The Famous Case of Heiner v. Mellon
Written by K. R. Overholt Critchfield, 6-28-05
~~ Updated 10-16-05 ~~

[Karen’s Note: This edited version contains my use of bold and red fonts, and I increased the number of paragraphs -- all for the sake of clarity (i.e., for those of us who are not lawyers or law students). For your own copy of the source text, the URL for the page at is below.]


U.S. Supreme Court

HEINER v. MELLON, 304 U.S. 271 (1938) ~~ 304 U.S. 271

HEINER v. MELLON et al. (two cases). ~~ Nos. 144, 145

 ~~ Argued March 8, 1938.

~~ Decided May 16, 1938.

Why should the Extended Overholt Family be interested in the details of the famous case of
Heiner v. Mellon?

This case concerns the Overholt distilleries at
West Overton and Broad Ford, herein described as being melded into the business entity of West Overton Distilling Company, and contains legal descriptions of the monetary worth of the liquidated assets of "whiskey certificates," and the "large [Overholt] whiskey inventories in bonded warehouses," which Andrew William Mellon and Richard Beatty Mellon owned and shared profits, during the time third partner Henry Clay Frick was alive, and also after his death in 1919.

[304 U.S. 271, 272]

Messrs. Homer S. Cummings, Atty. Gen., and Golden W. Bell, Asst. Sol. Gen., for petitioner.

Mr. John G. Frazer, of Pittsburgh, Pa., for respondents.

Mr. Justice BRANDEIS delivered the opinion of the Court.

These cases, tried below in the federal court for Western Pennsylvania and argued together here, arise from the same facts and present the same questions of law.

Each action was brought against D. B. Heiner, as former Collector of Internal Revenue and individually, to recover an amount paid under protest by the taxpayer in 1927 upon a deficiency assessment of his 1920 income tax. The amounts taxed as additional income were the distributive shares of certain profits alleged to have been earned by each in 1920 as a partner in two firms. Due demand for a refund was made.

In No. 144 the taxpayer was A. W. Mellon; in No. 145, R. B. Mellon. Both having died, the suits are by their executors.

In No. 144, the District Court entered judgment for $202,502.22 with interest (14 F.Supp. 424); in No. 145 for $187,787.17 with interest.

These judgments were affirmed by the Circuit Court of Appeals, 3 Cir., 89 F.2d 141. Certiorari was granted because [304 U.S. 271, 273] of alleged conflict as to applicable rules of law important in the administration of the revenue laws. 302 U.S. 672, 58 S.Ct. 21, 82 L.Ed. --.

There is no dispute as to the relevant facts. Prior to December 12, 1918, A. W. Mellon, R. B. Mellon, and H. C. Frick each owned one-third of the entire capital stock of two distilling corporations -- A. Overholt & Company and West Overton Distilling Company. On that day those three individuals formed two partnerships in which each partner was to have a one-third interest.

In January, 1919, they caused to be transferred to the partnership called A. Overholt & Company all the assets of the corporation of that name; and to the partnership called West Overton Distilling Company, all the assets of that corporation. These assets included large whisky inventories in bonded warehouses.

Neither corporation had distilled any whisky after 1916. Liquidation of the businesses of each had been started by the two corporations in 1918; and the partnerships had been organized for the purpose of liquidating them. The business of each partnership in 1920, had, like its business in 1919, consisted in the sale of whisky certificates and the storage, bottling, casing, and sale of the stock of whisky.

It was not until 1925 that the assets of the partnerships then remaining were sold in bulk, and the proceeds distributed among those entitled thereto.

Frick died December 2, 1919; but throughout 1920 the businesses of A. Overholt & Company and of West Overton Distilling Company were conducted, and their books were kept, in the same manner as the businesses had been conducted and books had been kept by the partnerships in 1919, and by the corporations in 1918.

For 1920 the partnership returns of the two concerns disclosed facts from which it appeared that substantial gains had been made from the sale of whisky.

But the amounts were not reported as income of the partnerships; and neither A. W. Mellon nor R. B. Mellon included in their income [304 U.S. 271, 274] tax returns for 1920 any amount on account of them.

The Commissioner of Internal Revenue determined that these sums were distributive profits; that the returns of taxable income of A. W. Mellon and of R. B. Mellon for the year 1920 should have included one-third of the profits in that year of each firm from the sale of whisky; and made a deficiency assessment on A. W. Mellon of $190,419.70 and on R. B. Mellon of $175,259.70.

The Revenue Act of 1918 governs taxation of 1920 income. Section 218(a) of the Act provides that individuals carrying on business in partnership shall be liable in their individual capacities for the income tax on profits earned therein, and that in computing the net income of each partner there shall be included his distributive share, whether distributed or not, of the net income of the partnership for the taxable year.

Section 224 provides that the partnership shall file an informational return setting forth the items of its gross income, the deductions allowed and the distributive share of net income to which each partner is entitled.

The two Mellons filed their individual returns for 1920, and also the informational partnership returns for that year. While the Mellons claimed that they were not taxable on their share of the profits from whisky sold in 1920, they recognized that they were taxable for their shares of these other profits of the concerns earned in 1920.

The partnership returns in the case of each concern showed a gain arising from storage, bottling and casing operations, sales of barrels, interest and rentals. One-third of each of these profits was entered by each of the Mellons in his individual return as his distributive share of the profits of the two partnerships.

First. The primary question for decision is whether the net profits made by the two partnerships in 1920 from the [304 U.S. 271, 275] sales of whisky were in their nature taxable income.

Throughout 1920, A. Overholt & Company and the West Overton Distilling Company were engaged in business. The mere fact that the purpose of the partnerships was to liquidate the assets taken over from the corporations is not of legal significance.

Profits made in the business of liquidation are taxable in the same way and to the same extent as if made in an expanding business. Nor is it of legal significance that the liquidation was not completed until 1925 and that until completion of the liquidation it could not be known whether the business venture, taken as a whole, had been profitable. The federal income tax system is based on an annual accounting.

2. Under that law the question whether taxable profits have been made is determined annually by the result of the operations of the year.

Purchasing real estate, subdividing and selling it in parcels is, in essence, a liquidating business. The claim has been repeatedly made that no income was realized until the investment was recouped; but the Board of Tax Appeals has uniformly held in accord with Article 43 of Regulations 45 (and later regulations) that the cost of the real estate must be apportioned among all the lots, and income returned upon the sales in each year, regardless of the number of lots remaining undisposed of at the close of the tax year.

3. A like rule has been applied where the [304 U.S. 271, 276] taxpayer had purchased personal property in a block and was engaged in selling it in parcels.

The claim that there was no taxable income until the capital had been returned was rejected.

4. The fact that it might prove that when the business was fully liquidated the profits of 1920 were offset by heavy loss of later years is immaterial.

Losses suffered by a taxpayer in a later year may be deducted from profits, if any, earned by him in that later year; but the tax on a year's income may not be withheld because losses may thereafter occur.

If A. Overholt & Company and West Overton Distilling Company had remained corporations they would have been obliged to make each year return of the profits made therein and pay taxes annually throughout the period of liquidation although it might ultimately prove that the losses of the later years exceeded the profits of the earlier ones.

5. Likewise, if the concerns had each been owned by a single individual, the fact that his sole business was liquidating the concern would not have relieved him from paying annually taxes on the [304 U.S. 271, 277] net profits

No good reason is suggested why a different rule should apply to partnerships.

We conclude that gains from the sale of whisky in 1920 were income of that year.

The amount of the income was determinable from the partnership books. Section 212(b) of the Revenue Act of 1918 provides that the net income shall be computed 'in accordance with the method of accounting regularly employed in keeping the books of' the taxpayer, and it is not shown that the method employed clearly failed to reflect net income.

Second. The fact that the partnerships had been dissolved by Frick's death before 1920 does not affect the liability of the Mellons as surviving partners for income taxes on their distributive shares of the net profits made in that year.

Compare Rossmoore v. Anderson, D.C.S.D.N.Y., 1 F.Supp. 35, affirmed, 2 Cir., 67 F.2d 1009; Rossmoore v. Commissioner, 2 Cir., 76 F.2d 520. The business of A. Overholt & Company did not terminate on Frick's death. Although dissolved, the partnerships and the business continued, since, as stated in the Pennsylvania Uniform Partnership Act: 'On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.'

6. Throughout the year 1920, the business of selling stock on hand and deriving income therefrom was carried on precisely as it had been theretofore, and for the same purpose.

Article 424 of Regulations 45 recognizes that even in the hands of a receiver a partnership must file a return.

Third. The Mellons contend, and the court below held, that the partners' interests in the partnerships were capitalized upon dissolution, so that until the liquidation returned to them the cost of their interests, no taxable income was received; that Article 1570 of Regulations 45 [304 U.S. 271, 278] so provides; and that this did not take place before 1925.

But, as already pointed out, technical dissolution does not affect the liability of a partner under section 218 for taxes on his distributive share of the partnership's income; and Article 1570 does not establish any rule that dissolution capitalizes the interest of a partner in future partnership profits.

The article provides: 'When a partner retires from a partnership, or it is dissolved, he realizes a gain or loss measured by the difference between the price received for his interest and the cost to him or (if acquired prior thereto) the fair market value as of March 1, 1913, of his interest in the partnership, including in such cost or value the amount of his share in any undistributed partnership net income earned since February 28, 1913, on which income tax has been paid. ...

This article is in no way inconsistent with the taxation of a partner on his share of the income of the partnership earned in a single year after dissolution but before completion of liquidation and distribution. It deals only with the determination of a partner's gain or loss on his investment when he completely severs his connection with the partnership and its assets. The gain or loss is determined substantially like that on any other business venture of the individual, treated as a whole.

On the other hand, the profits from the sale of whisky in 1920 were current income of the partnership for that year, not different in their nature from the profits from storage, bottling, casing, and similar operations which the Mellons returned as income. Article 1570 does not deal with this situation.

Fourth. The Mellons contend that because the partnerships were dissolved by the death of Frick in 1919, A. W. Mellon and R. B. Mellon, being surviving partners, became by operation of law liquidating trustees; that any income earned in 1920 from operations of the dissolved partnerships was income to the Mellons only in their [304 U.S. 271, 279] fiduciary capacity as such trustees; that under section 219 of the Revenue Act of 1918, 40 Stat. 1071, the trust estate was a separate taxable entity; that if any income tax was due, it was therefore due from the trust; and that its assessment is now barred by the statute of limitations.

We do not find it necessary to determine whether assessment of the tax on this theory is now outlawed, or whether, as the Collector urges, recovery is precluded in any event under the doctrine of Stone v. White, 301 U.S. 532, 57 S.Ct. 851; for we are of the opinion that the Mellons are not trustees within the meaning of section 219. The fact that they may be so denominated by the law of Pennsylvania, 59 P.S.Pa. 1 et seq., is not conclusive.

It is well settled that in the interpretation of the words used in a federal revenue act, local law is not controlling unless the federal statute 'by express language or necessary implication, makes its own operation dependent upon state law.' 'The state law creates legal interests, but the federal statute determines when and how they shall be taxed.' Burnet v. Harmel, 287 U.S. 103, 110, 53 S.Ct. 74, 77.

7. We think it is clear that under the circumstances set forth, the income earned in 1920 was income of a partnership 'carrying on business' within the meaning of section 218 rather than of a trust under section 219.

The obligation of the Mellons to pay, under the federal law, taxes on the profits made in 1920 from sales of [304 U.S. 271, 280] whisky is in no way affected by their fiduciary obligation under the law of the State to account to the Frick estate for its interest in the two partnerships being liquidated.

The surviving partners continued during 1920 to conduct the business from which they earned profits. On such income the federal law required that taxes be paid. It did not require that the payments be made from the partnership assets.

How the assets shall be disposed of, and what shall be done with the proceeds when realized, are matters which may be determined by the law of the State or by agreement of the partners. But however the assets are required by the law of the State to be disposed of, or the proceeds applied, the federal law requires that taxes be paid if, in disposing of them within the year the business is conducted and profits are made.

Fifth. The Mellons contend that under the law of Pennsylvania no distribution of profits could lawfully have been made by the surviving partners as liquidating trustees until all debts and liabilities, contingent or otherwise, had been paid or satisfied, and the partners' capital returned; and that although the business of the partnerships had been carried on after dissolution precisely as before, and the partnership accounts for the year 1920 showed large profits earned, their respective shares of them were not distributable and could not be deemed taxable income of the partners.

Section 218(a) of the Revenue Act of 1918 provides that 'There shall be included in computing the net income of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year ....'

If 'distributive' meant 'currently distributable under state law,' the contentions made by the Mellons might have some force. But it does not. Article 322 of Regulations 45 (and corresponding articles of subsequent Regulations) defines 'distributive' as meaning 'proportionate.'

Compare Earle v. Commissioner, 1 Cir., [304 U.S. 271, 281] 38 F.2d 965, 967, 968. And section 220 of the Revenue Act of 1918, 40 Stat. 1072, taxing to the shareholders the income of a corporation improperly accumulating its gains and profits for the purpose of avoiding surtax, assumes that the two words are synonymous. The tax is thus imposed upon the partner's proportionate share of the net income of the partnership, and the fact that it may not be currently distributable, whether by agreement of the parties or by operation of law, is not material.

8. No claim is made that the proportionate interests of the surviving partners was improperly determined by the Commissioner.

Sixth. Finally, the Mellons contend that in 1928 and 1929 the Commissioner determined that no profit was realized until final liquidation of the partnerships in 1925, and that income taxes for that year have been collected on this theory and not yet refunded.

The Commissioner's alleged change of position is not here important. It is not shown that refund of these taxes is now barred. Nor is it necessary for us to consider the cost to the Mellons of their interests in these partnerships, or whether the Mellons' 1925 income taxes were erroneously assessed and collected, or whether the Commissioner correctly settled the tax liability of the Frick estate.

None of these questions has any bearing upon the determination of the case before us.


Mr. Justice CARDOZO and Mr. Justice REED took no part in the consideration or decision of this case.


[Footnote 1] Act of February 24, 1919, c. 18, 40 Stat. 1057.

[Footnote 2] Burnet v. Sanford & Brooks Co., 282 U.S. 359, 365, 51 S.Ct. 150, 152; Burnet v. Thompson Oil & Gas Co., 283 U.S. 301, 306, 51 S.Ct. 418, 420; Woolford Realty Co. v. Rose, 286 U.S. 319, 326, 52 S.Ct. 568, 569; Brown v. Helvering, 291 U.S. 193, 198, 199 S., 54 S.Ct. 356, 358, 359; Helvering v. Morgan's Inc., 293 U.S. 121, 126, 127 S., 55 S.Ct. 60, 61, 62; Guaranty Trust Co. v. Commissioner, 303 U.S. 493, 58 S.Ct. 673, decided March 28, 1938.

[Footnote 3] Appeal of J. S. Cullinan, 5 B.T.A. 996; J. S. Cullinan v. Com'r, 19 B.T.A. 930; Thomas J. Avery v. Com'r, 11 B.T.A. 958; Brodie C. Nalle v. Com'r, 19 B.T.A. 427; Frederika Skinner v. Com'r, 20 B.T.A. 491. See, also, B. S. Roberts v. Com'r, 7 B.T.A. 1162; Hannibal Missouri Land Co. v. Com'r, 9 B.T.A. 1072; D. C. Clarke v. Com'r, 22 B.T.A. 314, 325; Biscayne Bay Islands Co. v. Com'r, 23 B.T.A. 731; Searles Real Estate Trust v. Com'r, 25 B.T.A. 1115. Compare Perkins v. Thomas, 5 Cir., 86 F.2d 954, 956, affirmed on other grounds, 301 U.S. 655, 57 S.Ct. 911; see, also, Elmhurst Cemetery Co. v. Commissioner, 300 U.S. 37, 57 S.Ct. 324.

[Footnote 4] Santa Maria Gas Co. v. Com'r, 10 B.T.A. 1412; American Industrial Corp. v. Com'r, 20 B.T.A. 188; Bancitaly Corp. v. Com'r, 34 B.T.A. 494. Compare Weser Bros., Inc. v. Com'r, 12 B.T.A. 1394; C. H Swift & Sons, Inc. v. Com'r, 13 B.T.A. 138; Deer Isle Logging Co. v. Com'r, 14 B.T.A. 1027; O. H. Himelick v. Com'r, 32 B.T.A. 792.

[Footnote 5] See Regulations 45, Art. 547; Tazewell Elec. Light & Power Co. v. Strother, 4 Cir., 84 F.2d 327; Northwest Utilities Securities Corp. v. Helvering, 8 Cir., 67 F.2d 619; First Nat. Bank of Greeley v. United States, 10 Cir., 86 F.2d 938. Compare Burnet v. Lexington Ice & Cold Storage Co., 4 Cir., 62 F.2d 906; Taylor Oil & Gas Co. v. Commissioner, 5 Cir., 47 F.2d 108; Hellebush v. Commissioner, 6 Cir., 65 F.2d 902; Whitney Realty Co. v. Commissioner, 6 Cir., 80 F.2d 429.

[Footnote 6] Pa. Laws 1915, No. 15, 30, Pa. Stat. Ann., Purdon, 1930 tit. 59, 92.

[Footnote 7] See, also, Burk-Waggoner Oil Association v. Hopkins, 269 U.S. 110, 113, 114 S., 46 S.Ct. 48, 49; Palmer v. Bender, 287 U.S. 551, 555,55 6, 53 S.Ct. 225, 226; Thomas v. Perkins,..301 U.S. 655, 659, 57 S.Ct. 911, 912; Biddle v. Commissioner, 302 U.S. 573, 58 S.Ct. 379. Compare Board of Trade of City of Chicago v. Johnson, 264 U.S. 1, 8-11, 44 S.Ct. 232, 233, 234; United States v. Robbins, 269 U.S. 315, 327, 328 S., 46 S.Ct. 148, 149; Corliss v. Bowers,....281 U.S. 376, 378, 50 S.Ct. 336; Tyler v. United States, 281 U.S. 497, 503, 50 S.Ct. 356, 359, 69 A.L. R. 758. See, also, Hart v. Commissioner, 1 Cir., 54 F.2d 848, 851; Fidelity-Philadelphia Trust Co. v. Commissioner, 3 Cir., 47 F.2d 36, 38; Rosenberger v. McCaughn, 3 Cir., 25 F.2d 699; Eagan v. Commissioner, 5 Cir ., 43 F.2d 881, 883, 71 A.L.R. 863; Fritz v. Commissioner, 5 Cir., 76 F.2d 460, 461, 462.

[Footnote 8] Compare Earle v. Commissioner, 1 Cir., 38 F.2d 965; Hill v. Commissioner, 1 Cir., 38 F.2d 165, 168; Pope v. Commissioner, 1 Cir., 39 F. 2d 420; Ruprecht v. Commissioner, 5 Cir., 39 F.2d 458; Benedict v. Price, D.C.E.D.N.Y., 38 F.2d 309; W. Frank Carter v. Com'r, 36 B.T.A. 60. See, also, O.D. 187, 1 C.B. 174.

First Big Question:
Exactly when did it come to pass that
H. C. Frick owned the West Overton distillery? If anybody can clear this up, please write with the details!

Who was D. B. Heiner?
See below what a search of the Full Text online archives of HistoricPittsburgh has revealed about the public record of
D. B. Heiner.

The original judgements against the Mellons:
$202,502.22 + $187,787.17 =
plus interest

March 28, 1918
See below the
R. B. Mellon letter sent to H. C. Frick. It makes one wonder exactly when the partnerships began in earnest.

December 12, 1918
Frick and the Mellons formed two distinct partnerships and divided "the entire capital stock" of each [Overholt] distilling corporation into three one-third interests.

January, 1919
All the assets of each corporation were transferred (by them) to the two partnerships. Assets included large [Overholt] whiskey inventories in bonded warehouses.

Distillation ended after 1916;
Liquidation began in 1918.
In 1919 & 1920, sales were in the sale of whiskey certificates and the storage, bottling, casing, and sale of the stock of [Overholt] whiskey.

In 1925, the assets then remaining of the partnerships were sold in bulk.

Frick died Dec. 1, 1919.
But the books were kept in the same manner by the businesses from year to year -- 1918, 1919, 1920.

For 1920, the partnership returns of A. Overholt & Company and West Overton Distilling Company disclosed that substantial gains had been made from the sale of whiskey, but the amounts were not reported as income by either Mellon, as partnerships or as individuals.

Total of Deficiency Assessment:
$190,419.70 + $175,259.70 =

The Revenue Act of 1918 governs taxation of 1920 income.

The Mellons claimed they were not taxable on their shares of the 1920 profits.

One-third of the 1920 profits from each concern was entered by each of the Mellons in his individual tax return.

The Primary Question:
Were the 1920 net profits made by the partnerships taxable income?

Profits made in the business of liquidation are taxable in the same way and to the same extent as if made in an expanding business.

Profits made through the operation of a concern during a specific year are taxable in that same specific year.

The Mellon claim was rejected.
It was immaterial that the profits of 1920 were subsequently subject to a "heavy loss" taken in later years.

Taxes on net profits must be paid annually, despite the possiblity that losses of later years may exceed the profits made in earlier years.

Partnerships must pay annual taxes annually.

Gains from the sale of whiskey in 1920 were income.

The amount of the income was determinable from the partnership books.

As surviving partners, the Mellons were liable for income taxes on their distributive shares of the net profits made in 1920.

The business of selling stock on hand and deriving income therefrom remained unchanged, and was engaged in for the same purpose, from one year to the next.

Technical dissolution does not affect the liability of a partner for taxes on his distributive share of the partnership's income.

The profits from the sale of whiskey in 1920 were current income of the partnership for that year.

The Mellons claimed that after Frick's death, they became "liquidating trustees" and that any 1920 income came to them as trustees, so any tax due was due from the trust, an assessment barred by the statute of limitations.

The Mellons are not trustees within the meaning of section 219. The fact that they may be so denominated by the law of Pennsylvania, 59 P.S.Pa. 1 et seq., is not conclusive.

Local law is not controlling unless the federal statute 'by express language or necessary implication, makes its own operation dependent upon state law.'

'The state law creates legal interests, but the federal statute determines when and how they shall be taxed.'

Federal law required that taxes be paid.
It did not require that the payments be made from the partnership assets.

The Mellons contended that under PA law, the "large profits" earned and shared in 1920 were not distributable and could not be deemed taxable income of the partners.

The word "distributive" is defined as meaning "proportionate," not "currently distributable under state law."

No claim is made that the proportionate interests of the surviving partners was improperly determined by the Commissioner.

The Mellons contend that in 1928 and 1929 the Commissioner determined that no profit was realized until final liquidation of the partnerships in 1925, and that income taxes for that year have been collected on this theory and not yet refunded.

None of these questions has any bearing upon the determination of the case.



More Questions

To Reiterate My First Big Question:
Exactly when did it come to pass that
H. C. Frick owned the West Overton distillery? If anybody can clear this up, please write with the details! I have already reported on the data surrounding Frick's acquisition of the Broad Ford site (see the addenda and Timeline, of OLD OVERHOLT: The History of a Whiskey).

I have studied a portion of HENRY CLAY FRICK: An Intimate Portrait, wherein Martha F. S. Sanger describes an interesting sequence of events when Frick systematically absorbed anything and everything of consequence that was built up, developed and owned by his cousin Abraham Overholt Tinstman (see pages 45-51). A. O. Tinstman was the first grandson of Abraham Overholt (by his oldest daughter, Anna), a man who by any measure succeeded at every task his grandfather set before him. By 1864, Abraham made his namesake a partner in his firm A. Overholt & Co. This Tinstman was the same man who gave young Clay Frick all those "second-chance" jobs at the Broad Ford distillery, after he had washed out at every other job he had held elsewhere. And it was this same cousin who even (from Sanger's account) bathed and fed Frick during his illness of February 1875, and who wrote sorrowfully in his diary about the expected demise of the younger man.

It is possible that the Overholts were too kind to Frick, and were blind to his penchant to speculate with other people's money. It is possible that during this particular period of aggressive corporate takeovers (beginning with Frick's unauthorized negotiation of the sale of Tinstman's Broad Ford Railroad, and culminating with the October 1875 acquisition of the "coveted" Morgan Mines from partners A. O. Tinstman and Col. A. S. M. Morgan), Frick came to believe he owned the distillery at West Overton. If he came to own the property outright, there should be some documentation of that transaction.

Again, reported by Sanger, this was also the time when Frick replaced his Overholt uncles as sole trustee "of his mother's share of Abraham Overholt's estate," which she suggests may have increased in worth after the death of Maria Overholt, widow of Abraham. In other source material, I have found reference to Frick becoming the sole executor of Abraham's estate. The whole estate? How did that happen? What happened to the shares bequeathed to other members of Abraham's family? Are we to believe that out of all those many individuals at West Overton, who were tried and true businessmen, not one man was equal to the task of providing executorship of Abraham's estate? How did Henry Clay Frick end up with all the marbles?

As Elizabeth's oldest son, he had every right to represent her financial interests, but the move to replace his uncles as executors was just another version of the corporate takeover, whereby he accused one of the uncles of "commingling" his sister Elizabeth's inheritance with his own personal moneys, and then going bankrupt. Lest we forget, it was Frick who borrowed the inheritance of his mother, his oldest sister and his grandmother to fund his own coal and coke enterprises. I would like to see on paper to what extent he built up the value of those inheritances, how many times he relied on those funds to reach his personal goals, and how much of it was turned over to the heirs or the heirs of the original heirs. It appears Frick took full control of his grandfather's bequests, and thereafter was free to manipulate them as he saw fit.

Why were the Overholts and Tinstmans suddenly such poor businessmen and prone to bankruptcy?
Sanger reports over and over again that the
Overholts were running their businesses into bankruptcy. This does not seem logical to me. Personally, I am amazed by how many seasoned, professional men in the Extended Overholt Family suddenly went "bankrupt," after nearly a century of incomparable success in every expression of commerce they ever attempted -- agriculture, textiles, distilling, coal mining, coke production, railroad building -- not to mention their participation and support of religion, higher education, local politics, and every other endeavor that it took to build a viable community. As "exhibit A," I offer the famous picture of the commercial success of Abraham Overholt and the Extended Overholt Family at West Overton.

1867 Westmoreland County Historic Atlas - Maps & Drawings
"Property of A.S.R. Overholt & Co. - West Overton"

This is a picture of a stable community bustling with activity, both agricultural and commercial. It would be nice if it were an actual photograph that captured a particular day in time, but it it not a photograph. How much of what is depicted by the artist can be trusted as valid? I vote to trust the artist.

At the upper left (further clarified by the inset), there are working coke ovens filling railroad cars with product, while a passenger train chugs along a track that leads to Abraham's distillery. In the lower right corner, you can see well-dressed ladies and men wearing top hats riding two-abreast, like gentry going out for a morning ride. You can see horse-drawn carriages and teams of horses pulling wagons, some heading toward the distillery, where men are moving barrels out to be loaded.

At the lower left, a surveyor plots out the land, and visitors are approaching Abraham's house, where a man sits on the small front porch, reading a newspaper. There are horses getting attention at the huge barn on the left, and activity at the stable, carriage house and small warehouse near the bridge. A rider is about the cross over the bridge that spans the creek, and a carriage is parked in front of one of the houses that still stands at today's West Overton. The men and women assembled outside the huge "tenement" building represent the workers employed at the coal works, the farm, the mill, and the distillery. The large house off by itself, is identified as another "tenement."

The drawing does indicate Abraham's House as the residence of A. S. R. Overholt, but either that or the 1867 date is in error. However, if you wish to purchase your own full-size copy of this picture, go to the URL below. I just bought one for myself, and I love it!

John Pritiskutch Reproductions

Property of A. & H. S. Overholt & Co.
The Atlas obviously erred in identifying this picture as the property of
A.S.R. Overholt (see note below). Abraham was still alive in 1867, and his company was still operating as A. Overholt & Co. Also, the double sign on the side of the distillery building reads, "Registered Distillery of A. & H. S. Overholt." That was Abraham and his oldest son, Henry Stauffer Overholt, who were joint owners of the West Overton distillery, mill and farm. Abraham died suddenly on January 15, 1870, and Henry died six months later, June 18, 1870, after a long illness.

In December of 1867, Henry Clay Frick was a lad of 17, beginning his third year in Mount Pleasant with his uncle, Martin Overholt, and his family, working as a clerk and attending college sporadically.

Who was A. S. R. Overholt?
There was an Aaron S. R. Overholt, and he had an interesting lineage. He was the son of the Rev. John D. Overholt (a Mennonite bishop) and Elizabeth Stauffer, the grandson of Jacob Overholt and Elizabeth Detweiler, and the great grandson of Henry Oberholtzer. Aaron's mother was the daughter of Christian Stauffer and Agnes Overholt (daughter of Martin Oberholtzer, the brother of Henry Oberholtzer).

A. J. Fretz clears up the mystery on pages 69 and 70 of his volume, A Genealogical Record of the Descendants of Martin Oberholtzer. Regarding Aaron, Fretz wrote the following. The bold font is mine.

He was for many years book-keeper [sic] for the firm of A. & H. S. Overholt. After their death he became a partner in building and opperating [sic] a large Coke plant of the firm of A. S. R. Overholt & Co. Afterwards A. C. Overholt & Co. He is at present a stock holder in the United States Cast Iron & Pipe Foundry Co., one plant being at Scottdale, Pa. He also has interests in Silver mines in Colorado. He is an accurate business man, there are few better. In some business matter a lawyer was heard to say, "if A. S. R. Overholt has counted it we need not look it over." He was universally liked by his employees, one of whom remarked that he would rather work for him than any one he had ever known, as he always knows what he wants to do before he gives his orders to his men. He is kind hearted and generous to all. He with his twin brother John served for three years in the Civil War, enlisted Aug 1862, in Co. A. 15th, P. V. C. mustered out at Nashville, Tenn., as first Sergeant June 1865. He is the present occupant of the old Homestead, where his great grandfather Henry Overholt lived. C: Ralph, Clyde. [Fretz published this Record in 1903.]

It appears the Atlas drawing was highlighting the coke plant, after all, and since the plant was built after the deaths of Abraham Overholt and his son, Henry, the picture must have been drawn after June 18, 1870, at a time when Aaron was living in the Homestead House -- not in 1867.

Additionally, it may be interesting to note that Aaron's twin, John S. R. Overholt, married Maria Overholt Frick (first child of Elizabeth Overholt Frick -- Henry Clay Frick being the second child), whose marriage to John made her full name Maria Overholt Frick Overholt. For a period of time, this John and Maria lived in the Homestead House, where she had been raised by her grandparents (Abraham and Maria Overholt), until they moved to Ohio. Fretz identified John as a merchant and miller, and noted that the first two children born to John and Maria (son Jay and daughter Lucy) died as infants. Third child Grace died in 1894 at the age of 21 years. Karl, b. 1877, and John D., b. 1886, were still alive at the time of publication (1903).

What happened to the third one-third?
Did it go to
Frick's widow or to his surviving children? Or was it absorbed by one or both of the surviving partners? Twice over?

In the text of OLD OVERHOLT: The History of a Whiskey, the author states, "In one of the many deals between Frick and his friend, Andrew W. Mellon, one-third interest in the Overholt Distillery was sold to Mellon. In 1919, at Frick's death, Mellon got a second third interest as trustee. Thus, Mellon had control of the Overholt Distillery when under President Harding, he became Secretary of the Treasury the first time."

Remember, after Abraham built his new four-story distillery building at West Overton , it's daily capacity was reportedly 200 bushels of grain and 860 gallons of whiskey. Daily capacity. That was not counting the daily capacity of the Broad Ford site. Ten years after his death, the statistics (at Broad Ford?) were 800 bushels of grain and 3,450 gallons of whiskey per day. In 1905, the capacity was 1,500 bushels of grain, or 6,450 gallons of whiskey daily. In 1919, when Prohibition began, there were great stores of Overholt whiskey aging in barrels filling the rack houses. How many rack houses were there? And where were they located?

Prohibition stopped distillation at West Overton, but not at Broad Ford, which was one of the few distilleries allowed to produce whiskey "for medical purposes." What was the year the federal government allowed Broad Ford to continue its full operation? I would like to have access to any data showing the daily capacity of the Broad Ford distillery prior to and during the years 1818 to 1820, something that would indicate the amount of profit earned by the partnerships under scrutiny in Heiner v. Mellon.

The Mellon 1918 Letter (see below)
A copy of the March 1918 letter written by
R. B. Mellon to H. C. Frick was among the photocopies of information given to me many years ago, after my first visit to West Overton. It appeared in the addenda section of my first big feature, OLD OVERHOLT: A History of a Whiskey.

As stated at the bottom of page 92, in HENRY CLAY FRICK: An Intimate Portrait, author Sanger reveals it was in the summer of 1887, that "he sold a one-third interest in the Broad Ford distillery to Andrew Mellon." If R. B. Mellon was following "statistics" since January 1918, exactly when did his partnership with Frick begin?

How many gallons of whiskey are in a barrel?
Times that by $2.00 per gallon equals how much? Were the gallons of "beverage spirits" less the barrels of Overholt and Old Farm, or including them?

The stated "110,000,000 gallons of beverage spirits," times the given rate of $2.00 per gallon, equals $220,000,000.00, right? Split this three ways, and each of the partners may have expected to profit by as much as $73,333,333.33 (that is $73+ million). If Andrew W. Mellon actually bought his share for a mere $25,000, as stated in the article below, this was quite a big payoff for a few years' attention to detail.

Stated another way, through this partnership with Henry Clay Frick, the Mellon family profited a full two-thirds of the total available assets generated by Overholt whiskey, and in the short span coming up to Prohibition, this was something like $146,666,666.66 ($146+ million), right? This expression of the "liquidation" of assets is astounding to me, and difficult to comprehend in light of its enormity. When considering we are contemplating the monetary value (circa 1918-1920) of the following assets, I wonder what Abraham Overholt would have thought about this outcome for the fruits of his labor?

Scheduled for Liquidation:
1) all Overholt spirits and other brands bonded & aging in barrels and/or in bottles in every warehouse;
2) the two quite famous Overholt distilleries;
3) all the equipment in those distilleries, much of it pure copper;
4) all the Overholt warehouse buildings in various locations all over Western Pennsylvania, some of them still in existence and currently being used by other business concerns;
5) all the land upon which all the buildings stood; and, something harder to translate into dollars,
6) all the commercial ties and connections between all the people and companies supporting every aspect of
Abraham Overholt's whiskey business.

I wonder if anybody ever made a thorough documentation of the total assets of the Overholt distilleries at the time the partnerships began -- both real (as in real estate) and commercial (as in working systems of commerce) -- or in preparation for this federal court case? If so, I would dearly love to see that documentation.


Text of Letter from R. B. Mellon to H. C. Frick
Re: Overholt Distillery; Dated March 28, 1918



March 28th., 1918

APR - 8 1918


My Dear Mr. Frick:

I was glad to receive yours of the 25th, and would have

answered promptly, but I was waiting to get some statistics.

The following is about what we think it correct

as of January 31st. About 110,000,000 gallons of beverage

spirits of all kinds. The consumption is about 65,000,000

gallons per year. Gins, cordials etc., are being consumed

very rapidly, that should throw an increase on the consump-

tion of whiskies. As I see it there is very little more than

a years supply on hand and I think there will be a tendency

to hoarding by people that are afraid of being left entirely

dry. When the Distillers were ordered to shut down we

promptly raised our price to $1.90 per gallon and upwards,

averaging somewhat above $2.00. We own 75,765 barrels of

Overholt and 8,457 barrels of Old Farm; at the average price

of $2.00 per gallon we would receive more than $7,500,00 for our

stock of whiskey; that is not all profit, it is an accumulation

of many years. Of course, we would have the plants left, but

of very little value unless they would be used again for making

whiskey. Our withdrawals and bottling are getting heavier from

whiskey that is owned by the trade, but that will soon be

exhausted and we are bound to make sales. The cheaper grades of

whiskey are going first, especially by concerns that are in debt

or are carrying whiskey certificates on a margin. I am glad to

know the price that was paid by the British Government for

whiskey. I will be in New York within a few weeks and will

call and see you.


Sincerely yours,

R B Mellon


From the Full Text Online Archives at Historic Pittsburgh

Reference: Andrew W. Mellon, the Man and His Work, by Philip H. Love.
Originally Published: Baltimore, Md. : F.H. Coggins & Company, 1929.


Reference: The Story of Pittsburgh and Vicinity: Illustrated.
Originally Published by Pittsburgh Gazette Times, 1908.

Who Was D. B. Heiner?

The following two articles thoroughly identify D. B. Heiner, the second going so far as to identify his whole family back to his great-great grandfather, and forward to naming his offspring. In part, both are offered here partly in tribute to the variety of information available from very old books in libraries. But actually, the Heiner of 1938 is better represented by the second article, which describes a man who has risen to an elevated position in society, and fully capable of squaring off against the powerful forces (i.e., financial, political, and social) of the Mellon family.

Reference: The Story of Pittsburgh and Vicinity: Illustrated.
Originally Published by Pittsburgh Gazette Times, 1908.

Reference: Annals of Southwestern Pennsylvania, Vol. 4, by Lewis Clark Walkinshaw.
Originally Published: New York: Lewis Historical Publishing Company, Inc., c. 1939.

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