3 F.(2d) 938 selves that the National Company is not charging its local subsidiaries more than the service rendered by it to them is worth. They may not, so the Supreme Court has said, go into an inquiry as to how profitable the business may be to the National Company, or as to what percentage that Company earns upon its property used in the public service. In this case the National Company did, at our request, go to some extent into both questions, and produced witnesses who were apparently informed upon the subject. They gave direct testimony and were open to cross-examination. The Commission, in its opinion, had commented severely upon the refusal of both the companies to furnish it with information on these matters. In no small part, it based its conclusions upon the presumption it thought it was justified in drawing from such refusal. A large part of the public doubtless adopted this point of view, and have not unlikely gone much farther in the inferences they have drawn from it. Under the circumstances, it seemed to us inexpedient for the National Company to stand on its legal right to refuse the information so much sought after. In compliance with our emphatically worded suggestion, it gave what was asked for while expressly reserving its legal objection to the materiality of this testimony. [14] The law wisely makes the findings of the Commission presumptively correct. We have differed with them, in so far as we have, with regret, and only because we are compelled to do so by our understand ing of the facts and the law. We are fully in accord with its view that the telephone rates should not be raised, unless and until the necessity for so doing is clearly demonstrated. It is the great glory of the privately owned telephone system of this country that the charges at which its facilities have been furnished have, in the past, been such that so large a proportion of our people have been able to make generous use of them. The maintenance of such conditions is of moment to all of us, and not the least to the telephone companies themselves. It follows, from this too lengthy opinion, that: First, that $36,122,912 was the value new of the Company's property on December 31, 1923; second, that there was in the depreciation reserve on that date the sum expressed in dollars of 1923 of $6,614,963; third, that the difference between these two sums, $29,507,949, is the amount upon which the Company was as of December 31, 1923, entitled to earn a fair return; fourth, that, in view of the relations between the Maryland and the National Companies, the court cannot hold that 6 per cent. was not a fair return; fifth, that anything under 6 per cent. would not be a fair return; sixth, that the Commission was not justified in forcing upon the Company rates which would yield as of December 31, 1923, less than $1,770,477 per annum; seventh, that the Commission, for the purposes of ascertaining the net return to the Company, was not entitled to deduct from the Company's expenditures any part of the sums paid by it to the National Company under the 42 per cent. license contract or under the agreement for the division of tolls on interstate messages or otherwise; eighth, that the net annual revenue of the Maryland Company was less than $1,400,000 at the time when its property had, as before stated, a fair value for rate-making purposes of $29,507,949; ninth, that the order of the Commission continuing such rates for two years longer was and is confiscatory, within the established legal meaning of that term; tenth, that the Company is entitled to the interlocutory injunction asked for by the second and third prayers of its bill. We are not a rate-making body. All that we decide is that the Commission may not rates which will produce at the minimum 6 deny the Company permission to charge per cent. on the fair value of its property at the time used, or useful, in telephone service, and that on December 31, 1923, that property was of a value of $29,507,949. To-day it is, of course, that value plus whatever net additions to it have since been made, diminished, however, by whatever net increase, if any, there has been in the unexpended balance standing to the credit of depreciation reserve. A decree in accordance with this opinion may be submitted for signature. NOTE: Upon the handing down of the above opinion, the Commission held a new hearing and raised the rates fixed by its previous order in such manner as to allow the Company to earn a very slight shade over 6 per cent. upon the value of its property as determined by the court. The Commission consented to the preliminary injunction being made permanent, which was done by a decree of the court entered on March 20, 1925, and the case was thereby finally closed. There was nothing left open from which either side could appeal. WOLKIN v. GIBNEY. (District Court, S. D. New York. January 19, 1925.) Removal of causes 21-Prohibition officers and agents not "revenue officers," within Judicial Code; "revenue act.” The National Prohibition Act (Comp. St. Ann. Supp. 1923, § 10384a et seq.) is not a "revenue act," and prohibition officers and agents are not "revenue officers," within Judicial Code, § 33 (Comp. St. § 1015), providing for removal to federal courts of actions brought in state court against revenue officers, notwithstanding National Prohibition Act, § 28. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Revenue Officer.] At Law. Action by Isidor Wolkin against James J. Gibney. On defendant's motion to remand to state court. Granted. This action was brought in the state court against a federal prohibition agent to recover damages for false arrest and malicious prosecution. The action was removed to this court on the ground that, in making the arrest, the defendant was acting in his capacity as a federal prohibition agent and under the authority of the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 101384 et seq.), and the internal revenue laws of the United States, and while working under the direction of the division chief of the general prohibition agents appointed under the National Prohibition Act. The plaintiff now moves for an order remand ing the action to the state court, because defendant is not a revenue officer, within the meaning of section 33 of the Judicial Code (Comp. St. § 1015). Neil P. Cullom, of New York City, for plaintiff. William Hayward, of New York City (John M. Ryan, of New York City, of counsel), for defendant. BONDY, District Judge (after stating the facts as above). Notwithstanding Oregon v. Wood (D. C.) 268 F. 975, Morse v. Higgins (D. C.) 273 F. 832, Commonwealth of Massachusetts v. Bogan (D. C.) 285 F. 668, United States v. Commonwealth of Pennsylvania (D. C.) 293 F. 931, to the contrary, the motion is granted. The federal Prohibition Act is not a Revenue Act. See Lipke v. Lederer, 259 U. S. 557, 42 S. Ct. 549, 66 L. Ed. 1061. Prohibition officers and agents are not within the provisions of section 33 of the Judicial Code. In the court's opinion the provision of section 28 of the National Prohibition Act that all officers whose duty it is to enforce criminal laws shall have the protection in the enforcement of the act, which is conferred by law for the enforcement of existing laws relating to the sale or manufacture of intoxicating liquor under the laws does not give to such officers or agents the right to removal. See Smith v. Gillian (D. C.) 282 F. 628. 8 F.(2d) 961 JOHN C. WINSTON CO. v. FEDERAL TRADE COMMISSION. entered into by the parties. As the facte are not in dispute we are concerned only (Circuit Court of Appeals, Third Circuit. Feb- with their inferences. ruary, 27, 1925.) No. 3223. 1. Trade-marks and trade-names and unfair competition 802, New, vol. 8A Key-No. Series-Order of Trade Commission to cease practice which had been abandoned before complaint unauthorized. Complaint by Federal Trade Commission to compel a respondent to cease a practice which respondent had on advice of counsel abandoned, and offered to stipulate it would never do again, cannot be sustained. 2. Trade-marks and trade-names and unfair competition 68-Method of selling encyclopedia, together with encyclopedic and research services, held not unfair competition. In proceedings before Federal Trade Commission, under Act Sept. 26, 1914 (Comp. St. §§ 8836a-8836k), sale of set of encyclopedias, together with an encyclopedic cumulative loose-leaf service and research service, by subscription blank, on which price was written in red ink, rather than printed, held insufficient to constitute unfair competition, as a representation that price to be paid was for the two services, and that purchaser was to receive volumes of encyclopdia free. Before the Commission filed the complaint, the Winston Company, a publishing concern, was putting on the market a work entitled "Winston's Cumulative Loose-Leaf Encyclopedia in Ten Volumes." The looseleaf arrangement was adopted so that the books could be supplemented from time to time by additional leaves supplied by looseleaf services going with the sale of the books. One service was called "Winston's Cumulative Loose-Leaf Annual Service," intended to supply encyclopedic information' for a period of ten years; and the other was known as "International Bureau of Research Service," intended to supply for the same period information in response to questions propounded by subscribers. There was nothing unfair about these trade offerings. The trouble arose in the method of their sale. This, briefly, was as follows: The company furnished its salesmen with printed subscription blanks which described the loose leaf encyclopedia and the two loose leaf services and stated by printed figures the price of the first to be $55 and the price Petition for Review of an Order of the of the two services, together, to be $49, and Federal Trade Commission. The Federal Trade Commission filed complaint, charging the John C. Winston Company with unfair practices in respect to methods of sale. On petition of respondent to review order of the Trade Commission requiring it to cease and desist from the practices complained of, it appeals. Order vacated. Joseph J. Brown and Henry P. Brown, both of Philadelphia, Pa., for appellant. Edwin H. Cassels, of Chicago, Ill., ami cus curiæ. . the price of all $104. At the top of the subscription blank the words "Special Contract" were written in red ink, and in red ink the supposed regular prices of $55 and $49 and the total of $104 were stricken out and the figures $49 written in at the bottom, thus indicating to one who contemplated subscribing that he would get the three things for the price of two; or, in other words, he would get the two services at the regular price and the ten volumes of the encyclopedia free. Contemporaneously with the furnishing of these blanks to its salesmen, the company Edward E. Reardon, of Washington, D. C., and W. H. Fuller, of McAlester, Okl., caused to be inserted in the Review of Refor appellee. views an advertisement purporting to show that the price of the encyclopedia with the Before BUFFINGTON, WOOLLEY, and ten year revision service was $104 when, DAVIS, Circuit Judges. WOOLLEY, Circuit Judge. The John C. Winston Company, respondent in proceedings instituted by the Federal Trade Commission, brings here for review an order of the Commission commanding it to cease and desist from trade practices which it found to be unfair and therefore unlawful methods of competition. Act of September 26, 1914, 38 Stat. 717, 719, 720 (Comp. St. § 8836a-8836k). All findings by the Commission are based on a stipulation of facts 3 F. (2d)-61 as a matter of admitted fact, the price of the books with the two services was never higher than $49. (There is another subscription blank in question, but as it differs in no material respect from the one we have described it will not be necessary to refer to it.) When the Federal Trade Commission inquired into its practices the company consulted counsel who gave it the sound advice to stop this method of sale. This it did at once; and it did it in evident good faith. Later, however, the company adopt ed another method which consisted of furnishing its salesmen with subscription blanks containing substantially the same wording as the former but omitting the printed prices. The price of $49 for all three things-books and services-was written in red ink, indicating, perhaps, a special price, but the Commission thought it indicated more, namely, that $49 was the price of the two services and that a person subscribing for them would get the ten volumes of the encyclopedia free. On this belief the Commission filed a complaint against the company charging it with unfair practices in respect to both methods of sale, the one abandoned and the one substituted, and, after hearing, entered the order now on review, commanding the company to cease and desist from both practices. [1] Whether the method of sale first pursued by the company and then abandoned on the suggestion of the Commission was an unfair method of competition is a question which, in the circumstances, is more academic than real and therefore is one on which we do not feel called upon to express an opinion. It will be enough to say that the evidence shows that the company itself had ceased and desisted from the practice before the Commission filed the complaint, and on this evidence the order of the Commission to cease and desist from doing what the company had already ceased and desisted from doing-and what it offered to stipulate never to do again—cannot be sustained. [2] The second method of sale the one pursued at the time of the hearing before ing for certainly the buyer knows he is getting three things for one price-$49. Moreover, that is the only price named in the blank, and it is named immediately after a descriptive statement of the encyclopedia and the services. He also knows that each costs money to supply and that in each, or in the three taken together, there is a profit to the vendor; and, similarly, he thinks that the three have a value to him, otherwise he would not buy them. Whether in a transaction of this kind the profit of the vendor is large or the value to the vendee is small are matters with which, in the absence of fraud, the Commission, we surmise, would not concern itself. The sole question is whether hidden in the transaction there is an inducement, based on an untruth, that the purchaser is getting ten volumes of the encyclopedia for nothing. This is difficult to believe when, obviously, he knows that the encyclopedia is the principal thing to which, of necessity, the services are merely incidental. It is conceivable that a very stupid person might be misled by this method of selling books, yet measured by ordinary standards of trade and by ordinary standards of the intelligence of traders, we cannot discover that it amounts to an unfair method of competition within the sense of the law. The order of the Commission is vacated. the Commission-is very different from the. W. T. WAGGONER ESTATE et al. v. WICHI first, both in character and in its probable effect upon the purchasing public. In this one there is no deception in respect to an offer at a price below the figures of an advertised price. True, the price was written in the blank and so might make an unthinking subscriber believe that he was being favored. Yet it would be going rather far to require vendors of wares, in order to avoid the appearance, or to avoid the fact, of unfair competition in commerce, to conduct their dealing with vendees in printed fig TA COUNTY et al. (Circuit Court of Appeals, Fifth Circuit. January 28, 1925.) No. 4379. 1. Mines and minerals 79(1)—Lessor held owner of that part of oil reserved as royalty, both before and after production. Under an oil lease requiring the lessee to deliver one-eighth of all oil produced and saved to the lessor in the pipe line as royalty, the lessor remains the owner of that part of the oil, both before and after it is brought to the surface. 2. Taxation 63-Oil in place is taxable as "real property." The property right of a lessor in mineral oil in or under the land owned by him is tarable as "real property," under Vernon's Sayles' Ann. Civ. St. Tex. 1914, art. 7504. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Real Property.] 3 F.(2d) 962 3. Taxation 438-Transfer of property from personal to real property tax roll held not prejudicial to owner. Under Vernon's Sayles' Civ. St. Tex. 1914, art. 7702, authorizing correction of tax rolls of real property, transfer of an item by the commissioners' court from the personal property roll to the real property roll is not prejudicial to the owner, especially where he was heard on the question of valuation. Appeal from the District Court of the United States for the Northern District of Texas; William H. Atwell, Judge. Suit in equity by the W. T. Waggoner Estate and another against Wichita County and others. Decree for defendants, and complainants appeal. Affirmed. For opinion below, see 298 F. 818. Geo. Thompson, J. H. Barwise, Jr., and G. W. Wharton, all of Fort Worth, Tex. (Thompson, Barwise & Wharton and F. B. Walker, all of Fort Worth, Tex., and Joe B. Carrigan, of Wichita Falls, Tex., on the brief), for appellants. T. R. Boone and E. W. Napier, both of Wichita Falls, Tex. (E. L. Fulton, E. T. Duff, and John B. King, all of Wichita Falls, Tex., on the brief), for appellees. Before WALKER and BRYAN, Circuit Judges, and DAWKINS, District Judge. WALKER, Circuit Judge. This is an appeal from a decree dismissing a bill in equity filed by the appellants, W. T. Waggoner, a citizen and resident of Tarrant county, Tex. (herein referred to as the lessor), and the W. T. Waggoner Estate, a trust or voluntary association created by written articles of agreement, to enjoin the enforcement or collection of a tax levied by the taxing authorities of Wichita county, Tex., for the year 1923, on so-called royalties under oil and gas leases, made by the lessor, of sundry tracts of land in that county, which lands were owned by the lessor on January 1, 1923, the date for the fixing of the 1923 taxes, and were, in March, 1923, conveyed, together with the lessor's interest in oil produced therefrom, to the other appellant. Within the time prescribed by statute the lessor, for taxation purposes for the year 1923, rendered or returned to the tax assessor of Wichita county, on a form furnished by that official, an inventory of property. Following a descriptive list of parcels of land, a value of each parcel being stated, that instrument contained the following: "Total number of producing wells, 143; royalty, 723.... .$325,350." In making up the rolls in the assessor's office, the just-mentioned item was put on the roll under the heading "Personal Property." After the lessor was given notice to appear before the equalization board to show cause why his valuation of that item should not be raised to $1,000 per barrel, and after he had by his agent appeared before the board and contested the valuation, the board raised the valuation of that item to $723,000. After this suit was brought, the tax assessor, in compliance with an order of the commissioners' court, prepared a supplemental or amended roll, putting that item on the real estate roll. By the terms of one of the oil and gas leases which are in question the lessor, for the recited consideration of a stated sum of money, "to be paid in oil produced from" a described tract of land, "granted, demised, leased, and let❞ to a named corporation that tract of land "for the sole and only purpose of drilling and mining for gas and oil." That instrument contained the following: "Lessee agrees and binds himself to pay an annual rental of one dollar and fifty cents per acre until actual drilling is begun hereon, and failure to pay said rental when due, at the option of the lessor, shall void this lease. "Subject to the terms and condition herein, this lease shall remain in full force and effect for a term of three years from date hereof, and as much longer as gas and oil are found and produced in paying quantities: Provided, however, no one well shall hold more than ten acres, in a square form, said well being the center thereof. "In consideration of the premises, the lessee covenants and agrees: "To deliver to the lessor, free of charge, in the pipe line to which said lease may be connected, the equal one-eighth part of all the oil and gas produced and (saved from) said premises, settlement to be made not later than the 10th day of each month for the preceding month. "That the lessee will pay seven-eighths of all increase in taxes, by virtue of gas and oil, or either, that may be assessed against said premises. "That the lessor shall have the refusal from time to time of all oil and gas, or either, produced hereon, at the posted price." |