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ROTHENSIES EX REL. UNITED STATES v. EDWIN J. SCHOE

DISTRICT COURT, E.D. PENNSYLVANIA


April 5, 1940

ROTHENSIES, Collector of Internal Revenue, to Use of UNITED STATES,
v.
EDWIN J. SCHOETTLE CO. et al.

The opinion of the court was delivered by: KALODNER

KALODNER, District Judge.

Sur Motions for New Trial

The two defendants above named filed separate motions for a new trial.

 The principal defendant, Edwin J. Schoettle Company, urges that the Court erred in its ruling that the action was properly brought in the name of the incumbent Collector of Internal Revenue, although the bond upon which the suit was founded was in favor of a predecessor Collector.

 The pertinent authorities were exhaustively discussed in the brief and argument of counsel for the principal defendant. His principal contention is that the case of Greene County, for use of, v. Southern Surety Co., 1927, 292 Pa. 304, 141 A. 27, is dispositive of the issue in the instant proceeding, and that since the issue is one of substantive law, that under Erie R.R. Co. v. Tompkins, 1938, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487, that this Court is bound by that decision.

  As to the latter contention there can be no disagreement.

 I cannot, however, subscribe to the contention that the case of Greene County, for use of, v. Southern Surety Co., supra, is decisive of the present Pennsylvania rule. The Pennsylvania rule, as applicable to the instant proceeding, is stated in decisions of the Pennsylvania Supreme and Superior Courts subsequent to the Greene County case. These later cases include Concrete Products Company v. United States Fidelity and Guaranty Company, 1933, 310 Pa. 158, 165 A. 492; Commonwealth v. Great American Indemnity Company, 1933, 312 Pa. 183, 192, 167 A. 793, and Philipsborn v. 17th and Chestnut Holding Corporation, 1933, 111 Pa.Super. 9, 169 A. 473.

 Commonwealth v. Great American Indemnity Company clearly overruled the decision in the Greene County case. Mr. Justice Kephart, who wrote the opinion in the Greene County case, pointedly stressed that fact in his concurring opinion in the Great American Indemnity Company case. He said at page 201 of 312 Pa., at page 800 of 167 A.:

 "While I concur in the opinion of the court, it should be pointed out that the decision in this case overrules Greene County v. Southern Surety Co., 292 Pa. 304, 141 A. 27."

 The Greene County case was also discussed in considerable detail in Philipsborn v. 17th and Chestnut Holding Corporation, supra, which was decided some six months subsequent to Commonwealth v. Great American Indemnity Co., supra, and it was again pointed out that the Greene County case was no longer the Pennsylvania rule. Said the court in the Philipsborn case at page 11 of 111 Pa.Super., at page 474 of 169 A.:

 "The appellant relies upon the general rule of the common law which it claims prevails in this state, that no one not a party to the obligation may sue thereon in an action in his own name. Greene County v. Southern Surety Co., 292 Pa. 304, 141 A. 27.

 "* * * we believe that the Supreme Court has definitely changed the rule relied upon by the defendant, and has, by adopting the statement contained in the Restatement of the Law of Contracts by the American Institute, changed the law in Pennsylvania so as to conform with that of nearly all of our sister states. It will serve no useful purpose to repeat what Justice Simpson has said in Com. v. Great American Indemnity Co., 312 Pa. 183, 192, 167 A. 793, 797. Under the rule as set out in the Restatement, a beneficiary can assert his rights against the party who has made a promise for his benefit, even if he is not a party to the contract.

 "The appellant claims that the above case does not rule the present, for the reason that Justice Simpson, in adopting the Restatement of the Instituted in the words following, qualified it by the reference to the act of Assembly: 'We willingly join with our sister states in their conclusion on this subject, especially as the Legislature by the Act of June 23, 1931, P.S. 1181 (8 P.S. §§ 146 and note, 147, 148), has now established our public policy in regard to the matter, by expressly providing for such a provision is all future bonds,' and argues that the adoption of what may be called the 'new' rule for this state applies only to the subject-matter involved in the above case, that is, to contractor's bonds given in the making of public improvements. We do not so understand the language employed. The passage of the act of Assembly * * * was an additional inducement for the change of the attitude of the Supreme Court in this matter, but did not, if we take the definite language employed, limit its application to any particular class of contracts." (Italics supplied).

 The other points advanced by counsel for the principal defendant have already been exhaustively discussed in my first opinion.

 Counsel for the defendant surety, in support of his motion for a new trial, urges that this Court does not have jurisdiction over the subject matter of the litigation as far as the Secretary of Banking, now in possession of the surety defendant, is concerned. He contends that the plaintiff is limited to the filing of the claim at the time a receiver's account is filed in the State courts. See Act of May 15, 1933, P.L. 565, Art. VII, § 713, 71 P.S. § 733 -- 713.

 This defense was not raised prior to the judgment of the Court. An appearance was voluntarily entered on behalf of this defendant and an affidavit of defense filed on the merits.

 This Court clearly has jurisdiction over the subject matter of the litigation, which in substance is a suit by the United States on a bond given pursuant to the laws of the United States.

 If any valid objection existed with respect to the procedure in seeking to enforce the liability of the Secretary of Banking, as Receiver, such objection has been waived in this case by the entry of a general appearance and the filing of an affidavit of defense on the merits. Susquenanna County Auditors' Report, 123 Pa.Super. 195, 187 A. 78. In that case, Keller, J. stated at page 207 of 123 Pa.Super., at page 83 of 187 A.:

 "'An absolute want of jurisdiction over the subject matter may be taken advantage of at any stage of the proceedings; but where the court has jurisdiction of the subject matter, an objection based on lack of jurisdiction of the person or irregularity in commencement of the proceeding, or some other exceptional matter, must be raised in limine or it will be waived.' 15 C.J. 847, § 166."

 In accord: St. Louis, etc., Ry. Co. v. McBride, 141 U.S. 127, 11 S. Ct. 982, 35 L. Ed. 659. See, also, Rule 12(h) Federal Rules of Civil Procedure.

 Other reasons in support of the bank's motion for a new trial have been discussed in my former opinion.

 Accordingly, for the reasons stated, the motions for a new trial are denied.

19400405

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