE PURCHASER.

A creditor, receiving payment in full from an insolvent corporation, which effected an unlawful preference, under Stock Corporation Law N. Y. § 66, is not given the status of a purchaser for value without notice, within the exception in the statute, because of the surrender of a guaranty of his debt by a third person, especially where the guarantor was

president of the corporation and made the payment in its behalf. 6. GUARANTY 59 DISCHARGE OF GUARANTOR-PAYMENT BY PRINCIPAL.

To discharge a guarantor, payment by the principal must be a legal and valid one. At Law. This is an action brought by George K. Smith, as trustee in bankruptcy of the Ruddy & Saunders Construction Company, a bankrupt, against Thomas F. Powers, to recover of him the sum of $18,824.15, besides interest, paid by said Construction Company to said Powers, or to his duly authorized agent, in payment of certain notes of said company given to or held by said Powers and amounting to $13,824.15, and in payment for certain legal services rendered by said Powers to said company, amounting to the sum of $5,000, and which payments, it is claimed, were made within four months of the filing of the petition and adjudication in bankruptcy and under circumstances which,

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

and with such knowledge on the part of said Powers, as entitles the plaintiff to recover such sums so paid, with interest. Decree for plaintiff.

Danforth E. Ainsworth, John N. Carlisle, and C. B. Sullivan, all of Albany, N. Y., and D. G. Atkins, of Kingston, N. Y., for plaintiff.

Edward Murphy and John T. Norton, both of Troy, N. Y., for defendant.

RAY, District Judge. This action was tried before this court with a jury, and the jury, in answer to written questions submitted to it, found that at the time the Ruddy & Saunders Construction Company paid by its check to Thomas F. Powers the several sums of money shown by the evidence to have been paid in February and March, 1916, aggregating in amount the sum of $18,824.15, said Ruddy & Saunders Construction Company was insolvent, or that its insolvency was imminent, within the meaning of the state statute. The court had found and held as matter of law under the proof that when such payments were made the said company was insolvent within the meaning of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 544 [Comp. St. $$ 9585–9656]). This court now finds the above-stated facts in accordance with the finding of the jury and its own holding on such trial.

The court submitted the following question to the jury, and it disagreed, so that no answer was obtained, viz.:

"Were the payments made by the Ruddy & Saunders Construction Company to Thomas F. Powers in February and March, 1916, and made by checks of the said company, signed by the De Lees, or by De Lee and Saunders, and which were made on notes aggregating about $13,824.15, made by the otficer of the coinpany making the payment, with the intent on his part of giving a preference to said Thomas F. Powers; that is, with the intent of enabling the said Powers to obtain and retain a greater percentage of his said claim on the notes against the company than other creditors of the said company of the same class would receive?"

The following question was submitted to the jury, and it agreed on and reported an affirmative answer thereto, viz.:

"Were the payments made by the Ruddy & Saunders Construction Company to Thomas F. Powers in February and March, 1916, and which were made by the check or checks of said company, signed by the De Lees, or one of them, and given in payment of the bill of Powers for legal services, amounting to $5,000, made by the officer of the company with the intent on his part of giving a preference to said Thomas F. Powers; that is, with the intent of enabling said Powers to obtain and retain a greater percentage of his said claim of $5,000 for legal services than other creditors of said company of the same class would receive?"

It is seen that the jury drew a distinction between the payments made on notes and those made on account of legal services, and were disagreed as to the first and agreed as to the latter. The notes referred to were given as follows for the following amounts, viz.: June 1, 1915, note....

.$8,610.00 January 5, 1916, note.

2,000.00 January 19, 1916, note..

1,961.00 January 26, 1916, note.

800.00

The payments on said notes were made as follows: February 8, 1916, $1,001.70, and February 29, 1916, $12,822.45.

The legal services were rendered at various times after the organization of the company, but the payments were made as follows, viz.: March 1, 1916, $4,000; and March 2, 1916, $1,000. It is seen there could not, probably, have been much change in actual conditions between February 29, 1916, when the last payment on notes was made, and March 1, 1916, when the large payment on legal services was made; but, of course, much information might have been obtained in one day, or two days, or even in a few hours. In fact, there was no substantial change in conditions between the 29th day of February, 1916, and the 2d day of March, 1916. Powers knew March 1 that he had received from the now bankrupt $12,822.45 on the 29th of February, and knew of the other payments which preceded the final one of March 2, 1916.

The following question was also submitted to the jury for answer, viz. :

"At the time of the several payments of money by the Ruddy & Saunders Construction Company to Thomas F. Powers, the defendant here, in February and March, 1916, amounting to $18,824.15, did said Powers have reasonable cause to believe that such payments (that is, the payment of such sums of money made by check) and the retention of same by Powers would effect a preference; that is, enable said Powers to obtain a greater percentage of his debt than any other of the creditors of said company of the same class, first, when checks were given in payment of notes; and, second, when checks were given in payment for legal services ?”

As to whether or not Powers had such reasonable cause to believe, when checks were given in payment of notes, the jury was unable to agree, but the jury found that he did have such reasonable cause to believe when the checks were given in payment for legal services. Here, again, we have the same distinction drawn by the jury between the payments on the notes and payments for legal services.

Another question was and is involved in the case. It was and is claimed by the defendant, Powers, that when he made the first loan to the company he declined to make it without some sort of security for it and other contemplated loans, and that one Patrick E. De Lee, who was and is financially responsible, and who was interested in the company in a way, agreed to give and did give to him his written personal guaranty of payment of such first loan, and of such loans as he should make the company thereafter, and that, when payment of the notes was made and completed, he, shortly thereafter, surrendered and canceled such guaranty. This was and is denied by the plaintiff, and hence the following question was submitted to the jury, but it was unable to agree thereon, viz.:

“Did Patrick E. De Lee, at the time he borrowed the first money in question here, $4,000, July 31, 1914, execute and deliver to Thomas F. Powers, the defendant, his written guaranty that he would personally pay and be responsible for all sums of money the said Thomas F. Powers then loaned and thereafter might or should loan to the said Ruddy & Saunders Construction Company, now bankrupt, and did said Powers thereafter, and after payment to him of the several notes held by him executed by said company, in consideration and because of such payments, surrender such written guaranty to said Patrick E. De Lee?"

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