enue. However, there have been infractions of the strict letter of the Prohibition Law and an insufficient protection of the liquors or intoxicants, which, in my opinion, justify withdrawal of the permit until the permittee shall have provided itself with proper facilities and safeguards for insuring that the intoxicants will not be unlawfully consumed or disposed of.

Taking up the charges before the director and his findings seriatim, my conclusions are as follows:

1. I agree with the director that the loss of the 17 bottles of wine was due to the permittee's failure to provide a safe and secure locker or container in which said liqnors could be kept without exposure to those who might have access to the prescription room; but I do not believe that this action was in bad faith in the sense of a willful desire to violate the law. A separate room, closet, or locker, with proper lock, to which only the person or persons authorized to dispense the liquor and named in the permit, as required by the statute, would have access, should be provided by the permittee. With such provision, the representative or representatives charged with dispensing the liquors could be held responsible therefor.

2 and 3. Permittee in its answer admits that its president, John P. Scott, took the bottle of wine complained of in this instance from the locker, upon the suggestion of the pharmacist, Reece Epperson, that he would obtain a prescription therefor, but that it was not taken from the drug store until this was done. In explanation of this action, it is proven that the said Scott, because of an affection of the heart, has to have a certain amount of stimulants at times, and that this wine was obtained for that reason. Although the letter of the law may not have been violated, the said Scott should have applied personally for the prescription. It appears very irregular, to say the least, to obtain a prescription in the manner as was done in this instance. Of course, in a case where, under the particular circumstances, an examination were "impracticable," under the language of the statute, a physician would be justified in acting "upon the best information obtainable in good faith," where the physician believed "that the use of such liquor as a medicine, by such person, is (was) necessary and will (would) afford relief to him from some known ailment." Section 7 of title 2 of the Prohibition Act (Comp. St.

Here

Ann. Supp. 1923, § 101382cc). again, however, I do not find that there was an intentional violation of the law.

4. I do not find that this charge is sustained by the evidence. Vivian, who was not a licensed pharmacist or dispenser of medicines, was allowed access to the prescription room where the liquors were kept, but was not authorized to, and according to his own testimony, though an adverse witness to complainant, did not, dispense such intoxicants.

5. The evidence in support of this charge does not satisfy me that Scott, the president and manager of permittee, had knowledge of the disappearance of these two bottles of wine, or that they were covered by obtaining prescriptions in the manner alleged. The evidence is conflicting to some extent, but it is evident that some of that adverse to Scott was given by witnesses smarting under the fact that they had been discharged by him for the reason that they were suspected of getting some of the missing liquors, and others had been rendered hostile by being informed by the prohibition agents that Scott had accused them of being responsible for conditions which existed in the drug store. There is no such preponderance of the evidence as justifies the conclusion that Scott was a party to these acts, if they actually occurred.

6. What has been said with reference to findings Nos. 2 and 3 applies equally to this charge. While Scott may not have been guilty of a technical violation of the statute in obtaining this prescription from one who was not the physician of Mrs. Youree, and without said physician having seen or examined such patient, nevertheless, a habitual pursuit of the practice used in this instance would go far toward nullifying the spirit of the law.

[1] 7. The finding under this specification is erroneous both as a matter of law and fact. In the first place, there is no reason why one person may not own all of the stock of a corporation, and yet that entity be entirely responsible for its affairs as distinguished from the individual. Of course, official corporate action could not be had, such as directors' meetings and the exercise of powers required to be performed in that manner; but the ordinary business of the corporation, if it were originally legally organized in good faith, could be carried on and continued, even though there be but one stockholder. There is no doubt but that the corporation was originally validly

formed, and that one or two shares of stock stand in the name of employees of the concern for purposes of corporate action. This charge and the evidence in support thereof affords no ground for revoking the permit. 8. It is not at all certain that the name of Epperson appeared in the application for permit as secretary when it was originally executed. His name as such officer is filled in in a different kind of type from the rest of the application, which appears to be in the type of a machine used by the bookkeeper of the business, who has been employed for many years, and it is not clear as to how this happened. Here again, however, I think Scott has shown a want of proper diligence, in that he should see and know that a matter of such importance is properly and correctly handled. He is unable to say what the real condition of the application was, stating that he signed it without careful reading, relying upon his confidence in Epperson, the pharmacist, who had been with him for a long time.

9. The evidence on this point is very vague and indefinite; but, if there was any promiscuous drinking of intoxicants in the store, I am convinced that it was without the knowledge or acquiescence of Scott.

[2] 10. Scott, the executive head of the institution, was not connected with or shown to have had a knowledge of this transaction. While I do not believe that the permit of a concern like this should be revoked for isolated infractions of the regulations, by employees or persons without the knowledge or consent of the responsible head, nevertheless it is the duty of the permittee to see that all reasonable provisions and precautions are taken to insure that they shall not occur, and, if they do, that responsibility therefor may be readily established and measures taken to prevent repetition; in other words, the permittee should act diligently and in absolute good faith.

[3] My conclusion on the whole is, therefore, that the ruling of the director should be modified to the extent that, when the complainant shall have provided a safe and separate room, closet, or locker wherein to keep such liquors, with keys for access thereto furnished only to those persons named in the application for permit, or others subsequently employed who meet the requirements of the law as persons eligible to dispense intoxicants, and whose names shall be supplied to the director and filled in the permit, and when the complainant shall have furnished the said director with

all of the information required by the regulations of the Commissioner of Internal Revenue, the permit should be restored, reserving to either side the right to apply to this court again for a determination of whether the terms of this decree have been complied with.

It is therefore ordered and decreed that the ruling of the said director be and the same is hereby set aside, and that the permit to dispense intoxicants be revived and restored to the said complainant upon compliance with the provisions and terms of this judgment.

I'd gf (ad); gb.

THE HURRICANE.

1. Maritime liens 30-Furnishers of repairs and supplies to dredge, without knowledge of unrecorded contract of conditional sale, held entitled to liens.

Where a contract of conditional sale of a

dredge was not recorded as required by the statutes of the state where made, and where the parties resided, and the dredge was in possession of the purchaser in another jurisdiction, claiming to be the owner, and its name was painted in large letters on the side of the order, without knowledge of the sale, held enboat, furnishers of repairs and supplies on its titled to liens, though by the terms of the contract, the purchaser was prohibited from creating liens.

2. Evidence 317 (2)-Statement of stranger to suit held incompetent as hearsay.

Testimony as to a statement made by a stranger to the suit held incompetent as hear

say.

3. Seamen 2-Dredge deepening channels in navigable water is "vessel," and persons employed thereon are "seamen."

A dredge employed in deepening channels in navigable water is a "vessel," and persons employed thereon are "seamen," within the meaning of Comp. St. § 8392, and entitled to liens for their wages.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Seaman; Vessel.]

4. Seamen 2-Foreman in charge of operation of a dredge is a "seaman," and not a "master."

The foreman in charge of the work of a dredge, under direction of a superintendent, is. not a "master," but a "seaman," and entitled to a lien for his wages.

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

In Admiralty. Libels by seamen and others against the dredge Hurricane; the Moore & McCormack Company, Inc., claimant. On final hearing on pleadings and proofs. Decrees for libelants.

THOMPSON,

District Judge. The dredge Hurricane was attached at the instance of employees claiming wages as seamen, and a number of libelants claiming liens for supplies and repairs furnished and made to her and to her machinery in various amounts upon the alleged orders of the Canal Construction Company, a corporation alleged to be the owner. The Moore & McCormack Company, Inc., claiming as owner of the Hurricane, admitted by answer the admiralty jurisdiction of the court over the Hurricane, denied ownership in the Canal Construction Company, denied necessity for the supplies and repairs, and set up the possession of the latter company under an agreement for conditional sale of the Hurricane by the claimant to the Canal Construction Company, dated January 4, 1922, and containing a clause under which the Canal Construction Company agreed not to incur any debts or obligations upon the credit of the dredge, and to hold it free and clear of any lien or claims whatever until all of the purchase price should be paid. By stipulation of the proctors for the respective parties, the cases were consolidated, and the testimony taken by deposition, that taken in any or all of the cases to be used interchangeably in any or all of them, either on behalf of the libelants or of the respondent and claimant.

[1] It was satisfactorily proved that the supplies and repairs for which liens are claimed were furnished and made on the order of George W. Beeman, president of the Canal Construction Company, Inc., while the dredge was lying at the port of Philadelphia, and that the amounts claimed were the amounts agreed upon between Beeman and the various claimants and were just and reasonable charges. The respond ent claims that no maritime lien arose, first, because the several libelants failed to exercise reasonable diligence to ascertain that, because of the terms of the agreement for the sale of the vessel, Beeman, who ordered the supplies and repairs, was without authority to bind the vessel therefor as provided by the Maritime Lien Act of June 23, 1910 (Comp. Stat. §§ 7783, 7784, and 7785), as construed in United States v. Carver (The Clio) 260 U. S. 482, 43 S. Ct.

The sufficiency of the testimony to establish reasonable diligence on the part of the various lien claimants must be determined in accordance with the circumstances in each case. The dredge was in the possession of the Canal Construction Company. Its president, Mr. Beeman, represented it as the person to whom the management of the dredge at the port of supplies was intrusted. From January 4, 1922, the Canal Construction Company was in possession under the conditional sales agreement of that date. Prior to that time, it was in possession under a charter dated March 29, 1921, from Moore & McCormack Company to it, by the terms of which the charterer agreed not to incur any debts or obligations upon the credit of the vessel, nor to create any lien upon the vessel while in possession under the charter.

As to the conditional sales agreement, it is undisputed that both parties thereto are residents of the city of New York and the borough of Manhattan. The agreement recites that both companies were organized under the laws of the state of New York and have their principal offices respectively in the city of New York. This agreement was never filed of record in the office of the clerk of New York county as provided by the New York Conditional Sales Act, No. 138 of the Session of 1915, chapter 14 (Consol. Laws, c. 41, § 60 et seq.). The act provides that conditional sales agreements shall be recorded in the city or town where the vendee resides at the time of the execution of the agreement, and, if the vendee is a nonresident, then in the city or town where the property is located, except that in the city of New York, in the borough of Manhattan, inter alia, it shall be recorded in the office of the clerk of the county of New York. Unless recorded within a reasonable time, the making of such agreement is void as against creditors. It is not necessary in the instant case to decide whether the lien of the seller was void at the time the various liens against the vessel, asserted in these proceedings, are claimed to have accrued.

Assuming that Moore & McCormack Company was the owner, it is quite apparent that it did not itself exercise any reasonable diligence to make known to creditors or any one, including the lien claimants, the

fact of its ownership. Upon the sides of the dredge the name "Canal Construction Company" was painted in large letters, and was allowed to remain there in the public view until after these suits were brought, and bankruptcy proceedings had been instituted, when the Moore & McCormack Company acquired possession.

All of the libelants were informed, upon making inquiry of Beeman, concerning the ownership of the dredge, that he was the owner; he speaking, it is apparent, as president of and on behalf of the Canal Construction Company. The Canal Construction Company's assertion of ownership in response to these inquiries, taken in connection with having its name upon the dredge, is sufficient, in my opinion, to establish reasonable diligence on the part of the several lien claimants in endeavoring to ascertain whether for any reason Beeman, the person in charge having the management of the dredge on behalf of the apparent owner, was without authority to bind the vessel. The existence of the conditional sales agreement was not known to those making the inquiry, and its existence would not have been revealed by a search of the records where it should have been filed in order to protect the alleged owner against creditors asserting a lien.

The facts in this case are distinguishable from Morse Dry Dock & Repair Co. v. United States (D. C.) 298 F. 153, where the result of the inquiry showed that the vessel had been bought from the United States, and that there was a charter sales agreement in effect between the United States and the purchaser, and the purchaser failed to make inquiries of the Shipping Board as to the terms of the contract; the disposition of government vessels through the Shipping Board being a matter of commercial and public interest. The facts there were amply sufficient to put the contractor upon further inquiry. And in the case of Gray's Harbor Stevedore Co. v. United States (D. C.) 298 F. 159, the vessel was under charter from the United States and no investigation as to its ownership was made. There was no evidence here sufficient to show general knowledge of ownership of the dredge, except such knowledge as would come from the name of the Construction Company upon its side.

[2] The respondent attempted to introduce evidence that Beeman had made statements to the effect that he had never informed any of the lien claimants that he

or the Canal Construction Company owned the vessel. Testimony was offered to show that he had appeared upon request of the proctor for the claimant at his office, and had there made some statements which were taken down in narrative form by a stenographer. The stenographer's testimony was corroborated by Mr. Harris, proctor for the claimant, and by Charles L. Walker, who was present at the time when the statement is said to have been made. The statement was unsigned. This testimony, as it was developed, was entirely hearsay. Beeman was not a party to the suits. He was called as a witness on behalf of the libelants, but was not cross-examined for the purpose of contradicting him as to any prior statements he had made. The testimony was clearly incompetent, and the objections to its admissibility are sustained, and the motion to strike out allowed.

It is contended by the respondent that the work undertaken as repairs to the dredge could not properly come under the designation of repairs, but was construction work. This point must be decided against the respondent under the authority of New Bedford Dry Dock Co. v. Purdy, 258 U. S. 96, 42 S. Ct. 243, 66 L. Ed. 482.

It is established by the evidence that the supplies and repairs furnished and made by the several libelants were the subject of a maritime lien for "repairs, supplies, or other necessaries," and that they were furnished upon the credit of the vessel upon the order of the Canal Construction Company by its president, to whom the management of the vessel was intrusted; that the lien claimants in the exercise of reasonable diligence could not have ascertained the terms of the conditional sales contract inhibiting the creation of liens upon the vessel.

[3, 4] In the libel filed on behalf of J. W. Mairs and Edward S. Field, liens for wages are claimed on behalf of Mairs for services as dipper tender on the dredge, and on behalf of Field as chief operator in charge of its operation. I have no doubt that the Hurricane, being engaged in the work of deepening channels in navigable water, an occupation incident to navigation, is a vessel within the meaning of section 8392, Comp. Stat., and that Mairs and Field, being employed in the operation of the dredge, are seamen entitled to liens for their wages. While Field was known as "captain," he was so designated merely because he was the foreman in charge of the

Arthur F. Friedman, of Denver, Colo., for defendant.

It is ordered that decrees be entered in

favor of the several libelants for the amounts claimed in their several libels, and their proctors may prepare and present decrees accordingly.

UNITED STATES v. HURST. (District Court, D. Wyoming. October 29, 1924.)

No. 1363.

1. Internal revenue 22-Decisions of depart

ment not binding on courts.

Decisions of department, while entitled to highest respect and consideration, are not binding on the courts.

2. Internal revenue 7-Mining claim, based solely on discovery and location, "gift," exempt from income tax.

Under Rev. St. §§ 2318-2320, 2324, 2329 (Comp. St. §§ 4613-4615, 4620, 4628), and Act Feb. 11, 1897 (Comp. St. § 4635), transaction by which a mineral claimant acquires a possessory right based on discovery and location, without patent, and without any direct consideration passing to the government, entitling him to removal of the mineral, as petroleum, to exhaustion, partakes more of the nature of a "gift" than of any other method of acquiring title to property, there being neither a sale, nor acquisition of title by occupancy, so that, under Revenue Act Sept. 8, 1916, §§ 2 (a), 4, value of the property is exempt from income tax.

[Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Gift.] 3. Statutes

245- Revenue statutes con

strued against government.

In case of doubt, revenue statutes are con

strued against the government and in favor of

the citizen.

4. Internal revenue 25-United States not

estopped to claim additional income by department's answer to inquiry and delay.

The government is not estopped to claim any income tax to which it is entitled because, while the matter of a tax was in process of adjustment, the department made answer to a supposititious case, on which a later return purports to have been filed, and thereafter there was delay by the department for some time in making any further claim.

At Law. Action by the United States against James T. Hurst. Heard on demur

rers to defenses. Overruled in part, and

sustained in part.

Albert D. Walton, U. S. Dist. Atty., of Cheyenne, Wyo. (Nelson T. Hartson, Sol. of Internal Revenue, and Thomas H. Lewis, Jr., Sp. Atty. Bureau of Internal Revenue,

the

KENNEDY, District Judge. This is a suit in which the United States seeks to recover income tax alleged to have accrued during the year 1917 and which remains unpaid. The petition is met by answer, which presents three separate defenses-the first being substantially a general denial; second, a defense in law to the effect that, because of the undisputed circumstances under which the property which is sought to be taxed was secured, it is not taxable as income; and the third that, on account of the actions of the department in dealing with the taxpayer, no further or other tax than that already paid can be enforced. To each of the two affirmative defenses a demurrer has been interposed by the government, which demurrers have been argued and submitted, and in this situation the cause is now before the court.

The admitted facts, for the purpose of considering the demurrers, are substantially as follows: One Mary E. Hurst, the wife of the defendant, with certain other qualified persons, made mineral locations on government owned lands in what was afterward known as the Elk Basin oil field in this state during the year 1915. Thereafter the locators, without expense to themselves, secured the exploitation of their claims by third parties, reserving to themselves royalty rights. Oil was discovered during the same year in commercial quantities. In 1917 Mrs. Hurst sold and disposed of her interest in said claims for a consideration of $100,000. On August 17th of that year, Mrs. Hurst died, upon which her husband, the defendant here, took possession of all her property; no administration being had of her estate. The defendant filed an income tax return for Mrs. Hurst, covering that portion of the year 1917 before her death, in which apparently no portion of the $100,000 so received for sale of her mineral rights aforesaid was included. There

after, and in the year 1919, in consequence of some correspondence with the department, the defendant filed an amended return, in which he included as income substantially one-third of the amount received from such sale. Nothing further being heard from the department, Hurst proceeded to pay the debts of the deceased and to distribute the property. The department,