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UNITED STATES of America, Plaintiff-Appellee, v. Edgar Elton LANE, Defendant-Appellant. No. 72-1987. United States Court of Appeals, Sixth Circuit. Submitted April 16, 1973. Decided May 22, 1973. Martin Reisig, Detroit, Mich, (court appointed), Thomas Jackson, Research Asst., for defendant-appellant; Edgar Elton Lane, pro se. Ralph B. Guy, Jr., U. S. Atty., Kenneth J. Haber, Asst. U. S. Atty., Detroit, Mich., for plaintiff-appellee. Before WEICK, EDWARDS and Me-CREE, Circuit Judges. PER CURIAM. Appellant appeals after a jury verdict of guilty to a charge of possessing, selling, and conspiring to sell counterfeit federal reserve notes, in violation of 18 U.S.C. §§ 472, 473 and 371 (1970). He was sentenced to 15 years imprisonment. The proofs viewed from the point of view favorable to the government’s case, which the jury accepted, show that appellant was arrested in possession of identifiable United States currency (bait money) which he had received in exchange for counterfeit federal reserve notes. The details of the transaction were testified to by the purchaser — a federal Secret Service Agent named Lucas, who at the time in question was operating under cover. The principal issue argued on this appeal concerns whether or not this court’s opinion in United States v. Lonardo, 350 F.2d 523 (6th Cir. 1965), requires reversal of this case. In Lonardo a government agent a week and a half before trial deliberately destroyed a stenographic transcript of a witness interview. In addition, the record indicated that there was a major discrepancy between the destroyed transcript and the report which was furnished. In the instant case Lucas’ report was furnished to appellant’s counsel in accordance with the Jencks Act, 18 U.S. C. § 3500 (1970). What appellant asserts should have been furnished also were Lucas’ rough notes which he employed in drafting his report and then destroyed. This report discloses no material discrepancies in the report furnished from the original rough notes. Nor do we have here, as in Lonardo, deliberate destruction of arguably important evidence “in the possession” of the government on the eve of trial. The report which was prepared and “adopted” by agent Lucas was furnished to appellant. On these facts the controlling case for this circuit is United States v. Fruchtman, 421 F.2d 1019 (6th Cir. 1970): Appellant also raises a Jencks Act question. After Smeraldi and an agent for the Internal Revenue Service testified for the Government, appellant moved for production of all statements available to him under the Jencks Act, 18 U.S.C. § 3500. He requested in particular the handwritten notes of interviews conducted by these agents. Both Smeraldi and the IRS agent testified that their notes had been destroyed several months before trial. There was no evidence that they were destroyed to prevent their examination by appellant, and the reports which had been compiled from the handwritten notes were made available to appellant’s counsel. Since it is not shown that the notes were destroyed for an ulterior purpose and the same information was available to appellant in the reports themselves, the trial judge correctly refused to strike the agents’ testimony. Killian v. United States, 368 U.S. 231, 82 S.Ct. 302, 7 L.Ed.2d 256 (1961); Rosenberg v. United States, 360 U.S. 367, 371, 79 S.Ct. 1231, 3 L.Ed.2d 1304 (1959); United States v. Greco, 298 F.2d 247 (2nd Cir. 1965). United States v. Fruchtman, supra at 1021-1022. An additional appellate issue is presented concerning the application of Rule 23(b) of the Federal Rules of Criminal Procedure. This rule, by its terms, requires that any waiver of a 12-man jury be stipulated in writing. Here a juror took ill and the District Judge consulted counsel in open court with appellant present as to how to proceed. The District Judge offered appellant the alternative of seating an alternate juror, conducting a new trial, or proceeding with an 11-man jury. In open court defendant, by counsel and through his own voice in a colloquy with the Judge, agreed to the latter proposal. Since this was immediately recorded in the reporter’s shorthand notes, we believe that it meets the test of “stipulate [d] in writing” of Rule 23(b). Alternatively, it seems clear that the facts in this case comply fully with the waiver rule previously announced in the Ninth Circuit in United States v. McCurdy, 450 F.2d 282 (9th Cir. 1971), and Bayless v. United States, 381 F.2d 67 (9th Cir. 1967). The Ninth Circuit in Bayless held as follows: Rule 23 also requires that an agreement to be tried by a jury of fewer than twelve jurors be in writing. In Rogers v. United States, 319 F.2d 5 (CA 7, 1963), cert. den. 375 U.S. 989, 84 S.Ct. 524, 11 L.Ed.2d 475, and in Horne v. United States, 264 F.2d 40 (C.A. 5, 1959), cert. den. 360 U.S. 934, 79 S.Ct. 1460, 3 L.Ed.2d 1549, it has been held that an oral agreement in open court is sufficient to validate a trial with such a jury. In the instant case the appellant, in order to obtain a substantial advantage for himself, knowingly and intelligently agreed that one of the several issues in the case should be decided by the court. We think he thereby validly waived whatever right he might, in the absence of that agreement, have had. Bayless v. United States, supra at 75. The defendant in this case in person intelligently and knowingly expressed consent to the District Judge in open court to proceed with the 11-man jury. See Rogers v. United States, 319 F.2d 5 (7th Cir. 1963). We agree with the Seventh and Ninth Circuits that such express consent by the defendant in person in open court and on the record constitutes a valid waiver of the express terms of Rule 23(b). The judgment of the District Court is affirmed.

f2d_479/html/1137-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

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Alson T. WAHRLICH, Petitioner-Appellant, v. STATE OF ARIZONA, A. E. “Bud” Gomes, Superintendent, Arizona State Prison, Respondent-Appellee. No. 72-1638. United States Court of Appeals, Ninth Circuit. Argued Feb. 7, 1973. Decided June 4, 1973. Andrew Silverman (argued), Post Conviction Legal Assistance Clinic, Tucson, Ariz., for petitioner-appellant. Thomas A. Jacobs, Asst. Atty. Gen. (argued), Gary K. Nelson, Atty. Gen., Phoenix, Ariz., for respondent-appellee. Before CHAMBERS and HUFSTEDLER, Circuit Judges, and FERGUSON District Judge. Honorable Warren J. Ferguson, United States District Judge for the Central District of California, sitting by designation. OPINION PER CURIAM: Wahrlich’s petition for federal habeas relief from a conviction for kidnapping in a state court in Arizona was denied, and he appeals. He contends that the state court’s refusal to receive psychiatric testimony offered to prove that he was incapable of forming the specific intent that is an element of the offense denied him due process and equal protection secured by the Federal Constitution. Wahrlich did not rely on an insanity defense, and the evidence was not offered to prove either insanity or diminished capacity. His theory is that the expert testimony offered was relevant to show that he could not have harbored the requisite “intent to hold or detain” the victim and that the rejection of the testimony deprived him of his due process right to introduce all evidence tending to disprove an essential ingredient of the offense. The argument is logical, and it has been skillfully presented, but we reject it. We do not admit all evidence that is competent and probative in a criminal trial. A wide assortment of relevant evidence is deliberately excluded by reason of counterbalancing factors that are believed to be of greater moment than the unfettered admission of relevant testimony. Among the considerations that we have taken into account in refusing to accept Wahrlich’s argument are these: (1) in the interest of harmonious federal-state relations, federal courts should not unnecessarily interfere with the state’s trial of criminal cases; (2) courts should be extremely reluctant to constitutionalize rules of evidence; (3) the state of the developing art of psychiatry is such that we are not convinced that psychiatric testimony directed to a retrospective analysis of the subtle gradations of specific intent has enough probative value to compel its admission. Alternatively, Wahrlich contends that Arizona’s admission of the evidence of age and of intoxication for the purpose of determining specific intent and its exclusion of psychiatric evidence offered for the same purpose create an unreasonable or arbitrary classification. We think not. Exposure to the effects of age and of intoxicants upon state of mind is a part of common human experience which fact finders can understand and apply; indeed, they would apply them .even if the state did not tell them they could. The esoterics of psychiatry are not within the ordinary ken. The differences are sufficiently manifest to thwart constitutional attack. Affirmed.

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Caselaw Access Project

2024-08-24T03:29:51.129235

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UNITED STATES of America, Appellee, v. Michael D. WILLIAMS, Appellant. No. 73-1145. United States Court of Appeals, Fourth Circuit. Argued May 9, 1973. Decided June 13, 1973. Robert M. Harvey, Dunbar, W. Va. [Court-appointed counsel], for appellant. John A. Field, III, U. S. Atty., for ap-pellee. Before HAYNSWORTH, Chief Judge, BRYAN, Senior Circuit Judge, and CRAVEN, Circuit Judge. CRAVEN, Circuit Judge: Michael Williams appeals his conviction by a jury in district court for distributing heroin in violation of 21 U.S.C. § 841(a) (1). Three of the several points of assigned error are worth discussion: the admissibility of a confession, the in-court identification of defendant’s “girlfriend,” and remarks made by the prosecutor in his closing statement to the jury. The government’s case rests primarily on the testimony of Melvin Lee. The evidence tended to show that special narcotics agent Rinehart observed Lee going to the doorway of defendant Williams’s apartment and then returning with 18 bags of heroin purchased with $200 furnished by Rinehart. Lee testified that he bought the heroin from defendant Williams and that Williams’s girlfriend, Madonna Breeden, was present in the apartment at the time of the purchase. Lee also pointed out Madonna Breeden, in the presence of the jury, as being then present in the courtroom. Defendant Williams is black; Madonna Breeden is white. The only other evidence of consequence is a confession by Williams obtained under allegedly improper eircum-stances. Williams was twice given the Miranda warnings, and on the second occasion signed a waiver of his rights. He then indicated a willingness to talk, at which time special agent Rinehart suggested that he “try to help himself.” Williams supposedly responded, “You mean by introducing you around to people[,] like Melvin [Lee] introduced you to me.” Rinehart then asked him, “Do you mean to say you are now telling me you sold me heroin?” Williams replied, “Yes.” Once conversations lawfully begin, we believe a law enforcement officer may properly tell the truth to the accused, and we think it is a fact of criminal life that accused persons can and often do help themselves by cooperating with the police, e.g., if he testifies about the criminal activity of others, he may be granted immunity for his testimony, obtain a dismissal of cumulative counts, or at the very least obtain a recommendation of leniency from the prosecutor. The timing of a conversation such as this one is of controlling importance. Here, the suggestion of cooperation came only after full Miranda warnings had twice been given and after Williams had waived his right against self-incrimination. Thus, we are not presented with the question whether the warnings may have been diluted by advice that it is better to cooperate than to exercise one’s constitutional rights. Upon the facts of this case we hold that Williams’s admission of the sale of heroin was neither induced nor obtained by any direct or implied promise. See United States v. Springer, 460 F.2d 1344 (7th Cir. 1972); United States v. Glasgow, 451 F.2d 557 (9th Cir. 1971); United States v. Ferrara, 377 F.2d 16 (2d Cir. 1967); Martin v. United States, 166 F.2d 76 (4th Cir. 1948). Of greater concern to us are the defendant’s points of error concerning the prosecutor’s statements to the jury and the identification of Madonna Breeden. In his closing argument to the jury, the Assistant United States Attorney said that the government’s evidence was the only evidence in the case, that it “is uncontradicted and undenied and unrefuted.” It is urged upon us that this was a comment on the failure of the defendant to testify in violation of the fifth amendment as interpreted in Griffin v. California, 380 U.S. 609, 85 S.Ct. 1229, 14 L.Ed.2d 106 (1965). It is true that the overwhelming weight of authority, even after Griffin, is to the effect that the prosecutor may point out that the defense did not offer evidence to contradict the government’s case, United States v. Lipton, 467 F.2d 1161, 1168 (2d Cir. 1972); United States v. Hager, 461 F.2d 321, 324 (7th Cir. 1972); United States v. Lepiscopo, 458 F.2d 977, 979 (10th Cir. 1972); United States v. Smith, 421 F.2d 1229, 1230 (3d Cir. 1970); United States v. Johnson, 337 F.2d 180, 203 (4th Cir. 1964), aff’d, 383 U.S. 169, 86 S.Ct. 749, 15 L.Ed.2d 681 (1966); Davis v. United States, 279 F.2d 127 (4th Cir. 1960), at least where it is apparent that witnesses other than the defendant might have been offered by the defense. Desmond v. United States, 345 F.2d 225 (1st Cir. 1965). The test adopted by several circuits is: “Was the language used manifestly intended to be, or was it of such character that the jury would naturally and necessarily take it to be a comment on the failure of the accused to testify?” The argument to a jury that the government’s evidence is “undenied,” although sometimes approved, see 53 Am. Jur. Trial 378n.6 (1945), seems to us to skirt the precipice of reversible error. The very entry of a not-guilty plea is an effective denial of all of the government’s evidence. That evidence may be unrefuted and uncontroverted certainly does not mean that the defendant fails to deny its truth. But in context with the words “uneontroverted” and “unre-futed,” we are unable to say with any degree of assurance that the jury was misled. In United States v. Weems, 398 F.2d 274, 275-276 (4th Cir. 1968), we held that a “single statement by the prosecutor, in the course of his closing argument to the jury, to the effect that certain evidence and testimony was ‘uncontradicted and undisputed’ ” was not plain error. We then admonished “United States Attorneys in this circuit to observe the spirit of Griffin and to avoid jeopardizing otherwise certain convictions by arguments that border on forbidden ground.” We repeat the monition. As to Lee’s in-court identification of Madonna Breeden, we are gravely concerned with Williams’s assertion that it was a blatant and unnecessary injection of a matter (race) calculated to inflame the jury. If we were convinced of invidious purpose we would reverse. But the government urges plausibly that Madonna Breeden was identified before the jury in order to establish a basis for the prosecutor’s later comment during his jury argument that the government’s evidence was “uncontradicted,” i.e., to show on the record that the defendant could have called another witness and did not do so. It is beyond argument that showing the availability of such a witness is material and competent even in those jurisdictions that require no such foundation for the comment, and as we have noted, it is essential in the First Circuit. See Desmond, supra. Although we cannot help wondering if the reason advanced by the government for her identification is not a pretentious afterthought, we think we should not impute the worst motive the facts will support when a perfectly lawful reason for the identification of Madonna Breeden is equally supportable. We have considered the other assignments of error and find them to be without merit. The conviction is, therefore, Affirmed. It has been said that it is neither charity, nor common sense, nor law, to infer tke worst intent which the facts will admit of; the reverse being the true rule both of justice and of law. . In Desmond the First Circuit announced a rule that comment concerning lack of contradiction is improper “[U]nless it is apparent on the record that there was someone other than himself whom the defendant could have called.” [Emphasis added]. Desmond v. United States, 345 F.2d 225, 227 (1st Cir. 1965). . See United States v. Follette, 418 F.2d 1266, 1269 (2d Cir. 1969), and the cases therein cited. . See State v. Hill, 181 N.C. 558, 560, 107 S.E. 140, 141 (1921):

f2d_479/html/1141-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

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NATIONAL LABOR RELATIONS BOARD, Petitioner, v. Rudolph R. ZAWADZKI d/b/a Marla Security Service, Respondent. No. 73-1194. United States Court of Appeals, Sixth Circuit. June 5, 1973. Marcel Mallet-Prevost, Asst. Gen. Counsel, N.L.R.B., Washington, D. C., Bernard Gottfried, Acting Director, Region 7, N.L.R.B., Detroit, Mich., for petitioner. Rudolph R. Zawadzki, pro se. Before CELEBREZZE, PECK and LIVELY, Circuit Judges. ORDER PER CURIAM. This cause came on to be considered on Petitioner’s application for the summary entry of judgment enforcing its Order of January 14, 1972 against Respondent, adopting with modification the findings, conclusions, and recommendations of the Trial Examiner’s decision and ordering appropriate relief thereunder. Respondent has filed no response to this application. Upon review of the record filed with this Court by Petitioner it appears that Respondent failed to file timely objections to the Trial Examiner’s decision, as required under Section 10(c) of the Act and under Sections 102.46 and 102.48 of the Rules and Regulations of the National Labor Relations Board, Series 8. Respondent has failed to show this Court any extraordinary circumstances which might excuse this failure, and it is therefore precluded under Section 10 (c) of the Act from raising any objections to Petitioner’s Order before this Court. It is therefore ordered that said application for summary entry of judgment enforcing Petitioner’s Order be and the same is hereby granted and that said Order be and the same is hereby enforced.

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UNITED STATES of America, Plaintiff-Appellee, v. John William WOKKOPICH, Defendant-Appellant. No. 72-2676. United States Court of Appeals, Fifth Circuit. June 5, 1973. J. V. Eskenazi, Federal Public Defender (court-appointed but not under Act), Theodore J. Sakowitz, Asst. Federal Public Defender, Miami, Fla., for defendant-appellant. Robert W. Rust, U. S. Atty., J. Daniel Ennis, Asst. U. S. Atty., Miami, Fla., for plaintiff-appellee. Before JOHN R. BROWN, Chief Judge, and WISDOM and AINS-WORTH, Circuit Judges. WISDOM, Circuit Judge: John William Workopich was indicted and convicted on four counts of violating the Controlled Substances Law, 21 U.S. C. § 841. Court I charged that he possessed “about” 1 gram of heroin on June 2, 1972, with the intent to distribute it, and Count II charged its actual distribution on that date. Counts III and IV asserted a similar type possession and distribution of “about” 1.15 grams of heroin on June 9, 1972. On appeal he argues several grounds for reversal: first, that he had established entrapment as a matter of law; second, that the evidence was sufficient to require the district judge to charge the jury on entrapment ; third, that he was merely ah agent for a government informer and had no dominion or control over the drugs; and, fourth, that a charge of possession with intent to distribute merges into a charge of distribution, and is therefore multiplicitous. We hold that the defendant did not establish en» trapment as a matter of law but that the evidence created a question of fact as to entrapment. The defendant was therefore entitled to a charge explaining entrapment to the jury and he was entitled to have 'the jury decide the issue. Due process is not satisfied with less. We reverse and remand for a new trial. I. Workopich was a twenty year old heroin addict who lived with another addict in the hippie enclave in Coconut Grove, a section of Miami, Florida. At the time of his arrest he had been a user of heroin for seven years, an addict for four years. On June 2, 1972, special agents Walde and Dodge of the Bureau of Narcotics and Dangerous Drugs, and detectives D’Ambrosia and Wrightson, two local policemen, arrived at 2 p. m. by automobile in Coconut Grove. Each was dressed to pass unnoticed in a hippie area. By arrangement they met Guy-man, a government informer. They observed Workopich “milling” around near Lum’s Restaurant “doing nothing”. Guyman, who had met the defendant three weeks earlier, spoke with Worko-pich intermittently during the afternoon. At 4 p. m. Guyman asked Worko-pich to sell him some drugs for friends who were addicts. Workopich replied that he did not have any heroin and did not sell it but that he knew someone who did and that person was scheduled to arrive in twenty minutes and perhaps the purchase could be made from him. “(a) Except as authorized by this sub-chapter, it shall be unlawful for any person knowingly or intentionally— (1) to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense a controlled substance; ” Shortly afterwards, the informer introduced agent Walde to the defendant. The three were together when Worko-pich’s supplier arrived. The defendant approached the supplier and asked if he had any drugs he could sell to Guyman and agent Walde. The supplier told Workopich to ask them how much they wanted. The defendant then asked the informer, standing only ten paces away, how much he wanted. The reply was thirty dollars worth and agent Walde gave the thirty dollars to Workopich. The defendant and the informer then walked the ten paces back to the supplier and made the transaction. Worko-pich kept no money nor any drugs. He immediately returned and delivered the drugs to the agent. All of these acts took place in close proximity to and in clear vision of the agents, except for a short moment when Workopich stepped behind Lum’s with the informer and the supplier to make the exchange. One week later informer Guyman again approached Workopich at Lum’s. Guyman told the defendant that his two friends were suffering withdrawal symptoms and needed to purchase heroin quickly. Workopich then entered an automobile with Guyman and the two agents and drove down the street until he spotted his supplier. The agents gave him thirty dollars of recorded government money with which to buy two bags of heroin. Workopich stepped out of the car, purchased two bags of heroin, and handed them to the agents. In this transaction the defendant, then suffering the onset of withdrawal symptoms, also purchased a bag for himself on credit. He told the agents this heroin was for his own use and as soon as possible he found a quiet place where he injected the heroin into his arm. Six days later he was arrested. At the trial the court refused to instruct the jury on the defense of entrapment. The jury found the defendant guilty on all four counts and he was sentenced under 18 U.S.C. § 4253(a) to treatment for .an indeterminate period not to exceed ten years. Prior to this case the defendant had no history of dealing in drugs. II. The defendant argues that because government agents solicited his criminal activity and because they provided him with currency without which the purchase could not have been made, that entrapment had been proved as a matter of law under this Court’s decision in United States v. Bueno, 5 Cir. 1971, 447 F.2d 903. In Bueno the defendant was induced by a government informer to sell heroin to a government agent. The informer, compensated by the government, had imported the heroin into the United States from Mexico. Because the government failed to produce the informer at the trial, the defendant’s testimony of inducement was uncontested. In granting a new trial, the court concluded that unless the government could produce contradictory testimony on remand, the defendant would be entitled to acquittal as a matter of law. In the present case the government did not call the informer as a witness to challenge' the testimony of the defendant. But, unlike Bueno where the government supplied contraband, the government here supplied a commodity legal in itself, United States currency. Furthermore, whereas in Bueno the defendant was merely the conduit between two government employees, here the defendant actually arranged the purchase from one illegally dealing in heroin. Subsequent to the briefs and argument in this case, the Supreme Court issued its opinion in United States v. Russell, 411 U.S. 423, 93 S.Ct. 1637, 36 L.Ed.2d 366, 1973. There a government agent approached the defendant and offered to supply him with a chemical essential to the illegal manufacture of amphetamines. This ingredient was legal in itself to possess, in contrast to the contraband supplied in Bueno. In Russell the Court noted the decision in Bueno but neither expressly approved or disapproved of its holding. The Court did not reach a review of the principle in Bueno because it concluded that even if such a principle were adopted the defendants there would not come within its scope. In fact the defendants had previously acquired the ingredient for the production of amphetamines before the time they were approached by the government agent. Though the Supreme Court noted that it might “some day be presented with a situation in which the conduct of law enforcement agents is so outrageous that due process principles would absolutely bar the government from invoking judicial process to obtain a conviction,” the Court concluded that this was not the day. In holding that there was not an “intolerable degree of governmental participation” in the government solicitation in Russell, the Court reaffirmed the entrapment doctrines enunciated in Sorrells v. United States, 1932, 287 U.S. 435, 53 S.Ct. 210, 77 L.Ed. 413, and Sherman v. United States, 1958, 356 U.S. 369, 78 S.Ct. 819, 2 L.Ed.2d 848. Noting that “entrapment is a relatively limited defense” the Court emphasized that the focus of the entrapment defense is upon the predisposition of the defendant. “[T]he fact that officers or employees of the government merely afford opportunities or facilities for the commission of the offense does not defeat the prosecution.” Sorrells, 287 U.S. at 441, 53 S.Ct. at 212; Sherman, 356 U.S. at 372,. 78 S.Ct. 819. Both in Sorrells and in Sherman the government activity went beyond merely affording an opportunity for crime. In Sorrells a jury issue was created and in Sherman entrapment was established as a matter of law because of the repeated entreaties to the defendants, coupled with persuasive argument of an informant to enter into criminal activity. In Sherman the informant was met with “refusal,” then with “evasiveness,” then with “hesitancy” before eventually cooperating. Furthermore, these requests were “predicated on [the agent’s] suffering.” Sherman, 356 U.S. at 371, 373, 78 S.Ct. 819. Similarly in Sorrells, there were multiple requests before the defendant complied and provided the agent with illegal liquor. This “repeated and persistent solicitation in which [the agent] succeeded by taking advantage of the sentiment aroused by the reminiscences of their experiences as companions in arms in the World War” constituted an issue of entrapment for the jury to determine. Sorrells, 287 U.S. at 441, 53 S.Ct. 210. See Henderson v. United States, 5 Cir. 1958, 261 F.2d 909. Here the defendant testified that the informer approached him twice prior to June 2 and asked to purchase heroin; he was refused. The defendant testified that on June 2 the informant stated the heroin was for friends who were suffering from withdrawal symptoms. The informer did not take the stand to contradict this testimony. When counsel for the defendant asked agent Walde if he had told the defendant why he needed the drugs, the trial judge sustained an objection by the government. He concluded that the question was “totally irrelevant to the offenses charged” and “it wouldn’t be entrapment.” When the defense questioned the defendant as to what agent Walde had told him, the court overruled a government objection. The court found that “the evidence in this case, giving the defendant the benefit of it, is that he thought these people were users and were about to be subjected to withdrawals pains [sic] and that he out of a desire to help them, made the purchase. . . .” In Sorrells the Court concluded that a jury issue had been created, but in Sherman the Court concluded that entrapment was established as a matter of law. The Court noted in Sherman that in finding entrapment as a matter of law it was “not choosing between conflicting witnesses, nor judging credibility. Aside from recalling [the informer] who was the Government’s witness, the defense called no witnesses. We reach our conclusion from the undisputed testimony of the prosecution’s witnesses.” Sherman, 356 U.S. at 373, 78 S.Ct. at 821. In a companion case of the same day the Court dealt with an alignment of testimony more similar to our present facts, Masciale v. United States, 1958, 356 U.S. 386, 78 S.Ct. 827, 2 L.Ed.2d 859. The defendant there was introduced to a government agent by a government informer. The defendant testified that the informer had lured him into crime by promises of an easy income, but the informer himself did not testify. The Court rejected the argument of the defendant that his uncontradicted testimony of conversations with the informer could establish entrapment as a matter of law. “While the petitioner presented enough evidence for the jury to consider, they were entitled to disbelieve him in regard to [the informer] and so to find for the Government on the issue of guilt. Therefore the trial court properly submitted the case to the jury.” Masciale, 356 U.S. at 388, 78 S.Ct. at 829. Thus, when the undisputed testimony of a defendant is the sole basis for an entrapment defense, entrapment is not established as a matter of law but rather is an issue for the jury to decide. Accord, United States v. Burgess, 5 Cir. 1970, 433 F.2d 987. Cf. United States v. Bueno, 5 Cir. 1971, 447 F.2d 903, where, when the government supplied contraband to the defendant, his uncontradicted testimony established entrapment as a matter of law. Here, the defendant’s uncontradicted testimony is that he was approached several times before he capitulated. He further testified that he was told that the drugs were for addicts, like himself, who were suffering the pain of withdrawal. On the other hand, the relationship of the defendant and the informant was ephemeral and transitory. Though he had no drugs for sale, the defendant had no resistance in assisting a purchase through his connection. The defendant was compliant but not eager. In these circumstances entrapment was not established as a matter of law, but was a question for the jury to resolve. The burden of proving entrapment is upon the defendant and the burden of proving predisposition is upon the government. Pierce v. United States, 5 Cir. 1969, 414 F.2d 163. “If there is any evidence in the record that, if believed by the jury would show that the government’s conduct created a substantial risk that the offense would be committed by a person other than one ready to commit it, then, as in all other cases involving questions of guilt or innocence, the jury must be permitted to resolve the matter.” Pierce, 414 F.2d at 168. Paralleling the result in Sorrells, we hold that the defendant was entitled to have his defensive theory of the case explained to the jury by an appropriate charge on entrapment. We remand for a new trial. III. The defendant also contends that his activity as an intermediary between a government informant and his connection was not a “distribution” under 21 U.S.C. § 841(a)(1). The definitional section, 21 U.S.C. § 802(11) reads: “The term ‘distribute’ means to deliver . a controlled substance.” That definitional section at 21 U.S.C. § 802(8) states: “The term ‘deliver’ or ‘delivery’ means the actual, constructive, or attempted transfer of a controlled substance, whether or not there exists an agency relationship.” Thus a “sale” is not required and the issue of agency is irrelevant. Cf. Adams v. United States, 5 Cir. 1955, 220 F.2d 297. The acts of the defendant here clearly fall within the plain meaning of those words. IV. Finally, the appellant contends that the convictions of possession with intent to distribute and of distribution are multiplieitous. The defendant was sentenced under the provisions of 18 U. 5. C. § 4253 to treatment for a period not to exceed ten years. The court could have imposed this sentence for any of the four counts of which the defendant was convicted. Thus, under the concurrent sentence doctrine we need not now reach the issue of multiplicity. United States v. Vasquez, 2 Cir. 1972, 468 F.2d 565. Indeed, the sentence received is a shorter period than the fifteen years confinement which could have been imposed for a single count under 18 U.S.C. § 841(b)(1)(A). Reversed and remanded for proeeed-ings not inconsistent with this opinion. . 21 U.S.C. § 841(a)(1) reads as follows: . The contents of the two bags transferred on June 2 weighed .27 grams of which .03 grams was heroin. The packets on June 9 weighed .52 grams of which .03 grams was heroin. . In contrast to the present case, the district court in Russell charged the jury on the entrapment issue. The issue on appeal was whether an absolute defense was available because of the creative activity of the government, regardless of predisposition of the defendant to commit the crime. . Note Section 531 of the President’s version of the Revised Criminal Code, 13 Cr.L.Rep. 3001, April 4, 1973: “[T]he provision of a facility or an opportunity for commission of an offense or mere solicitation which would not induce an ordinary law-abiding person to commit an offense, does not in itself constitute unlawful entrapment.” . In restating the opinion of the majority in Russell, Mr. Justice Stewart in a dissenting opinion noted: “And in the absence of a conclusive showing one way or the other, the question of the defendant’s ‘predisposition’ to the crime is a question of fact for the jury. The Court today adheres to tins approach.” . These definitions were promulgated by the Comprehensive Drug Abuse Prevention and Control Act of 1970, effective October 27, 1970; 1970 U.S.Code Cong. & Admin.News p. 4566. That act, in describing unlawful acts, makes illegal the broader inclusive acts of “distribution” or “dispensing”, and does not use the more restrictive term “sell”. Cf. Palmer v. United States, 5 Cir. 1964, 340 F.2d 48.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Curtis T. BUSSE and Myrtle Busse, Petitioners-Appellees, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant. No. 72-1957. United States Court of Appeals, Seventh Circuit. Argued April 12, 1973. Decided June 1, 1973. Scott P. Crampton, Asst. Atty. Gen., William S. Estabrook, III, Atty., Tax Div., U. S. Dept, of Justice, Washington, D. C., for respondent-appellant. John S. Best, Robert A. Schnur, Milwaukee, Wis., for petitioners-appellees. Before HASTINGS, Senior Circuit Judge, CUMMINGS, Circuit Judge, and CAMPBELL, Senior District Judge. Senior District Judge William J. Campbell of the Northern District of Illinois is sitting by designation. HASTINGS, Senior Circuit Judge. Pursuant to § 7483 of the Internal Revenue Code of 1954, the Commissioner of Internal Revenue brings this appeal from a decision and order of the United States Tax Court, 58 T.C. 389 (1972), holding that he erroneously determined a deficiency in the 1967 federal income tax of Curtis T. Busse (the taxpayer) and Myrtle Busse of Randolph, Wisconsin. The parties stipulated all the facts. Sometime before March 20, 1958, taxpayer invented a method and machine for stacking cans on pallets. On that date, he assigned an undivided one-half interest in the invention to his brother. A patent covering the invention issued to taxpayer on August 16, 1960. By reason of the assignment, taxpayer and his brother each owned one-half of the patent. When the brother died on July 10, 1962, his interest passed to his widow. Taxpayer and the widow organized Busse Bros., Inc., a Wisconsin corporation, on January 2, 1966, in which at all relevant times each owned 50 per cent of the issued and outstanding stock. On the same day the corporation was organized, taxpayer, his sister-in-law and the corporation entered into an oral agreement by which each shareholder sold his entire interest in the patent to the corporation. In return, the corporation agreed to pay taxpayer and his sister-in-law quarterly installments, during the life of the patent, equal to five per cent of the corporation’s net selling price (as that term was defined in the agreement) of devices covered by the patent claims. During 1967 the corporation paid taxpayer $36,029.01 as his one-half share of the payments required under the agreement. Although taxpayer’s 1966 assignment to the corporation was plainly “[a] transfer * * * of property consisting of * * * an undivided interest [in all substantial rights to a patent] which includes a part of all such rights, by any holder ,” as described in § 1235(a) of the Code, taxpayer was not able to treat the 1967 payments as long-term capital gain under § 1235. Such treatment was precluded by the operation of § 1235(d), because taxpayer’s assignment to the corporation was a transfer between related persons, speei-fically, in the words of § 267(b) (2) as modified by § 1235(d)(1), between “[a]n individual and a corporation 25 percent or more in value of the outstanding stock of which is owned * * * by * * * such individual.” However, taxpayer was able to and did report the entire amount of the 1967 payments as long-term gain received upon the sale of a capital asset, under the general provisions of §§ 1221 and 1222. The Commissioner, pursuant to the appropriate regulations under § 483, nevertheless concluded that only $33,011.81 of the 1967 payments constituted capital gain, while the remaining $3,017.20 was unstated interest on an installment sale, taxable at ordinary income rates. In line with this analysis, the Commissioner determined an income tax deficiency for 1967 of $1,659.47. He rejected taxpayer’s contention that § 483(f)(4) protected the 1967 payments from unstated interest treatment. Taxpayer petitioned the Tax Court for a redetermination, and that court determined that there was no 1967 deficiency. This appeal followed. The Tax Court’s decision was of a narrow legal question: Given a patent transfer which is described in § 1235(a) of the Code but which does not receive its capital gain treatment under § 1235, should some part of the payments received pursuant thereto be treated as unstated interest under § 483, or is such treatment precluded by the exception contained in § 483(f)(4)? We agree with the Tax Court that such payments do qualify for the statutory exception and, accordingly, affirm the decision and order. Section 483, “Interest on certain deferred payments,” was added to the Code by the Revenue Act of 1964, Pub.L.No. 88-272, § 224(a), 78 Stat. 19, 77. The section provides, in pertinent part: “(a) * * * [I]n the case of any contract for the sale or exchange of property there shall be treated as interest that part of a payment * * * which bears the same ratio to the amount of such payment as the total unstated interest under such contract bears to the total of the payments * * * which are due under such contract. •X* •X* *X* if "X1 •}£ “(c) * * * “(1) * * * Except as provided in subsection (f), this section shall apply to any payment on account of the sale or exchange of property which constitutes part or all of the sales price and which is due more than 6 months after the date of such sale or exchange under a contract— “(A) under which some or all of the payments are due more than one year after the date of such sale or exchange, and “(B) under which * * * there is total unstated interest.” . The report of the Committee on Ways and Means of the House of Representatives, which accompanied the Revenue Act of 1964 on its sojourn through the Congress, explained the general reasons for the new provisions: “Your committee sees no reason for not reporting amounts as interest income merely because the seller and purchaser did not specifically provide for interest payments. This treats taxpayers differently in what are essentially the same circumstances merely on the grounds of the names assigned to the payments. In the case of depreciable property this may convert what is in reality ordinary interest income into capital gain to the seller. At the same time the purchaser can still recoup the amount as a deduction against ordinary income through depreciation deductions. Even where the property involved is a nondepreciable capital asset, the difference in tax bracket of the seller and buyer may make a distortion of the treatment of the payments advantageous from a tax standpoint. Your committee believes that manipulation of the tax laws in such a manner is undesirable and that corrective action is needed.” As specifically mentioned in subsection (c)(1), supra, subsection (f) contains outright exceptions to the applicability of § 483. There are five exceptions in all, of which only that contained in subsection (f)(4) concerns us: “(4) Sales or exchanges of patents. —This section shall not apply to any payments made pursuant to a transfer described in section 1235(a) (relating to sale or exchange of patents).’,’ On brief, the Commissioner agrees that the payments made pursuant to the 1966 assignment “appear to fall within the literal language of Section 1235(a).” It would seem, then, that taxpayer is entitled to be excepted from the operation of § 483 by the “plain, unambiguous and understandable” words of the statute. United States v. Chused, 8 Cir., 209 F.2d 548, 550 (1954). This situation calls to mind the words of the late Circuit Judge Major for our court in Durkee Famous Foods, Inc. v. Harrison, 136 F.2d 303, 307 (1943), rev’d on other grounds, 320 U.S. 718, 64 S.Ct. 367, 88 L.Ed. 422: “This clear and unambiguous language calls for the application of another rule, long recognized by the courts but too often, we fear, honored only by lip service. In United States v. Standard Brewery, 251 U.S. 210, 217, 40 S.Ct. 139, 140, 64 L.Ed. 229, the court said: ‘Nothing is better settled than that in the construction of a law its meaning must first be sought in the language employed. If that be plain, it is the duty of the courts to enforce the law as written, provided it be within the constitutional authority of the legislative body which passed it.’ Again, in United States v. Merriam, 263 U.S. 179, 187, 44 S.Ct. 69, 71, 68 L.Ed. 240, 29 A.L.R. 1547, the court said: ‘But in statutes levying taxes the literal meaning of the words employed is most important, for such statutes are not to be extended by implication beyond the clear import of the language used.’ Again, in United States v. Missouri P. R. Co., 278 U.S. 269, 277, 49 S.Ct. 133, 136, 73 L.Ed. 322, the court said: ‘We are therefore bound by the words employed and are not at liberty to conjure up conditions to raise doubts in order that resort may be had to construction. * * * Construction may not be substituted for legislation.’ “Another rule often overlooked in construing a revenue statute is that in a doubtful situation the taxpayer is entitled to the benefit of the doubt. As was said by the court in United States v. Merriam, supra, 263 U.S. at page 188, 44 S.Ct. at page 71, 68 L. Ed. 240, 29 A.L.R. 1547: ‘If the words are doubtful, the doubt must be resolved against the government and in favor of the taxpayer.’ ” We do not consider that the law in this area of statutory construction has changed appreciably since Judge Major expressed it. Nevertheless, the Commissioner seeks to avoid the consequences of strict construction by invoking the judicially developed rule which justifies “a departure from the letter of the law” when adherence to the letter would cause an absurdity “so gross as to shock the general moral or common sense” and when it is plain that Congress intended “that the letter of the statute is not to prevail.” Crooks v. Harrelson, 282 U.S. 55, 60, 51 S.Ct. 49, 50, 75 L.Ed. 156 (1930). The best indication of the intent of Congress is, of course, the literal wording of the statute itself, which we have held is not ambiguous. Discussion of subsection (f) (4) in the congressional committee reports is minimal and perfunctory, shedding no light on the intent the Commissioner purports to see of avoiding the result the Tax Court decision dictates. Contemporaneous agency interpretation of the statute, as represented by Treas.Reg. § 1.483-2(b) (4), is largely a restatement of the statute and, when considered in the light most favorable to the Commissioner’s position, is ambiguous in a way that the statute is not. To turn from a clear statute to an unclear regulation for guidance is hardly an accepted method of interpretation. To support his contention that the plain language of the statute leads to absurd results, the Commissioner cites two examples of what he terms “anomalous situation[s].” The first of these examples proceeds from the Commissioner’s assumption that Congress created a favored class of taxpayers in enacting § 1235, a class of which the present taxpayer is not a member. Characterizing the exception of § 483(f)(4) as “a benefit essentially ancillary to the benefits provided by Section 1235,” the Commissioner is disturbed by the specter of the present taxpayer obtaining some of the benefits of class membership without qualifying for actual membership in the class. The second example springs from the interrelationship of words and phrases within the various subsections of § 1235. The word “holder” in subsection (a) is defined in subsection (b). As we have noted previously, taxpayer qualifies as a holder under subsection (b) (1) because he “created” the property transferred. The Commissioner points out, however, that subsection (b)(2)(B) makes eligibility for holder status by persons other than “creators” turn on their not being related to the creator within the meaning of subsection (d). Thus, for example, should Busse Bros., Inc., assign the patent rights to a third party at some future time, it may not claim the benefit of the § 483(f)(4) exception even if, like taxpayer, it can qualify the transfer for capital gain treatment under §§ 1221 and 1222. Or, as the Commissioner states the situation in his brief: “Put another way, Section 1235-type transactions disqualified because of an unauthorized ‘transfer’ would not be subject to imputed interest, but Section 1235-type transactions disqualified because of failure to meet the definition of ‘holder’ would be so subject. The proper distinction should lie, in our view, not in how the transaction became disqualified, but rather in whether the transaction was disqualified under Section 1235.” (Emphasis in original.) However much the statute, in operation, may offend the Commissioner’s sense of symmetry and propriety, we cannot say that the results it causes are either absurd or unintended by Congress. Courts have no power (just as the Commissioner has no power in his capacity as an administrative official) “to rewrite legislative enactments to give effect to” their “ideas of policy and fitness or the desirability of symmetry in statutes.” United States v. Shirah, 4 Cir., 253 F.2d 798, 800 (1958). The powers of repeal and amendment are uniquely legislative in their nature. See Lang v. Commissioner, 289 U.S. 109, 113, 53 S.Ct. 534, 77 L.Ed. 1066 (1933) ; Iselin v. United States, 270 U.S. 245, 250-251, 46 S.Ct. 248, 70 L.Ed. 566 (1926); Arkansas Valley Industries, Inc. v. Freeman, 8 Cir., 415 F.2d 713, 718 (1969). We find additional support for our position in the opinion of the Eighth Circuit in Helvering v. Rebsamen Motors, Inc., 128 F.2d 584, 587-588 (1942): “It is not our understanding that a taxing statute is only to be read literally when a literal reading favors the Government. * * * “One may honestly and reasonably believe that in drafting a taxing act Congress uses the language which most nearly expresses the legislative intent, and that if the language used fails properly to express that intent, corrections should be made by Congressional action and not by Treasury regulations or by judicial construction. This is not to say that the language of such an act should not be accorded its full meaning or should be given an unduly restricted interpretation or one which will defeat a clearly apparent Congressional purpose. It seems to us, however, that neither the taxing authorities nor the courts are justified in virtually amending a taxing act because they are of the opinion that Congress may have had or should have had a different intention than that which was expressed in the act. There would seem to be nothing unreasonable in a rule of construction which requires legislative bodies, in enacting taxing statutes, to use language of sufficient clarity to be understood by an ordinarily intelligent taxpayer as well as by those who are required to administer and to interpret the statutes.” In sum, taxpayer’s 1966 assignment to the corporation was “a transfer described in section 1235(a).” Payments received pursuant to the assignment thereby qualified for the exception from unstated interest treatment contained in § 483(f)(4). Since there is every reason to give effect to the plain language of the latter statute, the Commissioner erred in determining a deficiency in taxpayer’s 1967 income tax. The United States Tax Court was correct in so holding, and we affirm its decision and order. Affirmed. . Myrtle Busse is the wife of Curtis T. Busse and is a party to these proceedings solely because she filed a joint income tax return with her husband. . The oral agreement was reduced to writing by an assignment executed April 28, 1967. . As an “individual whose efforts created sucli property,” taxpayer comes within the definition of “holder” for purposes of § 1235. Code, § 1235 (b) (1). . Rev.Rul. 69-482, 1969-2 Cum.Bull. 164. . In so holding, the Tax Court specifically adhered to its prior decision in Floyd G. Paxton, 53 T.C. 202 (1969). Although the Commissioner did not elect to appeal Paxton, he expressed his disagreement with the result by means of a nonacquiescence, 1971-2 Cum.Bull. 4. . “[T]he term ‘total unstated interest’ means, with respect to a contract for the sale or exchange of property, an amount equal to the excess of— “ (1) the sum of the payments * * * which are due under the contract, over “(2) the sum of the present values of such payments and the present values of any interest payments due under the contract.” Code, § 483(b). . H.R.Rep. No. 749, 88th Cong., 1st Sess. (1964). . 1964-1 Cum.Bull. (Part 2) 125, 196. The Senate’s Committee on Finance agreed completely with the views of the House committee. S.Rep. No. 830, 88th Cong., 1st Sess. (1964), 1964-1 Cum.Bull. (Part 2) 505, 606. . The entire discussion in the House report follows: “The bill specifies five situations in which this provision [§ 483] is not to apply: * * * Fourth, this provision is not to apply in the case of payments with respect to patents, which are treated as capital gain under present law.” 1964-1 Cum.Bull. (Part 2) 125, 197-198. The Senate report is identical. 1964-1 Cum.Bull. (Part 2) 505, 607. Moreover, as the Tax Court pointed out, 58 T.C. at 394 n.5, Congress has used the phrase “described in section 1235” elsewhere in the Code without mentioning subsection (a), thus indicating that it is aware of a distinction between the two references. See Code, §§ 871(a)(1)(B) and 1441(b) and (c)(5). . “Section 483 does not apply to any payments made pursuant to a transfer described in section 1235(a) (relating to sale or exchange of patents). The preceding sentence does not apply to transfers which are not described in section 1235(a) but which receive capital gain treatment under another section of the Code.” The regulations under § 483 were adopted on January 24, 1966. T.D. 6873, 1966-1 Cum.Bull. 101. . See note 3, supra. . Congress has delegated to the Commissioner the task of prescribing “all needful rules and regulations for the enforcement” of the internal revenue laws. Code, § 7805(a). See Bingler v. Johnson, 394 U.S. 741, 749-751, 89 S.Ct. 1439, 22 L.Ed.2d 695 (1969); United States v. Correll, 389 U.S. 299, 307, 88 S.Ct. 445, 19 L.Ed.2d 537 (1967). It is nevertheless true that in so doing he may not act unreasonably and unrealistically in the light of the statute he purports to interpret. United States v. Cartwright, 411 U.S. 546, 93 S.Ct. 1713, 36 L.Ed.2d 528 (May 7, 1973). In view of the foregoing discussion of the Commissioner’s position in this case, we have no difficulty in holding that Rev.Rul. 72-138, 1972 Int.Rev.Bull. No. 13, at 16, insofar as it embodies that position, is of no effect and force. United States v. Eddy Bros., Inc., 8 Cir., 291 F. 2d 529, 531 (1961).

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America, Plaintiff-Appellee, v. Frank Richard COPPOLA, Defendant-Appellant. No. 72-1735. United States Court of Appeals, Tenth Circuit. June 4, 1973. Robert J. Roth, U. S. Atty., and James Twitty, Sp. Atty., Dept, of Justice (Roger A. Pauley and Ronald G. Scheraga, Attys., Dept, of Justice, on the brief), for plaintiff-appellee. Larry E. Benson, Kansas City, Kan., and Patrick J. Hurley, Leavenworth, Kan., for defendant-appellant. Before HILL and DOYLE, Circuit Judges, and BRATTON, District Judge. WILLIAM E. DOYLE, Circuit Judge. The appellant was charged in an indictment with Joe Cordova, Fred John Molina and Natividad Baca with having conspired to murder one Willard Hardaway in connection with a dispute growing out of the alleged failure of Hardaway to deliver a quantity of heroin to appellant in the United States Penitentiary at Leavenworth, Kansas (in violation of 18 U.S.C. § 371). In a second count he was charged with aiding and abetting Cordova, Molina and Baca in the murder of Hardaway, contrary to 18 U.S.C. §§ 2 and 1111. Defendant was tried and was found guilty on March 27, 1972, and was subsequently sentenced to life imprisonment on count 2 and to five years in prison on count 1 (conspiracy). The life sentence was ordered to run consecutively to any sentence which appellant was then serving. The five-year sentence was ordered to run concurrently with the life sentence. The government’s theory was that appellant, an inmate at the United States Penitentiary at Leavenworth, was the major supplier of heroin within the institution. The homicide in question resulted from a dispute, again according to the government’s theory, between appellant and Willard Hardaway, the victim, concerning the delivery of the supply of heroin. Coppola had agreed to pay Hardaway $500.00 to smuggle a shipment of heroin into the prison. Hardaway instructed his wife that she would receive a package in the mail and that she should bring the heroin with her to a graduation exercise on August 23, 1968. Hardaway’s wife carried out his instructions. She received the package in the mail and secreted it into the prison. She then divided it into two packages. One package was transferred to Harda-way. The other was delivered to Fred Deering, another inmate, for delivery to Coppola. It was this division of the package which resulted in the homicide. When Deering took the package to Coppola, the latter recognized that half of it was missing and then stated to Deering that Hardaway had “beat him for half of it” but that he “would take care of it.” Later Coppola told Deering that he was paying two Chícanos $500.00 and some narcotics to take care of Harda-way. On September 11, 1968, Hardaway was killed in his cell. The murder weapon was a heavy piece of pipe which was discovered shortly thereafter in a trash bag not far from Hardaway’s cell. The evidence was amply sufficient to support the convictions and apparently appellant’s attorneys recognize this, for the issues posed here involve the trial court’s evidentiary rulings together with the conduct of the prosecutors. It is unnecessary therefore to detail the testimony of the various inmates and others inasmuch as there will be occasion for mentioning much of this testimony in relation to the evidentiary and other problems which will be hereinafter discussed. The alleged errors relied on are, first, the introduction of prior statements of the witness William Triplett under the guise of impeachment. Secondly, the calling of the witness John Marshall Caifano, notwithstanding that the government knew that he was not going to give testimony and was going to claim his privilege against self-incrimination. Error is predicated upon his claiming the privilege in response to 18 questions. Third, the alleged error in allowing the witness Herman to testify as to conversations with codefendants of appellant allegedly long after any conspiracy had terminated. Fourth, the failure of the court to issue process for witnesses to testify as to a confession made by an inmate who has since died. Fifth, the alleged failure of the prosecution to disclose at the pretrial omnibus hearing the nature of the testimony of the informers. Sixth, the failure of the court to include lesser included offenses. Seventh, failure to grant a continuance. It is unnecessary to take up points fifth, sixth and seventh in view of our rulings on the other points and our view of the comments of the prosecutors. I. THE GOVERNMENT’S ATTEMPT TO IMPEACH THE WITNESS TRIPLETT One of the main witnesses on behalf of the government was William Triplett who, like the defendant, was an inmate at Leavenworth prison. This witness had been interviewed by the FBI soon after the incident in question and his statements had been reduced to writing and incorporated into the investigative report but were not, of course, signed. On the eve of the trial Triplett signed an affidavit in which he formally repudiated the statements which he had theretofore made. However, some six months before that he had also repudiated his statements. Therefore, the government attorneys were fully aware that he did not intend to testify in accordance with his prior statements. They may have had some hope that he might relent once he took the stand, but as it turned out this was unfounded and Triplett furnished nothing. Nevertheless, the government managed to bring his prior statements to the attention of the jury by asking questions which in toto included a reading of the entire statement. It was not therefore a case in which Triplett was called as a witness and gave positive testimony damaging to.the government and did so contrary to the reasonable expectations of the government. Rather, he had given prior notice to the government attorneys that his statements to the FBI were not true and that he was not going to testify in accordance with them. Nevertheless, the government started out by asking him about his prior statement. At the outset the trial court showed concern about this procedure, noting the necessity for showing surprise and also questioning whether surprise could in fact be shown. The trial court instructed government counsel to proceed in the usual way, meaning to ask questions seeking to get the desired information before attempting to impeach. The government counsel started to comply with this. The next question to Triplett was as to his knowledge of the homicide; but after this first question he again reverted to his original method of asking Triplett whether he had made a prior statement and then reading the entire statement to him. At common law a party was not allowed to impeach his own witness. The party who called the witness vouched for him, and if he should refuse to testify as expected the testimony given was binding. See Crago v. State, 28 Wyo. 223, 202 P. 1099 (1922) (Blume, J.). The first breakthrough, according to Justice Blume, occurred about the middle of the Nineteenth Century and this exception allowed an examiner in some instances to propound leading questions for the purpose of refreshing the witness’ recollection. Legislation was enacted in many of the states which provided for examining the witness to refresh his recollection and permitting proof of previous statements made out of court under certain conditions. However, the proof of extrajudicial statements for the purpose of impeachment was extraordinary, and when impeachment was allowed it was only for the purpose of neutralizing the unexpected testimony which he had given on the stand. Never, however, could this be done by attacking the general character of a witness. Therefore, impeachment of one’s own witness has been and is now allowed only for the purpose of alleviating the harshness of subjecting a party to the mercy of a witness who has been unscrupulously tampered with by an adversary. But even this does not furnish an occasion for the wholesale introduction of out of court statements, statements which are hearsay and which could be confused by the jury and considered as substantive evidence. See 3A Wigmore, Evidence §§ 906, 1018 (Chadbourn rev. 1970). The authorities recognize the danger of allowing prior statements to be freely introduced because of the difficulty of distinguishing between impeachment and substantive evidence. Inasmuch as the only purpose of impeachment is to neutralize the damaging testimony given, the impeaching evidence should be carefully restricted to compensating for the injury inflicted. See Wigmore, supra, § 1018, and see the legion of authorities cited in the Note following § 1018, supra. See also United States v. Dobbs, 448 F.2d 1262 (5th Cir. 1971); United States v. Miles, 413 F.2d 34 (3d Cir. 1969). That it is reversible error to refuse to properly instruct the jury even in a case of justified impeachment is held in United States v. Lipscomb, 425 F.2d 226 (6th Cir. 1970). See also Brooks v. United States, 309 F.2d 580 (10th Cir. 1962). It is clear from the above that positive damage and surprise to the party calling the witness are requisite. It is also clear 'that the testimony here was limited to the witness’ assertion that his prior statement made to the FBI was false. In his words it was “prefabricated.” The assertion that the statement was false, even if it be regarded as having some damaging aspect, could not possibly justify the introduction of the entire statement. The mischief could have been cured and the effect neutralized by much less of a showing. As to surprise, we do not say that this requirement is lacking simply because there is prior notice that the witness has changed his story. However, the justification for impeachment is substantially lessened when the party calling a witness knows that he intends to repudiate his prior statement and intends to refuse to testify; and, he is still limited by the requirement that the witness shall have damaged his case. See United States v. Dunmore, 446 F.2d 1214 (8th Cir. 1971); United States v. Johnson, 427 F.2d 957 (5th Cir. 1970); Bushaw v. United States, 353 F.2d 477 (9th Cir. 1965), cert. denied, 384 U.S. 921, 86 S.Ct. 1371, 16 L.Ed.2d 441 (1966). And the absolute rule remains that a party is not allowed under the guise of impeachment to bring before the jury an ex parte statement of a witness by calling him to the stand when there is reason to believe that he will refuse to testify and when in fact he does so refuse. The party is bound by his refusal and cannot introduce his prior statement by the expedient of asking him leading questions. Compare Kuhn v. United States, 24 F.2d 910, 913 (9th Cir. 1928). In the case at bar the government knew from the beginning that Triplett was going to deny the truth of his prior statement, for he persisted in this position from the start. Triplett did give some information as to heroin traffic, but declined to answer any question concerning the alleged contract to commit the homicide. As to this, he said that he lacked knowledge. Thus, his failure to testify favorably to the government is negative presentation and did not constitute damage. See McCormick, Law of Evidence § 38, at 73 (1954). A careful reading of the entire testimony of Triplett convinces the reader that the impeachment of Triplett was not to undo affirmative damage. Instead, one is impressed that an effort of the government was to bring about damage in order to justify the introduction of prior statements. The court’s cautionary instruction attempting to distinguish between impeachment and substantive use of statements is of no value because, as has been shown, whether Triplett was lying is not relevant. There is obviously no value in calling a witness and proving that he is a liar. On the other hand, the introduction of prior unsworn statements which have not been subjected to cross-examination in this indirect manner is unquestionably prejudicial. II. THE PERSISTENT QUESTIONING OF THE WITNESS JOHN MARSHALL CAIFANO, NOTWITHSTANDING THAT HE REFUSED TO TESTIFY AND CLAIMED HIS PRIVILEGE AGAINST SELF-INCRIMINATION A TOTAL OF 20 TIMES The witness Caifano had given a brief statement to the FBI prior to trial and the government had contemplated calling him as a witness. However, immediately before trial they learned that he would refuse to testify in accordance with his statement. The prior statement of this witness did not reveal eyewitness knowledge of the homicide. He had advised the FBI agent who questioned him that on the day of the homicide he had heard a low moaning sound from a cell below his own, and had also heard someone say “get a guard with a stretcher”; he heard the moan almost simultaneously with the sounding of the work bell and he saw no one on the tier who did not belong there. He also stated that the trash bag for the third tier was located outside his cell by the stairs and that inmates normally put trash in it on their way to work and that he saw nothing unusual nor any inmate carrying anything or moving exceptionally fast on the morning of September 11, 1968. When, a guard came he followed the guard to Hardaway’s cell and saw that Hardaway had been hit on the head. Questions were asked by the government as to whether the witness knew about the events surrounding the murder — whether he was implicated, whether he was hired to actually do it, or whether he was requested by appellant to arrange for someone to hit Hardaway on the head, or whether he had actually hit him on the head. The scope and extent of this questioning are illustrated by Appendix I attached to this opinion. Caifano invoked his Fifth Amendment privilege to all these questions and more. After the eighteenth question was asked, and following the claim of privilege eighteen times, the judge denied the motion of counsel for appellant for a mistrial, but sustained the objection, ruling that continued questioning of the witness with knowledge that he was going to invoke the Fifth Amendment was improper. Even after this ruling the prosecution asked two additional questions, both of which the witness refused to answer and again claimed his privilege. The record reveals that prior to the trial Caifano’s attorney informed both the prosecution and the defense that Caifano would refuse to testify. Also, the prosecution commented in closing argument on the fact that the witness had claimed the privilege. So also did the defense attorney comment on it. On the motion for new trial appellant argued that it was error for the prosecution to call the witness knowing that he would probably invoke his Fifth Amendment privilege. The trial court found, however, that the government counsel had some basis for believing that Caifano might answer their questions and further found that at no time during the questioning did counsel for appellant object to the questions or request an instruction to the jury. The judge relied on Namet v. United States, 373 U.S. 179, 83 S.Ct. 1151, 10 L.Ed.2d 278 (1963), which upheld the calling of a witness to give him an opportunity to answer questions even though there was prior knowledge that he intended to refuse to answer claiming the Fifth Amendment. In Namet the Supreme Court said that the prosecutor need not accept at face value every asserted claim of privilege no matter how frivolous because the privilege is personal and the witness alone must decide whether to exercise it; that the privilege is not a prohibition against inquiry and cannot be effectively raised before the question is asked and is applicable only to particular questions. See Marcello v. United States, 196 F.2d 437, 441 (5th Cir. 1952); United States v. Terry, 362 F.2d 914, 917 (6th Cir.), cert. denied, 385 U.S. 1029, 87 S.Ct. 758, 17 L.Ed.2d 676 (1966). The ruling in Namet goes no further than to allow the government to call a witness so as to give that witness an opportunity to answer particular questions. It does not stand for allowing the prosecution to ask various and sundry questions which are certain to produce a claim of privilege and to give rise to an atmosphere of guilt. This was the problem at bar. The witness here, according to the statement which he furnished the FBI, knew nothing about the actual murder and yet he was questioned about a great variety of subjects creating the impression that he might have been- an actual participant in some degree or perhaps the principal actor. Yet nothing was produced to support these inferences as to the details of the murder. It left the suspicion that he was implicated but silenced. Accordingly, the conduct of the government comes within that part of the Namet opinion which condemns the conscious effort to derive evidentiary value from unfavorable inferences arising from the claiming of the privilege. In Namet the Court acknowledged that each case must be considered on its merits, and it recognized that unfavorable inferences drawn from the claim of privilege are not competent. The number and variety of questions propounded in the case at bar plainly show that the government was seeking to get eviden-tiary value from the questions and the claims of privilege. This was plainly invalid and prejudicial. It is true that the defendant’s objection did not come until after the harm was done and at this late stage the court sustained the objection. But merely sustaining the objection could not cure the misconduct. The problem would not have been eliminated even if the court had gone further and had, at the conclusion of the questioning, instructed the jury to disregard the questions and answers, and even if the court had admonished the jury that they were not at liberty to draw any inference from the questioning on the claims of privilege. However, if the court had given such cautionary instruction even at that late stage, it would have made the problem less aggravated. Since neither instruction nor admonition was given, the inference arising from the prosecutorial conduct involved and the plain violation of the rules of evidence remained. It is this condition which dictates our conclusion that the goings-on were prejudicial. Cf. 86 A.L.R.2d 1435, 1443 (1961). Moreover, neither counsel should have been allowed to comment in closing arguments on the witness’ exercise of the privilege. See Courtney v. United States, 390 F.2d 521 (9th Cir.), cert. denied, 393 U.S. 857, 89 S.Ct. 98, 21 L.Ed.2d 126 (1968) and Rule 513(a) of the proposed Federal Rules of Evidence. Here both sides did it. This added to the unfavorable trial atmosphere. III. THE STATEMENTS OF CO-CONSPIRATORS One of the witnesses for the prosecution, Killian Joe Herman, also an inmate, testified that he was an orderly in the segregation unit of the prison after the commission of the offense and after appellant and the other alleged co-conspirators were transferred there following the attack. Appellant here challenges the fact testified to by Herman that he was at the time in question an orderly in the segregation unit, but we need not deal with this dispute. Herman testified that he delivered heroin during this time from the appellant to both Molina and Cordova, and Herman was allowed to testify as to conversations which he had with Molina and Cordova which he repeated to the appellant. When the government first attempted to elicit this information from Herman, the objection of the defense was sustained. The government then proceeded to show that Herman had communicated the statements of Molina and Cordova to appellant, and following this showing he was allowed to go ahead and testify as to what Cordova had said to him. He said Cordova “told me that Frank had hired him to get at somebody to kill Mr. Hardaway and he first approached him, wanted him to do it. . and then Cordova said that he went ahead and made arrangements with Molina to have him do it.” Herman was also allowed to testify over objection as to a statement made to him by Molina. Herman testified as to this: “He [Molina] said he wasn’t getting enough stuff. That he wanted all his stuff and he was getting messed around.” Herman further testified to an incriminating statement made to him by the appellant. In this statement appellant was supposed to have said in response to Herman’s question as to how he became involved in all this business that he was being cheated by some of his pushers and that he owed Molina $500 and narcotics for “making a contract to have Hardaway killed.” As to this statement of appellant, we see no problem. It was competent as an admission against appellant. It is the statements attributed by Herman to Cordova and Molina which must be ruled incompetent. These conversations stand on a completely different footing from the statement of appellant. They are hearsay and could have been ruled admissible only on the theory that they were made by a conspirator during the continuation of the conspiracy. But the object of the conspiracy, the murder of Hardaway, had been at this time, in November 1968, completed since September and this was the central object of the agreement. The Molina and Cordova statements were made after this object had been carried out. Such statements made long after the conspiracy and not a part of the original transactions or otherwise in furtherance of the conspiracy are inadmissible. Grunewald v. United States, 353 U.S. 391, 405, 77 S.Ct. 963, 1 L.Ed. 2d 931 (1957); Krulewitch v. United States, 336 U.S. 440, 69 S.Ct. 716, 93 L.Ed. 790 (1949). There is no basis for a finding that appellant embraced these statements either expressly or impliedly. Since the statements were remote in time from the completion of the object of the conspiracy, they cannot be ruled a part of the original conspiracy. And efforts to superimpose a new conspiracy to conceal the offense or to divide the fruits of the crime are fictional and unavailing. The fact that the defendant was continuing to transfer drugs to Molina and Cordova does not evidence any continuing conspiracy related to the murder, for he had been supplying these two with drugs long before the murder was committed. To hold that the statements are competent would require an unauthorized expansion of the Krule-witch and Grünewald doctrines. The fact that the statements may have been repeated to appellant in no way cleanses them or changes their character since appellant is not shown to have adopted them as his admissions or to have been silent when he should have spoken. Accordingly then the two statements retain their hearsay character and it was error for the court to receive them. See 4 Wigmore, Evidence § 1071 (3d ed. 1940). Defendant argues that both statements violate the doctrine enunciated in Bruton v. United States, 391 U.S. 123, 88 S.Ct. 1620, 20 L.Ed.2d 476 (1968). We disagree. In Bruton the Supreme Court held that the reception in evidence of a codefendant’s confession violated the constitutional rights of the defendant to confrontation and cross-examination. The limitations of the Bruton doctrine are explained in Dutton v. Evans, 400 U.S. 74, 91 S.Ct. 210, 27 L.Ed.2d 213 (1970). In our case we are not concerned with any misuse of a confession. In our case raw hearsay was admitted without the benefit of any exception. We have taken up this matter in order to avoid any problem on retrial of the case. IY. THE STATEMENTS AND ARGUMENTS OF THE PROSECUTORS It is contended that unjustified, unwarranted statements were made by the prosecutors in opening statements, during the trial and in closing arguments. Specific objections now made are 1) referring to the appellant as the heroin king of the penitentiary and to the statement that he had an extensive business that affected many people; that he had many ways of introducing this illegal contraband into the penitentiary ; 2) the many references to appellant’s involvement with heroin throughout the trial; 3) referring to the defendant as a member of organized crime; 4) commenting on the impeaching questions propounded to Triplett and the reading of his prior answers and the statement that “I think he told the truth the first time when he told us that he wasn’t seared at that time 5) referring to appellant as the king of beasts as follows: This [the penitentiary] is a jungle, ladies and gentlemen, and in every jungle there are beasts, and there’s always a king of beásts. But how does he become the king, in a fair fight, that’s how he becomes king, in a fair fight. You don’t bludgeon a person over the head when he is asleep without giving him a chance. That’s how you become king. But in this jungle, that’s the way Frank Coppola wanted to become king and to remain king of the heroin traffic, I’m convinced of that. And the statement in support of the argument for the death penalty: If Coppola is permitted to survive, he can continue doing what he has been doing and you will be turning him loose back in the prison yard, back at these witnesses who are courageous enough to come back here and to go back and set up his evil crimes again and society is handcuffed and blocked from doing anything about it, from remedying the worse form of cancer, that is the depraved, merciless, coldblooded killer. Unless this man suffers death, no inmate, and particularly not those who have testified, can ever lead normal, secure, safe lives. The survivors who are still living have a right to survive. Contracts can be let from prison to the outside as well as the inside of the walls. No objection was made to the expressions of personal opinion and to the remarks, and hence these references probably could not furnish a basis for reversal. See Devine v. United States, 403 F.2d 93, 96 (10th Cir. 1968), cert. denied, 394 U.S. 1003, 89 S.Ct. 1599, 22 L.Ed.2d 780 (1969); Van Nattan v. United States, 357 F.2d 161, 163 (10th Cir. 1966). Since, however, the case is to be retried, it is appropriate to point out the impropriety of arguments which are designed primarily to inflame and prejudice rather than to enlighten. Throughout the transcript it is apparent that the government attorney’s strategy was primarily to put emphasis on defendant’s deep involvement in the heroin traffic. It was proper to show the evidence as to the heroin insofar as it related to the conspiracy to murder and the actual murder. The heroin evidence was, however, emphasized unnecessarily. Also, it is not appropriate for the prosecutor to offer his own opinions as to guilt. This not only violates the canon of ethics, it is invalid, for he is not a witness in the case, he is a representative. Cf. Hall v. United States, 419 F.2d 582, 587-588 (5th Cir. 1969); Devine v. United States, supra, at 96 of 403 F.2d. In summary then: insofar as the heroin issue showed motive for the murder it was relevant. This is such an explosive issue that its presence in a case produces a conviction almost automatically regardless of the depth of the evidence. For this reason, undue and unjustified emphasis must be avoided. Inferences which fairly reflect the record are proper argument. Methods designed to arouse prejudice, passion and use of invective are not proper argument. Y. THE DENIAL OF APPELLANT’S APPLICATION FOR SUBPOENA OF A WITNESS We fail to see any error in the refusal of the court to grant an application for a writ of habeas corpus ad testificandum directed to a penitentiary inmate who supposedly would say that one John Lee “Snake” Arnold, another inmate since deceased, had confessed to the killing of Hardaway. The trial court denied the application on the basis of Donnelly v. United States, 228 U.S. 243, 273, 33 S.Ct. 449, 57 L.Ed. 820 (1913). Without considering the affect that final approval of the Federal Rules of Evidence, particularly Rule 804(b)(4), would have on this question, we conclude that the trial court was correct in denying this request because apart from the question of its competence as evidence, the court could have easily determined that it was grossly incredible. X X- * -X- * X Because the errors here are substantial we cannot avoid reversing and remanding this case for a new trial. The individual matters discussed above are substantial and, at the same time, are cumulative. Thus, a new trial is essential even though the valid evidence is legally sufficient to show the defendant’s guilt. We recognize the difficulties incident to the prosecution of an inmate of a penitentiary, but a separate set of standards applicable to this kind of a prosecution cannot be adopted. Accordingly, the judgment of the district court is reversed and the cause remanded for a new trial. APPENDIX TESTIMONY OF JOHN MARSHALL * -X- -X- -X- X X Q. Do you also have another name, Mr. Marshall ? A. Yeah, the name I was born with is Marshall Caifano. Q. How do you spell that name ? A. C-a-i-f-a-n-o. Q. Mr. Caifano, I mean Mr. Marshall, have you been an inmate at the Leavenworth Penitentiary? A. Yes. Q. And how long have you been an inmate? A. About five and a half years. Q. Were you an inmate on September 11, 1968? A. Yes, I was an inmate. Q. Do you remember what cell house you lived in on that day ? A. Well, listen, I want to— Q. Well, let— A. I respectfully decline to answer because my answer may be — may tend to make me — on the grounds that my answer may tend to incriminate me. Q. All right. Mr. Caifano, I would like to ask you did you on that day, September 11, 1968, live in Cell D-301? •X- X X , X X X Q. Mr. Marshall, on September 11, 1968, did you know Willard Hardaway? X X X X X X Q. On September 11, 1968, or thereabouts, were you acquainted with Frank Coppola ? •X* * * * * *x- Q. On that same date were you a close friend of Mr. Coppola? X X X X X- X Q. Mr. Marshall, do you know whether or not Mr. Hardaway, Willard Harda-way, was hit in his cell on September 11, 1968? X X X X X X Q. Mr. Marshall, I will hand you what has been marked Government’s Exhibit No. 22, or I will show it to you, and also Government’s Exhibit 23, and I will ask you whether or not you’ve ever seen either of those exhibits ? X- X X X X X Q. Mr. Marshall, do you know whether or not Government’s Exhibit 22, being the steel rod which I just showed you, was found in the trash bag on Tier 3 of Cellhouse D outside your cell on September 11, 1968 ? X- X X X X X Q. Now, Mr. Marshall, assuming that Mr. Hardaway was hit on the head with Government’s Exhibit 22 on September lli 1968, somewhere around 7:20 or between 7:20 and 7:30 in the morning of September 11, 1968, do you know who hit him on the head ? X- X- X X- X- X- Q. At that same time, being approximately 7:20 to 7:30 on September 11, 1968, did you see anyone in Cell D-311, which is the one Willard Hardaway was in, other than Mr. Hardaway ? * * * * * * Q. Mr. Marshall, did Frank Coppola hire you or ask you to hit Richard — Willard Hardaway over the head and kill him in his cell ? ■X- ■Jf ‘X1 *X" ’X- *X* Q. Mr. Marshall, did you, at the request of Mr. Coppola, ask anyone to hit Mr. Hardaway over the head ? * * * * * * Q. Mr. Marshall, did you personally hit Willard Hardaway over the head on September 11, 1968, at approximately 7:20 to 7:30 in the morning? * * -X- *x- * Q. Do you know Natividad Baca, a person named Natividad Baca? -X- * * * * -X- Q. Do you know Fred John Molina? ****** Q. Do you know Joe Cordova? * * * * * * Q. Now, on September 11, 1968, at approximately 7:20 to 7:30 in the morning, did you see either Natividad Baca, Fred John Molina, or Joe Cordova in Cellhouse D? * -X- -X- * -X- * Q. At that same time, being September 11, 1968, at approximately 7:30 in the morning, did you see Fred John Molina leave cell D-311, which is the cell of Willard Hardaway? * * * * * * MR. BENSON: Your Honor, may counsel approach the bench ? * * * * * * THE COURT: Yes, you may. * * * ->:• * * THE COURT: I think under the circumstances it is not improper for the United States Attorney to place the witness on the stand and give him an opportunity to answer the questions, assuming that he might not claim his privilege, but I do think that continued questioning along this line now, knowing that he is claiming the Fifth, would be improper. Objection sustained and the motion for a mistrial will be denied. (The following proceedings were had in open court in the presence of the jury:) By Mr. Roth: Q. Mr. Marshall, do you recall ever being interviewed by any member of the Federal Bureau of Investigation concerning this matter ? * # * * * -X- Q. Well, Mr. Marshall, if I continue asking you questions about this matter, no matter what they are, will you continue giving that same answer ? * *X- * *X- -X- * MR. ROTH: You may cross-examine. MR. HURLEY: No questions, your Honor. * * * * * * . Prior to Coppola’s trial, Molina and Baca were allowed to plead guilty to voluntary manslaughter and each was sentenced to ten years’ imprisonment. All charges against Cordova were dismissed. . Coppola pleaded guilty to a heroin charge growing out of the same general transaction. . Hardaway had completed a two-year college course within the prison. . The following' excerpts from Triplett's ex parte statements to the FBI were introduced. Each of the paragraphs shown was included in a single question. “It was common knowledge among the inmates of U.S.P.L. that Frank Richard Coppola’s associates such as Freddie Deering, Warren Smith, and Courtney Taylor, were involved in a narcotics trade in Leavenworth, and that Marie Hardaway brought into the penitentiary two packages the approximate size of a cigarette package containing $5,000.00 worth of heroin at Willard Hardaway’s U.S.P.L. inmate graduation.” * * * * * “Willard Hardaway apparently tampered with the packages which he gave to Coppola. The package Hardaway gave to Coppola did not contain the right amount of heroin, and Coppola told Freddie Deering and Warren Smith that it was short. Triplett overheard this conversation.” * sis # * * “At approximately 6 p. m. three or four days after Hardaway’s college graduation at U.S.P.L. which took place during late August or early September, 1968, Triplett met Coppola in front of Coppola’s cell. Triplett was going to borrow some money from Coppola, and Coppola said that he had some money and papers, that is, packages of heroin. Coppola wanted Triplett to stash, hold these items for him.” * * * * * “Coppola gave to Triplett a $20.00 bill and a $10.00 bill in the presence of Freddie Deering who came out onto the range after making coffee in his cell. Triplett took the money and papers Coppola had given him and put them in his pocket. He then left Coppola’s cell. When he reached the end of the range, Coppola called to him. Deering had left by this time and Coppola came down to Triplett at the far end of the range, that is the opposite side from where the stairs are located. Coppola asked Triplett if he had a good place to stash the money and heroin, and Triplett told him that he did. Triplett was told by Coppola that he could keep the whole thing, that is, the money and heroin, and that all he had to do was to knock the son of a bitch’s brains out. Triplett said that lie did not understand what Coppola was talking about. Coppola asked him if he knew Hardaway, the loan shark. Triplett said he did, and Coppola said all he had to do to keep the money and heroin was to knock Hardaway’s brains out. Triplett said he wouldn’t do this, but he would stash the money and heroin.” * # s¡; * s¡: “About two hours later Coppola came to Triplett’s cell and told him to forget about what lie had said about Hard-away, and that the matter was settled. He was told to just forget about it.” ❖ sfs 5¡s * sfs “No more than 48 hours later Hard-away was bludgeoned in his cell and subsequently died.” . The trial judge’s concern was expressed in this statement: “What is this about now? This man is a government witness, and you are impeaching him before you ask any questions.” . McCormick, Law of Evidence § 38 (1954). . The text of his statement reads : JOHN MARSHALL, also known as MARSHALL CAIFANO, inmate, United States Penitentiary, Number A83259-L, cell #D301 orderly of the cell house, was advised of the identity of the interviewing agent and of Captain W. W. TUCKER, U. S. Penitentiary. MARSHALL stated that on August 11, 1968, he left his cell at approximately 6 :00 AM and went to breakfast. He returned to his cell after breakfast and took the trash out to the flag which he defined as the floor of the cell house. He returned to his cell prior to the work bell and stayed in his cell where he read the newspaper. He heard a low moaning sound which he thought was coming from below his cell on another tier and went to the door of his cell where he heard someone from the left say, “Get a guard with the stretcher”. He stated that he heard the moan almost simultaneously with the work bell as the inmates were walking on the way to work. He stated that everyone he saw on the tier belonged there. MARSHALL stated that the trash bag for the third tier is located outside his cell by the stairs and that inmates normally put things in it on their way to work. He stated he saw nothing unusual nor any inmate carrying anything or moving exceptionally fast on the morning of September 11, 1968. A guard came up and MARSHALL followed the guard to HARDAWAY’s cell and saw- that HARDAWAY had been hit in the head. . See Sanders v. United States, 373 F.2d 735 (9th Cir. 1967); Fletcher v. United States, 118 U.S.App.D.C. 137, 332 F.2d 724 (1964). . See United States v. Terry, supra, at 917 of. 362 F.2d and cases cited therein. See also United States v. Maloney, 262 F.2d 535 (2d Cir. 1958). . Defense counsel said : You recall Mr. Marshall, and Mr. Douthitt testified that he was the gentleman that looked so suspicious to him and that he was standing by that receptacle where the alleged murder weapon was found. And then did you see Mr. Marshall come in here to testify, and what did he say? “I refuse to answer on the grounds it might tend to incriminate me.” “Me”, not Prank Coppola. And then consider the fair way in which the Government examined him after it being evident to everybody in the courtroom that every question he was asked except his name and address, he would take the Fifth Amendment to. Then and only then did they start asking him questions like, “Did Prank Coppola do it?” I’m sure if he had been asked if J. Edgar Hoover committed the crime, he would still have taken the Fifth Amendment. (Tr. 73A-6). The prosecution said: So they make a big issue out of Mr. Marshall. I don’t know why Mr. Marshall took the Pifth Amendment, but if he was withholding evidence that was helpful to us, he was — would have been admitting to a crime of a felony, that’s why he is taking the Fifth Amendment. He possibly had given statements earlier that we hoped to show, but he wouldn’t testify. Why wouldn’t he testify? I’ll only speculate with you, he was scared to death, just like the rest of them. (Tr. 756). This response was repeated by Marshall to all subsequent questions, and so only the subsequent questions are included.

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Daniel BURR et al., Plaintiffs-Appellees, v. The NEW ROCHELLE MUNICIPAL HOUSING AUTHORITY et al., Defendants-Appellants. No. 688, Docket 72-2425. United States Court of Appeals, Second Circuit. Argued April 9, 1973. Decided May 25, 1973. Michael J. Dale, The Legal Aid Society of Westchester County, New Rochelle, N. Y. (Martin A. Schwartz, White Plains, on the brief), for plaintiffs-ap-pellees. Richard L. Baltimore, New York City, for defendants-appellants. Jeanne Hollingsworth, New York City Housing Authority, New York City, for amicus curiae. Maria L. Marcus, New York State Commissioner of Housing, New York City, amicus curiae. Before SMITH, HAYS and TIMBERS, Circuit Judges. HAYS, Circuit Judge. This is an appeal from an order of the United States District Court for the Southern District of New York granting plaintiffs’ motion for summary judgment. The district court found that plaintiffs had a right under the due process clause of the Fourteenth Amendment to notice and a full adversary hearing before being required by the New Rochelle Municipal Housing Authority to pay higher rents or an across-the-board service charge. The court ordered the Authority not only to serve on the tenants a written notice of a public hearing but also to provide an opportunity to exchange evidence prior to the hearing. The court also held that due process required the oral presentation of evidence by the Authority, representation of the tenants by selected representatives, assisted by counsel, an opportunity to introduce rebuttal evidence, a stenographic verbatim transcript of the hearing, and a written determination by the Authority Board of Review based upon the evidence presented at the hearing. Although we hold that due process requires certain procedural safeguards before an across-the-board rent increase can be imposed by a municipal housing authority, we do not agree that a formal adversary hearing with attendant procedures is necessary. We therefore modify the judgment of the district court and affirm it as modified. Plaintiffs are tenants in apartments controlled and operated by the defendant New Rochelle Municipal Housing Authority, a public corporation organized under New York State law, to provide low rent housing for persons of low income. On June 24, 1971, the Chairman of the Housing Authority sent to all tenants residing in the Authority’s housing, notice of the imposition of a service charge of $2.00 per room per month for each apartment, effective August 1, 1971. The Authority states that the service charge was made necessary because of the increasing deficits the Authority faced, due primarily to increased utility costs. The Authority has three sources of income: (a) Subsidy from the State of New York; (b) Subsidy from the City of New Rochelle; (c) Rental income from the tenants. According to the Authority it proved impossible to get any additional subsidy from either the city or the state to meet the deficits; therefore the choice confronting the Authority was either to raise the rents, through a service charge in this instance, or decrease the services provided the tenants. The Authority chose the former course and the service charge became effective August 1, 1971. Five hundred and twenty tenants were affected by this action; four hundred and forty-five are paying the service charge. Several tenants including some of those paying the service charge and some who refused to pay, instituted this action under 42 U.S.C. § 1983 seeking a declaration that the across-the-board rent increase was invalid and enjoining the adoption of any such increase unless the tenants were accorded a hearing. As we have noted, the district court granted summary judgment for the plaintiffs. I. To begin with, we must reject appellants’ contention that the New Rochelle Municipal Housing Authority is not a government agency, and that the 14th Amendment does not apply because there is no State action. This court has held that the actions of the Authority are State actions within the meaning of § 1983. King v. New Rochelle Housing Authority, 442 F.2d 646 (2d Cir.), cert. denied, 404 U.S. 863, 92 S.Ct. 113, 30 L.Ed.2d 107 (1971). The district court was clearly correct in finding that “The facts and prior case law mandate the conclusion that [the Housing Authority’s] official actions are actions taken under color of State law.” II. Since the action of the Authority in imposing the service charge was State action, and the “interest at stake” (see Board of Regents of State Colleges v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)) was of such a nature as to be within the protection of the Fourteenth Amendment, the remaining question is the extent of the procedural safeguards required by the concept of due process. See Morrissey v. Brewer, 408 U.S. 471, 92 S.Ct. 2593, 33 L.Ed.2d 484 (1972). See generally, Note, Procedural Due Process in Government-Subsidized Housing, 86 Harv.L.Rev. 880 (1973). A. The nature of the interest The interest at stake here is clearly substantial. As this court said in Escalera v. New York City Housing Authority, 425 F.2d 853, 864 (2d Cir.), cert. denied, 400 U.S. 853, 91 S.Ct. 54, 27 L.Ed.2d 91 (1970): “. . . the small size of the ‘additional rent’ charges [cannot] be relied on to deny tenants automatically fair procedures. To be sure, the size of the charges is relevant to the question of the burdensomeness of the required procedures, but even small charges can have great impact on the budgets of public housing tenants, who are by hypothesis below a certain economic level.” As a result of the service charge the plaintiffs in this action are required to pay roughly 10% more per month for their apartments. Daniel Burr — raised to $113.00 from $102.00 Ethel Gary — raised to $99.00 from $90.00 Willie Riley — raised to $112.00 from $101.00 J. Smith — raised to $112.00 from $101.00 B. The burden of administration The administrative burden occasioned by the requirement of full adversary hearings would be a very heavy one. Some five hundred tenants are directly involved in the imposition of the service charge by the New Rochelle Municipal Housing Authority and tenant representation at an adversary hearing would be difficult but perhaps not impossible. The district court ordered that a single hearing be held at which the 520 tenant families were to be represented by 4 persons, with the other tenants having the right only to attend and observe. The attorney for the tenants was to be one of the four representatives. The court then broke down the 520 tenants into three groups, each with one representative, as follows: “The approximately one hundred seventy-five (175) tenants who receive public assistance shall be entitled to one (1) representative. The approximately one hundred thirty-nine (139) tenants whose individual incomes exceed seven thousand ($7,-000) dollars shall be entitled one (1) representative. The balance of two hundred six (206) tenants shall be entitled to one (1) representative.” We must consider the effect of our decision in other areas. The New York City Housing Authority, for example, operates 188 housing projects, housing approximately 600,000 persons in 15&,-610 apartments. A full adversary hearing in such a situation with all attendant procedures would present the most serious difficulties. The virtual impossibility of setting up an equitable scheme for the representation of 155,000 tenant families in New York is apparent. Even if a scheme could be devised to assure adequate representation for the diverse interests of tenants situated in differing complexes and having different problems, the large number of representatives required would make a single hearing unmanageable. The selection of representatives for 600,000 people would alone require an operation of approximately the same magnitude as the election of the legislature in about a dozen of the states of the United States. C. Type of procedure necessary to protect the tenants’ interests We disagree with the finding of the district court that a full adversary hearing is so necessary to the protection of the interests of the tenants as to justify the grave administrative burdens which such a hearing would impose. The questions involved in a rent increase do not turn on the resolution of specific factual issues on which the tenants as a group would have any special knowledge. The decision to raise rents requires rather the evaluation of complex financial data. The rise in utility costs which occasioned the service charge in the present case must be evaluated within the context of the Authority’s overall financial condition, the intricacies of project management, the possibilities of savings in some types of operations, and a hundred other intricate details. In McKinney v. Walter E. Washington, 143 U.S.App.D.C. 4, 442 F.2d 726, 727 (1970) the court said: “The financing of a low-rent housing program, which sometimes necessitates the raising of rents, is a very complicated operation requiring a high degree of expertise. It is quite unlikely that courts, to say nothing of tenants, would possess the necessary expertise. In many cases-it is only too probable that participation by tenants in rental decisions and review by the courts would cause senseless and damaging delays.” In a situation in which the individual rights of the tenant are directly affected, see Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970) (termination of welfare benefits) a trial type of hearing is required and the opportunity to present oral evidence serves a real function. However, in a situation such as the instant case, we agree with the district court in Geneva Towers Tenants Organization et al. v. Federated Mortgage Investors et al. (N.D.Calif. January 8, 1972), that: “[T]he opportunity to present oral evidence is not particularly valuable where technical financial data is at issue. The ‘credibility’ of conflicting data is not best resolved by evaluating the demeanor of witnesses; it is best resolved by independent agency investigation . . .” While this court in Langevin v. Chenango Court, Inc., 447 F.2d 296 (2d Cir. 1971), said, in passing, that a hearing would be required in a situation in which the landlord is a governmental body, Judge Friendly noted that “Whether the ‘hearing’ need always be the traditional ‘trial-type’ is another matter.” We agree with the statement of appellee that “. . . the import of Langevin is that decent, safe and adequate low-rent public housing at rents low income tenants can afford is an interest of the nature which merits due process protection. The question then becomes the type of procedures required by the due -process clause in the light of the severity of the private interest, the procedures necessary to protect that interest and the administrative burden.” III. Balancing the interests of the Authority in a summary procedure against the interests of the tenants and the type of procedure necessary to protect these interests, we hold that due process does not require an adversary hearing before a general rent increase or service charge can be imposed. See Hahn v. Gottlieb, 430 F.2d 1243 (1st Cir. 1970). We feel that the interests of the tenants, while eoneededly important, can be protected through a less formal procedure. Notice of a proposed increase in rent shall be served well in advance of the date for the increase. Opportunity for filing written objections shall be given. There need be no opportunity for oral presentation. The tenants or their representatives shall have the right to submit any material they consider relevant to disprove the need for the rent increase. Finally, the Review Board upon reaching a decision shall issue a statement outlining the reasons for either approving or rejecting the requested rent increase. The tenants may of course be represented by counsel. Modified and, as modified, affirmed. “While the court concludes that due process does not require a formal hearing with its concomitant panoply of procedures, problems, and costs, there are other procedures available to safeguard tenants’ rights . . . The court therefore concludes that due process requires that tenants be given notice of their lessor’s application for approval of rent increases; that tenants have a reasonable opportunity to make written objections thereto; and that tenants be furnished with a concise statement of FI-IA’s reasons for approving an increase.” . The notice rend as follows : June 24, 1971 TO THE TENANTS OE HARTLEY HOUSES, MAO LEAY APARTMENTS and BRACEY APARTMENTS : It is with great regret that we must inform you that in order to meet current expenses and to prevent a deterioration in the services rendered to you, it is mandated that we make a service charge of $2.00 per room per month for each apartment. This service charge is uniform. We have exhausted every other possible remedy before taking this action and have, in fact, been criticized for our delay in placing this service charge despite the fact that other authorities have imposed it for a period of time prior to this. The increase will be reflected in your rent statement for the month beginning August, 1971. Sincerely yours, NEW ROCHELLE MUNICIPAL HOUSING AUTHORITY . State subsidies for public housing are regulated and limited by law (Public Housing Law, § 73 [McKinney’s Consol. Laws, c. 44-A, 1972-1973 Supp.]). The total amount of money available for this purpose is fixed by the procedures set forth in Article XVIII, § 3 of the New York Constitution and cannot be increased unless the electorate approves an increase in subsidies. . “Adjudicatory hearings serve an important function when the agency bases its decision on the peculiar situation of individual parties who know more about this than anyone else. But when, as here, a new policy is based upon the general characteristics of an industry, rational decision is not furthered by requiring the agency to lose itself in an excursion into detail that too often obscures fundamental issues rather than clarifies them.” WBEN, Inc. v. United States, 396 F.2d 601, 618 (2d Cir.), cert. denied sub nom. Kings Garden Inc. v. FCC, 393 U.S. 914, 89 S.Ct. 238, 21 L.Ed.2d 200 (1968). . In Geneva Towers Tenants Organization et al. v. Federated Mortgage Investors, et al. (N.D.Calif. January 8, 1972) a district court set up much the same procedure in a similar situation.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America, Appellee, v. Wesley Clyde BROWN, Appellant. No. 739, Docket 73-1068. United States Court of Appeals, Second Circuit. Argued March 23, 1973. Decided May 23, 1973. Feinberg, Circuit Judge, dissented and filed opinion. Michael B. Standard, New York City (Herbert Jordan, Rabinowitz, Boudin & Standard, New York City, N. Y., of counsel), for appellant. David A. De Petris, Asst. U. S. Atty. (Robert A. Morse, U. S. Atty., E. D. N. Y., L. Kevin Sheridan, Asst. U. S. Atty., Brooklyn, N. Y., of counsel), for appel-lee. Before SMITH, FEINBERG and MANSFIELD, Circuit Judges. MANSFIELD, Circuit Judge: By decision filed on December 6, 1972, United States v. Brown, D. C. Cir., 470 F.2d 285, we vacated a judgment of the United States District Court for the Eastern District of New York, Walter Bruchhausen, Judge, sentencing Wesley Clyde Brown to a term of two and one-half years imprisonment upon his plea of guilty to a one-count indictment charging him with refusal to report for induction in violation of 50 U.S.C.App. § 462(a). The case was remanded for re-sentencing by another judge. We held that the refusal of the sentencing judge to make the presentence report available to Brown, pursuant to a uniform policy the judge had followed, constituted a failure to exercise his discretion under Rule 32(c)(2), F.R.Cr.P., which we found requires the discretion to be “exercised on a case-by-case basis, not by a blanket policy of non-disclosure.” 470 F.2d at 288. Upon remand the case was assigned by lot to Judge Travia, who made the presentence report available to Brown and his counsel before sentencing and, after holding a sentencing hearing, re-sentenced Brown to the same term that had previously been imposed. From this second sentence Brown, who has been incarcerated since January 27, 1972, appeals. He contends that Judge Travia, upon the resentencing, committed various errors which necessitate still another resentencing. We cannot agree and must affirm the judgment of the district court. Since the background of the case up to the point of our remand is set forth in our earlier opinion, we need not repeat it here. Upon this appeal Brown urges that Judge Travia erred in (1) failing' to give any legally justifiable reasons for reimposing the same sentence, (2) failing to identify the facts in the presentence report relied on by him, (3) basing the sentence on Brown’s political beliefs and on erroneous information in the presentence report, (4) failing to “redo” the entire sentencing process, and (5) abusing his sentencing discretion in reimposing the two and one-half year sentence. To the extent that Brown asks us to review on the ground that the sentence was excessive, we must decline the invitation. We are still bound by the basic principle against appellate review of sentences except in extraordinary circumstances. United States v. Tucker, 404 U.S. 443, 447, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972); Gore v. United States, 357 U.S. 386, 393, 78 S.Ct. 1280, 2 L.Ed.2d 1405 (1958); Blockburger v. United States, 284 U.S. 299, 305, 52 S. Ct. 180, 76 L.Ed. 306 (1932). Although cracks in the wall are beginning to develop, see Woosley v. United States, 478 F.2d 139 (8th Cir. 1973) (en banc) (5-year sentence imposed pursuant to a rigid policy upon a Jehovah’s Witness for refusing induction vacated on ground that district court had “manifestly or grossly abused its discretion” and “[t]he severity of the sentence shocks the judicial conscience”), the present case is not an appropriate one for departure from the policy against appellate review. Here the sentence was one-half of the permissible five-year statutory limit. In characterizing the two and one-half year sentence imposed on Brown as “harsh” in our earlier opinion —a view from which we do not retreat —we were referring to that fact as an additional reason for requiring the sentencing judge to exercise his discretion on an individual basis in this case. That discretion has now been exercised in favor of full disclosure of the presentence report with respect to Brown, and Judge Travia, in imposing sentence, has acted within the discretionary limits afforded to the district_jmurt, which are broad. United States v. Tucker, 404 U. S. 443, 447, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972); United States v. Sweig, 454 F.2d 181, 183-184 (2d Cir. 1972); McGee v. United States, 462 F.2d 243, 245 (2d Cir. 1972), Absent the sentencing judge’s reliance on constitutionally impermissible factors or upon material inaccuracies, it is not our function to review a sentence falling within statutory limits. United States v. Mitchell, 392 F.2d 214 (2d Cir. 1968); Blockburger v. United States, 284 U.S. 299, 305, 52 S. Ct. 180, 76 L.Ed. 306 (1932); United States v. Holder, 412 F.2d 212, 214 (2d Cir. 1969). Brown’s contention that the district court erred by failing to state the reasons for reimposing the same sentence and by failing to designate the portions of the presentence report relied upon by it must also be rejected. Were we writing on a clean slate, we might well be persuaded in favor of a requirement that the sentencing judge state his reasons. Such a rule would be “a powerful safeguard against rash and arbitrary decisions” at this crucial stage of the criminal process where the defendant’s liberty is at stake. M. Frankel, Criminal Sentences — Law Without Order 41 (Hill and Wang 1972). It would serve “to promote thought by the decider, to compel him to cover the relevant points, to help him eschew irrelevancies —and, finally, to make him show that these necessities have been served.” Id. at 40. It would also promote fairness by minimizing the risk that the sentencing judge might rely on misinformation or on inaccuracies in the presentence report. See United States v. Needles, 472 F.2d 652 (2d Cir. 1973). If a misapprehension on the court’s part were disclosed, the defendant and his counsel would then have the opportunity to answer and explain, pointing out the error. A Sphinx-like silence on the court’s part precludes anyone (including the parties, the judge, and an appellate tribunal) from learning whether he acted in error. Furthermore, a statement of reasons by the court could prove to be of considerable assistance to prison and parole au-thoritites in later determining the type of institution in which the defendant should be incarcerated and the time and conditions of parole. In the present ease it would have been of considerable assistance to have had the rationale of the conscientious sentencing judge, since the information found in the presentence report and accompanying documents, all of which we have examined, is for the most part favorable to Brown. He has no known criminal record, has frankly admitted his offense, and has based his refusal to report for induction on moral grounds. The report describes him as a person who has had a better than average background and education. He has enjoyed the support of his parents and siblings, an average scholastic rating, and a good behavior record in school. He is not addicted to narcotics and, prior to his incarceration, he was reasonably self-supporting. An impressive array of letters have been sent to the court by persons offering Brown employment, and by clergymen, teachers and other members of the community, which emphasize his sincerity and talents. With respect to Brown’s attitude and refusal to serve in the war effort the presentence report states that he has “deep personal convictions” and that while he is not a member of the Black Panther Party his refusal to serve is based on “beliefs as set forth in the Black Panther Party tenets from which he quotes extensively.” In the face of this profile the reasoning behind the court’s two and one-half year prison sentence is difficult to grasp. Although a sentencing judge should in our view be encouraged to state his reasons and such a statement would have been welcomed here, we have repeatedly held that in view of the trial judge’s very broad discretion, see decisions cited page 1172, swpra, “he is generally under no obligation to give reasons for his sentencing decisions,” McGee v. United States, 462 F.2d 243, 247 (2d Cir. 1972). Clarification has been required only under circumstances not found here, e. g., where a sentence was imposed upon the basis of (1) misinformation of constitutional magnitude; such as an inaccurate criminal record, Townsend v. Burke, 334 U.S. 736, 741, 68 S.Ct. 1252, 92 L.Ed. 1690 (1948), (2) a record comprising prior unconstitutional convictions, e. g., United States v. Tucker, 404 U.S. 443, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972), (3) the effect of a simultaneous sentence and conviction upon a more serious count of the indictment, which was later invalidated, McGee v. United States, 462 F.2d 243 (2d Cir. 1972), or (4) failure of the court to receive and consider mitigating circumstances, United States v. Malcolm, 432 F.2d 809, 818 (2d Cir. 1970). With one possible exception, discussed below, we here fail to find evidence of any materially false assumptions on the part of the sentencing judge or reliance by him on material inaccuracies or on constitutionally impermissible factors. After Brown and his counsel had been afforded the opportunity to read, review and discuss the presentence report, Judge Travia convened court, made a record of Brown’s motion papers and of the numerous letters with respect to Brown that had been received and read by the court and by the Probation Office. Brown’s counsel then directed the court’s attention to several inaccuracies in the presentence report, which were reviewed in detail by Judge Travia, who indicated either, that they were immaterial or that he would not give them weight. For instance, the judge stated that as far as he was concerned Brown was not considered to be a member of the Black Panther Party. None of the alleged errors in the report, which we have reviewed, are of sufficient importance to be of constitutional significance. Accordingly we must reject Brown’s contentions that his sentence be vacated because of the sentencing judge’s failure to state his reasons or because of inaccuracies in the presen-tence report. There remains the question whether Judge Travia, although he did not state his reasons, relied upon a constitutionally impermissible factor, i. e., Brown’s expressed sympathy with the political and social views of the Black Panther Party. In a letter to his Local Board dated March 5, 1969, quoted in the presentence report, Brown stated: “Point six of the Black Panther Party platform and program states: 'We want all Black men exempt from military service. We believe that Black people should not be forced to fight in the military service to defend a racist government that does not protect us. We will not fight and kill other people of color in the world who, like black people are being victimized by the white racist government of America. We will protect ourselves from the force and violence of the racist police and the racist military, by whatever means necessary.’ “This is the position I adhere to. Therefore, since the government grants no rights, I owe it no duties. And if you can't relate to that, you can [obscenity].” After reading in open court the foregoing portion of Brown’s letter, the court made the following statement: “The Court: He should also take the responsibility for saying those words. That brings us to the quote of Voltaire. And I don’t have to quote from there.” Thereupon Judge Travia, after complimenting appellant’s counsel upon his efforts in the .matter and stating that he had thoroughly reviewed all sentencing data and given the matter a great deal of thought, advised “I cannot change the judgment of the Court as previously set forth” and reimposed the two and one-half year .sentence, subject to the condition that Brown might, pursuant to 18 U.S.C. § 4208(a)(2), become eligible for parole at such time as the Board of Parole might determine. Seizing upon the above-quoted remarks of the district court, Brown contends that the district judge improperly based the sentence upon his distaste for Brown’s political and moral beliefs. We disagree. Although Judge Travia’s statement that Brown must “take responsibility for saying those words” is not entirely free from doubt, we are satisfied from the sentencing minutes, considered as a whole, that he did not base the sentence on his revulsion arising out of Brown’s social or political views, which would be improper. United States v. Mitchell, 392 F.2d 214, 217 (2d Cir. 1968) (concurring opinion of Judge Kaufman); cf. Brandenburg v. Ohio, 395 U.S. 444, 89 S.Ct. 1827, 23 L.Ed.2d 430 (1969). Read in context, the court’s remarks were apparently directed toward Brown’s statement that he would protect himself from what he considered force and violence by the police or military “by whatever means necessary.” Although Brown’s counsel stated that these words did not amount to a “call to violence on his part,” the remark, when considered with Brown’s statement to the Probation Officer that “his obedience to the laws of the land is limited, if these laws conflict with certain of his personal beliefs,” could properly have raised a serious question in the sentencing judge’s mind as to whether Brown posed a threat of violent or anti-social conduct to the community. The record reveals that Judge Travia, before imposing sentence, carefully and conscientiously considered all relevant information that was available to him, including the recommendation of the two members (in addition to Judge Bruch-hausen) of the earlier sentencing panel, who had recommended sentences of two years and four years, respectively, and of the Probation Office, which had recommended three years. Since Judge Travia was imposing the same sentence as that previously imposed by Judge Bruchhausen, a statement of reasons would have removed any lingering doubt that he had acted arbitrarily or according to a rigid, discretionless formula. However, under the circumstances we cannot say that the sentence was not reasonably related to a legitimate sentencing purpose. Assuming that Judge Travia’s duty was “to redo the entire sentencing process,” McGee v. United States, supra, 462 F.2d 243, 247 n. 8, that obligation was met. The judgment is affirmed. FEINBERG, Circuit Judge (dissenting) : In March 1969, Wesley Clyde Brown, a young black man, delivered himself of some bitter comments on American society. To this judge, sitting in his quiet chambers, Brown’s words may seem extreme and unwarranted; to some, they may be most offensive. But to none, I submit, should Brown’s strictures justify a two and one-half year jail sentence. Because that is apparently what occurred here, I dissent. It is essential to put the sentence in this case into perspective. Brown, a teacher and writer, was not yet 24 years old when he wrote the 1969 letter to his draft board, expressing sympathy with point six of the Black Panther Party platform, quoted in the majority opinion. When Brown reappeared in the district court in December 1972 after our remand, he had no criminal record other than his conviction in this case. Up to that time, apparently, he had never engaged in an act of violence, nor had he even been in any serious trouble. Brown came from a good home and had a fine behavior record in school. He frankly admitted his offense, and no one questions that his refusal to report for induction was based on moral grounds. As the majority opinion points out, “the information ... in the presen-tence report and accompanying documents ... is for the most part favorable to Brown.” The judge on resen-tencing also had before him “[a]n impressive array of letters which emphasize [Brown’s] sincerity and talents.” There was not the faintest suggestion from anyone or in any document or report — other than the letter already referred to — that Brown posed a threat of violence to anyone. The majority picks up a statement by Brown to the Probation Officer, whose report of it is quoted in the margin. As the pre-sentence report indicates, the context of this remark is that Brown would not serve in the armed forces if '“his conscience would not permit him to .” This, of course, is why he was being sentenced in the first place, after pleading guilty to failure to report for induction. Any graver implication is unwarranted. Moreover, Brown’s conduct, his actual mode of life from March 1969 to January 27, 1972, when he was incarcerated, gave no basis for a belief that he was a threat to society. It is painfully obvious — at least to me— that the judge referred to Brown’s political and social views, as expressed in the letter, when he said that Brown must “take responsibility for saying those words.” The majority agrees that a sentence based on “revulsion arising out of Brown’s social or political views . would be improper.” But apparently that is what happened, and the sentence therefore should not stand. If there is any doubt about the matter, the judge should at least be required to state his reasons for imposing the same two and one-half year sentence that Brown received before. Such a statement, as the majority points out, would “have removed any lingering doubt” that the judge had acted improperly. Moreover, our own prior decision in McGee v. United States, 462 F.2d 243, 247 (1972), furnishes ample precedent for requiring clarification in this case See also United States v. Tucker, 404 U. S. 443, 447-449, 92 S.Ct. 589, 30 L.Ed.2d 592 (1972); Townsend v. Burke, 334 U. S. 736, 741, 68 S.Ct. 1252, 92 L.Ed. 1690 (1948); United States v. Malcolm, 432 F.2d 809, 819 (2d Cir. 1970). The majority cites these cases but confines them to their own facts; such a narrow construction is unjustified. McGee stands for the proposition — which the other decisions implicitly support — that under some circumstances a sentencing judge may be required to give reasons for his sentence, although this is not ordinarily done. This case is clearly an appropriate instance, since the record certainly suggests that a sentence that we all agree was harsh was imposed for a constitutionally impermissible reason. In a case “not entirely free from doubt,” as the majority puts it, this court should not strain to avoid a strong inference of invalidity; if there was a proper reason for the sentence, the judge should state it. Accordingly, I would remand for re-sentencing. Alternatively, at the very least, we should require the judge to give “a summary explanation of his reasons” for the sentence. See McGee v. United States, supra, 462 F.2d at 247. . The reference to the “quote of Voltaire” is puzzling. Assuming that the judge was alluding to the famous remark “I disapprove of what you say but will defend to the death your right to say it,” S. G. Tallentyre: The Friends of Voltaire, the reference appears inconsistent with the idea that Brown must “take responsibility” for his words by risking jail. Possibly the court was referring to another quote from Voltaire: “Men use thought only as authority for their injustice, and employ speech only to conceal their thoughts,” Dialogue 14, Le Chapón et la Poulard (1763). . See generally, Zavatt, Sentencing Procedure in the United States District Court for the Eastern District of New York, 41 F.R.D. 469 (1966), 54 F.R.D. 327 (1968). . The pre-sentence report states, under the heading “Defendant’s Statement” : “[H]is obedience to the laws of the land is limited, if these laws conflict with certain of his personal beliefs.”

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Robert Alan JONES, Individually, Etc., Plaintiff-Appellant, v. Henry WADE, Individually, Etc., and Frank Dyson, Individually, Etc., Defendants-Appellees. No. 72-1481. United States Court of Appeals, Fifth Circuit. May 30, 1973. Rehearing En Banc Granted Aug. 6, 1973. Simpson, Circuit Judge, dissented with opinion. Bill Barbisch, Austin, Tex., for plaintiff-appellant. N. Alex Bickley, Joseph G. Werner, Dallas, Tex., for Dyson. Edgar A. Mason, Asst. Dist. Atty., Dallas, Tex., for Wade. John L. Hill, Atty. Gen. of Texas, Jay Floyd, Gilbert J. Pena, Asst. Attys. Gen., Austin, Tex., for State of Texas. Before TUTTLE, WISDOM and SIMPSON, Circuit Judges. WISDOM, Circuit Judge: The question before us is whether a three-judge court should have been convened to decide this case, involving alleged desecration of the American flag in violation of Texas law. This is a jurisdictional matter for the Court of Appeals to decide. We hold that a three-judge court, not a single judge, had jurisdiction to decide the case. Robert Jones, defendant-appellant, was arrested for violation of the Texas flag desecration statute. Vernon’s Ann. Tex.Pen.Code Art. 152. He sued in the federal district court seeking a declaratory judgment that the statute was unconstitutional on its face and requesting an injunction to prevent the state from prosecuting him under the statute. Jones requested that the district court convene a three-judge court to hear the case. The district court dismissed his suit without an evidentiary hearing and without findings. This Court remanded for an evidentiary hearing. Jones v. Wade, 5 Cir. 1971, 436 F.2d 1382. After a hearing, the district court issued a written opinion again dismissing the suit. Jones v. Wade, 1972, N.D.Tex., 338 F.Supp. 441. Jones brought this appeal. We hold that Jones’s complaint presented a substantial federal question both as to the constitutionality of the statute and the propriety of federal intervention, and that the district court therefore erred in refusing to convene a three-judge court. We reverse and remand with directions to convene a three-judge court. This holding should not be construed as a decision on the merits. On the afternoon of May 18, 1970, Jones went to the Dallas Police Department to file a complaint against a Dallas police dispatcher. He was wearing an army surplus green fatigue shirt with a small American flag sewn over the right breast pocket, and a pair of army surplus green fatigue pants with slits in the cuffs into which he had sewn small American flags. While Jones was in the process of filing his complaint, he was arrested for investigation of a possible violation of Article 152 and jailed. His attorney filed an application for ha-beas corpus in state court, which was scheduled for a hearing the morning of the following day, May 19. Later that afternoon Jones was released without charges. Unaware that his client had been released, Jones’s attorney brought this action in federal court on the morning of May 19, before the hearing on the application for state habeas. Subsequent to the filing of this suit, on the afternoon of May 19, Jones went to the office of the Dallas County District Attorney wearing the same attire; There he was again arrested. The parties have stipulated that the persons who arrested Jones on May 19 were not acting in concert with the officers who arrested him on May 18. Jones has been indicted for this second violation, but the state has withheld prosecution pending the outcome of the present case. In its opinion dismissing the case the district court state,d that Jones had been arrested not for expression within the protection of the First Amendment, but for unprotected conduct. Further, the district court held that federal injunc-tive or declaratory relief was inappropriate under Younger v. Harris, 1971, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669, and its companion cases absent a showing of bad faith. Finally, the district court held that the Texas flag desecration statute was a constitutional exercise of the state’s police power. Our jurisdiction on this appeal is limited to considering whether the district court erred in refusing to convene a three-judge court on the ground that Jones failed to present a substantial federal question. Schackman v. Arnebergh, 1967, 387 U.S. 427, 87 S.Ct. 1622, 18 L.Ed.2d 865; Idlewild Bon Voyage Liquor Corp. v. Epstein, 1962, 370 U.S. 713, 716, 82 S.Ct. 1294, 8 L.Ed.2d 794; Stratton v. St. Louis Southwestern Ry., 1930, 282 U.S. 10, 51 S.Ct. 8, 75 L.Ed. 135. Our inquiry is three-fold: (1) Does Jones present a justiciable controversy and have standing to bring this suit? (2) Is there a substantial question as to the constitutionality of the statute? (3) Would a three-judge court be precluded from exercising its discretion to grant injunctive or declaratory relief? See Ex Parte Poresky, 1933, 290 U.S. 30, 54 S.Ct. 3, 78 L.Ed. 152; Maryland Citizens for a Representative General Assembly v. Governor of Maryland, 4 Cir. 1970, 429 F.2d 606, 611; Reed Enterprises v. Corcoran, 1965, 122 U.S.App.D.C. 387, 354 F.2d 519, 521; Frontiero v. Laird, 1971, M. D.Ala., 327 F.Supp. 580 (three-judge court). We consider these questions in order. I. Jones has presented a justiciable controversy and has standing to maintain this action. Jones had been arrested once at the time he brought this suit. He was facing the possibility of future arrests under a statute which at least arguably made his actions illegal. We conclude that Jones has asserted “a sufficiently direct threat of personal detriment.” Doe v. Bolton, 1973, 410 U.S. 179, 93 S.Ct. 739, 35 L.Ed.2d 201, 210. His standing to challenge this statute on its face is not affected by whether his apparel is characterized as protected symbolic speech (see Tinker v. Des Moines Indep. School District, 1969, 393 U.S. 503, 89 S.Ct. 733, 21 L.Ed.2d 731) or as mere “conduct.” Note, The First Amendment Overbreadth Doctrine, 83 Harv.L.Rev. 844, 847 (1970). II. As originally enacted, Article 152 reads: Any person who shall within this State, publicly or privately, mutilate, deface, defile, defy, tramp upon, or cast contempt upon, either by word or act any flag, standard, color, or ensign of the United States, or that of any of its officers, or on any imitation of either of them, shall be confined in the penitentiary not less than two nor more than twenty-five years. The Texas state courts have substantially narrowed the scope of this statute to remove constitutional defects. In Deeds v. State, Tex.Cr.App.1971, 474 S.W.2d 718, the Texas Court of Criminal Appeals removed the statute’s prohibition of speech. More recently the Court of Criminal Appeals has excised the statutory prohibition of private acts. Delorme v. State, Tex.Cr.App.1973, 488 S.W.2d 808. See also Van Slyke v. State, Tex.Cr.App.1973, 489 S.W.2d 590; Case v. State, Tex.Cr.App.1973, 489 S.W.2d 593; Holland v. State, Tex.Cr.App.1973, 489 S.W.2d 594. Even given these limiting constructions, we cannot agree with the district court that the statute is clearly constitutional. The state undoubtedly has a legitimate interest in preventing breaches of the peace which might follow certain acts of flag desecration. Street v. New York, 1969, 394 U.S. 576, 590-593, 89 S.Ct. 1354, 22 L.Ed.2d 572. But Article 152 is not focused narrowly on the furtherance of this interest. Instead, the statute broadly proscribes all acts which “cast contempt” upon the flag. Nowhere does the statute offer any guidance to potential defendants or arresting officers as to the meaning of the words “cast contempt.” Conceivably included within the sweep of this language is a wide variety of activity: “black power” salutes by militant athletes, a refusal to remove one’s hat during the playing of the Star Spangled Banner, the flying of tattered flags, the display of mud-spattered bumper stickers, or the wearing of small flags sewn on the shirts of police officers. See Crosson v. Silver, 1970, D.Ariz., 319 F. Supp. 1084 (three-judge court); Hodsdon v. Buckson, 1970, D.Del., 310 F. Supp. 528 (three-judgecourt). The circumstances of Jones’s arrests demonstrate the difficulty of giving content to this statutory language. His attire at least arguably fell within the statute’s prohibition. Yet though it is not disputed that he wore this apparel in full view of law enforcement officers on several occasions, he was arrested only twice. And those arrests took place while Jones was trying to file a complaint against a Dallas police officer. There is no indication that his actions ever provoked violence or public disorder. The statute contains other broad language. Article 152 punishes conduct directed not only against a “flag,” but also against any “standard, color, or ensign of the United States, or that of any of its officers, or . any imitation of either of them.” The statute does not define what constitutes an “imitation.” And it is questionable whether mutilation of any and all such symbols, or imitations thereof, would be so likely to provoke public disorder or outrage as to furnish legitimate grounds for state regulation. See Crosson v. Silver, supra, 319 F.Supp. at 1089 & n.6. III. In a case otherwise within the jurisdiction of a three-judge court, the question whether the Younger doctrine requires abstention is generally a matter for the exercise of equitable discretion, and thus ordinarily a determination to be made by a three-judge court rather than by a single district judge. Abele v. Markle, 2 Cir. 1971, 452 F.2d 1121, 1125; see Note, The Three-Judge District court: Scope and Procedure Under Section 2281, 77 Harv.L.Rev. 299, 309 (1973). A single district judge may dismiss only where it is plain that Younger leaves no room for a three-judge court to exercise equitable discretion. In the present case the district court found that Younger was controlling, and that Jones had failed to demonstrate a pattern of bad faith harassment as required by Younger. Even assuming that the district court was correct in finding that Jones’s allegation of bad faith harassment was patently frivolous on its face, we cannot agree with the conclusion that the Younger doctrine so clearly prevents the issuance of declaratory or injunctive relief in these circumstances as to deprive a three-judge court of jurisdiction. In Younger the Court held that a federal court could not issue an injunction against a pending state criminal proceeding absent a showing of “great and immediate” injury. The Younger Court stated that the mere allegation that a statute was overbroad was insufficient to show “great and immediate” injury; there must in addition be a showing of a scheme of bad faith official enforcement or the like, rendering reliance on state procedures inadequate to vindicate constitutional rights. Samuels v. Mackell, 1971, 401 U.S. 66, 91 S.Ct. 764, 27 L.Ed.2d 688, a companion case, applied like requirements to requests for declaratory relief. The Court in Younger expressly did not purport to settle the question of what standard must be met to obtain federal injunctive or declaratory relief when, as here, state criminal proceedings under an allegedly overbroad statute have not yet been instituted. The considerations of federalism which Younger stressed are cast in a much different light when state proceedings are merely threatened and not actually pending. A federal injunction at the pre-prosecution stage causes only a minimal disruption of the state’s enforcement of its criminal laws, since state prosecutor-ial machinery has not yet been set in motion. Moreover, though the state has an interest in having its statutes reviewed initially in its own courts, in the pre-prosecution context there is no guarantee that the state courts will ever get that opportunity. State prosecuting authorities may, as here, simply decide to drop the ease rather than press for a conviction. Correspondingly, there is a danger of undue prolongation of the chilling effect of an overbroad statute. When a state prosecution is. already pending, federal courts may assume that federal rights will be promptly vindicated by the state judiciary. When a state prosecution has not yet been instituted, there is a danger of lengthy delay prior to indictment. Or the state may simply decide not to prosecute, whether or not in good faith, possibly leaving the defendant without a state remedy and deterred from engaging in protected activity by the threat of future arrest. A number of federal courts have accordingly found the Younger doctrine inapplicable to suits for federal relief against threatened state proceedings. The Supreme Court has again recently suggested the viability of the pending/threatened distinction. Compare Roe v. Wade, 1973, 410 U.S. 113, 93 S.Ct. 705, 35 L.Ed.2d 147, 162, with Doe v. Bolton, 1973, 410 U.S. 179, 93 S.Ct. 739, 35 L.Ed.2d 201, 210. This Court has not expressly adopted a contrary position. The only full opinion of this Court discussing the showing necessary to obtain federal injunctive or declaratory relief against threatened state prosecutions is Becker v. Thompson, 5 Cir. 1972, 459 F.2d 919, rehearing en banc denied, 1972, 463 F.2d 1338, cert. granted sub nom. Steffel v. Thompson, 410 U.S. 593, 93 S.Ct. 1424, 35 L.Ed. 2d 686 (U.S.1973). In Becker, however the plaintiffs attacked a state statute not on its face but only as applied to them. When as in Becker the state is clearly seeking to enforce its criminal statute in good faith and without discrimination, the. case for federal anticipatory relief is normally less strong when a statute is challenged as applied than when it is attacked as unconstitutional on its face. Assuming it is enforced in good faith, a facially valid statute, unlike an overbroad statute, poses no danger of a broad societal chilling effect on federal rights. See Hufstedler, Comity and the Constitution: The Changing Role of the Federal Judiciary, 46 N.Y.U.L.Rev. 841, 868 n. 85 (1972). Moreover, the state’s legitimate interest in good faith interpretation and enforcement of its facially valid laws is of much greater weight than any state interest in pressing prosecution under facially unconstitutional statutes. And a court engaging in overbreadth scrutiny is operating in a domain of more purely federal concern, focusing not on the actor’s conduct but on the possible impact of legislation against a broad background of federal rights. Since Jones challenges Article 152 as unconstitutional on its face, his claim presents a more pressing question than that raised by the plaintiffs in Becker. We consider that Becker does not foreclose a three-judge court from granting appropriate relief. The judgment of the district court is reversed and the case is remanded with directions to convene a three-judge court. SIMPSON, Circuit Judge (dissenting) : I respectfully dissent from the decision of the majority reversing and remanding “with directions to convene a three-judge court.” I regard this case as clearly governed by the decision of this Court in Becker v. Thompson. Despite the attempt to draw fine distinctions between constitutional assaults on a state criminal statute as applied (Becker v. Thompson) on the one hand, and facially (this case) on the other, the clear pronouncements of Becker v. Thompson should bind this panel: “Stated another way, is the propriety of granting a declaratory judgment concerning threatened future criminal prosecution determined by the same test as the propriety of granting in-junctive relief, i. e., bad faith harassment? Younger v. Harris, supra. May we transpose to this case, where no state prosecution was pending, what was said about declaratory relief in Samuels v. Mackell, supra, where a state prosecution was pending: [T]he same equitable principles relevant to the propriety of an injunction must be taken into consideration by federal district courts in determining whether to issue a declaratory judgment, and * * * where an injunction would be impermissible under these principles, declaratory relief should ordinarily be denied as well. Id. 401 U.S. at 73, 91 S.Ct. at 768.” Op. cit. 459 F. 2d at p. 921-922. And: “If the practical effects of injunc-tive and declaratory judgment remedies are identical because they result in the disruption of a state’s enforcement of its criminal statutes when a criminal prosecution is pending, and therefore bad faith harassment must be shown before either remedy may issue, and if, as we have seen, the same test of bad faith harassment is prerequisite to injunctive relief in a threatened criminal prosecution, it follows that a like showing must be made for declaratory relief in a threatened prosecution.” Op. cit. at p. 922. And further: “It is, of course, self-evident that where state prosecutions were pending Younger and Samuels established a limitation on the use of the Declaratory Judgment Act, 28 U.S.C.A. § 2201, to those cases where bad faith harassment was shown. The same limitation on the use of the Act necessarily applies in preprosecution cases.” Op. cit. p. 923. And finally: “If ‘the propriety of declaratory and injunction relief should be judged by essentially the same standards’, then in preprosecution cases there must be a showing of bad faith harassment for the granting of declaratory as well as injunctive relief. Cooley v. Endictor, 5 Cir. 1972, 458 F.2d 513. We conclude that under the circumstances of this case, even though no state prosecution was pending against Steffel, since there was no showing of bad faith harassment, he was not entitled to a declaratory judgment.” Op. cit. p. 923. The importance of Becker v. Thompson as a precedent in this Circuit is emphasized by the two opinions at pages 1338 to 1340 of 463 F.2d, first, that of Judges Gewin and Dyer specially concurring in the denial by the full Court of the petition for rehearing en banc, and second, that of Chief Judge Brown for himself and Judges Wisdom and Goldberg, dissenting from the denial of rehearing en banc. It sharpens the basis of my dissent at this point to quote from the memorandum decision appealed from, which embodied findings of fact and conclusions of law: “It is clear that plaintiff must assert traditional equitable grounds entitling him to the injunctive relief he requests. Younger v. Harris, 401 U.S. 37, 46, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971); Perez v. Ledesma, 401 U.S. 82, 122, 91 S.Ct. 674, 27 L.Ed.2d 701 (1971); see also Douglas v. City of Jeanette, 319 U.S. 157, 63 S.Ct. 877, 87 L.Ed. 1324 (1943), and Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). The facts of this case present no such equitable grounds for relief. ****** “In addition, this Court finds that under the circumstances surrounding the institution of this suit, the doctrine of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), would be thwarted if plaintiff were granted relief from the state prosecution through federal interference. The Younger case repeats the admonition of Fenner v. Boykin, 271 U.S. 240, 46 S.Ct. 492, 70 L.Ed. 927 (1926), that a suit to enjoin state prosecutions ‘even with respect to state criminal proceedings not yet for mally instituted, could be proper only under very special circumstances.’ (emphasis added) Younger v. Harris, supra, 401 U.S. at 45, 91 S.Ct. at 751. “The Younger doctrine of non-interference with pending state prosecutions is one of reasonableness and results from the necessity that our federal and state systems coexist and function to achieve the just and speedy disposition of criminal prosecutions. The rationale of the Younger doctrine would be defeated if races to the courthouse were allowed to circumvent the application of the rule. “The facts of this case show that the plaintiff was arrested for suspicion of a violation of Article 152 and was released, and that the next day plaintiff was arrested again for the same conduct and later was indicted by a grand jury. The second arrest took place in the office of the district attorney, who is charged with enforcement of state penal statutes, where plaintiff had gone knowing that arrest was probable and with the intent of doing what he knew to be considered a violation of Article 152. The State officials had no alternative to the prosecution of plaintiff other than a complete abdication of their responsibilities to enforce the laws of the State of Texas. In this case, the good faith of the State prosecutors cannot be challenged.” (Emphasis supplied) Absent a showing of bad faith harassment or irreparable injury there is simply no equitable ground for declaratory relief. Bad faith harassment was neither alleged nor proved below. Charges stemming from the first arrest were dismissed and it was only when Jones presented himself in the office of the state district attorney — a place where his attorney had warned him that arrest was likely — that the second arrest occurred. Affirmance of the district court’s dismissal of the action seems to me to be mandated by the Younger v. Harris double trilogy as construed and applied by us in Becker v. Thompson. ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC Before JOHN R. BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, IN-GRAHAM and RONEY, Circuit Judges. BY THE COURT: A member of the Court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc. It is ordered that the cause shall be reheard by the Court en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of supplemental briefs. . The appellees also contend that the state has an interest in requiring proper respect for the dignity of the flag. To a large extent this is properly a federal rather than a state interest, and should be adequately served by the federal flag desecration statute. 18 U.S.C. § 700. To the extent that the state has a legitimate interest in such regulation, it is subject to strict limitations. See Street v. New York, 1969, 394 U.S. 576, 593, 89 S.Ct. 1354, 22 L.Ed.2d 572; West Virginia Board of Education v. Barnette, 1943, 319 U.S. 624, 63 S.Ct. 1178, 87 L.Ed. 1628. Nor, for the reasons expressed in this opinion, does the statute appear to be confined to the protection of this interest. . The appellees argue that Article 152 is similar to the federal flag desecration statute, 18 U.S.C. § 700, which has been upheld as constitutional. Joyce v. United States, 147 U.S.App.D.C. 128, 1971, 454 F.2d 971, cert. denied, 1972, 405 U.S. 969, 92 S.Ct. 1188, 31 L.Ed.2d 242. The federal statute reads in part: (a) Whoever knowingly casts contempt upon any flag of the United States by publicly mutilating, defacing, defiling, burning, or trampling upon it shall be fined not more than $1,000 or imprisoned for not more than one year, or both. This statute is considerably narrower than Article 152. Unlike Article 152, it pro-Mbits only “knowingly” casting contempt on the flag. And the federal statute explicitly defines “casting contempt” as “mutilating, defacing, defiling, burning, or trampling upon.” Article 152 gives “casting contempt” an entirely undefined meaning different from those acts. . Compare West Virginia Board of Educ. v. Barnette, 1943, 319 U.S. 624, 63 S.Ct. 1178, 87 L.Ed. 1628. . In this ease a three-judge court properly has jurisdiction over the claim for declaratory as well as injunctive relief. See Perez v. Ledesma, 1971, 401 U.S. 82, 90, 91 S.Ct. 674, 27 L.Ed.2d 701 (Stewart, J., concurring); Florida Lime & Avocado Growers, Inc. v. Jacobsen, 1960, 362 U.S. 73, 80-81, 80 S.Ct. 568, 4 L.Ed. 2d 568; Sterling v. Constantin, 1932, 287 U.S. 378, 393-394, 53 S.Ct. 190, 77 L.Ed. 375. . Younger v. Harris, 1971, 401 U.S. 37, 41, 91 S.Ct. 746, 27 L.Ed.2d 669. See Perez v. Ledesma, 1971, 401 U.S. 82, 120-122, 91 S.Ct. 674, 27 L.Ed.2d 701 (Brennan, J., concurring in part and dissenting in part); Younger v. Harris, supra, 401 U.S. at 55, 91 S.Ct. 746 (Stewart, J., concurring); LeFlore v. Robinson, 5 Cir. 1971, 446 F.2d 715, 719 (Goldberg, J., specially concurring). In Dombrowski v. Pfister, 1965, 380 U. S. 479, 85 S.Ct. 1116, 14 L.Ed.2d 22, the Court held that injunctive relief could be issued by a federal court against a threatened state criminal prosecution under an overbroad statute on a showing of bad faith harassment. But the Court did not state that a showing of bad faith was an essential prerequisite to federal relief. See The Supreme Court, 1970 Term, 85 Harv.L.Rev. 3, 302 (1971). The federal anti-injunction statute, 28 U.S.C. § 2283, does not bar this action, even if it could be said that there was a state “proceeding” against Jones after he was released without charge. Mitchum v. Foster, 1972, 407 U.S. 225, 92 S.Ct. 2151, 32 L.Ed.2d 705. . Wulp v. Corcoran, 1 Cir. 1972, 454 F.2d 826, 831; The Supreme Court, 1970 Term, sxipra, 85 Harv.L.Rev. at 308; Note, Implications of the Younger Cases for the Availability of Federal Equitable Relief When No State Prosecution Is Pending, 72 Colum.L.Rev. 874, 895 (1972). That the state brought charges against Jones based on his second arrest, after the filing of his federal action, is of no moment. The only relevant inquiry is whether state prosecution was pending at the time Jones brought suit in federal court. Younger v. Harris, supra, 401 U. S. at 41, 91 S.Ct. 746; id. at 55, 91 S.Ct. 746 (Stewart, J., concurring); Lewis v. Kugler, 3 Cir. 1971, 446 F.2d 1343, 1347. No charges were pending against Jones at the time he brought this action. . The Supreme Court, 1970 Term, supra, 85 Harv.L.Rev. at 307. . See, e. g., Wulp v. Corcoran, 1 Cir. 1972, 454 F.2d 826; Lewis v. Kugler, 3 Cir. 1971, 446 F.2d 1343, 1347; Hull v. Petrillo, 2 Cir. 1971, 439 F.2d 1184, 1186 n. 1; Thoms v. Smith, 1971, D.Conn., 334 F.Supp. 1203 (three-judge court); Anderson v. Vaughn, 1971, D.Conn., 327 F.Supp. 101 (three-judge court) ; cases cited in Note, Implications of the Younger Cases for the Availability of Federal Equitable Relief When No State Prosecution Is Pending, 72 Colum.L.Rev. 874, 895 n. 135 (1972). . Several per curiam opinions have apparently regarded the question as having been conclusively settled by Younger or Becker, without more. Thevis v. Seibels, 5 Cir. 1972, 464 F.2d 613; Cooley v. Endictor, 5 Cir. 1972, 458 F.2d 513; Thevis v. Moore, 5 Cir. 1971, 440 F.2d 1350. We cannot agree that Younger is controlling, especially in view of the Supreme Court’s careful avoidance of this question in Younger. See note 5 supra. Nor, for the reasons stated in this opinion, can we regard Becker as dispositive. Hobbs v. Thompson, 5 Cir. 1971, 448 F.2d 456, though involving an injunction sought against a state civil proceeding, suggested that the determination of whether federal anticipatory relief should be granted should turn on whether federal intervention would affect an ongoing state proceeding, whether civil or criminal. See Palaio v. McAuliffe, 5 Cir. 1972, 466 F.2d 1230, 1233. . Becker v. Thompson, 459 F.2d at 923-924 (Tuttle, J., concurring in result). . There is, however, a strong case for federal injunctive or declaratory relief against state criminal prosecution under a facially valid statute if the state is acting in bad faith or in a discriminatory manner. See Shaw v. Garrison, 5 Cir. 1972, 467 F.2d 113. . Id. 459 F.2d at 926 (Tuttle, J., concurring in result). . [G]eneral expressions, in every opinion, are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit, when the very point is presented for decision. Cohens v. Virginia, 1821, 19 U.S. (6 Wheat.) 264, 399, 5 L.Ed. 257, 290 (Marshall, C. J.). See Becker v. Thompson, 463 F.2d at 1340 (Brown, C. J., dissenting from denial of rehearing en banc). . Becker v. Thompson, 5 Cir. 1972, 459 F.2d 919, pet. for rehearing and rehearing en banc denied, 5 Cir. 1972, 463 F.2d 1338, certiorari granted sub nomine, Steffel v. Thompson, 1973, 410 U.S. 593, 93 S.Ct. 1424, 35 L.Ed.2d 686. See further, Cooley v. Endictor, 5 Cir. 1972, 458 F.2d 513; Thevis v. Moore, 5 Cir. 1971, 440 F.2d 1350. . See the majority opinion pages 11-13, printed copy. . In addition to Younger v. Harris, 1971, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669, and Samuels v. Mackell, 1971, 401 U.S. 66, 91 S.Ct. 764, 27 L.Ed.2d 688, discussed at length by the majority opinion in Becker v. Thompson, see specifically further Boyle v. Landry, 1971, 401 U.S. 77, 91 S.Ct. 758, 27 L.Ed.2d 696, reversing a three-judge district court’s injunction against both pending and anticipated prosecutions in the Illinois state courts under Illinois statutes alleged to be unconstitutional. I quote from the portion of the court’s opinion dealing specifically with the Illinois intimidation statute held unconstitutional, under which no charges had been brought: “There is nothing contained in the allegations of the complaint from which one could infer that any one or more of the citizens who brought this suit is in any jeopardy of suffering irreparable injury if the State is left free to prosecute under the intimidation statute in the normal manner. As our holdings today in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669, and Samuels v. Mackell, 401 U.S. 66, 91 S. Ct. 764, 27 L.Ed.2d 688, show, the normal course of state criminal prosecutions cannot be disrupted or blocked on the basis of charges which in the last analysis amount to nothing more than speculation about the future. The policy of a century and a half against interference by the federal courts with state law enforcement is not to be set aside on such flimsy allegations as those relied upon here. “For the reasons set out above and for those set out at greater length today in Younger and Samuels, we reverse.”

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

MISSOURI EDISON COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent, Panhandle Eastern Pipe Line Co., Intervenor. No. 72-1406. United States Court of Appeals, Distinct of Columbia Circuit. Argued Dec. 8, 1972. Decided March 20, 1973. Morton L. Simons, Washington, D. C., for petitioner. George W. McHenry, Jr., First Asst. Sol., F. P. C., with whom Leo E. For-quer, Acting Gen. Counsel, F. P. C., was on the brief for respondent. Gordon Gooch, Gen. Counsel, F. P. C., also entered an appearance for respondent. James J. Flood, Jr., Washington, D. C., with whom Raymond N. Shibley, Washington, D. C., was on the brief for intervenor. Before Mr. Justice CLARK, Associate Justice of the Supreme Court of the United States, and MacKINNON and ROBB, Circuit Judges. Sitting by designation pursuant to 28 U.S.C. § 294(a). Mr. Justice CLARK: This is another of a series of eases beginning a score of years ago and continuing through 1969, in which Panhandle Eastern Pipe Line Company, a major interstate pipeline system, has opposed the effectuation of the long-established policy of the Federal Power Commission “to favor service to industrial customers by local distributors.” Panhandle Eastern Pipe Line Co., Op. 274, 13 FPC 301, aff’d, Panhandle Eastern Pipe Line Co. v. FPC, 232 F.2d 467 (3 Cir. 1956), cert. den., 352 U.S. 891, 77 S.Ct. 129, 1 L.Ed. 2d 86; Panhandle Eastern Pipe Line Co., Op. 510, 36 FPC 1107, reh. den., Op. 510-A, 37 FPC 314, aff’d, Panhandle Pipe Line Co. v. FPC, 386 F.2d 607 (3 Cir. 1967); Panhandle Eastern Pipe Line Co., Op. 539, 39 FPC 581 (1968), reh. den., 39 FPC 1100; Panhandle Eastern Pipe Line Co., Op. 566, 42 FPC 621 (1969). Here, Missouri Edison Company (Mo Ed), which operates under the jurisdiction of the Missouri Public Service Commission, serves some 22 communities in northeastern Missouri and has its headquarters in Louisiana, Missouri, a town of 4500 people. It requested an order of the Federal Power Commission directing Panhandle to sell and deliver to it 15,000 mcf of gas daily for resale to Hercules, Inc. at its chemical works also located at the City of Louisiana and within Mo Ed’s service community. Hercules has been furnished gas direct from Panhandle’s pipeline since 1942 under contracts, the last of which expired in 1969, after which Panhandle continued service by agreement on a month to month basis. The service is by direct attachment to Panhandle’s pipeline and is, therefore, not regulated by either federal or state authority. In 1969, the year the last Panhandle contract expired, Hercules’ chemical works at Louisiana suffered a million dollar operating loss. In an effort to continue the plant in operation, it requested Panhandle to reduce its gas rate, but to no avail. Hercules then turned to Mo Ed and subsequently reached an agreement to acquire gas from that company at a three percent resale charge above cost. Mo Ed was also a customer of Panhandle, buying its requirements exclusively from the latter under a contract requiring a maximum of 12,500 Mcf of gas to be delivered daily on demand of Mo Ed. Panhandle delivered slightly over 1 million mcf under this contract in 1969, and the resale of this gas contributed some 12 percent to Mo Ed’s total revenues. Originally Mo Ed’s application with the Commission was made under Panhandle’s G-2 demand rate schedule which provided for delivery on a firm basis. However, on suggestion of the Commission’s staff, the application was amended to provide for delivery on an interruptible basis under Panhandle’s 1-2 interruptible rate schedule, the identical rate schedule under which Hercules was then receiving gas from Panhandle. Both the Commission’s staff and the Examiner approved the conversion of the sale from a direct pipeline one to an indirect distributor delivery, in keeping with prior Commission decisions. However, the Commission has overturned these recommendations and denied the application. We reverse. 1. The Findings of the Commission In its original opinion the Commission first stated a conviction that it “should not adhere with uncompromising rigidity to a policy of preferred shifting of interruptible loads from a pipeline to a distributor.” Appendix Vol. I, p. 124. As to the effect of the conversion on Panhandle’s ability to serve its other customers, the Commission concurred in the Examiner’s finding that there was no impairment. But other economic factors compelled a different result, it said, from that of the Examiner: It was the business of the pipeline to meet the requirements of its customers; however, the customers’ demands were highly uneven, reflecting seasonal requirements; to avoid waste and added cost associated with partially filled transmission lines the pipeline sells interruptible service or installs storage capacity for gas. The contribution of an interruptible load to the pipeline’s balancing program, however, is smaller when that load is “attached” by the customer rather than directly by the pipeline. Thus, “flexibility and related improved efficiency of the pipeline is diminished whenever a segment of interruptible service is transferred from direct pipelines attachment to indirect attachment through a distributor.” Id. at 125-126. In Mo Ed’s case the transfer of the Hercules account from Panhandle to Mo Ed would diminish the benefits which the interruptible character of the Hercules sale contributes to the load balancing operations of the Panhandle system since one-third of the annual volumes that Mo Ed proposes to deliver to Hercules would come under Panhandle’s firm service rate schedule (G-2). The transfer would only create additional pressure on the Panhandle system. The Commission also noted that under conditions of gas supply shortage, gas storage should be substituted for interruptible deliveries. It would be unwise to encourage the direct attachment interruptible gas customers to migrate to distributors since this would frustrate pipeline curtailment plans, increase industrial usage, and undermine the flexibility of the pipeline during period of gas supply shortage. 2. The Rehearing Application and Its Denial: On rehearing Mo Ed pointed out that it sought a supply of gas under Panhandle’s 1-2 rate schedule to serve Hercules on an interruptible basis; its proposal was intended merely to supplant the current non-jurisdictional, direct attachment service of Panhandle. No change in the type of service was contemplated, and the only question presented was whether Panhandle should serve Hercules by direct attachment to its pipeline or indirectly through Mo Ed. Mo Ed further noted that Panhandle’s 1-2 rate schedule specifically provided that “all gas sold on an interruptible basis to both direct and resale customers may be interrupted at any time and in any amount in the sole discretion of” Panhandle. However, in order to “lay this false argument to rest,” Mo Ed explicitly agreed as a condition of receiving the proposed 1-2 service that Panhandle’s 1-2 sale to Mo Ed should be subject to the identical interruptions and curtailment by Panhandle as had been the direct sale by the latter to Hercules. The Commission, in denying the application for rehearing, relied on its original opinion holding that Mo Ed had not discharged any element of its burden of proof. It had not shown that the transfer was necessary or desirable in the public interest and would not place an undue burden on Panhandle or cause an impairment of Panhandle’s ability to render adequate service to its customers. It further found that the transfer would “firm up” a substantial portion of an in-terruptible industrial demand, as indicated in its original decision, by permitting Mo Ed to serve Hercules with “valley gas,” even when 1-2 gas had been curtailed. It refused to accept Mo Ed’s proffered condition on the ground that Panhandle would still have less control over deliveries to Hercules than it had under its present interruptible sale arrangement. 3. The “Suggestion for Clarification” and the Order Granting It. In its request for clarification Mo Ed stated that the Commission apparently had misapprehended its proposed condition; “it was intended by the proposed condition that deliveries to Hercules would be curtailed by Panhandle exactly in the same manner and in the same amount whether those deliveries were made directly by Panhandle or indirectly through Mo Ed, that Mo Ed would agree not to use gas to which it might be entitled under Panhandle’s G-2 schedule to augment deliveries to Hercules when direct industrial and 1-2 deliveries were in curtailment.” Appendix, Vol. I, pp. 141-142. Contrary to the Commission’s decision on rehearing, the whole purpose of the conditions was to prevent Mo Ed from purchasing its full contract demand of G-2 gas and thereby augmenting deliveries to Hercules from its “valley gas” at times when Panhandle would be curtailing its direct sale customers. The Commission then entered its third decision entitled “Order Granting Suggestion for Clarification and ReAffirming Opinion No. 614-A”. It found that “no practical method exists for controlling deliveries under both the G-2 and 1-2 rate schedules so as to accomplish the objectives sought to be achieved by Mo Ed.” It reasoned that before gas can be taken under the 1-2 rate schedule, Mo Ed must first take all the gas it is entitled to purchase under its G-2 rate schedule. The Commission could envision no practical operating method whereby Mo Ed would know the number of cubic feet of gas its other customers would need each day under the G-2 rate schedule before gas would have to be taken under the 1-2 rate schedule for delivery to Hercules. Therefore, the only way the 1-2 and G-2 purchases could be handled together would be for Panhandle to bill all gas taken in excess of Mo Ed’s full G-2 entitlement at the 1-2 rates. The Commission concluded that the offer might be accepted if Mo Ed agreed never to purchase any “valley gas” under the G-2 rate schedule for resale to Hercules. However, the Commission observed that such an agreement would provide no benefits whatsoever to Mo Ed’s other customers, thus violating the principle that industrial sales should be switched to a distributor only where such sales serve to increase load factors and reduce costs. In evaluating Mo Ed’s offer the Commission also took into consideration the testimony of a witness that Hercules intended to convert one of its coal-fired boilers to gas, in view of Mo Ed’s reduced rate as compared with Panhandle’s current one, which would increase the consumption of boiler gas. 4. The Conclusions of the Court We believe that the refusal of the Commission to accept Mo Ed’s offer to condition its application as stated above was error. No question was raised as to its timeliness nor was there any suggestion of prejudice flowing from the fact that it was not proposed until after the Commission’s initial decision. Mo Ed had eoncededly proved that Panhandle’s ability to service its other customers would not be impaired. Its offer to condition its sale so that it would be identical to Panhandle’s current sale to Hercules cut the ground from under the other objections raised by the Commission and also proved that its proposed contract was in the public interest. At the outset we note that the present sale to Hercules by Panhandle is not under either federal or state regulation. The transfer of this sale to Mo Ed would place it under federal regulation. We believe that this is of prime importance and wholly in the public interest. In addition, we see no reason for a change in the Commission’s present policy regarding the conversion of direct pipeline sales to indirect sales by distributors. As the Commission points out, this is not a mandatory policy. However, we feel that unless it will prevent the pipeline company from serving its other customers satisfactorily or it adversely affects the public interest, it should be followed. Neither of these situations justifying a departure from prior Commission policy is present here. The Commission has found that the conversion would not adversely affect the stability of Panhandle. It is one of the larger pipelines with main transmission lines running from the Texas-Oklahoma Panhandle to Michigan and Ohio. In 1969 it sold some 720 million mcf and had revenues of $247,000,000. Only 55 million mcf [about 8 percent] of its sales were direct to industrial users. Most of its sales were under its G (General Service) rate schedule, with only 140,000 mcf under its I (Interruptible Service) rate schedule. The sale to Hercules is only .54 percent of Panhandle’s total sales and barely 7 percent of its direct industrial sales. The record shows that in 1969 only a minimal three-tenths of one percent of the Hercules 1-2 rate schedule sales of Panhandle was interrupted. Hence the distinction between the G-2 and the 1-2 rate schedules in actual practice here is without much significance. As the shortage of gas increases, it may have more impact; Panhandle would be obliged to further curtail its deliveries in that event, but under our disposition its power of curtailment would not be affected by the conversion of the Hercules contract from a direct pipeline sale to an indirect distributor one. On the other hand, by converting the sale to a direct distributor Hercules could save annually as much as $150,-000, which might well be the difference between life and death to its Louisiana chemical works. If the operation were closed down, some 500 people— one-ninth of the city’s population — would lose their jobs. This would not be in the public interest. In addition, the closing might cause some of the population to move away and bring about a reduction in the sale of gas and electricity with consequent loss of profits to Mo Ed. On the other hand, granting the application would be'in the public interest and would slightly increase Mo Ed’s profits, though not to the point presently realized by Panhandle. The percentage of reduction in Panhandle’s profits would be very minimal. We, therefore, find the reasons for the Commission’s refusal to accept Mo Ed’s offer and approve its application to be clearly erroneous. Under Mo Ed’s contract the same amount of gas will be furnished Hercules as is presently permitted under the Panhandle arrangement; it will be delivered on identical conditions and subject to the same curtailment requirements and exercise of control by Panhandle. Nor will this arrangement cause any increase in Hercules’ use of gas. The amount is the same as that presently supplied under Panhandle’s present contract with Hercules. The Commission indicates that a witness testified that Hercules intended to switch some coal boilers to gas. But the Commission can easily prevent this by requiring Mo Ed’s contract to prohibit any such increases in gas consumption. In the final analysis the Commission’s only ground for refusing Mo Ed’s offer is that there is no practical way of effecting Mo Ed’s proposal. It is a sad commentary on our regulatory agencies that not only, a business but an entjre community could conceivably be destroyed for lack of agency ingenuity. We cannot believe that an appropriate order is not within the expertise of the Commission. Indeed, its recognition in the order granting Mo Ed’s “clarification suggestion” of Mo Ed’s proposal to “agree not to use gas to which it might be entitled under Panhandle’s G-2 schedule to augment deliveries to Hercules when direct industrial and 1-2 deliveries were in curtailment” (Appendix, Vol. I, P. 145) indicates its awareness of a possible solution. The Commission could give Panhandle the sole right to curtail sales to Hercules by Mo Ed on the same basis that it curtails other 1-2 sales simply by notice to Mo Ed. There are, we are sure, other solutions. 5. Considerations on Remand. As we view the problem here, Mo Ed does not presently have sufficient gas under its 12,500 annual mcf contract (G-2 rate schedule) to fill its proposed contract with Hercules; if it did have sufficient gas under that contract, the application here would be routinely approved. However, Mo Ed needs additional gas to fill the contract, and it can be obtained only on an interruptible basis (1-2 rate schedule). This is what gave the Commission pause. But Mo Ed’s final offer met all objections to approval, other than as to form and like technicalities. We have decided that the Commission clearly abused its discretion in not accepting Mo Ed’s offer and approving its application as amended. On remand the Commission is directed to enter an order approving the application on the conditions outlined. The Commission may approve the application by permitting Mo Ed to use its available “valley gas” in filling the Hercules contract, supplemented by sufficient 1-2 rate schedule gas to meet Hercules’ needs, provided Mo Ed agrees to a condition in its contract that if and when Panhandle gives notification that 1-2 rate schedule gas is being curtailed, Mo Ed will accordingly curtail deliveries of both G-2 and 1-2 rate schedule gas to Hercules so that at all times such deliveries will be limited to the same extent as under Panhandle’s present contract with Hercules. We are not interested in how the Commission tags the gas; there is nothing sacrosanct about “valley gas” — it is but gas under any name. The crucial point is that Mo Ed’s deliveries to Hercules will be on the same basis and on like conditions as are Panhandle’s deliveries under its present agreement with Hercules. The decision of the Commission is reversed and its orders are vacated. This matter is remanded for the entry of an order approving the application in accordance with this opinion and upon the conditions herein enumerated. It is so ordered. ON PETITION FOR REHEARING OR CLARIFICATION In their petitions for rehearing Respondent and Intervenor both claim error in that we stated that the direct service furnished Hercules by Panhandle was not subject to either federal or state regulation, substituted our judgment for that of the Commission on a policy matter, and remanded the case with instructions rather than allowing the Commission freedom to conduct further proceedings. Implicit in our opinion is that the Commission, of course, has jurisdiction over the transportation of gas in interstate commerce, including the power to order curtailment of direct pipeline sales. The whole purpose of our order directing the Commission to grant Mo Ed’s application for additional gas upon the specified conditions was to ensure that the Commission would have the same curtailment powers over indirect sales to Hercules as it presently has over such direct sales. On the other hand, the rate charged to Hercules by Panhandle is not under either federal or state regulation. The transfer of this sale to Mo Ed would place the rate charged by Panhandle for sales to Mo Ed under federal regulation. Therefore, our order will increase the Commission’s regulatory powers over the sales to Hercules because it will subject to FPC rate regulation the additional Mo Ed sales necessary to meet Hercules’ requirements. The Commission has had a long-established policy of favoring industrial service by distributors rather than pipelines. In this single case it makes an exception. While, of course, it is within the Commission’s competence to change its policy, it must, we submit, where an application is singled out, specify cogent reasons for the exception that will stand up under close scrutiny. We believe the Commission has failed to justify its departure from established policy. Its belated attempt at justification was that the approval of Mo Ed’s application would insulate the sale from the Commission’s curtailment jurisdiction and would create a preference over Panhandle’s other direct sale customers. We did not agree. Indeed the refusal of Mo Ed’s application would constitute discrimination against the distributor, its customers and Hercules. Under the order that we have directed the Commission to enter, the source of the gas will be the same, the physical flow will be identical, the volumes will be equal, the use will be unchanged, and the power of the Commission to curtail the sale will be undiminished. The Commission has advanced no reason why its granting Mo Ed’s application for additional gas cannot be conditioned upon acceptance of these terms. If Mo Ed refuses to accept such conditions, then the Commission need not approve the application. Under our disposition the sale to Hercules will differ from the present direct sale by Panhandle in only two respects: In addition to its curtailment power the Commission will also have jurisdiction over the rate charged for the additional gas now sold initially to Mo Ed, and the financial benefits of the Hercules sale will be altered. Panhandle will not be allowed to skim off the cream of this small market by serving Hercules direct. On the other hand, the local distributor Mo Ed, as a result of the new industrial demand, will increase its load factor, reduce its unit cost of gas and thus benefit all its customers. Surely this benefit to Mo Ed’s customers is in the public interest. And the Commission has full power to fashion a gas curtailment order that will protect the public from any gas shortage. For these reasons our order requiring approval of Mo Ed’s application must stand. . G-2 rate schedule gas is a definite, firm amount of gas that the pipeline agrees to deliver on demand during a certain period on an uninterruptible basis. . I-2 rate schedule gas is surplus gas not under firm contract that the pipeline prorates among its customers after delivery of all of its commitments under firm (G-2) gas contracts. It is interruptible by the pipeline whenever it needs the gas to meet the other contracts. Hence the 1-2 is not a definite, firm delivery but is interruptible, depending upon the amount delivered under the firm contracts. . Valley gas is the amount of gas that a pipeline customer has the right to demand but does not do so because his sales are down on that particular day and he cannot sell it. The 12,500 Mcf that Mo Ed may demand daily under its present contract with Panhandle is designed to meet its peak load. When Mo Ed’s customers’ demands are less than peak, the difference is valley gas, and Mo Ed does not demand delivery of it unless it can find an off-peak user that wishes it. . . The Commission in its clarification decision at p. 147, Appendix Vol. I, states that the incremental net income to Mo Ed if 1-2 gas alone were used to fill Hercules’ requirements would be $12,844. Mo Ed’s witness testified it would be $48,-686. . In this connection we note that the Commission subsequent to the order here has been approving applications for the additional use of gas for industrial purposes, including substituted fuel capacity and other inferior uses, many times greater than the Hercules contract. Moreover these were new contracts involving additional gas which the Commission granted on a finding that it was “unable to find that certification [of the additional volumes of industrial gas] ... is not in the public interest.” Michigan Wisconsin Pipeline Company, July 20, 1972, Docket No. CP 72-175, slip decision at p. 7, despite the fact that substituted fuel capability was present where some of the gas was to be devoted to inferior uses.

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METROPOLITAN D. C. REFUSE HAULERS ASSOCIATION, an unincorporated trade association, et al., Appellants, v. Walter E. WASHINGTON, Commissioner of the District of Columbia, et al. No. 72-1438. United States Court of Appeals, District of Columbia Circuit. April 18, 1973. Rehearing Denied May 21, 1973. Alexander Boskoff, Washington, D. C., was on the brief for appellants. C. Francis Murphy, Corp. Counsel, Richard W. Barton and David P. Sutton, Asst. Corp. Counsels, were on the brief for appellees. Before BAZELON, Chief Judge, BAS-TIAN, Senior Circuit Judge, and MaeKINNON, Circuit Judge. PER CURIAM: This case involves the validity of a provision of the District of Columbia Solid Waste Regulations contained in section 8-3:606(e) which reads as follows: Each licensee shall pay no less than $5.00 per ton for solid waste disposal provided at any District owned operated or contracted facility. Each refuse hauler is required to obtain a “collector’s license” and a “collection vehicle license for each vehicle so used” (section 8-3:606(a)). Licensed collectors are not required to use a “District owned operated or contracted facility” but if they do the regulation imposes a fee of “no less than $5.00 per ton [of] solid waste” so disposed. Appellees assert that authority for this $5 fee derives from various congressional enactments: First, from D. C.Code § 1-226 (1967) which authorizes the “usual police regulations,” i. e.: The Commissioners of the District of Columbia are hereby authorized and empowered to make and enforce all such reasonable and usual police regulations in addition to those already made under section 1-224, 1-225, as they may deem necessary for the protection of lives, limbs, health, comfort and quiet of all persons and the protection of all property within the District of Columbia. Second, from D.C.Code § 47-2344 (1967) which, more to the point we are here concerned with, provides: The commissioners of the District of Columbia are authorized and empowered, when in their discretion such is deemed advisable, to require a license of other businesses or callings not listed in this chapter and which, in their judgment, require inspection, supervision, or regulation by any municipal agency or agencies and to fix the license fee therefor in such amount as, in their judgment, will be commensurate with the cost to the District of Columbia of such inspection, supervision, or regulation, and are further authorized and empowered in their discretion ... to raise or lower the amount of the license fee provided in this chapter, as the cost of inspection, supervision, or regulation is raised or lowered (emphasis added). Third, from D.C.Code §§ 6-811-812 (Supp. IV 1971), the regulation relating to air pollution control, which authorizes the Council [to] prescribe regulations for the control of the following air pollution problems in the District of Columbia: * * * * * * (B) solid waste disposal and salvage operations * * «• * * * Fourth, from D.C.Code § 6-501 (1967): The Commissioners of the District of Columbia are hereby authorized to make necessary regulations for the collection and disposition of garbage in the District of Columbia, and to annex to said regulations such penalties as will secure the enforcement thereof. Also, D.C.Code § 6-504 (1967) reads as follow: The commissioners are authorized, if in their opinion such action shall be to the best interests of the District of Columbia, after July 11, 1919, to conduct any or all of the operations involved in the collection and disposal of city refuse of every kind as municipal functions, and for that purpose to purchase or lease the necessary plants, buildings, and land, to purchase or hire horses and horse-drawn vehicles, passenger-carrying and other motor-propelled vehicles, equipment, and machinery, and to employ expert and other personal services, and labor, and to pay traveling, maintenance, incidental, and contingent expenses (emphasis added). It is plain from the foregoing statutes that the District is authorized “to make regulations for the disposition of garbage” (D.C.Code § 6-501); and “to conduct any operation [s] involved in the disposal of city refuse ... as [a] municipal function [s]” (D.C.Code § 6-504). Also, it is clear that the business of disposing of solid wastes is not a “business [es] or calling [s] listed in this chapter [D.C.Code §§ 47-2301-2350] [and thus the District of Columbia may] fix the license fee [for disposal] in such amount as will be commensurate with the cost to the District of Columbia of such inspection, supervision [and] regulation” (D. C.Code § 47-2344). Those licenses issued for the “collection [and] transportation of solid wastes in or through the District” (section 8-3:606(a)) do not cover the disposal of solid wastes in the District. The fee of $5 per ton is the type of license fee that is authorized by the above act (D.C.Code § 47-2344) and there is no proof in this case that the income it produces makes it more than a license fee, i. e., that the revenue it produces is not commensurate with the cost of the supervision and regulation. If the total income to the District from such fees was not commensurate with the cost of so regulating the disposal of such wastes the fee would be illegal to the extent that the revenue therefrom exceeded the applicable costs. With the above comments we affirm the validity of the fee on the basis of Judge Smith’s Memorandum Opinion and Order and also adopt the finding of such opinion on the constitutional issues. Judgment accordingly. Other than the District, no person shall by himself or otherwise use any vehicle for the collection or transportation of solid wastes in or through the District either for himself or for others without first having obtained a collector’s license so to do and a collection vehicle license for each vehicle so used, . Section 8-3:606(a) provides:

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UNITED STATES of America v. Haywood SANDERS, Appellant. No. 72-1534. United States Court of Appeals, District of Columbia Circuit. Argued March 14, 1973. Decided May 17, 1973. Robb, Circuit Judge, dissented and filed opinion. George F. Bason, Jr., Washington, D. C. (appointed by this Court), for appellant. William A. White, Asst. U. S. Atty., with whom Harold H. Titus, Jr., U. S. Atty., John A. Terry, Vincent R. Alto and Warren L. Miller, Asst. U. S. Attys., were on the brief for appellee. Before FAHY, Senior Circuit Judge, and LEVENTHAL and ROBB, Circuit Judges. FAHY, Senior Circuit Judge: A man entered a Hot Shoppe in this City around midnight on June 5, 1970, and inquired of the cashier, Miss Samu-els, aged eighteen at the time, when the restaurant closed. She answered that they were closing. The man then went to the food counter and gave Mr. Johnson, the manager, a note which read: “This is a holdup; I have a gun under this coat [draped over his right arm]; I don’t want to hurt anybody.” Under this threat the two men went into the manager’s office. There, money was taken from the safe and that in the cash register was also required to be given him. In all approximately $500.00 was put in a paper bag the robber had. He then fled with the bag. Appellant was convicted of the robbery, 22 D.C.Code § 2901 (Supp. V, 1972), and is serving a sentence of two to seven years. His appeal questions the admission at trial of the identifications by Miss Samuels and Mr. Johnson, without whose testimony he could not have been convicted. The jury’s own uncertainty as to the reliability of their identifications is indicated by what appears to have been a compromise verdict: convicted of robbery, appellant was acquitted of both armed robbery and assault with a dangerous weapon though there was no dispute a gun was used in the robbery. It is also significant that the judge who conducted the pretrial hearing on appellant’s motion to suppress the identification testimony, although denying the motion, expressed concern about the identification by Miss Samuels. We find in the totality of the circumstances that there was “a vei'y substantial likelihood of irreparable misidentification,” Simmons v. United States, 390 U.S. 377, 384, 88 S.Ct. 967, 971, 19 L.Ed.2d 1247 (1968), by Miss Samuels and Mr. Johnson, due to suggestive identification procedures, considered with the discrepancies and uncertainties in their testimony. We accordingly hold that their in-court identifications were inadmissible at this trial, requiring reversal. In developing the subject we refer first to the descriptions of the robber given by Miss Samuels and Mr. Johnson to the police shortly after the robbery. We then address the photographic and lineup identifications by these witnesses, after which we outline their trial testimony. We then draw our conclusions. THE INITIAL DESCRIPTIONS Miss Samuels testified at the suppression hearing that she had an opportunity to view the robber twice. The first was at the register when he asked if the restaurant was closed. The lighting there was “not very good” — because of the “orange lights.” The second was after the robber went into the manager’s office. When Miss Samuels came over to the doorway of the office Mr. Johnson told her to return to the cash register. The robber looked around and for a moment she saw him again. At the suppression hearing she testified as follows with regard to her initial description to the police, on her examination by defense counsel: Q Did you give a description of the robber to the police ? A Yes, I did. Q Do you recall how you described him? A No, I don’t. Q Well did you describe any of the characteristics about the appearance of the robber, do you recall ? A He was stout. Q He was stout? A Yes. * * -X- -X- -» * Q Can you recall at this time whether or not the robber had a beard or a goatee ? A No — I cannot. Q You cannot recall anything else unusual about his appearance other than that he was stout ? A He had a jacket, he had a dark jacket over his arm. Q Other than his clothing there was nothing else about his appearance? A No. THE COURT: Are you saying that that is all you can recall, or that is all that you saw that night? THE WITNESS: That is all I can recall. THE COURT: That is all you can recall now? THE WITNESS: Yes, sir. BY [Defense Counsel] Q Was there ever a time that you ever recalled any more ? A I’d say — I think I described him. Whether he had a lot of hair or anything— Q You think what? A Well I told them that he had hair and that, but I don’t know— THE COURT: He had hair? THE WITNESS: He had hair on his face. BY [Defense Counsel] Q Are you saying that at one time you had told the police that he had some sort of facial hair ? A Yes, I think so. Q Is that something that stuck out in your mind at the time ? A Yes. Thus her description was uncertain and vague: stout man with some sort of facial hair and a dark jacket over his arm. During the redirect examination the Court asked if she would have been able to recognize the robber if she saw him on the street later on the day of the robbery. She replied, “No.” At the same hearing Mr. Johnson’s initial description, which, as he put it, was “not very positive,” was as follows: Well, as best I can recall, I think I said he was about five foot six or seven, heavy structure, you know, around the neck line, and I think it was a slight beard .... He had the better opportunity to observe the man during the robbery, which he said lasted “more or less for about ten minutes — indirectly for about ten minutes.” The initial description of the robber recorded by the police, without an indication which witness gave it, was more reflective of Mr. Johnson’s recollection: Negro male — about 25, five feet six inches, tall, about 175 pounds, bush hair, dark complected .... THE PHOTOGRAPHIC AND LINEUP IDENTIFICATIONS On June 5, 1970, the day of the robbery, eight photographs of the head and shoulders of black males were shown to Miss Samuels and Mr. Johnson. The photographs gave no indication of height. Only two of the eight had any facial hair. One had a mustache, very short sideburns, and a slight goatee; he was not dark in complexion. The other had a heavy mustache, and sideburns down to his goatee or beard, which was full; he was also definitely dark in complexion, and heavier in build than the others. This was a photograph of appellant. When shown the eight photographs, Miss Samuels testified that the detective told her “that one of these men might be the robber and if I looked through them and see if I could see the man there.” She picked out the photograph of appellant. The following at the hands of the court occurred: THE COURT: . . . I'm asking you about the photographs — what was it that caused you to recognize this defendant. You did testify that if you had seen him in person in the street you wouldn’t have recognized him, so what was it about the picture that caused you to recognize him? THE WITNESS: I don’t know. Six days later, on June 11, 1970, she attended a lineup of nine men. Appellant was the only man in the lineup whose picture had been shown to the witness. He was the tallest man, and the only heavy-set, stout person, who had a full mustache and full goatee. Miss Samuels identified him because “he was tall and stout and the man just looked like the man that robbed us and that is the best that I can do.” Contrary to the initial descriptions of the robber as five feet six or seven inches, appellant was over six feet tall. At the suppression hearing she admitted being better able to identify appellant because of the identification procedures : Q Did you say that since you had seen these photographs several times and you had been to the lineup, that now you are more familiar with what he looks like ? A Yes. Mr. Johnson was also shown the eight photographs on June 5, 1970. The investigating officer testified he told Mr. Johnson that among the eight was the photograph of a man an informer had named as the robber. After going through the photographs twice Mr. Johnson selected appellant’s and explained why as follows: I told the Officer . . . that to the best of my knowledge that was it —looked like the guy that robbed me. Q Was there anything about this particular photograph that made you think it looked like the robber? A Yes — the area around the neckline and the shoulder area. Q Nothing to do with any facial hair? A Well, there was a chin beard, slight [apparently referring to his recollection of the robber] but I think this one was heavier [apparently referring to the picture], which would have made it more — I don’t think this was why I was doubtful because the photograph didn’t look one hundred percent like the guy. . . . At the lineup, Mr. Johnson also identified appellant as the man who looked more like the robber than anyone else in the lineup, again because of appellant’s shoulders and neck. When asked at the suppression hearing if he could identify the robber if he met him on the street now, Mr. Johnson said he was uncertain. THE IDENTIFICATIONS AT TRIAL At trial Miss Samuels described the robber as “stout, short bush, brown-skinned, goatee,” and that he was wearing a green sweater. On cross examination she now said she would have been able to recognize the robber on the street if she saw him on the day of the trial and on the day or day after the robbery, in the latter respect contradicting her testimony at the suppression hearing a year earlier. She could not explain why she answered differently at trial. Mr. Johnson described the robber as tall, close to six feet, although originally he had described him as being five feet six or seven inches. In identifying the photograph on June 5, 1970, he stated he could not be positive the man in the photograph was the robber. Similarly with respect to the lineup, Mr. Johnson said he was not positive, “not one hundred percent sure,” meaning: . if I am to determine whether or not someone has done a thing and solely on my determination, well I want to be sure, that I felt relatively sure if that was the man. But I wanted to erase any possibility that I could have been wrong. I saw the man and he appeared to be the same. •CONCLUSIONS The initial photographic identification procedures were impermissibly suggestive. Among the eight partial photographs appellant’s was the only one whose facial hair was in any way comparable to the initial uncertain descriptions given by the witnesses. Yet had the photographs been full length he would have been significantly taller than the witnesses had described the robber. The statement made by the investigating officer to Mr. Johnson as he viewed these photographs is admitted by the Government to have been suggestive, though the Government minimizes its effect. The suggestiveness of the statement to Mr. Johnson cannot be dismissed as of minimal effect but must be taken in its likely substantial impact, one which is magnified by the circumstance that Miss Samuels was such a weak identification witness. We have examined the photographs shown to the witnesses, and the photographs of the lineup. The stark fact is that appellant fairly leaps out of the pictures as the one person who is different, a judgment that can be made even without knowledge of what the witnesses said, because of his bulk and hair. When there is added to the equation the fact that these are distinctive characteristics attributed to the robber by Mr. Johnson, and that he was the one man whose photograph had previously been shown to both witnesses, it was well-nigh inevitable that he would be chosen in the circumstances. Foster v. California, 394 U.S. 440, 443, 89 S.Ct. 1127, 22 L.Ed.2d 402 (1969): Simmons v. United States, supra, 390 U.S. at 383-384, 88 S.Ct. 967. The elements of suggestiveness must be considered in the totality of the circumstances. Miss Samuels saw the robber briefly, once under not very good lighting, and then momentarily under better lighting. Her initial description was quite vague as given at the time of the suppression hearing. She had admitted her inability to recognize the robber if she saw him on the street the day of the robbery, yet she had become specific, with new details, at trial. As she said, having seen the photographs several times and him at the lineup she knew what he looked like. Mr. Johnson, who had a better opportunity to observe the robber, thought originally he was about five feet six, whereas appellant was more than six feet tall. He also thought he had a slight beard. In the pictures appellant had a full beard. Mr. Johnson was never positive appellant was the robber. He chose him because his shoulders and neck were heavy-set rather than for any other particular reason. Several factual elements enumerated by the Supreme Court as indicative of misidentification are clearly present: (1) vagueness and uncertainty in the original descriptions given by the witnesses to the police; (2) discrepancies between those descriptions and his actual appearance; (3) showing pictures of several persons among whom the photograph of a single such individual recurs or is in some way emphasized; (4) uncertainty in the pretrial identifications; (5) the “heightened chance of misidentification” if the police indicate to the witness that they had other evidence that one of the persons to be viewed committed the crime; and (6) the identification by picture of the defendant prior to the lineup. Neil v. Biggers, 409 U.S. 188, 199, 93 S.Ct. 375, 34 L.Ed.2d 401 (1972); United States v. Simmons, supra, 390 U.S. at 383, 88 S. Ct. 967; United States v. Wade, 388 U. S. 218, 241, 87 S.Ct. 1926, 18 L.Ed.2d 1149 (1967). In the totality of the circumstances we are of the opinion that the suggestive confrontations of the witnesses with the photographs and lineup gave rise to a very substantial likelihood of irreparable misidentification, rendering their in-trial identifications inadmissible as in violation of due process of law under the standards stated in United States v. Simmons, supra, 390 U.S. at 383-384, 88 S.Ct. 967; and see, United States v. Wade, supra, 388 U.S. at 241, 87 S.Ct. 1926; Foster v. California, supra, 394 U. S. at 442-443, 89 S.Ct. 1127; Neil v. Biggers, supra, at 198. Moreover, as appears from our analysis, the testimony lacks a solid basis for attributing the identifications to sources independent of the procedures referred to, and the errors residing in those procedures were not harmless, since the afflicted testimony was essential to the conviction. It is for these reasons we reverse. In the event of a new trial, identifying evidence by the witnesses Samuels and Johnson would be admissible only upon clear and convincing evidence adduced by the government that their respective in-court identifications would rest upon a source independent of the identifying procedures we have held to have been impermissibly suggestive. United States v. Ash (en banc), 149 U. S.App.D.C. 1, 14-15, 461 F.2d 92, 105-106, cert. granted, 407 U.S. 909, 92 S.Ct. 2436, 32 L.Ed.2d 682 (1972); Mason v. United States, 134 U.S.App.D.C. 280, at 286, 414 F.2d 1176, at 1182 (1969). Cf. Foster v. California, supra. The criteria governing the issue of admissibility which we have applied to the trial of this case was first referred to in Stovall v. Denno, 388 U.S. 293, 301-302, 87 S.Ct. 1967, 18 L.Ed.2d 1199 (1967). The Court was there concerned primarily with the possibly retroactive application of Wade, involving the right to counsel under the Sixth Amendment, but the Court considered also whether the identifying procedures in Stovall constituted a deprivation of due process of law under the Fifth Amendment, our present problem. And see, Foster v. California, supra, 394 U.S. at 442-443, 89 S.Ct. 1127; Simmons v. United States, supra, 390 U.S. at 383-384, 88 S. Ct. 967; and see generally, Clemons v. United States, 133 U.S.App.D.C. 27, 408 F.2d 1230 (1968), cert. denied, 394 U.S. 964, 89 S.Ct. 1318, 22 L.Ed.2d 567 (1969). Reversed and remanded. ROBB, Circuit Judge (dissenting): I cannot agree that the circumstances shown by the evidence compel the conclusion that there was “a very substantial likelihood of irreparable misidentifi-cation”. The district judge who denied the motion to suppress found “that the manner in which the photographs were shown and in which the lineup was held are not so impermissibly suggestive as to deprive this defendant of due process.” (Motion to Suppress TR. 40). He concluded “that the evidence is a matter to be considered on the issue of credibility rather than on the question of admissibility.” (Motion to Suppress TR. 40). I agree, and would therefore affirm the conviction. Without laboring my view of the evidence summarized by the majority I mention certain considerations and circumstances which the majority overlooks or does not emphasize: 1. Miss Samuels testified that she confronted the defendant face to face on two occasions, once when he came up to her at the cash register and again by the manager’s office. On each occasion he was only three or four feet away from her. The lighting by the cash register “was bright enough so you can see anybody in the building” and by the manager’s office there was “a real bright light.” (Trial TR. 87). Furthermore, she testified at the suppression hearing that she thought she had seen the defendant before, as a customer in the Hot Shoppe. (Motion to Suppress TR. 25). 2. The majority says that the district judge, although denying the motion to suppress, “expressed concern about the identification of Miss Samuels”. The concern expressed by the District Judge was about the response of Miss Samuels to the hypothetical question, whether she could have identified the defendant if she had seen him on the street on the day after the robbery. (Motion to Suppress TR. 37). I give little weight to such a hypothetical question and speculative answer. Otherwise Miss Samuels was at all times positive in her identification. (Grand Jury TR. 7, 9-10; Motion to Suppress TR. 13, 23; Trial TR. 84, 85). 3. The majority attaches great weight to the original descriptions of the robber given by Miss Samuels and Mr. Johnson, which descriptions are characterized as uncertain, vague and not very positive. Except for the item of height, however, these descriptions are not inconsistent with the defendant’s appearance. In any event a witness may retain a mental image of a man, but be unable to describe him precisely. As Miss Samuels testified, explaining why she identified the defendant in the lineup, “the man just looked like the man that robbed us and that is the best that I can do.” We should recognize also that at best the descriptions given by victims of crime are apt to be inaccurate; ordinarily a man confronted with a pistol does not think about the Bertillon measurements of his assailant. Thus Mr. Johnson told the grand jury “I could probably look at the gun and identify it better than I could the man.” (Grand Jury TR. 30). The issue of the defendant’s identification was presented and argued to the jury under proper instructions. I would not retry the issue here, but would affirm the verdict and sentence. . Mr. Johnson sent another employee to get this money. This employee did not testify at trial because be could not be found. . Counsel for the appellant justifiably questions the accuracy of this “ten minutes,” even as the witness qualified it, pointing out that Miss Samuels consistently testified that the robber entered the Hot Shoppe at 12:10 a. m., and Mr. Johnson said that the robber left at about 12:15 a. m., “if I’m not mistaken.” . Also included was a description of the robber’s clothing, consistent with Mr. Johnson’s recollection. . Mr. Johnson’s testimony before the Grand Jury in August, 1970, was to be as follows: “I saw several [photographs], I don’t know how many — but the one I would think to be more likely to be the one is the one that I picked out . . . . ”

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

UNITED STATES of America v. Thomas M. PHILLIPS, a/k/a Thomas P. Bailey, Appellant. No. 72-1504. United States Court of Appeals, District of Columbia Circuit. May 17, 1973. As Amended August 6,1973. Edward L. Koepenick, Bethesda, Md. (appointed by this Court), was on the brief for appellant. Harold H. Titus, Jr., U. S. Atty., John A. Terry and Peter C. Schaumber, Asst. U. S. Attys., and Robert J. Higgins, Asst. U. S. Atty., at the time the brief was filed, were on the brief for appellee. Before BAZELON, Chief Judge, WISDOM, Circuit Judge for the Fifth Circuit, and RICHEY, U. S. District Judge for the District of Columbia. Sitting by designation pursuant to 28 U.S.C. § 291(a). Sitting by designation pursuant to 28 U.S.C. § 292(a). BAZELON, Chief Judge: Appellant was convicted of robbery. Since the grounds urged for reversal are without merit, the conviction is affirmed. But there is a matter relating to the administration of the Youth Corrections Act which requires our attention. Appellant was 20 years of age at the time of his conviction and, at the direction of the trial judge, was evaluated for Youth Corrections commitment pursuant to section 5010(e) of the Act. The 5010(e) report recommended adult sentencing and, relying on that report, the trial judge imposed an adult sentence of 2-6 years. The sentencing occurred before this court's decisions in United States v. Coefield and United States v. Reed & Hoston. This case was on appeal when those decisions issued. We think they require that, in the present case, the sentence be vacated and the case remanded for reconsideration of Youth Corrections treatment. I An offender less than 22 years of age at the time of his conviction is eligible for Youth Corrections Act treatment. The Act provides the trial judge with four options: (1) granting probation, § 5010(a); (2) committing the offender to a federal Youth Center for up to six years’ indeterminate sentence, § 5010(b); (3) committing the offender for a maximum term of over six years but not exceeding the maximum sentence for the crime involved, § 5010(c); or (4) sentencing the offender as an adult, § 5010(d). “Congress [has] found that young people between the ages of 16-22, especially, were hopeful subjects for rehabilitation,” hence clothed them with a presumptive right to treatment under the Act. Accordingly, an adult sentence may be imposed “only if the applicable facts in the individual case meet the statutory requirements,” which include a finding that the offender “will not [derive] benefit from rehabilitative treatment” under the Act. This court has held that the no-benefit finding must be explicit and affirmative; that it is not enough to merely track the language of the statute; and that the basis for the court finding must appear in a statement of “reasons from which it can be determined that [the sentencing decision] is consistent with the purposes of the Act.” We also defined the scope of appellate review: What Congress has done, out of its urgent concern for saving the young while there is still time, is to require of the sentencing court in one limited but highly important area of sentencing the exposure on the record of the factors which informed and shaped the particular exercise of its discretion. An appellate court can only be concerned with the rationality of those factors in relation to Congressional objectives. The relevant Congressional objective is that an eligible offender should be denied Youth Corrections treatment “[only] in the exceptional case [where the sentencing judge is] convinced the youth is incorrigible and would derive no help from the program.” This is the legal criterion against which a sentencing court’s reasons are to be measured. While we have held that a denial of Youth Corrections treatment must be accompanied by a statement of reasons, we have also said that where a trial judge orders and follows the recommendation of 5010(e) study, “additional reasons need not be stated, although, of course, the judge is not precluded from adding reasons of his own.” This presupposes that the report provides the requisite reasons. In that case, when the sentencing judge adopts the reasons in the 5010(e) report as his own, a restatement would be, redundant. This adoption does not, however, obviate the need for exposure of the “factors which informed and shaped” the sentencing decision, nor relieve this court of responsibility to determine whether those reasons, from whatever source, demonstrate a “present and visible” rationality in relation to Congressional objectives. II When an offender is committed for observation pursuant to 18 U.S.C. § 5010(e), he is assigned to a Youth Center Classification Committee composed of an administrator, a parole officer, and a clinical psychologist. The parole officer, a social worker, submits a written classification study reviewing the offender’s background, prior record, and the circumstances of the instant offense. The clinical psychologist also submits his individual evaluation. The three professional staff members of the Committee then prepare a joint evaluation and recommendation. This completed study is forwarded to the D. C. Board of Parole, which makes its own recommendation in a covering letter and transmits the report to the District Court. These documents comprise the 5010(e) evaluation. III In the present case, the 5010(e) report recommended adult sentencing and the Board of Parole joined in that recommendation. The trial judge had only the following to say about the report and the accompanying transmittal letter: The Court has received a report from the Youth Center recommending against incarceration there stating among other things that the defendant appears to be a street-wise individual; that they feel he would not benefit from the Youth Program and they recommend that he be sentenced as an adult. Accordingly, since that is the purpose of the 5010(e) study, to determine whether or not the subject is likely to be rehabilitated, the Court will follow the suggestion of the Board of Parole and the report from the Youth Center and will impose sentence as an adult. Since the judge stated no independent reasons for adult sentencing we must now turn to the 5010(e) study, which suggests only two reasons: (A) that appellant is a “rather street-wise individual;” and (B) that he has failed to prove himself because he was on Youth Act probation when arrested for the instant offense. A. The label “street-wise” The Parole Officer’s reference to appellant as “a rather street-wise individual,” was echoed in the Board of Parole’s transmittal letter and repeated by the trial judge. But the report, itself, does not reveal the meaning of this label; nor does an examination of appellant’s background. He was convicted of robbery without a weapon, and had only one prior adult conviction — for petit larceny. He is described as not using drugs, and neither assaultive nor defiant of authority. He held a full time job, albeit an unskilled one, for over a -year prior to his incarceration. Neither this court nor the trial court should be left to conjecture about what the term “streetwise” is intended to convey — or to conceal. Without further explanation, this label is a shallow “litany or prescribed formula.” B. The prior Youth Act sentence The Classification Committee evaluation said of appellant’s prior Youth Act probation: It was felt [at the time of sentencing on the earlier petit larceny charge in the fall of 1970, that appellant] if placed in the probationary setting with the strong guidance and influence of a probation officer, . would have been able to make a satisfactory adjustment without the services of the Youth Center. However, it appears as though Mr. Phillips returned to his former family situation and was unable to adequately adjust which resulted in his involvement with the instant case. The Classification Committee feels that Mr. Phillips has had the opportunity to prove himself in the community and he failed to make a satisfactory adjustment. Therefore, the Committee recommends that Mr. Phillips be sentenced as an adult with the minimum time considered. The Parole Board’s letter also cited the fact that appellant committed the instant offense while serving a Youth Act probation sentence. In United States v. Coefield, we recognized that a no-benefit finding might be premised on “a prior sentence under the Youth Corrections Act, . . . followed by a subsequent offense.” We presumed, however, that the subsequent offense would evidence a failure to benefit from Youth Act treatment. Since appellant’s prior sentence was “without the services of the Youth Center,” his subsequent offense could not indicate such a failure. In addition, the report notes that Phillips’ return to his “former family situation” played a substantial part in his involvement in the instant offense. Commitment to a Youth Center, however, might also mitigate that environmental pressure. It is important to note that the 5010(e) report nowhere asserts that appellant would not benefit from treatment at the Youth Center. The report indicates just the opposite. The clinical psychologist’s evaluation described the factors which caused appellant’s criminal behavior: The root of his feelings of inadequacy seem to lie in his inability to provide support for himself and his family. ... He appears to feel a responsibility, since his father is dead, for helping his mother financially, in addition to taking care of his own children and their mother. Because he is too deficient in education and marketable skills to discharge this felt responsibility . . . appellant feels frustrated and impotent. The visible result of these feelings has been criminal activity to supplement his earned income. Keeognizing appellant’s rehabilitative potential, the psychologist recommended training in a marketable skill and remedial education — “this would relieve [Phillips’] anxiety . . . and give him a basis” for providing material support to his family without resort to crime. The Classification Committee recommended the minimum adult sentence, and the trial judge, in turn, recommended that appellant be incarcerated “at Petersburg, where he may be afforded training for a useable skill.” We have held that where an eligible offender is sentenced as an adult, but the court recommends treatment like that afforded under the Act, there is an implied finding that the offender would benefit from Youth Corrections treatment. Here the trial judge and Youth Center’s professional staff agreed that appellant would derive benefit from vocational and educational training. The Youth Corrections Act was born of an urgent concern for the rehabilitation of young offenders and a determination to reach some of the underlying causes of criminal behavior. There are indications that the' Youth Corrections system (particularly in the District of Columbia) has fallen far short of the- humane impulses for its being. Phillips’ case is illustrative. The legislative history of the Act specifically refers to “training offenders for a useful life through the learning of trades.” Although the Youth Center’s professional staff believe that training in marketable skill could put appellant on the path to a useful law-abiding life, he was recommended for adult sentencing. IY A candid statement of the reasons why an eligible offender is deemed incapable of rehabilitation is necessary to protect his presumptive right to Youth Act rehabilitative treatment. The reasons should reveal (1) what the decisionmakers understand to be the meaning of rehabilitation and the means for achieving it, and (2) to what extent the Youth Corrections system provides those means. It is also imperative to examine more closely the meaning of the label “incorrigible.” Such examination might bring us a step closer to meeting the “problem of crime ... at its focal point” — by identifying its causes. Our role in this “limited but highly important area of sentencing is to insure that a candid statement of reasons, bearing a “present and visible” rationality to Congressional objectives, does accompany any decision to deny an eligible offender treatment under the Act. The 5010(e) study in this case failed to provide such reasons. The trial judge failed to note their absence or add any reasons of her own. We are, therefore, compelled to vacate appellant’s sentence and remand the case. We do not order that appellant be committed to the Youth Center. We simply remand for reconsideration of sentence based on a full statement of reasons as described herein. For that purpose, the District Court may, of course, order a new 5010(e) study if so advised. And, if adequate reasons for adult sentencing do not exist, appellant must be committed to the Youth Center. Remanded. . 22 D.C.Code § 2901. . United States v. Coefield, 155 U.S.App. D.C. 205, 476 F.2d 1152 (1973); United States v. Reed & Hoston, 155 U.S.App. D.C. 198, 476 F.2d 1145 (1973). . 18 U.S.C. § 5005 et seq. . United States v. Coefield, note 2, supra, 476 F.2d at 1159; H.R.Rep.No.2979, 81st Cong., 2d Sess. 1-4 (1950) U.S.Code Cong. Service, p. 3983. . United States v. Waters, 141 U.S.App. D.C. 289, 292-293, 437 F.2d 722, 725-726 (1970) (emphasis original). . 141 U.S.App.D.C. at 291, 437 F.2d at 724 (emphasis original). . United States v. Coefield, note 2, supra, 476 F.2d at 1156. . Id. at 1157. . Id. at 1158. . United States v. Reed & Hoston, note 2, supra, 476 F.2d at 1150 (emphasis supplied). . United States v. Waters, note 5, supra, 141 U.S.App.D.C. at 291-293, 437 F.2d at 724-725; accord, S.Rep.No.1180, 81st Cong., 1st Sess., at 5 (1949). No-benefit must as a practical matter be taken to mean no significant rehabilitative benefit. . United States v. Coefield, note 2, supra, 476 F.2d at 1157 (emphasis supplied); see id., at 1157 (when “the judge imposes a sentence contrary to the recommendation in a report . . . the need for more detailed statement of reasons is more obvious”). . United States v. Reed & Hoston, note 2, supra, 476 F.2d at 1150. There is no basis for distinguishing, for purposes of appellate review, between a judge’s stated reasons and those he adopts in following the recommendation of a 5010 (e) report. While a 5010(e) report may represent the application of special expertise hy the Youth Corrections authorities, that factor cannot relieve this court of its obligation to insure that reasons relied on by the experts are rationally related to Congressional objectives. . The D. C. Board of Parole is made up of a Parole Executive and three members appointed by the Mayor-Commissioner. 24 D. C. Code § 201a; Reorganization Plan No. 3 of 1967, § 401-14-210, D.C. Code, Title I, Appendix at p. 61 (Supp. V, 1972) ; Mayor-Commissioner’s Organization Order No. 6, Dec. 26, 1967, as amended, March 2, 1971, D.C.Code, Title I, Appendix at pp. 80-81 (Supp. V. 1972). The Parole Executive and members are full time and salaried. While the members of the Board are not required to be professionals in corrections, they are to be selected “on the basis of their broad experience in responsible positions in the fields of correctional service, rehabilitation, law, or education in related fields of behavioral sciences.’ Mayor-Commissioner’s Organization Order No. 6, supra, Part II, at p. 81. . The trial judge specifically noted that there was no reference to an overcrowding problem as a basis for the 5010(e) report’s recommendation. Since we require that the factors which shape the sentencing decision be disclosed, we cannot assume the existence of any undisclosed reasons — including overcrowding— to justify an adult sentence. . United States v. Coefield, note 2, supra, 476 F.2d at 1157. . On the petit larceny charge, appellant received a sentence of 2 years probation under the Youth Act. 18 U.S.C. § 5010 (a). . United States v. Coefield, note 2, supra, at 1157. . See discussion infra indicating the extent to which the pressures of appellant’s family situation caused his criminal behavior. . The trial judge, before sentencing an eligible offender as an adult, must find that he would not benefit from commitment under sections 5010(b) or (c) of the Act, both of which envision a period of incarceration and treatment at a Youth Center, 18 U.S.C. § 5010(d). . The trial judge in United States v. Ward, 337 F.Supp. 185, 194 (D.D.C. 1971), appended to his opinion on remand a letter from the Director of the D.C. Department of Corrections, who described the most desirable Youth Corrections committee as a “defendant whose criminal activity has apparently resulted from an inability to attain desired ends because of a lack of economic, educa-ional or social opportunity.” . Unfortunately, a sentencing judge is unable to insure that an offender will get the needed services elsewhere in the correctional system. The judge can only recommend to what facility an adult offender will be sent and that recommendation often goes unheeded. In imposing an adult sentence, the trial judge in Waters, note 5 supra, recommended appellant be placed in a youth facility, but: [t]his direction of the court was only precatory and was speedily violated by the transfer of appellant . . . to the regular penitentiary. [At the adult facility], appellant was severely beaten with a lead pipe by an older prisoner, hovered in critical condition for about two weeks, suffered permanent impairment of his eyesight, [and] substantial amnesia. 141 U.S.App.D.C. at 292-293, 437 F.2d at 725-726. See also United States v. Ward, 147 U.S.App.D.C. 149, 151, 454 F.2d 992, 994. . United States v. Ward, 147 U.S.App.D.C. 149, 454 F.2d 992 (1971). . See United States v. Coefield, note 2, supra, 476 F.2d at 1159-1160. . Id.; Harvin v. United States, 144 U.S. App.D.C. 199, 220, 445 F.2d 675, 696 (1971) (separate opinion of Judge Tamm). . See, e. g., United States v. Alsbrook, 336 F.Supp. 973 (D.D.C.1971); United States v. Lowery, 335 F.Supp. 519 (D.D.C.1971). . H.R.Rep. 2979, 81st Cong., 2d Sess. at 4 (1950). . Harvin v. United States, note 25, supra, 144 U.S.App.D.C. at 220, 445 F.2d at 696 (separate opinion of Judge Tamm); H.R.Rep.No.2979, 81st Cong., 2d Sess. 1 (1950). . See notes 10-11, supra and accompanying text; United States v. Reed & Hos-ton, note 2, supra, 476 F.2d at 1150. For a discussion of a requirement for rea-oned sentencing decisions see American Bar Association Project on Minimum Standards for Criminal Justice, Standards Relating to Appellate Review of Sentences (Approved Draft 1968) § 2.3(e) ; R. Goldfarb & L. Singer, After Conviction at 191-95 (1972); M. Frankel, Criminal Sentences at 39-49 (1973); Wyzanski, A Trial Judge’s Freedom and Responsibility, 65 Harv.L.Rev. 1281, 1292-1293 (1952).

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2024-08-24T03:29:51.129235

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UNITED STATES of America v. Lewis C. ECKER, II, Appellant. No. 73-1154. United States Court of Appeals, District of Columbia Circuit. May 29, 1973. As Amended June 7, 1973. Herbert M. Silverberg, Chief, Mental Health Division, Public Defender Service, Washington, D. C., was on the motion for Summary Reversal. Harold H. Titus, Jr., U. S. Atty., John A. Terry, Oscar Altshuler, Roger C. Spaeder, and Lawrence H. Wechsler, Asst. U. S. Attys., were on the opposition to motion for Summary Reversal. Before BAZELON, Chief Judge, FAHY, Senior Circuit Judge, and Mac-KINNON, Circuit Judge. BAZELON, Chief Judge: Appellant Ecker has moved for summary reversal of the District Court’s denial of St. Elizabeths Hospital’s recommendation for his conditional release from that hospital on the ground that the trial judge clearly abused his discretion. We deny the motion for summary reversal and, sua sponte, summarily affirm the decision below. On the basis of this record, we find that the hospital’s evidence raised sufficient questions about appellant’s mental stability and about the adequacy of its own investigation into his mental status to support the-trial judge’s denial of Ecker’s conditional release in February of 1973. This determination does not prejudice future recommendations for conditional release or attempts by the hospital to clarify the questions raised in this record, now five months old. I. The facts of this case need be only briefly recited. In 1968, appellant Ecker was acquitted by reason of insanity, in an uncontested proceeding, of the rape-murder of a young Congressional secretary. He was committed to St. Eliza-beths with a diagnosis of severe soeio-pathic personality disturbance, sexual deviance (sadism) with organic features. He spent a total of four years in maximum security in the John Howard Pavilion, and nineteen months in minimum security prior to the hospital’s request for his conditional release. This request, dated January 4, 1973, encompassed the pursuit of an educational program at a technical institute in Virginia and visits to his parents’ home at the discretion of the hospital. A hearing was held on January 30, 1973, in the District Court. Dr. George Saiger, appellant’s ward psychiatrist since July of 1971, was the only witness. He testified at length as to appellant’s case history and hospital record, and gave his evaluation of Ecker’s current mental status. The Government did not oppose the hospital’s request for release for schooling, but did oppose the request for visits to Ecker’s parental home. At the conclusion of the testimony and arguments, the District Judge found that Ecker was still suffering from mental illness; and that there were indications that many issues were still unresolved so that appellant, still in turmoil, could not control his impulses. Because of this uncertainty and instability, the judge denied the hospital’s recommendation since, “if released into the community, [Ecker] might be likely to injure himself or others.” II. While the findings below are not a model of precision or completeness, we think the record offers a sufficient basis for the trial court’s determination to withstand appellant’s attack under the high standard set for motions for summary reversal. Moreover, we think that the interests of justice are best served by a sua sponte affirmance of the trial court since a careful study of the record convinces us that such relief is clearly warranted. Without exploring and exposing the details of appellant’s mental condition at greater length than necessary, we find that the testimony of Ecker’s psychiatrist raises not only ambiguities, but real doubts about the sufficiency of the investigation of Ecker’s condition, and the conclusions drawn therefrom that he was ready for a dramatic increase in both responsibility and unsupervised leave time from the hospital. These doubts are raised by three aspects of Dr. Saiger’s testimony. First, the extremely short period of time during which Ecker had been without medication. Second, the apparent haste to subject him to psychological testing and the inner turmoil still reflected therein. Third, Ecker’s elopement from the hospital shortly after being told to assume a great deal of “responsibility” for his own future. These factors all raise doubts about appellant’s reliance on the “down-to-earth persuasiveness” of Dr. Saiger’s testimony. They point out at least the need for further observation and information. Furthermore, they call into question the hospital’s conclusion that the likelihood of Ecker’s being dangerous to others was reduced to such a degree in January so as to permit his extensive, although not unconditional, release. Doubts about the expert’s conclusion were reflected in the trial judge’s concern that it was still “likely” that Ecker might be dangerous if released into the community. The consequent refusal to allow conditional release at that time, based as it was on the facts and uncertainties revealed by the hospital’s evidence, was not without a substantial basis in the record. III. Appellant challenges the validity of the trial judge’s exercising such a broad power of review over the hospital’s decision to release him. The thrust of this attack is that the differential handling of the release of civilly committed patients from those who, like Ecker, were civilly committed after a finding of not guilty by reason of insanity, deprives the latter of the equal protection of the laws. In Bolton v. Harris, this court upheld the release provisions of D.C.Code § 24-301 (e) which require court approval of the hospital’s recommendation. We did not think “equal protection is offended by allowing the Government or the court the opportunity to insure that the standards for the release of civilly committed patients are faithfully applied to [so-called “criminally” committed] patients.” Appellant re-asserts the proposition that any differential treatment of the release of the two groups of patients violates equal protection. But he fails totally to assert any facts or reasons why the Bolton rationale should be abandoned. At best, he argues that the trial court’s function must be severely restricted to the limited review of an essentially “medical” judgment, along the lines of the standard set forth in Tribby v. Cameron. That the issue of what standard of review should be applied to release decisions is a question of constitutional dimensions is beyond dispute. This court is continually called upon to test the validity of the substantive and procedural terms of commitment against the requirements of the Constitution. Moreover, it does seem relevant to examine more closely the statutory requirements of D.C.Code § 24-301 in light of current developments in the law. However, this case does not provide the opportunity to do so. Even under the standard outlined in Tribby, that the court assess whether the hospital has made a “permissible and reasonable decision in view of the relevant information and within a broad range of discretion,” the trial court’s judgment must be sustained. In the record before us, we find to be crucial the lack of extremely relevant information concerning the termination of Ecker’s medication. Not only is this important factor virtually brushed off by the psychiatric expert, but the period of time elapsed since the termination appears to us too short to provide any opportunity for adequate observation. We have noted previously the relevance of this type of medication to psychiatric evaluations of mental status and we find that the failure to deal with this issue undermines the “reasonableness” of the hospital’s decision. Similarly, we note that the recommendation for conditional release was based on only five months of liberalized privileges since Ecker’s elopement. Such a time span raises further doubts about whether the hospital’s decision was based on adequate relevant information. IV. We have decided to take the somewhat unusual step of affirming the judgment in this case sua sponte for a variety of reasons. First, because we are convinced that the standard for summary disposition is met, on this record, by the Government. Second, we see no real prejudice to the rights of appellant in so doing. • The emergency nature of appellant’s motion — to obtain release for schooling in February — has already been frustrated. Rather than simply deny summary reversal and allow the appeal to follow its normal course, it will better serve the interests of justice to terminate now what we would see to be a process which could not in the end provide the relief requested and might therefore only waste both the parties’ and the court’s resources. Moreover, our affirmance should in no way be interpreted as foredooming future recommendations for conditional release. We respect St. Elizabeths’ obvious efforts to secure a meaningful educational experience for this patient and we would urge that these efforts not cease. There is nothing finally determined by the denial of conditional release — particularly so in this case where the record raised questions and doubts which can, and may, be readily answered by the passage of time. Refusal by the court to allow release as of January in no way prejudices future attempts, and should not discourage the hospital from seeking release arrangements for its patients. If we were not convinced of the good faith of the trial judge in considering the hospital’s recommendations solely in light of the statutory standards for conditional release, we would be more deeply troubled by his reference at the hearing to the length of prison term to which Ecker might have been sentenced had he been convicted of murder. Ecker was not found to be legally responsible for his acts, he was not convicted, and he is not being punished. No considerations other than the terms of his release, his mental condition, and the possibility of dangerousness to himself or others should influence the decisions of either the hospital staff or the court. In this regard, we were appalled to read in the record that Dr. Saiger was instructed to contact the Senate Office in which Ecker’s victim had worked prior to her death to find out if Ecker’s release would “bother” anybody, a matter wholly irrelevant to the decision to be reached by those charged with responsibility in the matter. And we assert again that the theoretical limits of Ecker’s theoretical imprisonment are of no relevance in determining whether he should be conditionally released from the hospital. The motion for summary reversal is denied, and the judgment is Affirmed. . Transcript at p. 61. . The Government did contend that the conditions for release be “extremely narrowly circumscribed” to permit no time in the community other than bus trips and to provide for careful supervision. Tr. at p. 63. . Tr. at p. 66. . A party seeking summary disposition bears the burden of “demonstrating both that his remedy is proper and that the merits of his claim so clearly warrant relief as to justify expedited action.” United States v. Allen, 133 U.S.App.D.C. 84, 85, 408 F.2d 1287, 1288 (1969). See also Ashe v. Robinson, 146 U.S.App. D.C. 220, 450 F.2d 681 (1971). . The Government opposed appellant’s motion for summary reversal but did not file an opposing motion for summary affirmance. . Tr. at pp. 18, 38. Ecker received heavy doses of tliorazine at the time of his admission, and had been receiving other unnamed medication until December of 1972. Thus it was conceded that he had been without major tranquilizers for only a month and a half prior to the hearing. . Tr. at pp. 44-45. In November of 1972, a psychological tester found continued turmoil in Ecker’s unconscious fantasy life. Dr. Saiger explained this by adverting to the fact that the psychologists had asked him to delay the testing because Ecker had begun individual therapy, and because one expects unconscious turbulence in anyone in individual treatment. Dr. Saiger responded that it would not be possible to delay testing since “the notion of school in the spring” was already being discussed. . Tr. at p. 14. The connection between the elopement and “dumping” responsibility in Ecker’s lap was mentioned by the psychiatrist and is raised in appellant’s memorandum at p. 9. . This ease illustrates, of course, all the difficulties and ambiguities in setting standards for a patient’s conditional release from St. Elizabeths. Such standards have, unfortunately, received scant judicial attention. This is primarily due to the rapidity with which patients’ circumstances can be, and are changed, and the consequent frustration of adequate judicial review. See Jackson v. Robinson, 155 U.S.App.D.C. 94, 476 F.2d 539 (Issued March 20, 1973). As we have construed the conditional release provision of D.C.Code § 24-301 (e), complete recovery from a mental illness is not required. Indeed, for some patients conditional release may be an important and essential part of “recovery.” To approve such release, “the court must conclude that the individual has recovered sufficiently so that under the proposed conditions . . . ‘such person will not in the reasonable future be dangerous to himself or others.’ ” Hough v. United States, 106 U.S.App.D.C. 192, 195, 271 F.2d 458, 461 (1959). Whether this interpretation continues to be sound may be open to future examination. It is clear, however, that the nature of the conditions set for release play an important part in a determination of “sufficient” recovery and lack of dangerousness. Since neither determination may be capable of absolute precision or certainty, the standards are elusive. It is important, therefore, that both the hospital and the trial court elucidate with specificity those factors which weigh heavily in their decisions. Only by such explication on the record can there develop standards for review of conditional release decisions more meaningful than merely the “persuasiveness” of psychiatric testimony. . 130 U.S.App.D.C. 1, 395 F.2d 642 (1968). . Id. at 11, 395 F.2d 652. . “Equal protection does not require that all persons be dealt with identically, but it does require that a distinction made have some relevance to the purpose for which the classification is made.” Baxstrom v. Herold, 383 U.S. 107, 111, 86 S.Ct. 760, 763, 15 L.Ed.2d 620 (1966). See Bolton v. Harris, 130 U.S.App.D.C. at 10, 395 F.2d at 651. . “We do not decide whether the agency has made the best decision, but only make sure that it has made a permissible and reasonable decision in view of the relevant information and within a broad range of discretion.” 126 U.S.App.D.C. 327, 328, 379 F.2d 104, 105 (1967). For a discussion of the types of decisions calling for different standards, see Dixon v. Jacobs, 138 U.S.App.D.C. 319, 427 F. 2d 589, 597 (1970). . See, e. g., In re Ballay, 157 U.S.App. D.C. -, 482 F.2d 648 (Issued May 31, 1973); Waite v. Jacobs, 154 U.S.App.D.C. 281, 475 F.2d 392 (Issued March 8, 1973); Jackson v. Robinson, supra note 9. . E. g., Jackson v. Indiana, 406 U.S. 715, 729, 92 S.Ct. 1845, 32 L.Ed.2d 435 (1972). . Not only is the change in dosage levels virtually ignored, Dr. Saiger offered no explanation as to why he doubted medication was ever necessary in this case. Tr. at p. 38. This is not to intimate any judicial views on the psychiatric treatment Belter received. The point is that the issue of medication was passed over, and we are not convinced either of its irrelevance, or of the hospital’s implicit conclusion that 4-6 weeks was a sufficient span of time to observe Belter’s adjustment to the withdrawal of medication. . United States v. Bennett, 148 U.S.App. D.C. 364, 460 F.2d 872 (1972). . It was also brought out by Ecker’s psychiatrist that he felt Ecker had been treated “special in reverse” because of his advantageous background. Tr. at pp. 6-7. We hope it is unnecessary to state that this factor too should have no bearing on the determination to seek Ecker’s release.

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Henry LOWENSTERN, Appellant, v. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, AFL-CIO, et al. No. 73-1012. United States Court of Appeals, District of Columbia Circuit. May 21, 1973. Joseph M. Stone, Washington, D. C., was on the brief for appellant. Plato E. Papps, Washington, D. C., was on the brief for appellees. Before WINTER, Circuit Judge for the Fourth Circuit, and MacKINNON and ROBB, Circuit Judges. Sitting by designation pursuant to 28 U.S.C. § 291(a) (1970). MacKINNON, Circuit Judge: This is an appeal from an order of the District Court granting summary judgment in favor of the International Association of Machinists and Aerospace Workers, AFL-CIO (hereinafter IAM) in a dispute over the “vesting” provision of their “Grand Lodge Pensions.” The District Court found that the interpretation of the Plan adopted by the Administrators in denying appellant Lowenstern the vested rights he claimed was not arbitrary and capricious and therefore must be upheld. We agree. The IAM maintains a Pension Plan for its officers, representatives and employees administered by designated Administrators. Appellant Lowenstern was employed by the IAM on March 15, 1952 as a “professional or technical employee,” was initiated into the IAM on January 5, 1954 and was at all relevant times thereafter a member in good standing of the union. On September 16, 1968, appellant requested and was granted a leave of absence from his employment with IAM for the period from September 16, 1968 to February 1, 1969 to “try . . . out in a new position as Executive Editor of the monthly Labor Review at the U. S. Department of Labor.” Appellant never returned to work at the IAM and on January 22, 1969 appellant submitted his resignation from IAM to be effective February 1, 1969. At no time subsequent to December 31, 1968 did appellant do any work for IAM. These facts are not in dispute. Appellant sought a determination from the Administrators that he was entitled to “vested” benefits under section 6 of the Pension Plan. The Administrators found he was not so entitled and appellant instituted this action in the District Court. The relevant provisions of the Pension Plan concerning “vesting” of benefits provide in toto: “Vesting” Sec. 6. G.L. elective and appointive officers, representatives and all G.L. R.s., G.L.As., special representatives and coordinators assigned to G.L. Headquarters, regional offices or to special assignment work who must be good-standing members of the I.A.M. and who have rendered service in any of the above capacities on or after January 1, 1957, shall accrue vested rights in the Pension Plan as herein provided. Vested rights shall also extend to any professional or technical employee of the G.L. who is employed on January 1, 1969, and who is, and has been, a member in good-standing of the I.A.M. from at least September 1, 1968. All of the G.L. officers, representatives and other personnel referred to in the preceding paragraph who have rendered 15 years of service, as set forth in Section 4 of this Art., and whoj on or after January 1, 1957, voluntarily leave the employment of the G.L. or are otherwise terminated prior to reaching the age of 55, will qualify for payments from the Pension Plan as provided for in Sec. 7 of this Art. upon reaching the age of 55. The vested rights ■ accorded herein shall be cancelled upon the death of an individual with less than 15 years of credited service or upon termination of good-standing membership in the I.A.M., and are also subject to the provisions prescribed in Secs. 10 and 11 of this Art. All office and clerical employees, and any other personnel not specified in this Sec. as having vested rights, shall not accrue any vested rights in the Pension Plan. They shall, however, continue to be eligible for pensions as provided in Secs. 3, 4, and 5 of this Art. as long as they maintain an employment relationship with the I.A.M. (such employees will be considered to be in an employment relationship during periods of regularly scheduled employment, temporary layoffs, any other layoffs during which rights of recall remain effective, sick leaves, and leaves of absence). Any employee covered by this paragraph will become ineligible for pension when his or her employment relationship with the I.A.M. is terminated. No person shall qualify for more than one pension under the Pension Plans embodied in this Constitution. Constitution of the International Association of Machinists and Aerospace Workers, AFL-CIO, Art. XIV, § 6 (emphasis added). Since appellant was a professional or technical employee who was a member in good standing of the IAM, the only issue is whether he was “employed” by IAM on January 1, 1969 when he was trying out in a new position with the U.S. Department of Labor during his leave of absence from the union. The decision on this issue determines whether his rights “vested” under the terms of the italicized language of § 6, supra. Our scope of review in such cases is limited to a determination of whether the decisions by the Administrators were arbitrary and capricious in denying appellant his request. Assalone v. Carey, 154 U.S.App.D.C. 69, 473 F.2d 199 (1972); Gaydosh v. Lewis, 133 U.S. App.D.C. 274, 410 F.2d 262 (1969). In this case appellant urges an interpretation of the word “employed” that is broader than that adopted by the Administrators. However, even assuming appellant’s construction were reasonable, as between two competing interpretations of the Plan, we are bound by that of the Administrators if it is not arbitrary and capricious. Miniard v. Lewis, 128 U.S.App.D.C. 299, 387 F.2d 864 (1967), cert. denied, 393 U.S. 873, 89 S.Ct. 166, 21 L.Ed. 144 (1968); see also Roark v. Lewis, 130 U.S.App.D.C. 360, 364, 401 F.2d 425, 429 (1968). The appellees point out that their interpretation comports more closely with the scheme of § 6 as a whole. The Pension Plan of the IAM distinguishs between three classes of employees: (1) elective and appointive officers and representatives; (2) professional and technical employees; and (3) office and clerical employees. While the requirements for vesting are now different for each class, prior to January 1, 1969, the professional and technical employees had no vesting rights as is still the case with the office and clerical employees. Members of the latter class are not entitled to vested rights in the plan but are eligible for pensions as long as they maintain an “employment relationship” with IAM at retirement age. Under § 6 an “employment relationship” is explicitly defined to include leaves of absence. As to professional and technical employees, the term used to determine their eligibility under the Plan for vested rights is simply “employed.” Thus with regard to these professional and technical employees the broader term “employment relationship,” with its accompanying definition including leaves of absence, is not used. Appel-lees contend that the framers of the Pension Plan intended to apply a narrower construction to vestiture than to pension rights and rely upon the familiar maxim of interpretation that expres-sio unius est exclusio alterius. We agree and under these circumstances we cannot say that the interpretation by the Administrators, which concludes that appellant was not “employed” by the union on the same day that he was working for the U.S. Department of Labor, is arbitrary and capricious. This conclusion conforms to the fine analysis of the facts and the issues by the District Court and its judgment therefore must be and is Affirmed. . IAM Constitution, Art. XIV, adopted September, 1968, effective January 1, 1969. . Id., Art. XIV, § 2. . Appellant’s brief, p. 8. . It is only the vesting rights, not his pension rights, that are here in dispute. . Appellant’s brief, p. 5, asserts: “Plaintiff believes that an employee on leave of absence remains an employee during such period and is ‘employed’ while on such leave. . . . ” This statement of the issue fails to take into account a vital fact here, that during said “leave of absence” appellant was employed by another employer, i. e., the United States Government.

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Laurence GAGE et al., Petitioners, v. UNITED STATES ATOMIC ENERGY COMMISSION and United States of America Commonwealth Edison Company, Intervenor. No. 72-1459. United States Court of Appeals, District of Columbia Circuit. Argued March 6, 1973. Decided May 23, 1973. Joseph Karaganis, Washington, D. C., with whom Wallace Duncan, Washington, D. C., was on the brief, for petitioners. Jerome Nelson, Sol. A. E. C., with whom Kent Frizzell, Asst. Atty. Gen., Martin R. Hoffmann, Gen. Counsel, Harvey S. Price, Atty., A. E. C., Edmund B. Clark and Peter R. Steenland, Attys. Dept, of Justice, were on the brief, for respondent. Marx Leva, Washington, D. C., with whom Craig Matthews, Richard Shlak-man and Lois Sehiffer, Washington, D. C. , were on the brief, for intervenor. William H. Cuddy, Hartford, Conn., filed a brief on behalf of American Electric Power Co. Inc., and others, as amici curiae. Before TAMM and WILKEY, Circuit Judges, and JAMESON, Senior United States District Judge for the District of Montana. Sitting by designation pursuant to 28 U.S.C. § 294(d) (1970). WILKEY, Circuit Judge: This case arises on petition to review an order of the Atomic Energy Commission. The challenged order promulgated rules designed to implement the National Environmental Policy Act (NEPA), the policies of which are required to be reflected in agency regulations to the fullest extent possible. As amended by the AEC’s order, the regulations operate to prevent utilities from undertaking certain site preparation activities prior to the Commission’s decision on their applications for permits to construct nuclear facilities. Since a detailed environmental impact statement must be issued and analyzed prior to the grant of such a construction permit, the regulations also operate to bar site preparation prior to environmental review. Petitioners, who could have but did not participate in the underlying rule-making proceedings, challenge the regulations on the grounds that (1) NEPA requires the rules to go farther, to bar all land acquisition by license applicants before permit issuance, and (2) the regulations should themselves have been accompanied by a detailed statement concerning their impact on the environment. We hold that petitioners have come to the wrong forum with an inappropriate claim in search of an unavailable remedy. We dismiss their petition. I. Facts The new regulations challenged here effect a radical change in the concept of “construction of a production or utilization facility” subject to AEC regulation and barred before issuance of a construction permit. Under previous provisions, a utility planning to build a nuclear facility could extensively alter the proposed site before the AEC had reviewed potential environmental impacts or decided on the construction permit application. The new rule bars “any clearing of land, excavation or other substantial action that would adversely affect the natural environment of a site and construction of non-nuclear facilities . for use in connection with the facility.” However, the rule still allows, among other things, “changes desirable for the temporary use of the land for public recreational uses, necessary borings to determine foundation conditions or other preconstruction monitoring to establish background information related to the suitability of the site or to the protection of environmental values.” Both on proposal and promulgation, the AEC stated that “the Commission considers these amendments to be consistent with the direction of the Congress, as expressed in Section 102 of the National Environmental Policy Act of 1969, that, to the fullest extent possible, the policies, regulations and public laws of the United States shall be interpreted and administered in accordance with the policies set forth in that act.” Petitioners primarily contend that these regulations do not in fact go “to the fullest extent possible” in implementing NEPA; specifically, that land acquisition prior to AEC approval is not barred. Petitioners’ current lively interest in the challenged regulations stems from their plight as farmers caught in the path of a land acquisition program undertaken by the Commonwealth Edison Company. In November 1970 Edison applied for a construction permit to build a nuclear generating facility in LaSalle County, Illinois. Without awaiting any AEC action, the utility acquired 90% of the land needed for the proposed site and now plans to complete this acquisition with the use or threat of condemnation power granted by the State of Illinois. Petitioners contend that the mere acquisition of land — its change in ownership from these farmers or their landlords to Edison — would significantly damage the environment. Further, they argue that allowing acquisition to proceed before the AEC gets a chance to review the environmental impact of construction permit approval would change the balance of costs and benefits, thereby potentially affecting the AEC’s decision. Petitioners claim that NEPA requires the regulations to bar an applicant’s acquisition of land before the AEC’s grant of a construction permit, in order to prevent environmental damage and to protect the ability of the AEC to conduct a full and fair environmental review. Notice of the proposed regulations, in substantially the same form as those promulgated, appeared in the Federal Register on 1 December 1971. Fifteen interested persons became parties to the rule-making proceedings and submitted comments. Significantly absent were both petitioners and any other party advancing the arguments they attempt to raise now before this court. Petitioners stood aside, uninvolved, despite the fact that they had actual knowledge of the proceedings and were urged by AEC staff members to join the fray. II. Petition for Review Petitioners refrained from participating in the appropriate and available administrative procedure, which is the statutorily prescribed prerequisite for this court’s jurisdiction to entertain their petition for review of an Atomic Energy Commission order. The Atomic Energy Act, at 42 U.S.C. § 2239, provides that “any person whose interest may be affected” by certain proceedings, including those concerning issuance or modification of rules dealing with the activities of licensees, may get a hearing on request and shall be admitted “as a party to such proceeding.” Any final order of the AEC in such a proceeding is “subject to judicial review in the manner prescribed in the Act of December 29, 1950, as amended, and to the provisions of section 10 of the Administrative Procedure Act, as amended.” This petition for review was brought pursuant to the Act of 29 December 1950, which grants the Court of Appeals “exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or determine the validity of . all final orders of the Atomic Energy Commission made reviewable by section 2239 of title 42.” Jurisdiction may be invoked by the filing of a petition, under 28 U.S.C. § 2344, by “any party aggrieved by the final order.” (Emphasis added.) Since petitioners were never parties to the rule-making proceedings, this court simply does not have jurisdiction over their claim. Petitioners argue that the “party” status requirement, and the “exhaustion” doctrine implicit therein, does not apply in the context of an order promulgating rules of general and continuing effect. They base that claim on evidence that the Hobbs Act was originally intended to cover review of adjudicative orders. If taken too far, the argument from the legislative history of the Hobbs Act would lead to the conclusion that rule-promulgating orders are not properly the subject of petitions for review. That would vindicate petitioners’ interpretation of the statute’s origins; but it would also leave them without any remedy in this court. At best, their argument from legislative history is inconclusive. The clear words of the statutes involved make no distinction between orders which promulgate rules and orders in adjudicative proceedings. This court seems to have assumed that the “party” status requirement applies in either case. In addition, the general policy supporting this requirement applies with, if anything, even more force in the context of direct appellate court review of rule-making. Unlike requests for review of adjudicative orders, petitions for “direct” review of rule-promulgating orders demand judicial scrutiny of regulations which may well not have been applied in a concrete case. Unlike adjudication, rule-making may proceed in the absence of those who may ultimately have a right to complain of the application of the regulations which result. Unlike those subject to adjudicative orders, persons who may ultimately be affected by regulations may have legitimate grounds for deciding not to join in the formulation of the rules. For example, the ultimate impact, or even the likelihood of enforcement, of proposed rules may be far from clear. Standing aside may not foreclose all opportunity to propose new regulations or to challenge the validity of the promulgated regulations when they are applied to such a person’s detriment in a concrete case; but such abstinence will probably preclude the compilation of a record adequate for judicial review of the specific claims he has reserved. That is what happened in this case — and the effect of this void in the record on our ability to analyze petitioners’ major claim highlights the flaw in their petition for relief from this court. Petitioners seek expansion of a major rule of nationwide application on the basis of arguments which were never considered and which, therefore, are not addressed at all in the record compiled by the AEC. Yet the questions they raise would be very serious, complex and difficult even if a record had been compiled. The “party” status requirement operates to preclude direct appellate court review without a record which at the least has resulted from the fact-finder’s focus on the alternative regulatory provisions which petitioners propose. Whatever other routes may exist for their challenge to the validity of the promulgated regulations, petitioners’ failure to join as “parties” to the rule-making was at peril of their right to seek “direct” appellate review. An extensive factual record would clearly be required in order to judge whether or riot the present regulations implement the policies of NEPA “to the fullest extent possible.” The actual environmental impact of acquisition per se would be an essential subject of inquiry. .The potential extent and effectiveness of efforts to delay site acquisition would also have to be explored. If long delays were necessary to assure full environmental review, an expanded regulation might frustrate early site acquisition designed to foster advance environmental impact planning. On the other hand, an effective bar to pre-licensing acquisition might be impossible if utilities could purchase sites long before they even applied for an AEC construction permit. To the extent that acquisition may be necessary to gain access for adequate testing, petitioners’ proposed regulation might make the filing of detailed environmental impact studies impossible and thereby conflict with a basic policy of NEPA itself. The absence of a developed record on such issues would preclude satisfying analysis of the many troubling, legal issues lurking behind petitioners’ proposal. Any reviewing court would have to decide whether or not a bar to pre-licensing acquisition exceeded the statutory mandate of the AEC, impermissibly interfered with traditional state powers over land use and utility land acquisition, or unconstitutionally preempted private rights of free alienation. The reviewing court would also have to consider whether an expanded regulation would fail to serve the goals of NEPA because effective site-acquisition review requires centralized authority beyond the province of the AEC. The resolution of any of those questions would be impossible without a detailed record concerning the practical workings of AEC licensing procedures, the extent and nature of state and private interests, the structure of the affected industry, and actual environmental effects. No such record is before this court. The inappropriateness of the remedy sought by petitioners here is further highlighted by their counsel’s description, at oral argument, of the relief they seek. Although their primary concern centers on Edison’s acquisition program in Illinois, they were aware that this court lacks, at least in the context of a petition for review, the general equitable power required to issue an injunction directly, against the utility. Even if we could entertain this petition for review, and even if we found the AEC regulations allowing acquisition unlawful, it would still be up to the AEC to issue new valid regulations and to seek an injunction in federal District Court against actions in violation of the expanded rules. Recognizing this problem, petitioners asked for a general “declaration” to the effect that acquisition must stop. While we acknowledge their accompanying assertion that all of the parties would be respectful of the court’s view, the fact that the remedy they care most about is not available here gives pause. In addition, petitioners apparently recognized that the record in this rule-making proceeding was totally devoid of the factual background required to analyze the issues they raised. Even the substantial data submitted in their briefs, gleaned from other proceedings and technically not before this court, would prove insufficient for the task. To calm us on that score, they suggested a remand to the Commission for further proceedings. However, since they can petition the AEC for rule-making proceedings on their proposal at any time, such a remand is wholly unnecessary to provide a forum for their views. In short, petitioners’ request for an unenforceable “remedy” and a superfluous remand demonstrates that. they have simply come to the wrong forum for relief. III. Alternative Remedies Petitioners argue that despite the inappropriate procedural posture of this case this court should nevertheless take jurisdiction because they will otherwise be forever deprived of an opportunity to advance their claims. Even if petitioners’ sense of frustration were justified, we note that an absence of satisfactory alternative routes to review would not necessarily operate to create jurisdiction before this court. Furthermore, petitioners have had and will continue to have numerous opportunities to voice their objections. Despite reluctance to join formally in any AEC proceedings, petitioners have explored other avenues in an attempt to block Edison’s acquisition program. They complained informally to the AEC staff. They intervened in a proceeding before the Illinois Commerce Commission in order to oppose the state’s grant of eminent domain power with respect to the project in LaSalle County. They filed a suit seeking injunctive relief against both Edison and the AEC in the District Court for the Northern District of Illinois. Alternatives for the future include participation in the construction permit application proceedings and in any condemnation cases which may arise. To the extent that the AEC violated a clear, non-diseretionary legal duty in failing to issue an environmental impact statement in conjunction with the promulgation of these regulations, injunctive relief may be available in a District Court. Most significantly, with regard to the major claim presented in this case, petitioners retain the right to initiate rule-making before the AEC by formally proposing the promulgation ,of the expanded rules iS&ey desire. All these alternatives share the common characteristic of providing an opportunity to compile a detailed and focused record. Where appropriate, they allow the Commission a chance, within statutory limits, for informed exercise of its substantive discretion to issue regulations which protect the environment to the fullest extent possible. Together, they assure not only adequate but more meaningful review of every one of the various claims on which petitioners could conceivably deserve to gain relief. In contrast, this court could only act both ineffectively and out of ignorance. Accordingly, the petition for review is Dismissed. . See 10 C.F.R. § 50.10. The regulations were proposed on 1 December 1971. 36 Fed.Reg. 22848. They were promulgated, in substantially the same form, on 21 March 1972. 37 Fed.Reg. 5745. . 42 U.S.C. § 4321 et seq.f . See Calvert Cliff’s Coordinating Committee v. AEC, 146 U.S.App.D.C. 33, 449 F.2d 1109 (1971). . Prior to these amended regulations, a utility was permitted to excavate, prepare the site, drive piles, and construct roadways, railroad spurs, transmission lines and “non-nuclear facilities” (such as tur-bogenerators) which would be used in connection with the “nuclear facility.” . The new regulations also allow “construction of buildings which will be used for activities other than operation of a facility and which may also he used to house a facility. . . . ” 10 C.F.R. § 50.10(c)(3). . The Commission went on to declare that “these amendments will facilitate consideration and balancing of a broader range of realistic alternatives and provide a more significant mechanism for protecting the environment during the earlier stages of a project for which a facility or materials license is being sought.” . The list of petitioners also includes numerous civic organizations to which these farmers belong. . After extensive hearings, the Illinois Commerce Commission issued a Certificate of Public Convenience and Necessity for this project. . One of petitioners’ major arguments against Edison’s project is that the nuclear facility could be serviced by cooling towers, which would obviate the need for a large cooling lake and render much of the acquisition unnecessary. They claim that, in weighing these alternatives at the construction permit stage, the AEC will inevitably be influenced to some degree by the extent of acquisition which has already been completed. . The Sierra Club was a party to the rule-making. They suggested several changes, but did not argue that the regulations should include land acquisition within the concept of “construction” barred before permit issuance. . Since the record before us concerns the rule-making proceeding itself, in which petitioners did not participate, it obviously contains no evidence concerning their reasons for failing to join as parties. However, both sides concede that Gage, et al., were neither unaware of the proposed rule nor strangers to the AEC staff. At oral argument, counsel for petitioners attempted to justify their failure to intervene in the rule-making on the ground that the proposed rules said nothing at all about “acquisition,” which was his clients’ major concern. We cannot accept that excuse. The only fair reading of the proposed rules is that, on their face, they not only bar site preparation but also permit acquisition. They not only specifically allowed some types of construction but also clearly stated that they represented the AEC’s current judgment on what was necessary to protect the environment to the fullest extent possible. Another attempted excuse was that the petitioners had already informally presented their views, without success, to the Commission staff. At best, this argument amounts to a claim that, once certain in their own minds that the AEC would reach a result contrary to their views in the rule-making, petitioners had no further obligation to participate in order to preserve their right to petition for review. We reject that contention. . The Administrative Orders Review Act, hereinafter sometimes referred to as the “Hobbs Act.” . The legislative history of the Atomic Energy Act contains no reference to, and shows no awareness of, any special problems created by providing “exclusive” court of appeals review of rule-promulgating “orders.” See 1954 U.S.Code Cong. & Admin.News at p. 3456 et seq. However, the Supreme Court has rejected the notion that rule-promulgating orders may not be reviewed under the Administrative Orders Review Act. In Port of Boston Marine Terminal Assoc., et al. v. Rederiaktiebolaget Transatlantic, the Court described an argument that such orders were unreviewable because they “lacked finality” and had “no independent effect on anyone” as having “the hollow ring of another era.” 400 U.S. 62, 70-71, 91 S.Ct. 203, 209, 27 L.Ed.2d 203 (1970). . This court assumed that the status of the petitioners in Outward Continental No. Pac. Pr. Conf. v. PMC as “active parties to the rule-making proceedings which preceded issuance of [the contested orders]” was a prerequisite, along with their being “aggrieved,” in order for the court to entertain their petition for review under the Hobbs Act. 128 U.S.App.D.C. 199, 200-201, n. 3, 385 F.2d 981, 982, n. 3 (1967). See also Easton Utilities Commission v. AEC, 137 U.S.App.D.C. 359, 424 F.2d 847 (1970). . See Vining, Direct Judicial Review and the Doctrine of Ripeness in Administrative Law, 69 Mich.L.Rev. 1443 (1971). . Although we do not reach the issue, the need for a record on actual environmental impact is highlighted by the speculative . nature of petitioners’ description of the harm done by Edison’s acquisitions in LaSalle. While we cannot agree that the mere identity of Edison as a new landowner in the community could of itself damage the environment, we can tentatively accept petitioners’ argument that any effects of such ownership on population density and use characteristics of the site environs” may constitute “environmental harm.” See 10 C.F.R. § 100.10 (b). The broad sweep of NEPA’s policies includes protection even of “culturally pleasing surroundings.” 42 U.S.C. § 4331(b)(2). Petitioners claim that much rich farm land has been removed from cultivation as a result of adjacent owners’ decisions to “sell out.” However, it is far from clear that a conversion from farming tise would not have occurred (or could have been prevented) even without this particular change in ownership. In any event, Edison contends that it has re-leased most of the property for farming purposes pending the AEC’s decision. Indeed, the Illinois Commerce Commission has ordered it to minimize dislocation and ineffective land use. Even if we accepted petitioners’ version of the facts, it would take careful analysis on a detailed record to convince this court that environmental (as opposed to economic) interests were harmed by temporarily sparing the grassy plains of Illinois from the rude annual intrusion of the plow. We note that the distinct issue of the impact of subsequent conversion to nuclear power plant use will be considered in the construction permit proceedings. . Petitioners argue against acquisition before licensing on the ground that allowing the consolidation of utility-held acreage would affect the final cost-benefit balancing process when alternatives, such as those requiring less acreage or on sites for which no acquisition has begun, are considered. That argument tends to prove too much. Virtually every action taken independently by a private party whose project will eventually require government approval (and face a NEPA review) will affect the outcome of that analysis. For example, collection of certain types of technical personnel inevitably affects which sort of power plant can be constructed at lowest cost and which efforts to protect against environmental harm are technically feasible — yet petitioners could hardly argue that the AEC can or should hold up utility staffing decisions merely because the NEPA balancing-process will necessarily be affected thereby. If every decision which altered the “cost of change” had to await an impact statement, we would soon be reduced to government by impasse. . 42 U.S.C. § 2232, along with related safety and environmental regulations, requires applicants to submit detailed environmental information concerning the proposed site prior to issuance of a construction permit. This information must relate to site criteria such as “[pjhysical characteristics of the site, including seismology, meteorology, geology and hydrology.” 10 C.F.R. § 100.10(c). Much of this information may be unavailable without extensive on-site testing. Yet landowners hostile to the proposed project might well deny the necessary access. Precluding acquisition until after permit issuance might lead to a total stalemate. . NEPA does not mandate action which goes beyond the agency's organic jurisdiction. See Kitchen v. FCC, 150 U.S. App.D.C. 292, 464 F.2d 801 (1972). Application of the limits of the AEC’s statutory mandate might produce two different sorts of analysis with respect to the two distinct prongs of petitioners’ major argument. They claim, first, that the Commission’s regulations should bar acquisition in order to prevent environmental harm resulting directly therefrom. While “construction” of a nuclear facility, including site preparation, will almost invariably involve activities which will eventually come within the overall jurisdiction of the AEC, acquisition of land by a utility may well precede construction of a fossil fuel plant of the type totally foreign to the Commission’s regulatory sphere. Intervention to prevent environmental harm from private and non-federal action, as opposed to merely withholding its own “major federal action” of granting a construction permit until a NEPA review has occurred, may very well go beyond the AEC’s organic power, especially where the Commission’s eventual involvement is only indicated by a permit application which may be withdrawn at any time. See Boston v. Volpe, 464 F.2d 254 (1st Cir. 1972). The cases cited by petitioners to the contrary are not in point since they all arose subsequent to the existence of statutorily mandated federal action or federal partnership in private action. See Lathan v. Volpe, 455 F.2d 1111 (9th Cir. 1971); Arlington Coalition on Transportation v. Volpe, 458 F.2d 1323 (4th Cir. 1972); La Raza Unida v. Volpe, 337 F.Supp. 221 (N.D.Cal.1971); Silva v. Romney, 473 F.2d 287 (1st Cir. 1973). Petitioners’ second, and distinct, argument is that the regulations must bar acquisition before decision on the construction permit application in order to preserve the AEC’s ability to conduct a fair environmental review. The cost of land acquisition at one site or another is certainly a factor which the AEC may consider in connection with its review of a construction permit application and the alternatives to approval which may be available. In this light, a bar of pre-licensing acquisition might legitimately operate not to control environmentally harmful private activity per se but to protect the AEC’s own organic jurisdiction by preserving an unaltered balance of cost and benefit factors. And if the AEC’s ban only applied to utilities with applications pending, the difficulties present with regard to the pure “prevention of environmental harm” argument discussed above might evaporate. Of course, extension of the Commission’s regulations “to the fullest extent” to protect the decision-making process in this manner may very well not be “possible” within the terms and purposes of NEPA itself. It may also not be practical, for until the utility filed an application for a construction permit, presumably AEC would have no jurisdiction. Site acquisition might take place with no officially announced intention, and thus not be subject to the present very definite environmental protection restrictions of the AEC regulations. Sustaining petitioners’ position might thus be argued to promote evasion. . There are at least seven proposals now pending before Congress which would institute coordinated national regulation of power plant siting. See Brief of Inter-venor at p. 24. It is quite possible that meaningful regulation would absolutely require centralized siting control. A utility might acquire a site, on a river for example, which could be water, fossil fuel, or atomic powered. Until a decision was made, no one could say whether the Army Corps of Engineers, Federal Power Commission, or Atomic Energy Commission would have regulatory jurisdiction. . See 10 C.F.R. § 50.110. . 10 C.F.R. §§ 2.802 and 2.803. . It is arguable that if no adequate alternative remedies appeared and if their failure to join as “parties” to the rule-making was justifiable, petitioners could bring an action for “direct” review of the regulations. For example, if one party had been entrusted to represent petitioners’ interests but had, after promulgation, “dropped the cudgel,” they might be entitled to petition for review. See Easton Utilities Commission v. AEC, 137 U.S. App.D.C. 359, 365, 424 F.2d 847, 853 (1970). . In its Docket No. 56034, the Illinois Commerce Commission conducted an exhaustive environmental review of both Edison’s plans for this site and several alternatives. Petitioners were represented and fully participated. The Commission considered many factors, including the effects of the removal from production of the farm land in question. . Gage, et al. v. Commonwealth Edison Company, et al., 356 F.Supp. 80. The District Court issued its Memorandum and Order granting defendants’ motions to dismiss on 27 November 1972. To the extent that their complaint could be read to challenge the validity of the AEC’s regulations, the District Court concluded that this Court of Appeals had exclusive jurisdiction over that cause of action. To the extent that their complaint attacked the AEC’s failure to prepare an environmental analysis prior to Edison’s land acquisition, the District Court concluded that it might have jurisdiction to enjoin such “final agency inaction.” While dismissing for lack of jurisdiction on more technical grounds, the court strongly suggested that it would also deny relief on the merits because the AEC had violated no “clear, non-diseretionary legal duty.” We should note in parsing that we find the District Court’s substantive analysis quite sound. . Standing for such a challenge in District Court would, of course, turn on a showing that the regulations had been applied specifically to petitioners’ detriment. Their chances for success on the merits of that argument are even less than those on their major substantive claim. The Council on Environmental Quality has interpreted its own guidelines as not requiring a § 102 NEPA statement for regulations which themselves implement NEPA. See letter of CEQ General Counsel to the Chairman of the AEC, dated 17 August 1972, AEC Brief at p. 20. . Petitioners do have the right to petition the Commission for institution of a rule-making proceeding under 10 C.F.R. §§ * 2.802 and 2.803. This course has been suggested to them by the AEC itself. Denial of such a petition would constitute a final order reviewable by this court.

f2d_479/html/1223-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

C. M. CLARK INSURANCE AGENCY, INC., Appellant, v. David O. MAXWELL, Appellee. SAFEGUARD MUTUAL INSURANCE COMPANY, Appellant, v. David O. MAXWELL, Appellee. Nos. 71-1927, 71-2010. United States Court of Appeals, District of Columbia Circuit. Argued March 9, 1973. Decided May 30, 1973. James C. Eastman, Washington, D. C., for appellants. George P. Lamb, Jr., Washington, D. C., also entered an appearance for appellant. Joseph A. Califano, Jr., Washington, D. C., with whom Charles H. Wilson, Jr., Washington, D. C., was on the brief, for appellee. Before LEVENTHAL and ROBB, Circuit Judges, and WILLIAM J. JAMESON, Senior United States District Judge for the District of Montana. Sitting by designation pursuant to 28 U.S.C. § 294(d). JAMESON, District Judge: This is a consolidated appeal from orders dismissing plaintiffs’ complaints for failure to state a claim. The appellants, Standard Mutual Insurance Company and C. M. Clark Insurance Agency, Inc., asserting claims under the Civil Rights Act of 1871, 42 U.S.C. §§ 1983, 1985, and for malicious abuse of process, sought damages and injunctive relief from the appellee, David O. Maxwell, for actions taken by him while Insurance Commissioner of the Commonwealth of Pennsylvania. The primary question presented on this appeal is whether the District Court erred in dismissing the complaints for failure to state a claim on the ground that the appellee was immune from suit. Since we conclude that appellee was entitled to the protection of official immunity, it is unnecessary to determine the procedural questions presented. It appears from the complaints and exhibit thereto attached that on April 12, 1967 appellee in his capacity as Insurance Commissioner for the Commonwealth of Pennsylvania, “by authority of Section 502 of the Insurance Department Act of May 17, 1921, P.L. 789, as amended (40 Purdon’s Statutes 202),” issued a suspension order declaring Safeguard Mutual Insurance Company “to be in such condition that its further transaction of business will be hazardous to its policyholders, to its creditors, and to the public” and prohibiting Safeguard from conducting further business “without prior written approval of the Insurance Commissioner of the Commonwealth of Pennsylvania.” On the same day appellee filed in the Court of Common Pleas of Dauphin County, Pennsylvania a petition for liquidation of Safeguard. Section 502 of the Insurance Department Act <40 P.S. § 202) provides in pertinent part: “Whenever any domestic insurance company * * * is found, after an examination, to be in such condition that its further transaction of business will be hazardous to its policyholders, or to its creditors, or to the public * * * the Insurance Commissioner, after examination, shall suspend the entire business of any such domestic insurance company * * *. Upon suspension of any such organization by the Insurance Commissioner * * * he shall after approval of the Attorney General apply to the Court of Common Pleas of Dauphin County * * * for an order directing such company * * * to show cause why its business should not be closed, and the Insurance Commissioner should not take possession of its property and conduct its business, and for such other relief as the nature of the case and the interests of its policyholders, creditors, stockholders, or the public may require.” Following an extended hearing the Dauphin County Court denied the appellee’s petition for the appointment of a liquidator and granted Safeguard’s petition to vacate the suspension order. Commonwealth ex rel. Maxwell v. Safeguard Mutual Insurance Company, 91 Dauph. 305 (1969). Thereafter Safeguard and its agent, appellant C. M. Clark Insurance Agency, Inc., filed separate suits in the Eastern District of Pennsylvania against appel-lee as Insurance Commissioner, various members of his staff, and deputy attorneys general of the Commonwealth. The actions were dismissed as to appellee for lack of personal jurisdiction. Subsequently the actions were dismissed as to the remaining defendants under Rule 12(b) (6) Fed.R.Civ.P. on the ground of official immunity. Safeguard Mutual Ins. Co. v. Miller, 333 F.Supp. 822 (E.D.Pa.1971). The Court of Appeals reversed and remanded for further proceedings. 472 F.2d 732 (3 Cir. 1973). It is well established that judges are immune from liability for damages for official acts within their jurisdiction and that this immunity was not abolished by § 1983. Pierson v. Ray, 386 U.S. 547, 554, 87 S.Ct. 1213, 18 L.Ed.2d 288 (1967). The same is true of legislators for acts within the legislative role. Tenney v. Brandhove, 341 U. S. 367, 71 S.Ct. 783, 95 L.Ed. 1019 (1951). A like immunity extends to other public officials who are performing quasi-judicial functions or whose duties are related to the judicial process. Yaselli v. Goff, 12 F.2d 396 (2 Cir. 1926), aff’d per curiam, 275 U.S. 503, 48 S.Ct. 155, 72 L.Ed. 395, involving a Special Assistant to the Attorney General. Even where public officers are not engaged in performing quasi-judicial functions, they may be immune from liability for their discretionary acts performed pursuant to their lawful authority. This rule was early stated by this court in Cooper v. O’Connor, 69 U.S. App.D.C. 100, 99 F.2d 135, 142, 118 A.L.R. 1440 (1938), an action against the Comptroller of the Currency and other federal officials for allegedly procuring a false indictment of plaintiff, “falsely, maliciously and without probable cause”. In holding the defendants immune from liability the court recognized that immunity “has been applied, not only to officials, judicial and quasi-judicial, but to executive officers generally” (listing various officers, boards and commissions), and concluded “that as the acts of appellees were performed in the discharge of their official duties, the motives with which those duties were performed are immaterial * * In Barr v. Matteo, 360 U.S. 564, 79 S. Ct. 1335, 3 L.Ed.2d 1434 (1959), an action for libel against the Acting Director of the Office of Rent Stabilization, the Court, after referring to the absolute immunity granted public officials whose duties are related to the judicial process, recognized that this privilege has not been “confined to officers of the legislative and judicial branches of the Government and executive officers of the kind involved in Yaselli.” The Court quoted from its prior opinion in Spalding v. Vilas, 161 U.S. 483, 498-499, 16 S.Ct. 631, 40 L.Ed. 780 (1895), sustaining a plea by the Postmaster General of absolute privilege, where the Court said in part: “In exercising the functions of his office, the head of an executive department, keeping within the limits of his authority, should not be under an apprehension that the motives that control his official conduct may, at any time, become the subject of inquiry in a civil suit for damages. It would seriously cripple the proper and effective administration of public affairs as entrusted to the executive branch of the government, if he were subjected to any such restraint. * * -- ” 360 U.S. at 570, 79 S.Ct. at 1339. Recognizing that “the occasions upon which the acts of the head of an executive department will be protected by the privilege are doubtless far broader than in the case of an officer with less sweeping functions,” the Court stated that it was “not the title of his office but the duties with which the * * * officer * * * is entrusted” which must provide the guide in delineating the scope of his immunity. The Court concluded that the action of the petitioner was “an appropriate exercise of the discretion which an officer of (his) rank must possess if the public service is to function effectively.” 360 U.S. at 573-575, 79 S. Ct. at 1340-1341. Citing Barr v. Matteo, supra, this court in Carter v. Carlson, 144 U.S.App. D.C. 388, 447 F.2d 358, 362 (1971), rev’d on other grounds, 409 U.S. 418, 93 S.Ct. 602, 34 L.Ed.2d 613 (1973) recognized that in distinguishing “between discretionary and ministerial functions” and in “determining whether a particular governmental function falls within the scope of official immunity,” the “proper approach is to consider the precise function at issue, and to determine whether the officer is likely to be unduly inhibited in the performance of that function by the threat of liability for tortious conduct.” It is true, as appellants argue, that the doctrine of official immunity should be applied sparingly and that to “hold all state officers immune from suit would very largely frustrate the salutary purpose” of § 1983. Jobson v. Henne, 355 F.2d 129, 133 (2 Cir. 1966). Rather it is necessary to balance “competing considerations” in determining whether particular officers are immune. Dale v. Hahn, 440 F.2d 633, 637 (2 Cir. 1971). This was clearly recognized in Barr v. Matteo, supra, the Court calling attention to the conflict between “two considerations of high importance” — the protection of the individual citizen against oppressive or malicious action by governmental officers and the “protection of the public interest” by shielding responsible governmental officers on “account of action taken in the exercise of their official responsibilities.” 360 U.S. at 564-565, 79 S.Ct. at 1336. As in Barr v. Matteo, we conclude that the balance here must be resolved in favor of immunity. Appellee was the chief executive officer of the Department of Insurance of the Commonwealth of Pennsylvania, “which is charged with the execution of the laws of this Commonwealth in relation to insurance.” The duties, responsibilities and function of the Insurance Commissioner are clearly defined by statute. Upon specified findings he was required “to suspend the entire business” of an insurance company and apply for an order to show cause why the business should not be closed and the Insurance Commissioner take possession of its property and conduct its business. He was required to engage in the fact finding and decision making process and had the sole responsibility of determining, after investigation, whether a suspension order should be issued. While investigation may not be categorized as a judicial function, the role of the commissioner in the issuance of a suspension order — based on a finding of hazard to the public, coupled, as required, with the filing of what amounts to a petition for a court order of liquidation, that assured exposure, adversarial testing, and judicial resolution of the matters underlying the commissioner’s determination — may properly be labeled as “quasi-judicial” and an integral part of the judicial process. Moreover, appellee as the chief executive officer of the Commonwealth’s Department of Insurance was performing a governmental function which required the exercise of discretion. In exercising his discretionary function he was acting pursuant to lawful authority. In the performance of that function it is “likely” that he would “be unduly inhibited * * * by the threat of liability for tortious conduct.” Carter v. Carlson, supra. We conclude that appellee is entitled to the protection of official immunity on the grounds that (1) he was an executive officer performing a quasi-judicial function, and (2) he was performing a discretionary act in the exercise of his official duties and pursuant to lawful authority. Having determined that appellee is immune from suit for the acts alleged in the complaint, the orders of the District Court dismissing the complaints for failure to state a claim may properly be affirmed. Bauers v. Heisel, 361 F.2d 581, 591 (3 Cir. 1966), cert. denied, 386 U.S. 1021, 87 S.Ct. 1367, 18 L.Ed.2d 457 (1967); Tenney v. Brandhove, supra. Affirmed. . The court initially entered an order of dismissal in each case because of plaintiff’s failure to object to defendant’s motion to dismiss within the time allowed by local court rule. Plaintiffs filed motions to vacate the orders “pursuant to Rule 7 (b), 12(b) (6) and 56 of the Federal Rules of Civil Procedure.” The court treated the filings as motions for relief from a judgment or order under Rule 60 (b) Fed.R.Civ.P. and held that plaintiffs had “not made out a case for excusable neglect” and that after reviewing the “tardily filed opposition” the court was still “of the opinion that the complaint failed to state a claim upon which relief can be granted.” We affirm on the second ground. It is accordingly unnecessary to determine whether the district court abused its discretion in failing to find excusable neglect or erred in failing to hold a hearing under Rule 56. . Appellee was no longer a resident of the State of Pennsylvania when the actions were filed, having moved to the District of Columbia. These actions were commenced after dismissal as to appellee in the Eastern District of Pennsylvania, with the complaints in those actions attached as exhibits to the complaints in the District of Columbia. . The District Court concluded that while the remaining defendants were not entitled to the absolute immunity of judges and legislators or those acting in a quasi-judicial position they were entitled to governmental immunity for discretionary acts performed in scope of their authority. The court also quoted from the opinion of the Dauphin County court that, “We are satisfied * * * that the Commissioner’s action in suspending Safeguard on April 12, 1967 was a prudent one, embarked upon only after a careful examination of such information as was available to him at that time and in the reasonable belief that such action was mandatory upon him in light of section 502 of the statute.” 91 Dauph. 305 (1969). . Pointing out that “the complaints, while naming the office held by each defendant, do not describe the function, the relationship to the total functioning of the insurance department, or the degree 'of discretion vested in each office”, the court concluded that it could not “tell whether their position in the government of the Commonwealth is analogous to that of the judge held to be immune from suit for damages in Pierson v. Ray, 386 U.S. 547 [87 S.Ct. 1213, 18 L.Ed.2d 288] (1967), or more closely analogous to the law enforcement officers held, in the same case * * * not to be immune.” The court held further that good faith immunity is a matter of defense. . “This immunity applies even when the judge is accused of acting maliciously and corruptly, and it ‘is not for the protection or benefit of a malicious or corrupt judge, but for the benefit of the public, whose interest it is that the judges should be at liberty to exercise their functions with independence and without fear of consequences.’ (Scott v. Stansfield, L.R. 3 Ex. 220, 223 (1868), quoted in Bradley v. Fisher (13 Wall. 335) 349, note, at 350 [20 L.Ed. 646].)” (1872). Pierson v. Ray, supra, 386 U.S. at 554, 87 S.Ct. at 1218. . The respondent had sued petitioners alleging that in connection with an investigation by a committee of the California Legislature, of which petitioners were members, he had been deprived of rights guaranteed by the Federal Constitution. The district court dismissed the complaint. The court of appeals held that the complaint stated a cause of action. The Supreme Court reversed, holding that it appeared from the complaint that the petitioners were acting in a field where legislators traditionally have power to act. 341 U.S. 367, 376-379, 71 S.Ct. 783, 95 L.Ed. 1019. . See also Silver v. Dickson, 403 F.2d 642, 643 (9 Cir. 1968), where the court held that members of the California Adult Authority and other state officials, while employed in the processing of applications for parole, were “performing quasi-judicial functions” and “therefore have immunity from suits for damages under the Civil Rights Act”. . See also Hoffman v. Halden, 268 F.2d 280, 300 (9 Cir. 1959), relying upon Cooper v. O’Connor, supra, as a case “widely cited and followed”. . In further explanation of the reasons for recognizing the privilege, the Court quoted (360 U.S. at 571, 79 S.Ct. at 1339) from Judge Learned Hand : “It does indeed go without saying that an official, who is in fact guilty of using his powers to vent his spleen upon others, or for any other personal motive not connected with the public good, should not escape liability for the injuries he may so cause; and, if it were possible in practice to confine such complaints to the guilty, it would be monstrous to deny recovery. The justification for doing so is that it is impossible to know whether the claim is well founded until the case has been tried, and that to submit all officials, the innocent as well as the guilty, to the burden of a trial and to the inevitable danger of its outcome, would dampen the ardor of all but the most resolute, or the most irresponsible, in the unflinching discharge of their duties. * * *» Gregoire v. Biddle, 177 F.2d 579, 581 (2 Cir. 1949). . Jobson v. Henne is factually distinguishable. It was an action by an inmate of a state mental institution against its officers and psychiatrist on account of their allegedly having subjected the inmate to “involuntary servitude, peonage or slavery”. . Insurance Department Act of 1921, May 17, 1921, P.L. 789, as amended, 40 P.S. § 41. . While the Court of Appeals for the Third Circuit held in Safeguard Mutual Insurance Co. v. Miller, supra, that the action was improperly dismissed because the functions and “degree of discretion vested” in the offices held by the defendants were not described, it recognized that where the functions are precisely known, as with judges and prosecutors, a decision on the pleadings is proper, citing Bauers v. Heisel. As noted above, the functions of appellee as Insurance Commissioner are precisely defined by statute. The defendants left in Federal court for Eastern Pennsylvania after dismissal as to appellee (see note 2, supra) were officials below “cabinet” rank. Their duties and functions were left to development at trial.

f2d_479/html/1228-01.html

Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Bernard E. SCHILT, Esquire, Successor Guardian of the Estate of John Wesley Duvall, Jr., Appellant, v. Myrtle B. DUVALL, Trustee, and National Surety Corporation, her Surety, Appellees. No. 72-1482. United States Court of Appeals, District of Columbia Circuit. Argued March 12, 1973. Decided May 30, 1973. Fred Warren Bennett, Washington, D. C., with whom James R. Sharp, Washington, D. C., was on the brief, for appellant. James K. Foley, Silver Spring, Md., for appellee, National Surety Corp. Before LEVENTHAL and ROBB, Circuit Judges, and JAMESON, Senior United States District Judge for the District of Montana. Sitting by designation pursuant to 28 U.S.C. § 294(d). JAMESON, District Judge: This is an appeal from an order of the District Court entered March 7, 1972 denying the appellant’s motion to surcharge the appellee trustee and her surety for the trustee’s alleged misappropriation of trust funds. A. Factual Background By order entered March 29, 1968 in Civil Action 2915-67, appellee Myrtle B. Duvall was appointed trustee to convey the interest of John Wesley Duvall, her 16 year old son, in certain real estate in the District of Columbia, “provided that she file an undertaking in the amount of $14,000.00 with approved surety. * * *” A surety bond in that amount executed by appellee National Surety Corporation was duly filed. On June 10, 1968, Mrs. Duvall filed a “Sixty Day Report under Rule 22” showing that she held a certificate of deposit in the amount of $12,609.61 in the American Heritage Bank and Trust Company in Colorado Springs in the name of “Myrtle B. Duvall, Trustee in C.A. 2915-67 for John Wesley Duvall.” No certificate of deposit, however, was ever issued to Mrs. Duvall by Heritage Bank and Trust Company. Also on June 10, 1968 Mrs. Duvall executed in Colorado for filing in the District of Columbia an “Annual Report under Rule 22” showing a deposit of $12,609.61 in the National Bank of Washington in the name of “Myrtle B. Duvall, Trustee in C.A. 2915-67 for John Wesley Duvall.” The deposit of $12,609.61- — representing the proceeds of the sale — was in fact made in the National Bank of Washington on June 21, 1968. With interest of $126.09 credited October 1, 1968 the account totalled $12,735.70. At about this time Mrs. Duvall, with her son, apparently decided to take up permanent residence in Colorado. She began a series of steps to transfer her son’s estate from Washington, D. C. to Colorado, and to obtain authority from the Colorado courts to act as his fiduciary in that jurisdiction. On July 9, 1968 Mrs. Duvall was appointed Guardian of John Wesley Du-vall, Jr., by the Probate Court of the City and County of Denver and State of Colorado and filed a personal bond in the sum of $500.00 “until money is received from Washington, D. C.” On August 28, 1968 Mrs. Duvall filed in the District Court for the District of Columbia a “petition to transfer trust funds” to “herself in the State of Colorado”, reciting her domicile and appointment as guardian dn Colorado. On the same date the court entered an order providing: “1. That the Trustee, Myrtle B. Duvall, submit a final account and report with regard to the Trust account of John Wesley Duvall, Jr. “2. FURTHER ORDERED that after approval by the Court of the report on [sic] the Auditor on the final account and report of Myrtle B. Du-vall, trustee, and the payment of administrative costs, the trustee is hereby authorized to transfer the balance of the assets to Myrtle B. Duvall guardian of the estate of John Wesley Duvall, Jr., Minor in the Probate Court in and for the City and County of Denver and State of Colorado, No. P-47737.” A “final account” filed August 30, 1968 for the period March 29, 1968 to August 2, 1968, and executed by Mrs. Duvall on August 2, 1968, reports the sale of the real estate for $12,601.61. An “Annual Report under Rule 22” and “Sixty Day Report under Rule 22”, both filed September 24, 1968, show the deposit of that amount in the National Bank of Washington, in Mrs. Duvall’s name as trustee. On October 18, 1968 Mrs. Duvall withdrew $10,500.00 from the trustee savings account in the National Bank of Washington, obtaining a cashier’s check for $10,000.00 payable to “Myrtle B. Duvall, for credit to #D 64740-8, c/o Columbia Savings and Loan Association”, Colorado Springs, Colorado. On October 17, 1968 Mrs. Duvall had applied for a savings account at Columbia Savings and Loan Association in her name, No. D-64740-8, as Trustee for John Wesley Duvall, Beneficiary, a Totten trust agreement. On October 21, 1968 the check for $10,000.00 was deposited in that account, and $10,000.00 was withdrawn the same day. An additional $2,000.00 was withdrawn from the account in the National Bank of Washington on January 14, 1969 through a cashier’s check payable to “Myrtle B. Duvall”, and $200.00 was withdrawn on March 8,1969. On May 26, 1969 the “Report of the Auditor” was filed. The report reviewed the account for the period March 29, 1968 through August 2, 1968, referring to the “Sixty Day Report filed June 10, 1968, First-and-Final Account (designated Final) filed August 30,1968, Amended Sixty Day Report filed September 24, 1968 and Report filed September 24, 1968 of Myrtle B. Duvall, Trustee.” It concluded that the unpaid distributive shares, as of August 2, 1968, consisted of: “To: Edna Belle Duvall $ 156.75 Myrtle B. Duvall 19.00 John Wesley Duvall, Jr. 12,718.86” The auditor’s report concluded: “8. After confirmation of the Report of the Auditor, order to be prepared and presented by the Trustee, and after full settlement and distribution has been made and a verified statement to that effect filed with the Clerk of the Court as provided by Rule 22(g), together with vouchers, receipts, or canceled checks evidencing final distribution, the Auditor recommends that the Trustee and her surety stand discharged, except as to prior defaults, if any.” By order dated June 20, 1969 the court confirmed the report of the auditor and “ordered that Myrtle B. Duvall file the Certificate of Distribution and Settlement in compliance with Local Civil Rule 22g, after which, trustee and the Surety on his undertaking shall stand discharged, except for prior defaults, if any.” On August 22, 1969 the trustee filed a “Certificate of Distribution and Settlement by Fiduciary under Paragraph (g) of Local Civil Rule 22”, reciting that she had “made complete distribution of the funds entrusted to her * * * in compliance with decree of March 29, 1968.” This was executed May 5, 1969 — before the report of the auditor was filed. No certificate has been filed stating that the trustee has made distribution pursuant to the auditor’s report and order of the court confirming the report or the court order entered August 28, 1968; nor does the file contain any evidence that “vouchers, receipts or can-celled checks evidencing final distribution” were filed. On August 4, 1969 Mrs. Duvall opened two more savings accounts in the Colorado Savings and Loan Association, both in the form of Totten trusts, in the name of Myrtle B. Duvall as trustee for John Wesley Duvall. Account No. 05-87375-5 was opened with $8,000.00, and No. 05-60571-2 with $1,293.01. On January 5, 1970 Mrs. Duvall borrowed $14,540.98 from the Columbia Savings and Loan Association, giving them her note and pledging the three savings accounts. On May 5, 1971 the account balances were: D-64740-8 $ 8.03 05-87375-5 7,743.53 05-60571-2 15.78 On October 30, 1970 an order was entered by the probate court in Colorado removing Mrs. Duvall as guardian of the estate of John Wesley Duvall, Jr., upon a finding that the estate “was not properly administered.” Bernard E. Schilt, appellant, was appointed successor guardian, and letters of guardianship were issued to him on May 3,1971. By letter dated July 19, 1971 the Columbia Savings and Loan Association refused appellant’s demand for the surrender of the Totten trust accounts by reason of the fact that they had been pledged to secure Mrs. Duvall’s loan and the loan was delinquent. The motion to surcharge the trustee and her surety was filed by appellant on January 3, 1972. Following the oral argument on February 24, 1972 the motion was denied, the court concluding that the “motion comes too late to try to surcharge the surety * * * ”. A formal order was entered on March 7, 1972. Appellant filed a motion for reconsideration, which was denied on April 5, 1972, the court finding.: “(1) That petitioner’s motion to surcharge rests on a single authority, D.C. Code § 28-2504, which is directed toward attorney/trustees and sureties thereof, and that such provision is inapplicable to the case at bar, see United States Fidelity & Guarantee Co. v. Klein, 60 App.D.C. 354, 54 F.2d 828, cert. denied 285 U.S. 544 [52 S. Ct. 394, 76 L.Ed. 936] (1931); “(2) That the report of the auditor in this case, disclosing no illegal or improper transactions on the part of the trustee, has not been the subject of any objection; “(3) That the trustee and surety have been discharged by order of the Court; and “(4) That petitioner has made no showing that the funds — removed from this jurisdiction by the trustee prior to the order confirming the report of the auditor and discharging the trustee and surety — were expended by the trustee against the interests of her minor son”. Two related issues are presented on this appeal: (1) whether the trustee and her surety were discharged from liability by the order confirming the auditor’s report and certificate of distribution and settlement filed by the trustee; and (2) whether there was a misappropriation of funds in the District of Columbia, constituting a “prior default” under the order confirming the auditor’s report. B. Effect of Order Confirming Auditor’s Report Both the auditor’s report and order confirming it required the filing of a certificate of distribution and settlement in compliance with Rule 22(g), “after which” the trustee and her surety would “stand discharged, except for prior defaults, if any.” The certificate filed by the trustee failed completely to meet the requirements of either the court order or Rule 22(g). Although filed subsequent to the order confirming the report, it was actually executed prior to the report. It recited compliance with the order appointing the trustee to convey the property and receive the proceeds of the sale. Nothing was ever filed to show compliance with the recommendations of the auditor and the court order confirming his report. All of the withdrawals from the National Bank of Washington were made prior to the filing of the auditor’s report. In making the withdrawals the trustee failed to comply with the order of August 28, 1968: (1) that she submit a final account and report, and (2) that after approval of the report of the auditor on her final account she transfer the balance of the assets to “Myrtle B. Du-vall, guardian of the estate of John Wesley Duvall, Jr., Minor in the Probate Court In and for the City and County of Denver and State of Colorado, No. P-47737.” The so-called “final account” filed on August 30, 1968 was executed on August 2, 1968 and covered the period ending on that date. No true “final account” covering the period subsequent to that date was ever filed. Between August 2, 1968 and May 5, 1969, when Mrs. Duvall executed the so-called “certificate of distribution”, she made the improper and unauthorized withdrawals of the trust funds. Appellee surety argues that the auditor presumably had all documents and must have known of the transfer of the funds to Colorado at the time of the audit. There is no evidence to support that assumption. As noted, the audit covered the “final account” for the period ending August 2, 1968. On that date the funds were still on deposit in the National Bank of Washington. All of the defaults occurred subsequent to the period covered by the report, but prior to the filing of the report. Under these facts we find no merit in appellee’s contention that the order confirming the auditor’s report became res judicata. Nor was appellant required to seek to set aside the auditor’s report. C. Trustee’s Default and Misappropriation of Trust Funds 16 D.C.Code § 601 (Supp. V, 1972) provides for entry of a judgment against a trustee and surety “upon default by the principal in any of the conditions” of the undertaking or bond. The judgment may be entered, upon motion, in the action in which the undertaking is filed, as an alternative to an independent action. Schmidt v. Smith, 120 U.S.App.D.C. 74, 344 F.2d 168, 169 (1965). Appellee surety contends that there was no default through misappropriation of funds in the District of Columbia and that any misappropriation or misuse of trust funds took place in Colorado while Mrs. Duvall “was guardian.” It is true, as appellee argues, that where a trustee transfers property to “himself in another capacity in accordance with his duty or authority”, the surety is not liable for subsequent defalcations.” Here, however, the trustee failed to transfer the assets to herself in her capacity of guardian, as required by law and express order of the court. Instead the funds withdrawn from the account in the National Bank of Washington were paid to her individually or to her credit in a Totten trust in Colorado. This was in itself a misappropriation of the trust funds. It contributed to the eventual conversion by making the minor’s funds available for Mrs. Duvall to pledge them for her own use. This would not have been possible had she deposited the funds in the guardianship account pursuant to the court’s order of August 28, 1968. 5A Michie, Banks and Banking, §§ 57e, 91. The unauthorized withdrawals of the trust funds constituted “prior defaults” for which the surety is liable. D. Sufficiency of Evidence Appellee surety contends finally that (1) the documents upon which appellant relies were not properly in evidence and (2) there was no proof of the amount of any misappropriation. In its opposition to appellant’s motion appellee set forth as one of eleven grounds that the motion was filed “with allegations, opinions and conclusions unsupported by affidavit or admissible evidence.” Thereafter appellant filed his affidavit reciting that the statements in the motion were true to the best of his knowledge, information and belief. The hearing consisted of statements of counsel for the respective parties. Counsel for the surety contended (1) that the “attempt now to attack the report of the auditor” came too late, and (2) “that the auditor, at the time of the report was aware of the fact that funds had already been transferred to Colorado and were not in this jurisdiction.” He argued also that the motion “contains a series of allegations, none of them under oath, none of them verified.” The court did not rule upon the admissibility of the evidence, but concluded that a “certificate of distribution is in the file,” and that the “motion comes too late to try to surcharge the surety.” Before the court at the hearing were the motion with attached copies of documents, appellant’s affidavit, and appellee surety’s written opposition to the motion. While it does not appear that the original documents were formally offered in evidence, neither does it appear that it was necessary. In its opposition to the motion the appellee did not deny the authenticity of any of the documents or deny any of the statements of fact set out in the motion or in the documents. The order of the district court recited that it was based “[u]pon consideration of the pleadings filed herein”. Under these circumstances, it appears that the court gave judgment on the pleadings, and that it was not necessary for the appellants to offer the documents into evidence. Since the pleadings show a misappropriation and a prior default under the terms of prior court orders, appellant was entitled to judgment on the pleadings. The pleadings do not, however, indicate the final amount of the misappropriations, including interest due. The order of the district court is reversed, and we remand for a determination of the amount of the surcharge. So ordered. . The proceedings and transactions with which the court is concerned are somewhat complicated and confusing and may be best understood by setting them out in chronological order. . A letter from the president of the American Heritage Bank and Trust Company, dated December 23, 1971 states that on May 13, 1968 Mrs. Duvall brought to the bank a check for $12,609.61 with the request that it be placed in a certificate of deposit. She was informed that the check would have to be sent for collection before this certificate could be delivered. She did not make the deposit but did obtain a photo copy of the certificate, which was never issued. . It is uncertain when this report was . filed. The filing date of June 20, 1968 was stamped on the report, but crossed out. . The remaining $500.00 of the withdrawal is apparently unaccounted for. . A Totten trust is a tentative trust, revocable at will. The beneficiary has no right or title to the deposit until the death of the trustee. While the trustee lives, he has full control over the deposit. See 10 Am.Jur.2d Banks, § 392. . On May 29, 1969, a deposit of $109.25 was made in the National Bank of Washington account, and on July 1, 1969 a check for $127.17 was issued to “Myrtle B. Duvall.” . This was the order confirming the contract for the sale of the property and appointing Mrs. Duvall trustee to convey the minor’s interest. . Rule 22(g) provides: “(g) Statement of Distribution and Settlement. Promptly after full distribution and settlement of a trust estate the fiduciary shall file with the Clerk a verified statement to that ef-. feet, together with vouchers, receipts, or cancelled cheeks evidencing final distribution.’’ (emphasis supplied) . This was the primary contention of ap-pellee trustee at oral argument in the District Court, although it is not urged in its brief on this appeal. The court relied upon the order confirming the auditor’s report and his conclusion that a certificate of distribution had been filed in compliance therewith. . A certificate of distribution and settlement properly prepared in compliance with the court’s orders would have revealed the withdrawal of the trust funds from the National Bank of Washington. . There is no evidence that the auditor’s report was in any respect incorrect. It sets forth accurately the accounting transactions pertaining to the sale of the property and the proper allocation of the proceeds as of August 2, .1968. . This was the holding in Poole v. Garrett, 56 App.D.C. 378, 15 F.2d 892 (1926), upon which appellee surety relies. There an ancillary administrator collected assets and delivered them to himself as domiciliary administrator, and thereafter converted funds. The court held that the surety bond of the ancillary administrator was not liable. . As noted above, the deposits in the Columbia Savings and Loan Association were Totten trusts. A letter to appellant dated May 5, 1971 from the Association’s resident counsel stated that as far as he could determine the “Association had no knowledge that any of these funds were in fact belonging to the minor’s estate.” . The District Court assumed, improperly we think, that appellant’s right to recover depended upon D.C.Code § 28-2504 (1967), and cited United States Fidelity & Guar. Co. v. Klein, 60 U.S.App.D.C. 354, 54 F.2d 828 (1931), cert. denied, 285 U.S. 544, 52 S.Ct. 394, 76 L.Ed. 936 (1932). In the Klein case, however, there was no basis for recovery other than the cause of action asserted under § 28-2504. That is, there was no question that both the sale trustee and his surety had been fully and properly discharged at the time of the transfer; the testamentary trustee to whom the transfer was made took full possession of the sale proceeds in his fiduciary capacity; all conditions of the discharge order were fully performed by the sale trustee; and there was no allegation that the sale trustee had in any way deviated from or breached the terms of his undertaking prior to his discharge. As a result, disallowance of the purported statutory claim left plaintiff with no cause of action against the surety. In the case at bar, as in Klein, no cause of action lies under § 28-2504. But appellant also contends that there were misappropriations of funds prior to the discharge proceeding. These misappropriations were unauthorized withdrawals of trust funds and constitute “prior defaults” which give rise to an independent cause of action on the surety bond, and for which the surety is liable. . The statements were relatively brief and did not relate to many of the facts herein set forth and considered on this appeal. . It appears that $12,609.61, the proceeds of the real estate sale, plus $126.09 interest to October 1, 1968 was deposited in the "Washington, D.O. trust account. Mrs. Duvall’s misappropriations apparently began with unauthorized withdrawals of $12,700, but it also appears that Mrs. Duvall made another deposit of $109.25 on May 29, 1969, and on July 1, 1969 made another withdrawal of $127.17.

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Thelma JOY, Individually and on Behalf of all others similarly situated, Appellant, v. Holland DANIELS, Chairman, et al., Appellees. No. 72-2479. United States Court of Appeals, Fourth Circuit. Submitted March 27, 1973. Decided June 11, 1973. Frank Epstein, Charleston, S. C., on brief for appellant. No counsel for the appellees. Before CRAVEN, BUTZNER and RUSSELL, Circuit Judges. CRAVEN, Circuit Judge: By this action for declaratory and in-junctive relief under 42 U.S.C. § 1983, plaintiff challenges, as violative of the fifth and fourteenth amendments, her threatened eviction from the Joseph Paul Apartments. The apartments are quasi-public, having been constructed and now being operated by defendant, Joseph Paul Apartments, Inc., under Section 221(d)(3) of the National Housing Act. The district court held that the^ plaintiff could properly be evicted since her tenancy had expired under the terms of the lease, and that no other cause need be assigned for the eviction. We reverse. I. The plaintiff, Thelma Joy, is the head of her household and with her four minor children constitutes a “family” within the statutory scheme. Her effective monthly income of $222.20 is a “low income” for purposes of the federal housing programs, and she thus qualifies for occupancy in the Joseph Paul Apartments. On September 2, 1970, plaintiff leased one of defendant’s apartments. The standard form lease provided in relevant part: At the end of one year, lease is automatically renewed from month to month, rent to be payable in advance without demand on first day of each month. Either party may terminate lease at end of term or any successive term by giving 30 days’ notice in advance to other party. On September 11, 1971, the defendant gave plaintiff 30 days’ notice to vacate, no cause being assigned. It appears that the plaintiff has continued to occupy her apartment on a month-to-month basis, with her tenancy dependent on the outcome of this litigation. Section 221(d)(3) of the National Housing Act, 12 U.S.C. § 17151(d)(3) (1971), is a statutory scheme for encouraging housing for low income families. To participate in this program, defendant was required to conform to a regulatory agreement with the Federal Housing Administration governing, inter alia, the construction, occupancy, and daily operations of the project. The FHA also grants defendant rent supplements for the plaintiff and other tenants under Section 101 of the Housing and Urban Development Act of 1965, 12 U.S.C. § 1701s(b) (1971). Plaintiff, for example, enjoys occupancy of an apartment worth $157.00 per month at a cost to her of $48.00. FHA pays the difference, i.e., $109.00 per month, directly to defendant. As a prerequisite to participation in the rent supplement program, there must be local government approval. 24 C.F.R. § 5.15(c) (1971). The County Council specifically approved rent supplements for Joseph Paul Apartments on August 6, 1968. II. Initially we must determine if the fourteenth amendment is applicable, i.e., whether the action of defendant in seeking to evict plaintiff can be said to be “state action” since it is well settled the fourteenth amendment does not inhibit the conduct of purely private persons in their ordinary activities. Adickes v. S. H. Kress & Co., 398 U.S. 144, 169, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). The Supreme Court has never attempted to fashion a precise formula of what constitutes “state action” and the question frequently is difficult to determine. Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 172, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972); Burton v. Wilmington Parking Auth., 365 U.S. 715, 722, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). “State action” may result from administrative, regulatory, legislative, and judicial action. Moose Lodge No. 107, 407 U.S. at 179, 92 S.Ct. 1965. The determination must be made on a case-by-ease basis. “Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance.” Burton, 365 U.S. at 722, 81 S. Ct. at 860. In the present case the defendant receives mortgage benefits from the FHA and is thus subject to the attendant FHA regulations. Additionally, the defendant has undertaken to utilize the eviction procedures authorized by South Carolina. While these factors, either separately or combined, have been held insufficient to constitute “state action” they are relevant and material in the assessment of other evidence of state involvement. The defendant receives rent supplements from the FHA. Prerequisite to obtaining these supplements, the defendant received specific authorization from the County Council. We view this involvement of the state (power delegated to local government) in this case as similar to the zoning power which, with state eviction proceedings, resulted in a holding of “state action” in Lavoie v. Bigwood, 457 F.2d 7 (1st Cir. 1972). The participation of the federal government in such housing projects is conditioned upon state approval. The state is thus involved for there would otherwise be no federal direct funding through rent subsidies and indirect funding through mortgage benefits. We think that these factors coupled with utilization of state eviction procedure have “so far insinuated [the state] into a position of interdependence” with the defendant that the challenged activity “cannot be considered to have been so ‘purely private’ as to fall without the scope of the Fourteenth Amendment.” Burton, 365 U.S. at 725, 81 S.Ct. at 862. See McQueen v. Druker, 438 F.2d 781, 784 (1st Cir. 1971). Accordingly, we hold there is sufficient state involvement to constitute “state action” for pui’poses of the fourteenth amendment. We also hold that the facts are sufficient to satisfy the “under color of” law clause of 42 U.S.C. § 1983. See Adickes, 398 U.S. at 161-172, 90 S.Ct. 1598; Lavoie, 457 F.2d at 15; McQueen v. Druker, 317 F.Supp. 1122, 1133 (D.Mass.) (Wyzanski, C. J.), aff’d in part, 438 F. 2d 781 (1st Cir. 1971). Accordingly, the district court had jurisdiction under 28 U.S.C. § 1343(3). III. The district court concluded that plaintiff had no right of occupancy upon expiration of the term of the lease. Plaintiff contends that despite expiration of the term she may be evicted only for “good cause” and is entitled to the protection of procedural due process in the determination of whether cause exists. Since procedural due process applies only to the deprivation of interest protected by the fourteenth amendment, i.e., liberty and property, we must first determine plaintiff’s substantive rights. See Board of Regents v. Roth, 408 U.S. 564, 569, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); McQueen, 317 F.Supp. at 1128. As stated in Board of Regents v.# Roth: Certain attributes of ‘property’ interests protected by procedural due process emerge from [the Court’s] decisions. To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims. Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law —rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. 408 U.S. at 577, 92 S.Ct. at 2709. A person’s interest in a benefit is a ‘property’ interest for due process purposes if there are such rules or mutually explicit understandings that support his claim of entitlement to the benefit and that he may invoke at a hearing. Perry v. Sinderman, 408 U.S. 593, 601, 92 S.Ct. 2694, 2699, 33 L.Ed.2d 570 (1972). Thus we must now look to applicable statutes, governmental regulations, and the custom and understandings of public landlords in the operation of their apartments to determine if a public tenant has a “property interest” in a tenancy beyond the term of the lease except for cause. When Congress legislated with regard to mortgage insurance benefits which defendant receives, it provided: “The Congress affirms the national goal, as set forth in section 1441 of Title 42, of ‘a decent home and suitable living environment for every American family’.” 12 U.S.C. § 1701t. This policy of improving the “living environment of urban areas” was also the policy of Congress in enacting the Housing and Urban Development Act of 1965. Pub.L. 89-117, 79 Stat. 451 (Aug. 10, 1965). “This [policy] includes adequate, safe, and sanitary quarters. But it also implies an atmosphere of stability, security, neighborliness, and social justice.” McQueen, 317 F.Supp. at 1130. Cf., Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 93 S.Ct. 364, 34 L.Ed. 2d 415 (1972). In addition to the policy statements contained in the relevant funding statutes, Congress has also expressed itself in part on how these programs should be run. “No person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” 42 U.S.C. § 2000d. The policy of this statute, a person’s right to be free of invidious discrimination in federally assisted programs, is contained in many statutes, see, e.g., 42 U.S.C. § 2000a. This legislative establishment of policy carries significance beyond the particular scope of each of the statutes involved. The policy thus established has become itself a part of our law, to be given its appropriate weight not only in matters of statutory construction but also in those of decisional law. Moragne v. States Marine Lines, Inc., 398 U.S. 375, 390-391, 90 S.Ct. 1772, 1782, 26 L.Ed.2d 339 (1970). Not only the statutes, but also FHA regulations authorized under 12 U.S.C. § 1701s(f), imply a right to be free from arbitrary and discriminatory action. For example, 24 C.F.R. § 221.-536 (1971) provides that a landlord in a § 221(d)(3) apartment may not discriminate against any family because of children. The House Report dealing with the Housing and Urban Development Act of 1965 said, with regard to the rent supplement program: If his income increases sufficiently so that he can pay the full economic rent with 25% of his income, rent supplement payments on his behalf would cease to be made. The tenant could, however, continue to live in the project and would not be required to pay more than the full economic rent. H.R. Rep. No. 365, 89th Cong., 1st Sess. (1965), 1965 U.S.Code Cong, and Ad. News, pp. 2614, 2618. This suggests the Congress was contemplating more occupancy entitlement than limited leasehold terms. The tenant’s expectation of some degree of permananey, seemingly shared by the Congress, if not by the landlord, is bolstered by “custom.” Just\ as there may be a “common law” of tenure at a college or university, there may be a common law of tenancy in public housing projects. See Perry, 408 U.S. at 602, 92 S.Ct. 2694. The actual workings of the subsidized housing program must be examined to determine whether there is a reasonable basis for tenants to expect that in normal circumstances they will be permitted to remain in the housing indefinitely. And indeed one finds that the normal practice in subsidized housing, as in private housing, is to permit tenants to remain beyond the expiration of a lease unless a reason has arisen for eviction; termination is the exception, not the rule. Thus, tenants do have a reasonable expectation deserving of protection. Note, Procedural Due Process in Government-Subsidized Housing, 86 Harv.L.Rev. 880, 905 (1973). In view of. the congressional policies of providing a decent home (with stability and security) for every American family, and of prohibiting arbitrary and discriminatory action, bolstered by the FHA regulations and custom, we find in the scheme of the National Housing Act and the Housing and Urban Development Act of 1965 a property right or entitlement to continue occupancy until there exists a cause to evict other than the mere expiration of the lease. We therefore hold that the lease provision purporting to give the landlord power to terminate without cause at the expiration of a fixed term is invalid. Accord, Rudder v. United States, 226 F.2d 51, 96 U.S.App.D.C. 329 (1955); Brown v. Housing Auth., 340 F.Supp. 114 (E.D.Wisc.1972); McQueen, 317 F.Supp. at 1131. In Caulder v. Durham Housing Auth., 433 F.2d 998 (4th Cir. 1970), cert. denied, 401 U.S. 1003, 91 S.Ct. 1228, 28 L.Ed.2d 539 (1971), we stated: The “privilege” or the “right” to occupy publicly subsidized low-rent housing seems to us to be no less entitled to due process protection than entitlement to welfare benefits which were the subject of decision in Goldberg or the other right and privileges referred to in Goldberg. 433 F.2d at 1003. The court then held tenants entitled to notice, confrontation of witnesses, counsel, and a decision by an impartial decision maker based on evidence adduced at a hearing. 433 F.2d 1004. As stated by the court below, it could be inferred that the plaintiff here was to be evicted for cause. If so, she would be entitled to the same procedural safeguards set forth in Caulder. To allow a quasi public landlord to evict upon expiration of a fixed term is to enable secret and silent discrimination and would wholly emasculate the procedural safeguards of Caulder. See Robinson v. Diamond Housing Corp., 150 U.S.App. D.C. 17, 463 F.2d 853, 860 (1972). Cf. Ohio Bell Tel. Co. v. Public Util. Comm’n, 301 U.S. 292, 302, 57 S.Ct. 724, 81 L.Ed. 1093 (1937). Indeed, the entitlement of plaintiff to continue occupancy of public housing, like the interest of a covered employee under the Social Security Act, is, we think, “of sufficient substance to fall within the protection from arbitrary governmental action afforded by the Due Process Clause.” Flemming v. Nestor, 363 U.S. 603, 611, 80 S.Ct. 1367, 1373, 4 L.Ed.2d 1435 (1960). A position beyond that espoused in Flemming has been urged. But that under appropriate circumstances one’s interest in his government job, his publicly financed home, his food stamp meals, or his state university educational opportunities may indeed be constitutional rights in the positive-law sense ought no longer be denied. Van Alstyne, The Demise of the Right-Privilege Distinction in Constitutional Law, 81 Harv.L.Rev. 1439, 1463-64 (1968). However, in view of our holding that the congressional scheme and custom give plaintiff a right to remain in her apartment we need not decide whether her claim is also protected by equal protection and “substantive” due process. Finally we must determine what procedural due process requires by way of protection of plaintiff’s right to tenancy except for cause. In Johnson v. Tamsberg, 430 F.2d 1125 (4th Cir. 1970), we noted that the South Carolina eviction scheme requires the landlord to prove in court his allegations, allows trial by jury, and we concluded that “public housing tenants are not actually ejected until basic due process requisites are satisfied.” 430 F.2d at 1127. That is enough. A prior administrative hearing is not required so long as the tenant may at some stage receive a plenary judicial hearing. 430 F.2d 1127. Since we now hold that a Section 221(d)(3) landlord must before eviction give his tenant a good-cause notice and prove such cause exists, and since the South Carolina eviction procedure is constitutionally adequate, we perceive no reason for retention of jurisdiction in the federal court to consider the question of good cause for eviction. Landlord-tenant law is traditionally the province of the states. State judges are bound as are we by the due process clause of the fourteenth amendment. U.S.Const, art. VI; Glover v. Housing Auth., 444 F.2d 158, 161-62n.4 (5th Cir. 1971); McQueen, 317 F.Supp. at 1131. On remand the district court will enter its decree invalidating the lease expiration clause and enjoining the defendant from attempting to evict the plaintiff except for cause under the procedural and substantive law of South Carolina. Reversed and remanded. . It consists of a welfare benefit in the amount of $122.20, plus $126.00 worth of food stamps at a cost to her of $26.00. . In its answer to the complaint the defendant alleged that the plaintiff “maintained a slovenly and ill-kept apartment;” had destroyed window screens; failed to pay rent on time; and, used excessive electricity. The district court found that it could be inferred that these were the reasons defendant sought eviction, but that such a finding was unnecessary to decision and thus no such inference was drawn. . The principal benefit is a lower rate of interest than available commercially. The court in McGuane v. Chenango Court, Inc., 431 F.2d 1189 (2d Cir. 1970) cert. denied, 401 U.S. 994, 91 S.Ct. 1238, 28 L.Ed.2d 532 (1971), held that the mere receipt of benefits under Section 221(d) (3) was insufficient to make the recipient an agency of the state and to thus establish “state action.” . Since such laws are applied neutrally, they will not generally ariee to a level of state action. Wiegand v. Afton View Apartments, 473 F.2d 545 (8th. Cir. 1973); McGuane, 431 F.2d at 1190. . See Shelley v. Kraemer, 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161 (1948). . See also Note, Procedural Due Process in Government-Subsidized Housing, 86 Harv.L.Rev. 893, 895-96 (1973). . Since the pleadings do not raise the issue we need not decide if there is also “federal question” jurisdiction on the theory the defendant is an agency of the United States. But we note that if plaintiff’s life expectancy is as much as a decade (or less) the “bargain” value of her lease would seem to have a value greater than $10,060.00. 28 U.S.C. § 1331. . Indeed, the Court has held with regard to eviction from private housing: We do not denigrate the importance of decent, safe, and sanitary housing. But the Constitution does not provide judicial remedies for every social and economic ill. We are unable to perceive in that document any constitutional guarantee of access to dwellings of a particular quality or any recognition of the right of a tenant to occupy the real property of his [wholly private] landlord beyond the term of his lease, without the payment of rent or otherwise contrary to the terms of the relevant agreement. Lindsey v. Normet, 405 U.S. 56, 75, 92 S.Ct. 862, 874, 31 L.Ed.2d 36 (1972). . Expanding notions of “property,” sometimes defined as “entitlement,” are noted in Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970): It may be realistic today to regard welfare entitlements as more like “property” than a “gratuity.” Much of the existing wealth in this country takes the form of rights that do not fall within traditional common-law concepts of property. It has been aptly noted that ‘[s]ociety today is built around entitlement. The automobile dealer has his franchise, the doctor and lawyer their professional licenses, the worker his union membership, contract, and pension rights, the executive his contract and stock options; all are devices to aid security and independence. Many of the most important of these entitlements now flow from government: subsidies to farmers and businessmen, routes for airlines and channels for television stations ; long term contracts for defense, space, and education; social security pensions for individuals. Such sources of security, whether private or public, are no longer regarded as luxuries or gratuities; to the recipients they are essentials, fully deserved, and in no sense a form of charity. It is only the poor whose entitlements, although recognized by public policy, have not been effectively enforced.’ Reich, Individual Rights and Social Welfare: The Emerging Legal Issues, 74 Yale L.J. 1245, 1255 (1965). See also Reich, The New Property, 73 Yale L.J. 733 (1964). 397 U.S. at 262 n. 8, 90 S.Ct. at 1017. . See also Note, 82 Yale L.J. 258 (1972). . Indeed, early common law provided that even an estate at will could be transformed into an estate similar to a life estate by continuous custom. “This custom, being suffered to grow up by the lord, is looked upon as the evidence and interpreter of his will: his will is no longer arbitrary arid precarious; but fixed and acertained . . . . ” 2 Blackstone, Commentaries *147. . See also Slochower v. Board of Higher Educ., 350 U.S. 551, 555-556, 559, 76 S.Ct. 637, 100 L.Ed. 692 (1956); Cafeteria and Restaurant Workers Union v. McElroy, 367 U.S. 886, 898, 81 S.Ct. 1743, 6 L.Ed.2d 1230 (1961); Wieman v. Updegraff, 344 U.S. 183, 192, 73 S.Ct. 215, 97 L.Ed. 216 (1952); Cole v. Housing Auth., 435 F.2d 807 (1st Cir. 1970); Holmes v. New York City Housing Auth., 398 F.2d 262, 265 (2d Cir. 1968): Hornsby v. Allen, 326 F.2d 005 (5th Cir. 1964); Rudder v. United States, 96 U.S.App.D.C. 329, 226 F.2d 51 (D.C. Cir. 1955); McDougal v. Tamsberg, 308 F.Supp. 1212, 1214 (D.S.C.1970); Colon v. Tompkins Square Neighbors, Inc., 294 F.Supp. 134, 138 (S.D.N.Y.1968). . See James v. Strange, 407 U.S. 128, 140, 92 S.Ct. 2027, 32 L.Ed.2d 600 (1972); Rinaldi v. Yeager, 384 U.S. 305, 86 S.Ct. 1497, 16 L.Ed.2d 577 (1966). . Van Alstyne, supra at 1462. . The South Carolina scheme is thus unlike that of New York and North Carolina, where eviction in state court is summary in nature and full administrative hearings must be afforded. Caulder v. Durham Housing Auth., 433 F.2d 998, 1002 (4th Cir. 1970); Escalera v. Nsw York City Housing Auth., 425 F.2d 853 (2d Cir. 1970).

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Caselaw Access Project

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2024-08-24T03:29:51.129683

DUNLOP TIRE AND RUBBER CORPORATION, Plaintiff-Appellant, v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Defendant-Appellee. No. 626, Docket 72-2296. United States Court of Appeals, Second Circuit. Argued April 11, 1973. Decided June 5, 1973. Alexander C. Cordes, Buffalo, N. Y. (Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N. Y., on the brief), for plaintiff-appellant. Mark N. Turner, Buffalo, N. Y. (Brown, Kelly, Turner, Hassett & Leach, Buffalo, N. Y., on the brief), for defendant-appellee. Before SMITH, HAYS and TIMBERS, Circuit Judges. TIMBERS, Circuit Judge. The essential issue on this appeal involves the application of the standard inventory exclusion clause in a fidelity insurance policy and bond to a claim for loss of property alleged to have been sustained by reason of fraudulent or dishonest acts of an unidentified employee of the insured. Plaintiff Dunlop Tire and Rubber Corporation (Dunlop) brought this action in the New York Supreme Court, Erie County, in June 1970 to recover under a fidelity policy and bond issued by defendant Fidelity and Deposit Company of Maryland (Fidelity). The complaint alleged that a $57,002.50 loss of sporting goods from Dunlop’s warehouse in Carl-stadt, New Jersey, had been sustained in 1968 by reason of fraudulent or dishonest acts of an unidentified employee of Dunlop acting alone or in collusion with others; and that Fidelity had refused to indemnify Dunlop for the loss. The action was removed to the District Court for the Western District of New York. After a non jury trial before John T. Curtin, District Judge, the court filed an opinion on October 19, 1972 dismissing the complaint on the ground that Dunlop had failed to prove that the loss was sustained by reason of fraudulent or dishonest acts of Dunlop employees. We affirm. I. The critical facts as found by the district court are largely undisputed. Dunlop discovered the loss here involved on July 8, 1968 during an inventory by its employees. After comparing an actual physical count of goods on hand in its Carlstadt warehouse against its inventory records, it made a determination that the following items of sporting goods had disappeared from its warehouse between April 2, 1968 and July 8, 1968: 4,970 dozen golf balls; 820 dozen tennis balls; 114 golf clubs (woods); 127 golf clubs (irons); and 117 tennis frames and rackets. The total value of the lost property was estimated to be $57,002.50. The accuracy of the inventory and the determination of the quantity and type of goods lost is not challenged. The district court so found. At the trial, no employee of Dunlop who was familiar with the daily routine of its sporting goods warehouse facilities at Carlstadt testified. Nor did Dunlop adduce evidence that any particular employee was responsible for the loss. Rather, it relied upon inventory records and other circumstantial evidence intended to show that only Dunlop employees could enter the area where the loss occurred. For example, Harold Petnode, Operating Manager for the New York division of Dunlop, testified to the layout of the warehouse, its security system, and other relevant circumstances. Dunlop was the sole occupant of the Carlstadt warehouse. The warehouse contained its tire and sporting goods divisions. These were two independent units separated from each other by a cinder block wall but sharing a common office with connecting doors. There were locks on these connecting doors, as well as on the doors leading to the outside from each of the separate units. Inside the sporting goods unit, the goods that were lost were stored in a floor-to-ceiling locked wire cage. The warehouse was operated only during the day. It was locked at night. During the day, only authorized Dunlop employees were allowed in the sporting goods area. Three or four such employees had keys to the wire cage during the day, but all keys were turned in to the sporting goods manager at night. It was not established what the manager did with the keys at night. No Dunlop employees were on the premises at night. Night security was maintained by ADT through the use of an alarm system with electric eye beams. ADT employees had access to the sporting goods area but not to the locked wire cage. The alarm system was activated at the end of each day by a Dunlop employee before he went off duty. During the period of time that the loss occurred, no break-ins were reported by ADT, nor did anyone notice any physical evidence of burglary. After the loss was discovered, there was a substantial turnover of Dunlop personnel at its Carlstadt warehouse. Since that turnover, there were no appreciable shortages. Dunlop concluded from these circumstances that the loss disclosed by its inventory computation was caused by dishonesty of its employees. It filed a claim under the Comprehensive Dishonesty, Disappearance and Destruction Policy and the Commercial Blanket Bond, both of which had been issued by Fidelity to Dunlop in 1966. The policy and bond each included five separate Insuring Agreements. Only Insuring Agreement I (Employee Dishonesty Coverage) in the policy and bond is here involved. Pursuant thereto, Fidelity bound itself to reimburse and indemnify Dunlop against loss of money and other property sustained through the fraudulent or dishonest act or acts of any of its employees, acting alone or in collusion with others. Under the “Conditions and Limitations” part of the Insuring Agreement, two sections, set forth in the margin of this opinion, bear directly on the issue here involved: Section 2(b), the Inventory Exclusion Clause; and Section 4, the clause relating to Loss Caused By Unidentifiable Employees. Judge Curtin’s well reasoned opinion, while accepting the accuracy of Dunlop’s inventory and its determination of the quantity and type of goods lost, nevertheless held that the inventory, standing alone, was not sufficient to show that the loss was caused by any unlawful acts of Dunlop employees. He held that Dun-lop’s other circumstantial evidence was without probative force: “Giving plaintiff every benefit of the facts and the law in this case, it is the court’s belief that the circumstantial evidence produced was not sufficient to sustain plaintiff’s burden. The plaintiff failed to show that no one else had the ability to enter the cage except its own employees. . . . Plaintiff has failed to rule out the possibility that ADT employees had access to the manager’s keys and were able to enter the cage.” Although we affirm the district court’s dismissal of the complaint for failure of proof, we do so on a slightly different ground. We hold that since Dunlop failed to establish with evidence other than the inventory computation that a loss in fact was sustained as a result of employee dishonesty, its claim is excluded by Section 2(b) of the policy and bond. II. The issue on appeal is whether Dunlop proved that it was entitled to recover under the policy and bond. Dunlop contends that it sustained its burden of proof by showing through its inventory computation that a loss of property was sustained and by showing through circumstantial evidence that this loss must have been caused by the dishonest acts of an' employee or employees. Fidelity argues that, since Dunlop’s claim is wholly dependent upon inventory computations to prove the existence of a loss and its amount, the claim is excluded by Section 2(b) of the policy and bond. Section 2(b) has been a standard inventory exclusion provision of most fidelity policies and bonds for a number of years. It was designed to protect insurers against claims based on erroneous or falsified inventory or profit and loss computations. Paramount Paper Products Co. v. Aetna Casualty & Surety Co., 182 Neb. 828, 157 N.W.2d 763 (1968). Inventory records and other business records are less reliable than other evidence in proving that a loss of goods has been sustained or that a loss is attributable to employee dishonesty. Mid-Continent Stores v. Central Surety & Insurance Corp., 377 S.W.2d 567 (Ct. App., Mo.1964). On its face, Section 2(b) appears to permit only one proper interpretation. The language preceding the first semicolon clearly indicates that a claim at all dependent upon an inventory or profit and loss computation is to be excluded from the coverage of the policy. The insured cannot depend upon such evidence to establish his prima facie case. The language following the first semicolon indicates, however, that where the insured has some independent evidence that a loss was caused by employee fraud or dishonesty, the inventory or profit and loss computation will be admitted as corroborative evidence to help the insured meet his burden of proof. But there must be some evidence “wholly apart from such computations” both as to the existence and amount of loss; otherwise the claim is excluded. Section 4 of the “Conditions and Limitations” of the policy and bond, captioned “Loss Caused by Unidentifiable Employees”, imposes a requirement in addition to that prescribed by Section 2(b) under certain circumstances. Where the insured claims that a loss was caused by employee dishonesty, but the dishonest employee or employees cannot be identified, the insured must submit evidence which “reasonably proves” that the loss was caused by the fraud or dishonesty of undesignated employees. Therefore, before inventory computations will be admitted as evidence in the insured’s casein-chief, it must be reasonably proven that a loss caused by employee dishonesty has been sustained. This requires more than “some independent evidence” but less than a prima facie case as a condition to the use of inventory computations. The standard inventory exclusion clause has been the subject of considerable adjudication. In the typical case, the insured has evidence, other than inventory computations, of the factual existence of a loss due to employee dishonesty. The insured, however, does not have independent evidence indicating the full extent of the claimed loss. The courts are divided as to whether, under such circumstances, inventory computations may be introduced to prove the full amount of the loss. We need not decide, however, which of these lines of decisions is correct, for the issue before us is substantially different. Here, there is a complete absence of proof of employee dishonesty independent of the inventory computations. In support of its allegation that its loss was due to employee dishonesty, Dunlop has attempted to prove that only its employees could have taken the lost goods. It has adduced evidence to show that the lost property was separately stored and locked in a warehouse occupied only by it; that most of the articles were stored in a separately locked floor-to-ceiling cage; that nonemployees were not permitted access; that a burglar system was operational; that there was no physical evidence of burglary; and that since the turnover of employees following discovery of the loss, no similar losses have occurred. This is circumstantial evidence that, if a loss in fact was sustained, Dunlop employees were the perpetrators. But this so-called evidence of employee dishonesty presupposes the factual existence of the loss. The evidence merely tends to foreclose the possibility of theft by persons other than employees. It does not prove the existence of any loss. There are no confessions, actual or implied, from employees who had been stealing goods. Dunlop has not shown suspicious circumstances indicating that employees were pilfering goods. The only evidence that a loss occurred at all is the inventory computations. Such computations alone are insufficient to prove the existence of the loss in light of the prohibition of the inventory exclusion clause. Every court that has been confronted with the situation presently before us has concluded that the claim must be excluded. The only reported New York decision where this precise issue has been raised, so far as we know, is Kernwood Mfg. Corp. v. Home Indemnity Co., 65 Misc.2d 354, 317 N.Y.S.2d 113 (N.Y. City Civ.Ct.1970), aff’d, 67 Misc.2d 888, 326 N.Y.S.2d 682 (App.Term, 1st Dept. 1971). There the plaintiff’s proof consisted of “showing limited access to the premises, the nature of its business, and that the loss was possible only by its employees or through their connivance.” 65 Misc.2d at 356, 317 N.Y.S.2d at 115. The only evidence that a loss had occurred was provided by an inventory computation. The court granted defendant’s motion to dismiss at the end of plaintiff’s case on the ground that plaintiff had failed to prove a prima facie case: “In a word, the plaintiff’s cause of action ‘is dependent upon an inventory computation’, but the plaintiff did not offer any proof, ‘through evidence wholly apart from such computations’ that the loss was sustained ‘through any fraudulent or dishonest act or acts committed by any one or more’ of its employees.” Id. A case closely parallel to the instant one is York Lumber Co. v. Fidelity & Deposit Co. of Maryland, 331 F.Supp. 1131 (E.D.Pa.1971). There the lumber company’s profit and loss computation showed a sudden and unexplained decrease in profits. This was traced to a decrease in profits on roofing shingles. After a private investigator was assigned to guard the shingles, profits returned to normal levels. At trial, York sought on these facts to prove that only an employee or employees could have caused the loss reflected on the books. The court, in noting that York had failed to produce any evidence independent of the profit and loss computation to show that a loss had been sustained, stated: “York’s theory of employee dishonesty is premised upon the assumption that roofing shingles have been removed from the lumber yard. Such removal constitutes the factual existence of the loss. York, however, has presented only its own computations as evidence that roofing shingles have been stolen. Its allegations that only its employees had access to the roofing shingles and affidavits in support thereof merely attempt to exclude the possibility of theft by other individuals by creating a negative inference. Such evidence of employee dishonesty, however, presupposes the factual existence of the loss and adds nothing by which its existence can be proved. And the computations alone, even if accurate, are insufficient to prove the existence of the loss and support a claim under Section 2(b).” 331 F. Supp. at 1133. (emphasis added). The court therefore concluded that, because of the lack of independent evidence, York’s claim was excluded by the terms of the insurance contract. Accord, TriMotors Sales v. Travelers Indemnity Co., 19 Wis.2d 99, 119 N.W.2d 327 (1963). Dunlop failed to adduce any evidence, aside from its inventory computation, that it sustained a loss through the fraudulent or dishonest acts of its employees. Since Section 2(b) of Insuring Agreement I clearly provides that the policy does not apply to losses whose existence are proven solely by inventory computations, Dunlop failed to prove a prima facie case. Affirmed. “The judicial problem, therefore, is one of fair accommodation of the general right of an insurer to fix his undertaking (citing cases) and that of the general public, in buying insurance containing frozen, unbargained-for policy limitations, to get the degree of coverage it reasonably envisages. Such accommodation, in our judgment, should preclude recovery by the insureds under this bond if they had no proof whatever of an employee-connected loss other than inventory or profit and loss computations, no matter how reliable in the particular case.” . ADT is an abbreviation for American District Telephone Co., a well known supplier of electrical burglary protection devices, including central station alarm systems. See Brink’s Inc. v. American District Telegraph Co., 413 F.2d 359, 360 (7 Cir. 1969); United States v. International Telephone & Telegraph Corp., 324 F.Supp. 19, 40-41 (D.Conn.1970), appeal dismissed, 404 U.S. 801 (1971). . “Section 2. This Policy does not apply: * * * (b) under Insuring Agreement I, to loss, or to that part of any loss, as the case may be, the proof of which, either as to its factual existence or as to its amount, is dependent upon an inventory computation or a profit and loss computation; provided, however, that this paragraph shall not apply to loss of Money, Securities or other property which the Insured can prove, through evidence wholly apart from such computations, is sustained by the Insured through any fraudulent or dishonest act or acts committed by any one or more of the Employees; >> . “Section 4. If a loss is alleged to have been caused by the fraud or dishonesty of any one or more of the Employees and the Insured shall be unable to designate the specific Employee or Employees causing such loss, the Insured shall nevertheless have the benefit of Insuring Agreement I, subject to. the provisions of Section 2(b) of this Policy, provided that the evidence submitted reasonably proves that the loss was in fact due to the fraud or dishonesty of one or more of the said Employees, . " . No profit and loss computation is here involved. . For decisions requiring independent evidence as to both the existence and amount of the loss, see Gillette Company v. Travelers Indemnity Co., 365 F.2d 7 (7 Cir. 1966); Paramount Paper Products Co. v. Aetna Casualty and Surety Co., 182 Neb. 828, 157 N.W.2d 763 (1968); Locke Distributing Co. v. Hartford Accident and Indemnity Co., 407 S.W.2d 658 (Ct.App., Mo.1966); Mid-Continent Stores, Inc. v. Central Surety and Insurance Corp., 377 S.W.2d 567 (Ct.App., Mo.1964). For decisions allowing the introduction of such computations as the only proof as to extent of loss, where there is some independent proof of employee dishonesty, see Sommer v. General Insurance Co. of America, 22 Ohio App.2d 149, 259 N.E.2d 142 (1970); American Fire and Casualty Co. v. Burchfield, 285 Ala. 358, 232 So.2d 606 (1970); Meyer Jewelry Co. v. General Insurance Co. of America, 422 S.W. 2d 617 (S.Ct., Mo.1968); Hoboken Camera Center, Inc. v. Hartford Accident and Indemnity Co., 93 N.J. Super. 484, 226 A. 2d 439 (1967); Tri-Motors Sales Inc. v. Travelers Indemnity Co., 19 Wis.2d 99, 119 N.W.2d 327 (1963). . Dunlop recovered against Fidelity in an earlier action in the New York Supreme Court, Erie County, on a claim involving a similar loss at its Los Angeles warehouse. Dunlop argues that, under the doctrine of collateral estoppel, Fidelity should be barred from relying on Section 2(b) as a defense. We agree with the district court’s determination that in the earlier case there was substantial evidence that the manager of the warehouse had stolen or embezzled the goods from the warehouse. We hold that Dunlop’s claim of collateral estoppel is wide of the mark. . No choice of law issue having been raised on this appeal, we assume that New York law applies. And since this issue has not received extensive consideration by the New York courts, we also look to other decisions for guidance. . See also Hoboken Camera Center, Inc. v. Hartford Accident and Indemnity Co., 93 N.J.Super. 484, 496, 226 A.2d 439, 447-48 (1967): . In light of our holding that Dunlop has not established a prima facie case, we do not reach the issue of the appropriate measure of damages.

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Caselaw Access Project

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John C. SCHUMACHER, Appellant, v. Lowell SCHMIDT, Commissioner of Revenue, State of South Dakota, et al., Appellees. No. 73-1206. United States Court of Appeals, Eighth Circuit. July 5, 1973. Andrew G. Kohlan, Minneapolis, Minn., and Ramon A. Roubideaux, Rapid City, S. D., for appellant. M. T. Woods, Sioux Falls, S. D., for appellees. Before GIBSON, LAY and STEPHENSON, Circuit Judges. PER CURIAM. This appeal is before the screening panel pursuant to appellees’ motion for affirmance under Local Rule 8. The appeal is from an order by the Honorable Andrew W. Bogue granting summary judgment dismissing appellant-plaintiff’s complaint upon the merits. A review of the record and briefs filed herein leads us to conclude that the issue presented for review is so unsubstantial as not to need further argument and that summary affirmance is appropriate. Appellant brought this action under 42 U.S.C. §§ 1983, 1985 and 28 U.S.C.A. § 1343 for the alleged deprivation of civil rights, naming as defendants the Commissioner of Revenue of the State of South Dakota, the Director, Other Taxes and Licensing, and the Deputy Commissioner of Revenue of South Dakota. Appellant complained that the actions of the. defendants in refusing to grant him an on-sale liquor license (retail sales) were arbitrary and capricious and a denial of due process and equal protection. Defendants moved for dismissal and summary judgment which was granted, and this appeal followed. The material facts are not in dispute. In September 1971, the City Commissioners of the City of Huron, South Dakota, under the impression that newly enacted legislation authorized them to issue additional on-sale liquor licenses, adopted a resolution to approve seventeen on-sale licenses during the calendar year 1972 and scheduled public hearings thereon in November 1972. As a result of the hearings, Huron approved and forwarded to the Commissioner of Revenue for his approval 15 applications for on-sale licenses, which included 13 renewals and two new applications, one of which was appellant’s. Shortly thereafter appellee, Peterson, Director, Other Taxes and Licensing, advised the Commissioners of Huron that the 15 on-sale license applications exceeded the statutory limitations of the current statute by two, i. e., no more than 13 such licenses could be issued. As a result the Commissioners of Huron again met and voted to re-submit the 13 existing on-sale licenses for renewal; thus the application of appellant was not included. Appellant then brought this action. Judge Bogue found that although the Commissioner of Revenue is given discretion to approve or disapprove applications for licenses submitted by the municipality (S.Dak.Compiled Laws Ann. § 35-2-5.2 (1972))' the record shows that here there was no matter of discretion involved. The Court stated: “All fifteen applications were returned to the city for a final determination as to which thirteen applications would be approved. The City Commission of Huron made the decision as to preferences and priorities of applications, not the Department of Revenue. While the Court does not intend to infer such, if any deprivation of Constitutional rights occurred, it necessarily occurred at the municipal and not the state level.” Appellant does not charge deprivation of rights at the municipal level. He charges that the state officials misinterpreted the statute — that more on-sale licenses should be available to the City of Huron. The matter of statutory interpretation is for the state courts. In fact, there is support under South Dakota decisions for the position taken by appellees. See, Asmussen v. Schmidt, 202 N.W.2d 857, 859 (S.Dak.1972). In any event there is no showing of a deprivation of civil rights under 42 U.S.C. §§ 1983, 1985. Affirmed. . “The number of on-sale licenses issued shall not exceed three each and for the first one thousand of population and not exceed one each of such licenses for each additional one thousand of population or fraction thereof, provided, however, the number of such licenses shall not exceed the total number of such licenses allowable or issued prior to July 1, 1971.” Ch. 211, 1971 Laws of S.D.; S.D.Comp. Laws Ann. 35-4-11 (Supp.1972). . The population of Huron was 14,299. . The original files show that one of the appellees, Lowell H. Schmidt, Commissioner of Revenue, State of South Dakota, in an affidavit accompanying the motion to dismiss and for summary judgment below, stated that counsel for appellant in another action in behalf of another applicant unsuccessfully sought mandamus against appellees in the State Court of South Dakota wherein the State Circuit Court held the City of Huron was only entitled to a total of 13 on-sale licenses. This action apparently was not appealed to the South Dakota Supreme Court.

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Lester J. LEGER, Plaintiff-Appellant, v. AMERADA HESS CORPORATION, Defendant-Appellee, Consolidated Underwriters, Intervenor. No. 72-348 Summary Calendar. United States Court of Appeals, Fifth Circuit. June 13, 1973. W. D. Atkins, Jr., Lafayette, La., for plaintiff-appellant. John Pitts, Alexandria, La., for defendant-appellee. William H. de Launay, Jr., Alexandria, La., for intervenor. Before WISDOM, AINSWORTH and CLARK, Circuit Judges. Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of N. Y., 431 F.2d 409, Part I (5th Cir. 1970). PER CURIAM: The sole issue on this appeal in this diversity case is whether Lester J. Leger was the statutory employee of Amerada Hess for purposes of exclusive liability under the Louisiana Workmen’s Compensation statutes, La.Rev.Stat.Ann. § 23:-1032 and § 23:1061. The court below granted summary judgment for the defendant. We affirm. Leger’s general employer was Townsend Brothers, a firm which supplied labor to Amerada on a daily basis. At the time of his injury, Leger was engaged in cleaning up oil spilled from a separator at Amerada’s work site under the direction of a supervisor supplied by Amerada. The coverage of the “trade, business, or occupation” clause of § 23:-1061 has been the subject of extensive judicial interpretation which is summarized in a series of recent opinions of this court. See, e. g., Arnold v. Shell Oil Company, 419 F.2d 43 (5th Cir. 1969); Cole v. Chevron Chemical Company-Oronite Division, 427 F.2d 390 (5th Cir. 1970), on appeal after remand, 477 F.2d 361 (5th Cir. 1973). As we stated in Arnold, citing numerous Louisiana cases, the test for determining whether the work of employees of independent contractors is within the regular “trade, business, or occupation” of the principal employer is “whether the particular activity is essential to the business.” 419 F.2d at 50. The application of this test was further explained in Cole I thus: . the fact that the employer or the industry as a whole always contracts out the activity is not controlling. . Similarly not controlling is the fact that the employer hires workers of its own to perform activity related to the activity it contracts out. Instead, the decisive factors are the nature of the activity being contracted out, the nature of the principal employer’s business, and the relationship between the particular activity and the broader business operation. In this regard, the basic inquiry is not whether the activity contracted for is helpful or necessary to the operation of the business enterprise, for we may presume that businessmen in the normal conduct of their affairs will not contract for work that is neither helpful nor necessary. Rather, we inquire whether the particular activity is so related to the principal employer’s conduct of his trade, business, or occupation that it should be considered as an essential part thereof. . 427 F.2d at 393-394. One important indicia of whether the independent contractor’s employee falls within the scope of § 23:1061 is whether “the work contracted out was so necessary to the principal’s operations that, if it were not performed by the independent contractor, the principal would have had to hire workers of its own to perform the task.” Cole II, All F.2d 361. This alternative-employee test reflects the basic purpose of § 23:1061 which is to prevent the principal employer from evading his obligations under the Workmen’s Compensation Statutes by contracting out work which would otherwise be performed by its own employees. See Arnold v. Shell Oil Company, supra, 419 F.2d at 50; Foster v. Western Electric Co., 258 So.2d 153, 156 (La.App.1972); Malone, Principal’s Liability for Workmen’s Compensation to Employees of Contractor, 10 La.L.Rev. 25 (1949). While the essentiality of a particular activity to a given business enterprise may involve disputed facts, e. g., Cole v. Chevron Chemical Co.—Oronite Division, supra, 427 F.2d at 394; Gorsalitz v. Olin Mathieson Chemical Corp., 429 F.2d 1033 (5th Cir. 1970), where the factual picture of the principal employer’s operations and the part the activity in issue played in those operations is clear, summary judgment is appropriate, e. g., George v. Home Indemnity Co., 420 F.2d 782 (5th Cir. 1969); Fontenot v. Stanolind Oil & Gas Co., 243 F.2d 574 (5th Cir. 1957); Arnold v. Stupp Corp., 249 So.2d 276 (La. App.1971); Allen v. United States Fire Ins. Co., 222 So.2d 887 (La.App. 1969). In Arnold and Fontenot, this court held that the maintenance of oil separation equipment at field work sites is part of the regular operation of an integrated oil company, so that those engaged in the maintenance of such equipment are as a matter of law statutory employees of the oil company under § 23:1061. In the present case, Leger’s job — the removal and destruction of inflammable spillage from an oil separator —was part of the routine maintenance necessary to the continued safe operation of Amerada’s work site. We find no reason to distinguish the legal status of employees supplied by independent contractors who repair separation equipment from that of those who clean up spillage surrounding such equipment. Both types of maintenance are essential to the operation of the oil company’s enterprise. Whether Amerada chose, as a matter of practice, to perform this necessary function with its own employees or through servants obtained from independent labor contractors, those engaged in the clean-up operation are as a matter of law its statutory employees under the Louisiana Workmen’s Compensation Act. Since there were no disputed issues of material fact, a summary judgment was proper. Affirmed. . La.Rev.Stat. § 23:1032 provides: The rights and remedies herein granted to an employee or his dependent on account of a personal injury for which he is entitled to compensation under this Chapter shall he exclusive of all other rights and remedies of such employee, his personal representatives, dependents, or relations. Nothing in this Chapter shall affect the liability of the employer to a fine or penalty under any other statute. La.Rev.Stat. § 23 :1061 provides: Where any person (in this section referred to as principal) undertakes to execute any work, which is a part of his trade, business, or occupation or which he had contracted to perform, and contracts with any person (in this section referred to as contractor) for the execution by or under the contractor of the whole or any part of the work undertaken by the principal, the principal shall be liable to pay any employee employed in the execution of the work or to his dependent, any compensation under this Chapter which he would have been liable to pay if the employee had been immediately employed by him; and where compensation is claimed from, or proceedings are taken against, the principal, then, in the application of this Chapter reference to the principal shall be substituted for reference to the employer, except that the amount of compensation shall be calculated with reference to the earnings of the employee under the employer by whom he is immediately employed. Where the principal is liable to pay compensation under this Section, he shall be entitled to indemnity from any person who independently of this Section would have been liable to pay compensation to the employee or his dependant, and shall have a cause of action therefor. . In its recent opinion in Cole, this court affirmed a judgment N.O.V. limiting the plaintiff to his compensation remedies where, as an employee of an independent contractor, he was engaged in expansion and renovation work necessary to the continued operation of the defendant’s oil refinery. . We do not reach or decide whether the court below was correct in its alternative holding that as a matter of law Leger was a borrowed-servant of Amerada Hess, and therefore within the exclusive remedy provision of § 23:1032 and § 23:1035, as interpreted in Humphreys v. Marquette Casualty Co., 235 La. 355, 103 So.2d 895 (1958).

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GOVERNMENT OF the CANAL ZONE, Plaintiff-Appellee, v. Luis Alberto Rios C. (Corrella), Defendant-Appellant. No. 72-3292 Summary Calendar. United States Court of Appeals, Fifth Circuit. June 22, 1973. W. J. Sheridan, Jr., Federal Public Defender, Balboa Heights, Canal Zone, for defendant-appellant. Lester Engler, U. S. Atty., Balboa, Canal Zone, for plaintiff-appellee. Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges. Rule 18, 5 Cir., see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York, et al., 5 Cir., 1970, 431 F.2d 409, Part I. PER CURIAM: This 17 year-old appellant, Luis Alberto Rios C. (Corrella), was convicted below in a non jury trial for the nighttime burglary of a residence which re-suited in his being sentenced to three years at hard labor in the penitentiary. Notice of appeal was timely filed with this Court on September 22, 1972 but on December 4, 1972 the record was returned to this Court by the public defender of the Canal Zone with a cover letter stating that “I am unable to find in the record any appealable error and am of the same opinion as the trial judge . . . that the appeal is frivolous.” This Court, by Chief Judge’s order, ordered the public defender to comply with the prescribed procedure set out in Anders v. California, 1967, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493 for withdrawing as appointed counsel for a defendant in a criminal appeal. The public defender responded by filing a brief on the merits in appellant’s behalf. Though this brief raises a close question as to whether there was sufficient corroborative evidence supporting the testimony of appellant’s alleged accomplice in the burglary to satisfy the requirement of 6 C.Z.Code § 42(a), we decline to decide that issue at this time. Instead, we reverse the judgment of the court below and remand for a new trial. We take this course because our review of the record leaves us entirely unconvinced that this defendant was accorded the quality of representation which the Sixth Amendment guarantees an accused in a criminal trial. Our reading of —tfee-roeeiM. reveals serious questions regarding the legality of appellant’s detention, search, and arrest, none of which were objected to below by counsel. Also, we note certain conflicts in the testimony which were not pursued below by counsel during cross-examination. In short, here we conclude in our supervisory powers that the dictates of fairness require that appellant be tried again. There it ends. Reversed. . Title 3, § 10 of the Canal Zone Code makes the following provision for appointed counsel in criminal cases: “The Governor shall appoint a qualified member of the Canal Zone as a public defender. The public defender shall receive such compensation and such of the privileges of a Canal Zone Government employee as are fixed and granted by the Governor. The public defender shall represent, in the district court, any person charged with the commission of a crime within the original jurisdiction of the district court who is unable to obtain counsel for his defense, unless, in an exceptional ease, the court assigns other counsel. 76A Stat. 53.” . Title 6, § 42 of the Canal Zone Code provides in part: “(a) A conviction can not be had on the testimony of an accomplice unless his testimony is corroborated by other evidence which in itself and without the aid of the testimony of the accomplice, tends to connect the defendant with the commission of the offense. The corroboration is not sufficient if it merely shows the commission of the offense or the circumstances thereof.” . We express no opinion regarding the legality of these stages of the proceedings below nor as to the admissibility of the evidence resulting therefrom. We only point to a pattern of pro forma, almost passive, performance by counsel throughout the trial. This was, of course, further evidenced by counsel’s characterization of the appeal initially as frivolous. Then, after our admonishment, suddenly merit appeared. . An example of conflict, apparently unnoticed by counsel, occurred when the complaining witness testified that after being awakened by his barking dogs he was alerted that someone was in his house when he saw a flashlight light in his living room. The accomplice testimony was that no light was used during the burglary.

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UNITED STEELWORKERS OF AMERICA, LOCAL 1104 et al., Plaintiffs-Appellants, v. UNITED STATES STEEL CORPORATION, Defendant-Appellee. No. 72-1979. United States Court of Appeals, Sixth Circuit. Argued April 10, 1973. Decided June 5, 1973. George H. Cohen, Washington, D. C., Darryl J. Anderson, Bredhoff, Barr, Gottesman, Cohen & Peer, Washington, D.' C., Joseph E. Finley, Melvin S. Schwarzwald, Metzenbaum, Gaines, Finley & Stern, Cleveland, Ohio, on brief, for plaintiffs-appellants; Bernard Klei-man, Gen. Counsel, United Steelworkers of America, AFL-CIO, Pittsburgh, Pa., of counsel. Charles F. Clarke, Cleveland, Ohio, Thomas H. Barnard, Cleveland, Ohio, on brief, for defendant-appellee; Squire, Sanders & Dempsey, Cleveland, Ohio, of counsel. Before EDWARDS and CELE-BREZZE, Circuit Judges, and O’SULLIVAN, Senior Circuit Judge. PER CURIAM. This civil rights case charging discrimination on grounds of sex, in violation of Title VII of the Civil Rights Act of 1964, § 706(e), 42 U.S.C. § 2000e-5(e) (1970), was filed by appellants, United States Steelworkers of America, Local 1104, against United States Steel Corporation. Acting on behalf of female employees of the Lorain Works, appellant union sought to recover wages over a two-year period (1967 to 1969) during which the women were not compensated for their one-half hour lunch period while male employees were. The case was fully tried before a District Judge in the United States District Court for the Northern District of Ohio who entered judgment in favor of the defendant. The union charged sex discrimination in the company’s lunch rules whereby men were paid for their lunch period while women were not. The company explained its policy by saying that the men’s lunch period could, by contract, be varied as to time and place, and interrupted by the management when company tasks needed immediate attention, while the women’s lunch period was required by Ohio law to be fixed and uninterrupted. O.R.C. § 4107.46(E). In 1969 the Equal Employment Opportunity Commission announced that compliance with state female protective laws would not be a valid defense to an otherwise unlawful employment practice based on sex discrimination. The company thereupon began paying its women employees for their half-hour lunch period. In 1971 and 1972 both the Ohio and federal courts ruled the former female protective statutes void as against federal civil rights laws. Jones Metal Products Co. v. Walker, 29 Ohio St.2d 173, 281 N.E.2d 1 (1972); Ridinger v. General Motors Corp., 325 F.Supp. 1089 (S.D. Ohio 1971). After trial of the issues, the District Judge entered a Memorandum and Order containing extensive findings of fact. He concluded: The difference between the meal periods received by female employees as required by Ohio law and the lunch period allowed to the men is definite and material. The Ohio law makes it clear that the female meal period must be uninterrupted by any work and a place to enjoy it must be available away from the work station of the female employee. The defendant company observed and complied with these requirements of the Ohio law. Its male employees, however, were granted a lunch period that was subject to company direction as to its length, timing, and location. Moreover, the company reserved and exercised the right to interrupt the male employee’s lunch period whenever the continuous operation of the Lorain Works required the elimination of a mill breakdown, or the immediate performance of some other emergency repair or essential work. The appellant union does not claim that the District Judge’s findings are “clearly erroneous” and we believe they are well supported by the record. The appellant union does dispute the materiality of the lunch policy differences found by the District Judge and does dispute the company’s “good faith” in the premises, since it could have paid the female employees. The District Judge cited and relied upon a District Court case which this court subsequently affirmed, saying in part: The defendant, General Motors, did not have the benefit of any judicial determination of the validity of the Ohio female protective laws until 1971, and the enforcing agency had not handed down any definitive administrative interpretation which would assist in resolving the conflict between any such state statutes and the provisions of Title YII until August 19, 1969. Under all the circumstances of this case we cannot conclude that the District Judge abused his discretion in denying back pay to these plaintiffs. Manning v. General Motors Corp., 466 F.2d 812, 816 (6th Cir. 1972), cert. denied, 410 U.S. 946, 93 S.Ct. 1366, 35 L.Ed.2d 613 (1973). We conclude that this appeal is governed by the decision in Manning v. General Motors Corp., supra. The judgment of the District Court is affirmed.

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Catherine H. HITCHCOCK, Appellant, v. PETER KIEWIT & SONS COMPANY, INC., Appellee. No. 72-1609. United States Court of Appeals, Tenth Circuit. Argued and Submitted March 28, 1973. Decided June 19, 1973. Rehearing Denied July 27, 1973. William B. Rogers, Oklahoma City, Okl., for appellant. Gene Stipe, Oklahoma City, Okl. (Carl Hughes, Oklahoma City, Okl., with him on the Brief), for appellee. Before SETH and BARRETT, Circuit Judges, and TALBOT SMITH, Senior District Judge. Of the Eastern District of Michigan, sitting by designation. SETH, Circuit Judge. Appellant, plaintiff below, appeals from a judgment of the district court entered on a jury verdict in her favor in the sum of $829.16 as damages in a diversity suit against appellee for a breach of contract. Appellee, which is engaged in the business of highway construction, entered into a contract with appellant under the terms of which appellee was to remove certain quantities of sand from the appellant’s property or pay a minimum amount. After the sand had been removed, the contract required appellee to slope the land toward a creek running through the property so that the land would drain properly, and to replace the topsoil. Appellee removed the sand and paid for it according to the terms of the contract. However, several attempts by ap-pellee to grade the land and replace the topsoil failed to satisfy appellant and she brought this suit seeking damages in the sum of $32,950.00. This was the amount alleged by her to be necessary to put the property into the condition called for by the contract. As mentioned, the jury found in favor of appellant, but awarded only $829.16 as damages. Mrs. Hitchcock on this appeal asserts that the trial court committed error in that it applied the wrong measure of damages, and did not permit appellant to develop her theory of the case as it related to the principal purpose of the contract. Very early in the trial, and during the testimony of a witness, the court read portions of the syllabus and opinion of the Oklahoma Supreme Court to the jury. The opinion is in Peevyhouse v. Garland Coal & Mining Co., Okl., 382 P.2d 109. Other than the fact that it involved strip mining for coal instead of mining for sand, Peevyhouse is very similar to the instant case. In Peevyhouse, the Oklahoma Supreme Court agreed that grading the land and replacing the topsoil were provisions merely “incidental” to the main purpose of the contract there in issue, and because of this allowed as damages only the diminution in value of the property. The court also said in the opinion that had the restoration work been one of the main purposes of the contract the cost of completion of such work would have been the proper measure of damages. Although in the instant case it appears that the question of whether the work was an “incidental” or “main” purpose of the contract was indirectly submitted to the jury, the trial court, by reading from Peevyhouse with the admonition that it was binding, gave the jury the impression that the Oklahoma Supreme Court had already decided that the provisions in question were “incidental” as a matter of law, and that they could not be a “main” purpose of the contract. At this early point, the trial court also seemed of this opinion. However, appellant’s counsel objected to this interpretation of Peevyhouse,. and the court took a recess, apparently to study the case. Immediately after the recess, the trial court once more read from Peevyhouse, this time attempting to explain to the jury that provision of the case which requires that the owner of the land be awarded the cost of completion of the uncompleted work as damages, if those costs are not grossly disproportionate to the economic benefit to be gained by such full performance, once more apparently assuming that there was no question but what the provisions in issue were “incidental” as opposed to “main” purposes of the contract. The trial court then allowed testimony regarding what it would cost to complete the work called for by the contract, and left undone by the appellee. At no time does it appear that the jury was told that even though Peevyhouse was to be followed if applicable, it was their duty to determine whether the provisions relative to sloping the land and replacing the topsoil were “main” purposes of the contract here concerned, or merely “incidental.” They were only told that if they found that the provisions were incidental, they were to apply the rule as to damages set forth in Peevyhouse. Thus the jury never decided this question. The court seemingly read Peevyhouse to them as having made that determination as a matter of law. The result of the injection of the state court opinion into the case as a direct instruction to the jury resulted inadvertently in taking from the jury the determination of whether or not the restoration of the land surface was incidental to the agreement or not. This is a fact question for the jury. A careful reading of the transcript convinces us that there was at least a strong probability that the jury thought that they were foreclosed from deciding this issue because of the Oklahoma Supreme Court’s decision in Peevyhouse. Further remarks regarding the Peevy-house rule and the instructions to the jury, adequate in themselves, were not clear enough and unequivocal enough to clear up the initial misdirection. Additionally, we believe that Mrs. Hitchcock should have been allowed to testify as to the negotiations surrounding the execution of the contract, and her intent in entering into it. This testimony, though normally inadmissible, is admissible in this case as an exception to the parole evidence rule since the contract does not reveal whether the provisions in question were considered to be “main” purposes or merely “incidental” purposes, and the jury must decide this question. The use of the word “consideration” on several different occasions with a different meaning added to the confusion. Since it is necessary to remand this case for a new trial, it is not necessary in our view to discuss points (d), (e) and (f), except to say that we expect that any confusion which might have occurred because of the pretrial order in the original trial will, we trust, be cleared up before this ease is retried. Reversed and remanded for a new trial.

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Jordan Jay KING et al., Plaintiffs-Appellants, v. KANSAS CITY SOUTHERN INDUSTRIES, INC., et al., Defendants-Appellees. No. 72-1734. United States Court of Appeals, Seventh Circuit. Argued and Decided June 12, 1973. Lowell E. Sachnoff, Chicago, 111., for plaintiffs-appellants. A. Bradley Eben, George B. Christensen, Edward H. Hatton and Joan M. Hall, Chicago, 111., Landon H. Rowland, Kansas City, Mo., Marvin Schwartz, New York City, Arthur Susman, Harry Schulman, Harry A. Young, Jr., Chicago, 111., for defendants-appellees. Before PELL and STEVENS, Circuit Judges, and ESCHBACH, District Judge. Honorable Jesse E. Eschbach is sitting by designation from the United States District Court for the Northern District of Indiana. PER CURIAM. This is an appeal by a group of plaintiffs in only one of six consolidated cases pending in the district court. In the instant case, the district court on June 22, 1972, 56 F.R.D. 96, entered its order denying plaintiffs’ motion to have this action designated as a class action. Plaintiffs filed their notice of appeal to this court from that order and concede that they base their right of appeal, if any, on 28 U.S.C. § 1291. Defendant-appellee Kansas City Southern Industries, Inc., has filed its motion to dismiss the appeal for the reason that the order below was an interlocutory order not appealable under 28 U. S.C. § 1291. We agree. The question before the court on the motion to dismiss involves a much disputed question as to whether the dismissal of a class action portion of a complaint is appealable. In Thill Securities Corp. v. New York Stock Exchange, 469 F.2d 14, 17 (7th Cir. 1972), this court held that the denial of a motion to strike a class action was not an appealable order under 28 U.S.C. § 1291. We now hold that the present order is not ap-pealable under § 1291, necessitating the dismissal of the appeal for lack of jurisdiction. In so holding, we follow Hackett v. General Host Corp., 455 F.2d 618 (3d Cir. 1972), cert. denied, 407 U.S. 925, 92 S.Ct. 2460, 32 L.Ed.2d 812; Gerstle v. Continental Airlines, Inc., 466 F.2d 1374 (10th Cir. 1972); and our analogous prior decision in Jumps v. Leverone, 150 F.2d 876 (7th Cir. 1945). We decline to adopt and accordingly reject the so-called “death knell” theory originally enunciated in Eisen v. Carlisle & Jacquelin, 370 F.2d 119 (2d Cir. 1966), cert. denied, 386 U.S. 1035, 87 S.Ct. 1487, 18 L.Ed.2d 598 (1967). Likewise we do not find the “collateral order” doctrine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949), applicable to the type of order here involved. On June 11, 1973, the plaintiffs below purported to secure an order from the district court amending, on a nunc pro tunc basis, the order of June 22, 1972, which amended order would have permitted, pursuant to 28 U.S.C. § 1292(b), an appeal on the class action status as involving a controlling question of law as to which there is a substantial ground for difference of opinion. Our present disposition does not reach the issues raised by that action and we express no opinion as to whether the power existed in the district court to amend its previous order on a nunc pro tunc basis while an appeal was pending in this court, nor do we express an opinion as to whether this court in its discretion should permit an appeal to be taken from such order in the event it was properly entered below. Appeal dismissed.

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Charles KIESEL and Hilbert Kiesel, as owners of the S/V “CORAL SANDS”, Plaintiffs-Appellees, v. The STATE OF FLORIDA, DEPARTMENT OF NATURAL RESOURCES and Frank Fernandez, Defendants-Appellants. No. 72-3018. United States Court of Appeals, Fifth Circuit. June 25, 1973. Jerry E. Okner, Asst. Atty. Gen., Dept, of Legal Affairs, Robert L. Shevin, Atty. Gen., Tallahassee, Fla., for defendants-appellants. William C. Norwood, Richard M. Gale, Miami, Fla., for plaintiffs-appellees. Before WISDOM, DYER and INGRA-HAM, Circuit Judges. PER CURIAM: The case on appeal is an admiralty action for damages. Plaintiffs-appellees, the owners of a shrimping vessel, sued the State of Florida, the Department of Natural Resources and Frank Fernandez, a marine patrol officer of the Department of Natural Resources. The vessel was operating in navigable waters near Everglades City, Florida, when patrol officer Fernandez boarded the vessel and found eight crawfish tails in the hold. Since the vessel had no craw-fishing permit, Captain Russell, the master of the vessel, was cited and an appearance bond in the amount of $35 was set, which the Captain was unable to satisfy. In default of bond, Captain Russell was ordered to accompany Officer Fernandez to Everglades City. When advised he would not leave the boat, Officer Fernandez ordered the vessel into Everglades City through the nearest available channel. In the course of navigating the channel the vessel ran aground on a mud flat. While waiting for a high tide to clear the vessel from the flat Officer Fernandez and Captain Russell negotiated a lower bond in the amount of $25 which the vessel was able to make, and with the coming of high tide the vessel proceeded on its appointed rounds and sank shortly thereafter in clear seas. A more detailed account of the maneuverings is found in the findings of fact of the court below. We find no merit to the appellants’ claim that the federal court was without jurisdiction. Jurisdiction is vested under the admiralty and maritime laws of the United States pursuant to 28 U.S.C.A. § 1333 and F.R.Civ.P. 9(h). And the State of Florida had given its consent to be sued, Florida Statutes, § 768.15, as follows: “Torts by public officers and employees. (1) Waiver of immunity.- — The state, for itself and its counties, agencies, and instrumentalities, waives immunity for liability for the torts of officers, employees, or servants committed in the state. The state and its counties, agencies, and instrumentalities shall be liable in the same manner as a private individual, but no action may be brought under this section if the claim: (a) Arises out of the performance or the failure to perform a discretionary function; (b) Arises out of a riot, unlawful assembly, public demonstration, mob violence, or civil disturbance; (c) Arises out of the issuance, denial, suspension, or revocation of, or by the failure to issue, deny, suspend, or revoke, a permit, license, certificate, approval, order, or similar authorization ; or (d) Arises out of the collection or assessment of taxes. (2) Punitive damages. — Punitive damages shall not be allowed in an action brought under this section. (3) Venue. — Actions under this section shall be brought in the county where the cause of action arose. (4) Remedies cumulative. — The rights and remedies under this section are cumulative to all others. (5) Effective date. — This section shall become effective on July 1, 1969 and shall not apply to acts or omissions occurring before that date.” The appellants contend that a statute waiving immunity from suit is strictly construed and that the failure of the statute to specifically waive immunity in federal court conclusively shows that there was no such waiver. We believe the district court was correct in rejecting such contention. If the legislature had intended to limit the forums in which the state might be sued it could easily have done so. This it did not do. We believe and hold that the provisions of paragraph (3) of the Act relating to venue should be construed to extend to any court exercising competent jurisdiction over the designated area and certainly would include the admiralty court in an admiralty case. Upon the issues of liability and damages, we are of the opinion that the standards of McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20, are clearly met and we must affirm. We cannot conclude, from the record, that the findings of the district court are “clearly erroneous”. We are of the opinion that such findings are fully supported and correct. The judgment of the district court is affirmed.

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UNITED STATES of America, Plaintiff-Appellee, v. Peter Scott CLIFFORD, Defendant-Appellant. No. 72-2082. United States Court of Appeals, Ninth Circuit. May 25, 1973. Sull Lawrence (argued), Beverly Hills, Cal., for defendant-appellant. Joel Levine, Asst. U. S. Atty. (argued), William D. Keller, U. S. Atty., Eric A. Nobles, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff-appellee. Before BROWNING and DUNIWAY, Circuit Judges, and BURNS, District Judge. Honorable James M. Burns, United States Dis iet Judge, District of Oregon, sitting by designation. DUNIWAY, Circuit Judge: OPINION Clifford was convicted of failing to submit to induction into the armed forces, 50 U.S.C. App. § 462(a). We affirm. The pertinent facts are these: Over a period of about a year, Clifford completed 20 hours of study at a junior college in Bakersfield, California. On November 3, 1970, he was classified I-A by his local board. He did not appeal this classification. Shortly thereafter, the board received a certificate from Pierce College in Los Angeles, stating that Clifford was enrolled for 12% units as a first year student. The certificate states “Submission of this form does not constitute a request for deferment.” On November 27, 1970, Clifford requested a Form 150 for conscientious objectors which he returned, completed, on January 6, 1971. On February 2 the board reopened his classification and retained him in I-A. The minutes of the board for that date contain the notation. “I-A ■ — -Late Filing. Moral Background poor.” Again, Clifford did not appeal. Clifford’s only argument in this court is that his induction order was invalid because his board did not consider the Pierce College certificate. There is nothing in Clifford’s selective service file that shows whether or not the board considered it. But it did reopen and reconsider his classification. It is presumed that the local board complies with its duty to review the registrant’s entire file when it classifies him. United States v. Gress, 9 Cir., 1972, 464 F.2d 1002, 1005; Skinner v. United States, 9 Cir., 1954, 215 F.2d 767, 768. It follows from these cases that if Clifford’s board was required to look at the certificate by 32 C.F.R. § 1622.1 or any other regulation, we must presume that it did so. Our recent decision in United States v. Kelly, 9 Cir., 1973, 473 F.2d 1225 is not to the contrary. There, the board did not reopen after it received new information from Kelly. Here, the board did reopen. Clifford does not claim that the information in the Pierce College certificate was sufficient to require reopening. It did not make out a prima fade case. If Clifford had thought it sufficient, he had a remedy by appeal from the February 2, 1971 reclassification. He did not appeal. Nor are 32 C.F.R. §§ 1625.2 and 1625.4, as interpreted in United States v. Norman, 9 Cir., 1969, 412 F.2d 629 of any help to Clifford. Clifford argues that these regulations give a local board only two alternatives upon receipt of new information relating to a registrant’s classification: it can either reopen on the basis of that information or send the registrant a letter stating that the information does not warrant reopening. Its failure to do either lifts the presumption of administrative regularity and ambiguities regarding what the board actually did will be resolved in favor of the registrant. The rule in this circuit is that neither section 1625.2 nor section 1625.4 is triggered unless “a written request to reopen and consider anew the registrant’s classification” is submitted. Shaw v. United States, 9 Cir., 1959, 264 F.2d 118. Moreover, in this circuit the request cannot be implicit. The leading case on the point is Taylor v. United States, 9 Cir., 1960, 285 F.2d 703 (in banc), in which the registrant submitted information that he had taken a position as a part-time minister which could lead to full-time ministerial work. The court rejected his argument that the board should have reopened on the basis of this information, not because it did not establish a prima fade case, but because: “Taylor did not request that the classification be reopened. He advised, but did not request.” 285 F.2d at 704. To the same effect are United States v. Currier, 9 Cir., 1972, 453 F.2d 1242; United States v. Robley, 9 Cir., 1970, 423 F.2d 613; United States v. Weldon, 9 Cir., 1969, 422 F.2d 800, 801; Hoapili v. United States, 9 Cir., 1968, 395 F.2d 656; Storey v. United States, 9 Cir., 1966, 370 F.2d 255; Shaw v. United States, supra. See also Comment, Judicial Development of the Law of Selective Service Reopening, 69 Mich.L.Rev. 1074, 1089-95 (1971) (remarking upon this court’s restrictive reading of the written request requirement and rejection of implicit requests for reopening). Although none of the above cases discusses the issue in depth, their cumulative effect is to make it clear that the certificate sent by Pierce College was not a written request to reopen. It was merely new informaton provided by a third party without a specific statement regarding reclassification. Indeed, the form itself states that it did not constitute a request for a deferment. The case thus falls within the language of Taylor: there was advice but no request. It follows that Clifford is not entitled to the benefit of the regulations upon which he relies, the presumption of regularity prevails, and his conviction should be affirmed. In Norman, supra, there was a written request to reopen. So far as appears from the opinion in Kelly, supra, neither the presumption of regularity nor the requirement that there be a specific request to reopen were even considered in that case. Affirmed.

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UNITED STATES of America, Appellee, v. Leslie Gene UNTIEDT, Appellant. No. 72-1752. United States Court of Appeals, Eighth Circuit. June 8, 1973. Rehearing and Rehearing En Banc Denied July 18, 1973. Robert C. Gross, Cedar Rapids, Iowa, for appellant. Evan L. Hultman, U. S. Atty., and Robert L. Sikma, and Alan H. Kirshen, Asst. U. S. Attys., Sioux City, Iowa, filed printed brief for appellee. Before HEANEY, BRIGHT and ROSS, Circuit Judges. PER CURIAM. Leslie Gene Untiedt appeals from the denial of his motion to vacate sentence. On September 5, 1972, he pleaded guilty to stealing, receiving, possessing and concealing goods of a value of more than $100 which were part of an interstate shipment, in violation of 18 U.S.C. § 659. On appeal, Untiedt alleges that he was coerced into pleading guilty by the government’s threat to try him as a dangerous and special offender under 18 U.S.C. § 3575, and that the government did not fulfill its part of the plea bargain. In viewing the transcript of the guilty plea proceeding, we questioned whether F.R.Crim.P. 11 had been complied with. As this Court has previously stated, we have a duty to review compliance with Rule 11 even where that issue is not presented to the trial court. United States v. Briscoe, 428 F.2d 954, 957 (8th Cir. 1970), cert. denied, 400 U.S. 966, 91 S.Ct. 378, 27 L.Ed.2d 386 (1970). We hold that the judge at the guilty plea proceeding did not adequately establish on the record that there was a factual basis for the plea as required by Rule 11. At this proceeding, the prosecutor first stated what was charged by the indictment. The following then took place: “Q. Leslie Gene Untiedt, did you in fact commit this offense? “A. Yes. •x ■y.■ * * -x- * "The Court: Mr. Untiedt, what were the goods that you have either possessed or concealed or received or stolen in this case? “The Defendant: It was meat, Your Honor. “The Court: What form was it? “The Defendant: I really don’t know. I didn’t see the inside of the truck. “The Court: It was in a truck, trailer, the meat? “The Defendant: Yes.” This brief exchange does not sufficiently establish a factual basis for the plea. There was no discussion of the acts Un-tiedt actually performed. There was no showing that the goods stolen were part of an interstate shipment. The purpose of Rule 11 is to assure that the defendant is pleading guilty to committing acts which do in fact constitute the offense charged. As the Supreme Court in McCarthy v. United States, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969), stated: “Requiring this examination of the relation between the law and the acts the defendant admits having committed is designed to ‘protect a defendant who is in the position of pleading voluntarily with an understanding of the nature of the charge but without realizing that his conduct does not actually fall within the charge V ” Id. at 467, 89 S.Ct. at 1171. The court below could have asked Untiedt to describe what he did and intended, or could have asked the government to outline its proof. As our Court stated in United States v. Cody, 438 F.2d 287, 289 (8th Cir. 1971), thorough judicial inquiry is required to determine that the elements of the offense were present, therefore establishing a factual basis for the plea. The inquiry which took place here was far from thorough. The sentence and guilty plea must be vacated, and Untiedt must be allowed to plead anew. McCarthy v. United States, 394 U.S. at 463-464, 89 S.Ct. 1166. Reversed.

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John GILBERT, Appellant, v. UNITED STATES of America, Appellee. No. 559, Docket 72-2116. United States Court of Appeals, Second Circuit. Argued March 15, 1973. Decided June 5, 1973. Steven Thaler, New York City (Richard Markowitz, Philadelphia, Pa., and Joel C. Glanstein, New York City, of counsel), for appellant. James B. Magnor, New York City (Charles N. Fiddler, New York City, Gilbert S. Fleischer, Atty., in Charge, Admiralty & Shipping Section, Dept, of Justice, and Whitney North Seymour, Jr., U. S. Atty., S. D. N. Y., on the brief), for appellee. Before HAYS, MULLIGAN and OAKES, Circuit Judges. PER CURIAM: Where a settlement is agreed upon among clients and counsel, the terms are conveyed to the court by counsel and judgment entered accordingly, may the judgment be set aside on the complaint of one party that his counsel coerced him into agreement? The answer we give is in the negative, in this, a case which could so easily have been avoided by a precautionary letter of authorization from counsel to client. Appellant here, a licensed maritime officer, had a personal injuries claim arising under the Jones Act, 46 U.S.C. § 688, out of his service on a United States vessel. His counsel was Paul C. Matthews, who we are told is experienced and skilled in handling such matters. With trial scheduled in the District Court for the Southern District of New York for May 21, 1971, appellant returned from Japan to New York a week before, having refused by mail to agree to settle his claim for a sum in the area of $30-35,000, and apparently with hopes of obtaining $70,000 or so. Parenthetically, it is indicative, perhaps, of the strength (or weakness) of appellant’s case that he now complains that he was not met by counsel at Kennedy Airport “[a]lthough he had advised Paul C. Matthews by telegram to meet him at the Airport upon his arrival . . ..” Appellant complains also that he did not really have the chance to discuss the case in detail with Mr. Matthews until the day before trial, May 20, and that the discussions of the 20th extended until 3:00 a. m. of the 21st, the day of the trial, “to exhaustion.” It was found below by a magistrate and confirmed by District Judge Brieant, after hearing the evidence of appellant and his attorney, that Matthews “did have the approval to settle this action. . . . ” when he accepted by telephone between 2:00 and 3:00 a. m. on the 21st the United States’ offer of $32,500. Appellant’s brief admits as much, though with a qualification, in saying, “Upon further coaxing from his attorney, appellant without intent to accept the offer of settlement and against his will stated that he would take the $32,500.” (Brief for the Appellant at 11-12). As stated, this ease could have been avoided (and counsel indeed protected) had he secured a letter of authorization before confirming the settlement, but then he may have been concerned lest the client back out. According to appellant’s testimony he asked his lawyer to obtain an adjourned date for the trial, but the magistrate found that appellant went to Florida on the 21st without having ascertained the adjourned date. The magistrate accordingly credited the lawyer’s testimony that talk as to an adjournment occurred before the settlement, not after. Attorney Matthews assured Judge Bonsai (the judge to whom the case was assigned for trial) and opposing counsel on the morning of the 21st that the case had been settled for $32,500 net and an order of discontinuance was entered some two weeks later, on June 4, 1971. The findings below that the settlement was expressly authorized are supported by the evidence and not clearly erroneous. Fed.R.Civ.P. 52(a). Even if appellant had a claim against his own counsel for coercion or overbearing, this would not permit the settlement, one which is not claimed to have been unfair, here to be overturned. McKenzie v. Boorhem, 117 F.Supp. 433, 435 (W.D. Ark.1954); Smith v. Washburn & Condon, 38 Ariz. 149, 297 P. 879 (1931) (“. . . where express authority is given, the attorney may compromise any matter, and his action in so doing is binding upon his principal”); Allen v. Fewel, 337 Mo. 955, 87 S.W.2d 142 (Sup. Ct.1935). Cf. United States v. Kenner, 455 F.2d 1, 3-5 (7th Cir. 1972); Thomas v. Colorado Trust Deed Funds, Inc., 366 F.2d 136, 139 (10th Cir. 1966); Hot Springs Coal Co. v. Miller, 107 F.2d 677, 680 (10th Cir. 1939). See also Davis v. United Fruit Co., 402 F.2d 328,, 331 (2d Cir. 1968), cert. denied, 393 U.S. 1085, 89 S.Ct. 869, 21 L.Ed.2d 777 (1969); Beirne v. Fitch Sanitarium, Inc., 167 F. Supp. 652 (S.D.N.Y.1958). As was said in The S.S. Standard, 103 F.2d 437, 439 (2d Cir)., cert. denied sub nom. Standard Oil Co. v. Bonici, 308 U.S. 560, 60 S.Ct. 106, 84 L.Ed. 471 (1939), “Fair settlements are in the interest of the men, as well as of the employers.” It is unnecessary for us to determine whether the case could also be put on the somewhat narrower ground, supported by the language of some cases, that while the general rule is that an attorney may not settle his client’s ease without express authority, he is presumed to have that authority, and a party seeking to show that his attorney of record did not have the actual authority to compromise carries the burden of proof to vacate any judgment entered upon the attorney’s agreement. United States v. Beebe, 180 U.S. 343, 352, 21 S.Ct. 371, 45 L.Ed. 563 (1901); Thomas v. Colorado Trust Deed Funds, Inc., supra, 366 F.2d at 139. Accordingly, we affirm the judgment below denying appellant’s motion under Fed.R.Civ.P. 60 to vacate Judge Bonsai’s order of June 4, 1971, discontinuing the original action. Judgment affirmed.

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In the Matter of Laurence SEMEL, Bankrupt, Appellant in No. 72-2058. Appeal of FEDERAL, SUPPLY COMPANY, Appellant in No. 72-2059. Nos. 72-2058, 72-2059. United States Court of Appeals, Third Circuit. Submitted Under Third Circuit Rule 12(6) May 22, 1973'. Decided June 27, 1973. See also 3 Cir., 427 F.2d 651. Laurence Semel, Lyndhurst, N. J., for Laurence Semel. David M. Hoffman, Eckhaus, Guston & Hoffman, Wayne, N. J., for Federal Supply Co. Before KALODNER, ALDISERT and ADAMS, Circuit Judges. OPINION OF THE COURT PER CURIAM: These appeals require us to review an order of the district court vacating an order of the referee in bankruptcy granting appellant Semel’s discharge. After the referee granted Semel’s voluntary petition, Federal Supply Company filed seven specifications of objections to discharge. The referee dismissed all seven specifications. The district court, however, sustained specification number two, vacated the referee’s order, and denied discharge. Federal Supply contends that the court erred in affirming dismissal of specifications one, four and seven, and Semel claims that the court erred in sustaining specification number two. We find no error in the court’s ultimate disposition of this matter, and will affirm the judgment. We do, however, wish to clarify the facts surrounding specification number two, which charges a violation of 18 U. S.C. § 152. Section 152 subjects to criminal liability anyone who “knowingly and fraudulently makes a false oath of account in or in relation to any bankruptcy proceeding.” The Bankruptcy Act provides that a discharge will be denied whenever the court determines that the petitioner has violated section 152. See 11 U.S.C. § 32(c)(1). In sustaining this specification, the district court observed that in a “prior” bankruptcy proceeding, Semel avoided bankruptcy by testifying that his assets included over $250,000 in accounts receivable, and that he was in possession of records and books indicating that there existed some possibility of collection. Yet, in the present voluntary bankruptcy proceeding, Semel admitted that he never kept records of accounts receivable, that any amounts owed to him could be ascertained only by reviewing individual files, and that virtually all of these debts were uncollectible. Thus, in the instant proceeding, Semel’s schedule of assets listed nothing under “debts due petitioner on open account,” and under “unliquidated claims of every nature,” reported “[pjossible claims for professional services rendered, damages, possible fees on legal matters . . . costs and disbursements advanced for clients” with an estimated value of $100.00. During cross-examination, Semel admitted that he “was in error” when he failed to list outstanding debts owed to him, and conceded that “if somebody undertook to check out these people now, institute suits, prosecute them, that money would be recovered.” Soon thereafter, upon order of the referee, Semel submitted a lengthy list of these debts. See, In re Semel, 427 F.2d 651, 654 (3d Cir. 1970). Thus, at the inception of the instant proceeding, Semel denied the existence of debts owed to him, whereas under cross-examination' — in the same proceeding — he admitted that monies were owed him, that certain of these might prove collectible and furnished a list of these debts. We agree with the district court that “Semel’s palpable untruths cannot be overlooked,” and recite the foregoing only to demonstrate that these untruths occurred in the present proceeding, and not a prior proceeding. The order of the district court will be affirmed.

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SULLIVAN ELECTRIC COMPANY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent. No. 72-2104. United States Court of Appeals, Sixth Circuit. Argued April 18, 1973. Decided June 19, 1973. Charles Hampton White, Cornelius, Collins, Higgins & White, Nashville, Tenn., on brief, for petitioner. Steven C. Kahn, N.L.R.B., Washington, D. C., for respondent; Elliott Moore, Deputy Asst. Gen. Counsel, Washington, D. C., on brief. Before EDWARDS and MILLER, Circuit Judges, and LAMBROS, District Judge. Honorable Thomas D. Lambros, United States District Judge for the Northern District of Ohio, sitting by designation. PER CURIAM. Petitioner, Sullivan Electric Company, seeks review and setting aside of an order of the National Labor Relations Board requiring it to recognize and bargain with a union and to reinstate 13 employees. The Board in turn petitions for enforcement of its order (199 N.L.R.B. 97 (1972)). Petitioner, Sullivan, is an electrical contractor based in Nashville, Tennessee. The instant dispute concerns Sullivan’s operation on a construction project in Madisonville, Kentucky, where it was employing a 17-man crew, largely hired from the vicinity and under supervision of a superintendent. On October 8, 1970, a union representative for the International Brotherhood of Electrical Workers contacted petitioner’s superintendent, told him he had signed up a majority of the Madison-ville employees, and demanded recognition and bargaining. On being told by the superintendent that he had no authority to deal with such matters and that he would have to talk to the company officials in Nashville, the IBEW representative left and indicated that there would be a strike the following day unless they heard from the company. Later that afternoon the superintendent distributed pay checks to the employees and (as found by the Hearing Examiner and the Board subsequently from substantial evidence) asked ten or eleven of the seventeen employees whether they had signed up, in each instance receiving an affirmative answer. The following day the union did call a strike and thirteen of the employees failed to report for work. The company replaced them with other company employees sent in from outstate. On October 27, when an unconditional offer to return to work was made, the company informed the men that they had been permanently replaced. On these facts the Board found that the company had voluntarily conducted a poll of its employees and thus ascertained that in fact a majority of them had joined the union. On that basis the Board found that the company had violated the Act in refusing to bargain and that therefore the strike had been an unfair labor practice strike and the company was required to reinstate the thirteen employees with back pay. The Board found the company’s refusal to reinstate to constitute violations of sections 8(a)(1) and 8(a)(3) of the Act. (29 U.S.C. § 158(a)(1) and (3) (1972)). There is substantial evidence to support the Board’s finding that the employer’s own poll disclosed a clear union majority. If the facts warranted the Board’s finding of a duty to bargain, clearly there was substantial evidence on the whole record to support the Board’s findings of 8(a)(1), 8(a)(3) and 8(a)(5) violations. Although the petitioner had briefed this case as if it were a substantial evidence case, at oral argument petitioner’s counsel contended principally that the Board’s finding of a duty to bargain and violation of 8(a)(5) was inconsistent with the Board’s own cases, including Green Briar Nursing Home, Inc., et al., 201 N.L.R.B. 73 (1973); R & M Electric Supply Co., 200 N.L.R.B. 59 (1972), and Linden Lumber Division, Summer & Co., 190 N.L.R.B. 116 (1971). In these cases the Board was engaged in interpreting the effect of the Supreme Court’s decision in NLRB v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969). There the Supreme Court recognized the discretionary right of the Board to enter a remedial bargaining order based on employee choice of a union as expressed through representation cards where employer unfair labor practices had been such as to damage the possibility of a fair NLRB election. In fashioning a remedy in the exercise of its discretion, then, the Board can properly take into consideration the extensiveness of an employer’s unfair practices in terms of their past effect on election conditions and the likelihood of their recurrence in the future. If the Board finds that the possibility of erasing the effects of past practices and of ensuring a fair election (or a fair rerun) by the use of traditional remedies, though present, is slight and that employee sentiment once expressed through cards would, on balance, be better protected by a bargaining order, then such an order should issue. NLRB v. Gissel Packing Co., supra at 614-615, 89 S.Ct. at 1940. (Footnote omitted.) In Gissel the Supreme Court also said, with apparent approval: The Board pointed out, however, (1) that an employer could not refuse to bargain if he knew, through a personal poll for instance, that a majority of his employees supported the union, . . . . Id. at 594, 89 S.Ct. at 1930. In the instant case the Board held that petitioner had discovered by means of its poll that the union had a majority, and that it could not thereafter disclaim the result. Green Briar Nursing Home, Inc., 201 N.L.R.B. 73 (1973); Soil Mechanics Corp., 200 N.L.R.B. 60 (1972); Sullivan Electric Co., 199 N.L.R.B. 97 (1972); Nationwide Plastics Co., Inc., 197 N.L.R.B. 136 (1972). In Green Briar Nursing Home (a case relied upon by petitioner) the Board provided its own rationale for reconciling its post-Gissel cases: In Linden Lumber and our later decision in Sullivan Electric Company, [1972 CCH NLRB ff 24,699] 199 NLRB No. 97, we made it clear that an employer will not be found in violation of Section 8(a)(5) of the Act solely upon the basis of his refusal to accept union-proffered evidence of majority status other than the results of a Board election, unless his conduct precluded resort to an election In those cases we pointed out that an election would be precluded by substantial employer misconduct in violation of the Act, by an employer’s action in agreeing upon another method of ascertaining whether a union majority existed, or by an employer’s conduct of a poll of employees which established the existence of a majority. None of these factors, nor any others precluding a resort to an election, exists here; as noted infra, the Employer’s misconduct was not found to be of a character which would prevent the running of a fair election. We therefore find that the Respondent did not violate Section 8(a)(5) of the Act by refusing to bargain with the union despite the union’s asserted card majority. Green Briar Nursing Home, Inc., 201 N.L.R.B. 73 (1973). (Footnote omitted.) (Emphasis added.) We believe the Board’s reasoning in establishing the above-described exceptions to the general policy of determining bargaining representation by a Board election is consistent with the leading case law established in NLRB v. Gissel, supra. Enforcement of the Board’s order is granted. . Local 1701, International Brotherhood of Electrical Workers, AFL-CIO.

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UNITED STATES of America, Plaintiff-Appellee, v. Minot Wayne ESTESE, Defendant-Appellant. No. 72-2067. United States Court of Appeals, Sixth Circuit. Argued April 6, 1973. Decided and Filed June 19, 1973. Terry M. Tranter (Court Appointed), Cincinnati, Ohio, for defendant-appellant. Byron E. Trapp, Asst. U. S-. Atty., for plaintiff-appellee; William W. Milligan, U. S. Atty., Anthony W. Nyktas, Asst. U. S. Atty., Cincinnati, Ohio, on brief. Before WEICK and EDWARDS, Circuit Judges, and PRATT, District Judge. Honorable Philip Pratt, United States District Judge for the Eastern District of Michigan, Southern Division, sitting by designation. PER CURIAM. Appellant appeals from his conviction before the United States District Court for the Southern District of Ohio on the charge of possession of an illegal firearm (a sawed-off shotgun), in violation of 26 U.S.C. § 5861(b) (1970). He was tried to the court without a jury and sentenced to a term of one year on probation. Appellant’s appeal is directed solely at the denial by the District Judge of appellant’s motion to suppress evidence, i. e., the sawed-off shotgun. This motion was heard and decided before the trial itself. Relevant facts include these: Local police responded to a radio call reporting a breaking and entering at appellant’s apartment. They found the door open and observed evidence that it had been pried open. Appellant was not at home at the time. After police reinforcements arrived, the officers entered the apartment' and searched for the burglar. They found a cereal bowl full of marijuana in plain view on the table, and on looking under a water bed, where a burglar could have been hiding, they found a broken-down sawed-off shotgun emplaced in the holes of the concrete block supports employed for the bed. The police then left the shotgun in place and left one of their members guarding the building while others sought an arrest warrant for appellant. They also summoned federal officers to the scene to look at the weapon. When appellant returned to his apartment, he was arrested and the sawed-off shotgun was removed. After Miranda warnings, appellant admitted ownership of the gun. On these facts appellant contends that the warrantless seizure of the gun required the District Judge to suppress evidence, including the gun and the statements of an inculpatory nature made by appellant. The District Judge’s rationale in denying the motion to suppress is set forth in the record on said motion as follows: As far as the facts go, they aren’t in dispute. It is clear that the Silver-ton Police were called to this apartment and believed and had reason to believe that a burglary was in progress. It just has not been disputed, and that the report came in and that in response to a call the first officer got there, saw pry marks on the door, saw the door ajar and believed, properly, that the burglary suspect might still be in there. So, he called for assistance. When he called for assistance, the Chief and another patrolman responded. They searched the apartment as they were required to under the circumstances to see if the burglar was anywhere under the bed, behind the curtains, in closets. And that was a good idea for the additional reason that it was something they should do, too, in the interests of their own safety. In other words, there were exigent circumstances, to use the wording of the cases. What they saw in plain view they had a right to seize. Clearly in this case the basic invasion of appellant’s privacy had been accomplished by the burglar. Subsequently facts indicated that he had made off with appellant’s TV before the officers arrived. On their arrival the officers had no way of knowing this, but there was probable cause for the officers on the scene to believe that a burglary had been or was being committed and to search the apartment for the burglar. We likewise believe that the discovery of the sawed-off shotgun under the water bed in the course of the search referred to immediately above should be regarded as invoking the plain view doctrine of Harris v. United States, 390 U. S. 234, 88 S.Ct. 992, 19 L.Ed.2d 1067 (1968), and Ker v. California, 374 U.S. 23, 83 S.Ct. 1623, 10 L.Ed.2d 726 (1963). In the Harris case the Supreme Court said: It has long been settled that objects falling in the plain view of an officer who has a right to be in the position to have that view are subject to seizure and may be introduced in evidence. Ker v. California, 374 U.S. 23, 42-43 [83 S.Ct. 1623, 1634] 10 L.Ed.2d 726 (1963); United States v. Lee, 274 U. S. 559 [47 S.Ct. 746] 71 L.Ed. 1202 (1927); Hester v. United States, 265 U.S. 57 [44 S.Ct. 445] 68 L.Ed. 898 (1924). Harris v. United States, supra 390 U.S. at 236, 88 S.Ct. at 993. Since the officers never left the scene or gave up effective possession of the sawed-off shotgun, we feel the District Judge was justified in viewing the seizure as having been accomplished during the lawful search for the burglar. Cf. Chambers v. Maroney, 399 U. S. 42, 52, 90 S.Ct. 1975, 26 L.Ed.2d 419 (1970). The judgment of the District Court is affirmed.

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Mary LAYTON and Stanley Gregory Walker, etc., PetttionersAppellants, v. Dale CARSON, as Sheriff of Duval County, Fla., et al., Respondents-Appellees. No. 73-1913 Summary Calendar. United States, Court of Appeals, Fifth Circuit. June 18, 1973. Deitra Micks, Duval County Legal Aid Assoc., Jacksonville, Fla., for petitioners-appellants. Charles W. Arnold, Jr., First Asst. State Atty., Jacksonville, Fla., Reeves Bowen, Asst. Deputy Atty. Gen., Dept, of Legal Affairs, for respondents-ap-pellees. Before WISDOM, AINSWORTH and CLARK, Circuit Judges. Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I. PER CURIAM: This is an appeal from a dismissal by the district court of a habeas corpus petition for failure to exhaust state remedies. We conclude that it would be futile for the appellants to apply for relief in the state courts. Accordingly, we reverse the judgment of the district court and remand the case for further proceedings. The appellants, Mary Layton and Stanley Walker, were convicted of shoplifting in a Florida Justice of the Peace Court and each was ordered to pay a $200 fine or spend 60 days in jail. Since they were indigents and unable to pay the fines, they were automatically committed to jail. Layton and Walker brought petitions for writs of habeas corpus in Duval County Circuit Court, alleging that they had been imprisoned solely because of their indigency. The Circuit Court granted the writs, vacated the sentences, and remanded for resentencing. On remand the sentencing court, knowing that Layton and Walker were indigent, vacated the fines and sentenced them to 19 and 23 days’ imprisonment respectively. Layton and Walker then filed habeas corpus petitions in federal district court challenging the constitutionality of the state court’s action in resentencing them to imprisonment without providing them the option of paying a fine by some alternative means. The district court dismissed their petitions for failure to exhaust state remedies. Layton and Walker brought this appeal, contending that resort to the state courts would have been futile in light of the Florida Supreme Court’s decision in Phillips v. Allen, Fla. 1971, 255 So.2d 528. Petitioners for federal habeas corpus need not exhaust state remedies when it is plain that resort to the state courts would be futile. If the state’s highest court has recently rendered an adverse decision in an identical case, and if there is no reason to believe that the state court will change its position, a federal court should not dismiss a petition for federal habeas corpus for failure to exhaust remedies. See Davis v. Smith, 5 Cir. 1970, 430 F.2d 1256; Bruce v. Beto, 5 Cir. 1968, 396 F.2d 212; McDonald v. Moore, 5 Cir. 1965, 353 F.2d 106; Reed v. Beto, 5 Cir. 1965, 343 F.2d 723, aff’d on other grounds sub nom. Spencer v. Texas, 1967, 385 U.S. 554, 87 S.Ct. 648, 17 L.Ed.2d 606; Rowe v. Peyton, 4 Cir. 1967, 383 F.2d 709, aff’d, 1968, 391 U.S. 54, 88 S.Ct. 1549, 20 L.Ed. 2d 426. In Phillips v. Allen, Fla.1971, 255 So.2d 528, decided little more than a year ago, the Florida Supreme Court had before it a case substantially similar to the present case. Phillips, an indigent, had been given an alternative sentence of jail or fine, and because of his inability to pay the fine he was imprisoned. His sentence was vacated on his application for state habeas corpus. On remand the sentencing court vacated his fines and resentenced him to a shorter term of imprisonment. Phillips challenged the modified sentence on the same theory advanced by the appellants in the present case. The Florida Supreme Court held that the modified sentence did not violate his constitutional rights, stating that: With this modification of petitioner’s sentences, any issue regarding the fine evaporates and no further question exists regarding a possible violation of Tate v. Short, supra, Williams v. Illinois, 399 U.S. 235, 90 S.Ct. 2018, 26 L.Ed.2d 586 (1970) or Morris v. Schoonfield, 399 U.S. 508, 90 S.Ct. 2232, 26 L.Ed.2d 773 (1970). 255 So.2d at 528-529. Since the present case is indistinguishable from Phillips, and since we find no reason to expect that the Florida Supreme Court would depart from its precedent in Phillips, it is apparent that resort by the appellants to the state courts would be futile. The district court therefore erred in dismissing their petitions for failure to exhaust state remedies. Exhaustion is the sole point raised before this Court. The judgment of the district court is reversed and the case is remanded for further proceedings consistent with this opinion, but without intimating any view whatsoever on the merits of petitioner’s claim. . See Tate v. Short, 1971, 401 U.S. 395, 91 S.Ct. 668, 28 L.Ed.2d 130; Morris v. Schoonfield, 1970, 399 U.S. 508, 90 S.Ct. 2232, 26 L.Ed.2d 773; Williams v. Illinois, 1970, 399 U.S. 235, 90 S.Ct. 2018, 26 L.Ed.2d 586; Frazier v. Jordan, 5 Cir. 1972, 457 F.2d 726. . See Frazier v. Jordan, 5 Cir. 1972, 457 F.2d 726, 729-730. . The appellee suggests that this case is distinguishable from PMllips in that, in the present case, the sentencing judge learned that the appellants were indigent before resentencing them. Presumably the sentencing judge in Phillips had the same knowledge, however, since the Florida Supreme Court in Phillips directed reconsideration of the sentence in light of Tate v. Short, 1971, 401 U.S. 395, 91 S.Ct. 668, 28 L.Ed.2d 130, and Martin v. State, Fla.1971, 248 So.2d 643.

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Frank LANZA, Jr., et al., Plaintiffs-Appellants, v. DREXEL & CO. et al., Defendants-Appellees, Theodore J. Kircher and Christie F. Vitolo, Defendants-Appellants. No. 382, Docket 35794. United States Court of Appeals, Second Circuit. Original Argument Sept. 16,1971. Argument before the Court en banc Nov. 1, 1972. Decided April 26, 1973. Hays, Circuit Judge, concurred in part and dissented in part, and filed opinion in which J. Joseph Smith, Senior Circuit Judge and Oakes and Timbers, Circuit Judges, concurred. Timbers, Circuit Judge, with whom Oakes, Circuit Judge, joined, filed opinion concurring in part and dissenting in part. Franklin S. Bonem, New York City (Bonnie P. Winawer and London, But-tenwieser & Chalif, New York City, of counsel), for plaintiffs-appellants Frank Lanza, Jr., Vincent Sharbo, Marie Lanza Sharbo and Clara Lanza Stefano. James J. Higginson, New York City (Appleton, Rice & Perrin, New York City, of counsel), for defendant-appellant Theodore J. Kircher. Ralph M. Carson, New York City (Wallace Gossett, Richard M. Berman and Davis, Polk & Wardwell, New York City, of counsel), for defendants-appel-lees Drexel & Co., John Ames Ballard and Bertram D. Coleman. Krause, Hirsch & Gross, New York City, for defendant-appellant Christie F. Vitolo and defendant-appellee Leborio Pugliese. The Securities and Exchange Commission, Washington, D. C. (Walter P. North, Acting Gen. Counsel, Theodore Sonde, Asst. Gen. Counsel, and Frederic T. Spindel, Atty., Washington, D. C.), as amicus curiae. Before FRIENDLY, Chief Judge, and MOORE, SMITH, KAUFMAN, HAYS, FEINBERG, MANSFIELD, MULLIGAN, OAKES and TIMBERS, Circuit Judges. MOORE, Circuit Judge: We sit en banc to. decide a question important to the course of evolution of the law relating to corporate directors’ liabilities largely spawned by Securities and Exchange Commission (SEC) Rule 10b-5: To what extent does a director of corporation A, (1) who does not know that officers or directors of the corporation on whose board he sits have made false representations to, or have failed to disclose the inaccuracy of material information given to, or have omitted to give material information to owners of all the shares of corporation B who are exchanging their stock for that of corporation A, and (2) who has not been a participant in the negotiation of the sale or made any representation with respect thereto or had any knowledge thereof, owe a duty to such purchaser to inquire into all statements, oral and documentary, made to the stockholders of B in connection with the transaction before voting to authorize the contract formalizing the sale? I. On September 16, 1971, a panel comprised of Judges Moore, Smith, and Hays heard oral argument on two appeals, both arising from a judgment entered by Judge Frankel on October 13, 1970. Before any opinion was filed disposing of the appeals, this Court, sua sponte, filed an order on July 5, 1972, that set plaintiffs’ appeal down for rear-gument before all judges in active service and Judges Moore and Smith on the issue of “the effect of SEC Rule 10b-5 upon the duty of an independent director of a corporation which is about to issue securities, in connection with an acquisition.” At our invitation the SEC has submitted an amicus brief. II. On December 14, 1961, Frank Lanza, Jr., Marie Lanza Sharbo, and Clara Lan-za Stefano (then unmarried), son and daughters of Frank Lanza, Sr., exchanged 20,000 shares (¿. e., all the stock) of Victor Billiard Company (Victor) owned by them for 20,428 shares of BarChris Construction Company (Bar-Chris). Less than one year later Bar-Chris filed a petition in bankruptcy. After an unsuccessful effort to recover their shares in a rescission action against the trustee in bankruptcy, plaintiffs borrowed $100,000 to pay the trustee for the return of their Victor shares. Plaintiffs then commenced this action for compensatory and punitive damages against former officers and directors of BarChris. They based their suit on Section 10(b) of the Securities Exchange Act of 1934 (1934 Act) (15 U.S.C. § 78j(b) (1970) ), SEC Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.-10b-5), Section 17(a) of the Securities Act of 1933 (1933 Act) (15 U.S.C. § 77q(a) (1970) ), common law fraud, and a theory of prima facie tort. After a five-week non-jury trial, Judge Frankel in a fifty-three page opinion painstakingly analyzed the facts as they related to each of the defendants and their liability or non-liability. The testimony of defendant-appellee Coleman covered 511 pages of the record. From Coleman’s extended examination and cross-examination the trial judge had ample opportunity to appraise the quality of the man and his testimony. On this voluminous record Judge Frankel found: (1) that plaintiffs, through their accountant and representative Sidney Shulman, had been led by material misstatements and omissions on the part of certain officers and directors of BarChris to exchange their Victor shares for BarChris shares; (2) that plaintiffs had sustained compensable damages as a result thereof in the amount of $100,000 plus interest; (3) that defendants Christie Vitolo, president, Leonard Russo, director and vice president, and Theodore Kircher, director and treasurer, were liable to the plaintiffs under Rule 10b-5, under common law fraud, and, in the cases of Vitolo and Russo, under Section 20(a) of the 1934 Act (15 U.S.C. § 78t(a) ); (4) that Leborio Pugliese, vice president, was not liable under Rule 10b-5 and, assuming him to be a control person, he had established his good faith defense; (5) that defendant John Ames Ballard, director subsequent to December 14, 1961, was not liable to the plaintiffs for allegedly conspiring with Coleman, Pugliese, and one Friedman to delay plaintiffs’ appreciation of their right of rescission sometime during 1962 because in fact there had been no such conspiracy; (6) that defendant Bertram D. Coleman, director, was not liable to plaintiffs under either Rule 10b-5 or Section 20(a); and (7) that the firm of which Coleman was a partner, Drexel & Company, a Philadelphia investment and brokerage firm, was not liable on a theory of respondeat superior for Coleman’s alleged unlawful conduct. Plaintiffs appeal Judge Frankel’s decision exonerating Coleman and Drexel & Co. Defendant Kircher appeals Judge Frankel’s earlier denial of Kircher’s demand for a trial by jury. Our appellate task, therefore, is to review the record in order to ascertain whether there is proof sufficient to support Judge Frankel's fact-findings and conclusions. Conversely, our task is not to re-evaluate the proof but only to determine whether the fact-findings are “clearly erroneous.” Having done so, we affirm the lower court judgment in both appeals. III. Mindful that in construing Rule 10b-5 we deal with an area of the law “where glib generalizations and unthinking abstractions are major occupational hazards,” we set out in detail the evidence as to Coleman’s knowledge of, and participation in, the negotiations leading to the December 14, 1961, Victor-Bar-Chris exchange. We note at the outset that no one disputes the finding that Kircher, aided and abetted by Vitolo, Russo, Warren Trilling, controller, and Robert Birnbaum, secretary and house counsel, violated Rule 10b-5 in making to plaintiffs untrue statements of material facts and in omitting to state material facts necessary to render the statements made, in the light of the circumstances under which they were made, not misleading. Our concern is with Coleman’s responsibility (if any) for the fraud perpetrated by these other officers and directors, and not with whether fraud was perpetrated by such officers and directors. As will be developed infra, neither the language nor intent of Section 10(b) or Rule 10b-5 would justify a holding (1) that a director is an insurer of the honesty of individual officers of the corporation in their negotiations which involve the purchase or sale of the corporation’s stock or (2) that, although he does not conduct the negotiations, participate therein, or have knowledge thereof, he is under a duty to investigate each such transaction and to inquire as to what representations had been made, by whom and to whom, and then independently check on the truth or falsity of every statement made and document presented. Were a contrary result to be reached it would, in effect, place an affirmative duty on Coleman (and on all other directors) to intervene personally in every transaction involving the sale or exchange of his corporation’s stock and would amount to a holding that a director’s vote of approval for any such transaction negotiated and concluded by others, without his knowledge or participation, would be a representation to such purchasers that the director personally had inquired as to the facts upon which the negotiations were based and that he was satisfied that all representations were correct. A. Background In Escott v. BarChris Construction Corp., 283 F.Supp. 643 (S.D.N.Y.1968), purchasers of debentures issued by BarChris sued the defendants herein and others pursuant to Section 11 of the 1933 Act (15 U.S.C. § 77k (1970) ). As did Judge Frankel, we adopt portions of the late Judge McLean’s statement of the history of BarChris up to May 16, 1961, the date the debenture registration statement became effective: BarChris was an outgrowth of a business started as a partnership by Vitolo and Pugliese in 1946. The business was incorporated in New York in 1955 under the name of B & C Bowling Alley Builders, Inc. Its name was subsequently changed to BarChris Construction Corporation. The introduction of automatic pin setting machines in 1952 gave a marked stimulus to bowling. It rapidly became a popular sport, with the result that “bowling centers” began to appear throughout the country in rapidly increasing numbers. BarChris benefited from this increased interest in bowling. Its construction operations expanded rapidly. It is estimated that in 1960 BarChris installed approximately three per cent of all lanes built in the United States. It was thus a significant factor in the industry, although two large established companies, American Machine & Foundry Company and Brunswick, were much larger factors. These two companies manufactured bowling equipment, which BarChris did not. They also built most of the bowling alleys, 97 per cent of the total, according to some of the testimony. BarChris’s sales increased dramatically from 1956 to 1960. According to the prospectus, net sales, in round figures, in 1956 were some $800,000, in 1957 $1,300,000, in 1958 $1,700,000. In 1959 they increased to over $3,300,000, and by 1960 they had leaped to over $9,165,000. * * -X- -X- * -X In general, BarChris’s method of operation was to enter into a contract with a customer, receive from him at that time a comparatively small down payment on the purchase price, and proceed to construct and equip the bowling alley. When the work was finished and the building delivered, the customer paid the balance of the contract price in notes, payable in installments over a period of years. BarChris discounted these notes with a factor and received part of their face amount in cash. The factor held back part as a reserve. In 1960 BarChris began a practice which has been referred to throughout this case as the “alternative method of financing.” In substance this was a sale and leaseback arrangement. It involved a distinction between the “interior” of a building and the building itself, i. e., the outer shell. In instances in which this method applied, BarChris would build and install what it referred to as the “interior package.” Actually this amounted to constructing and installing the equipment in a building. When it was completed, it would sell the interior to a factor, James Talcott Inc. (Talcott), who would pay BarChris the full contract price therefor. The factor then proceeded to lease the interior either directly to BarChris’s customer or back to a subsidiary of BarChris. In the latter case, the subsidiary in turn would lease it to the customer. Under either financing method, BarChris was compelled to expend considerable sums in defraying the cost of construction before it received reimbursement. As a consequence, BarChris was in constant need of cash to finance its operations, a need which grew more pressing as operations expanded. * * * * # * By early 1961, BarChris needed additional working capital. The proceeds of the sale of the debentures involved in this action were to be devoted, in part at least, to fill that need. Drexel & Company was the lead underwriter of the debenture offering. Coleman joined the BarChris board of directors in connection with this transaction in April of 1961, and served until March of 1962, when he resigned. Liability was premised in Escott solely upon the statutory basis of Section 11, supra, which permit[s] any person acquiring a security issued under a registration statement containing an untrue statement of a material fact or omitting a required statement to sue “every person who signed the registration statement” (15 U.S.C. § 77k(a)(l) ). Coleman had signed; hence, he was liable regardless of his knowledge of material inaccuracies. The law applicable to the case now before us is in direct contrast to the absolute liability (except for the due diligence defense) imposed by Section 11. B. The Negotiations Leading to the Exchange of Victor and BarChris Shares: A Chronology In March of 1961, Frank Lanza, Jr., an owner of Victor stock, met representatives of BarChris at a trade meeting, at which time the possibility of a Victor-BarChris exchange was first discussed. Because both Lanza and Vincent Sharbo (Marie’s husband), a secretary-treasurer of Victor, had “modest academic training,” and were not versed in “business theory, finance, accounting or securities trading,” they relied upon their friend and accountant, Sidney Shulman, throughout the upcoming negotiations. His role was central for plaintiffs throughout the negotiations. Shulman for many years had been the accountant for the Lanzas and their enterprise. They relied upon him in the transaction here in question to study the financial papers and other data and to advise them in light of such study. His role in this respect was plain to all concerned on both sides of the deal. Coleman was not present at this meeting and there is no proof that he knew of the meeting or its purpose. At the first meeting held for the definite purpose of discussing the acquisition of Victor, on July 28, 1961, Shul-man requested of Kircher information on BarChris so that he could make “an educated suggestion” to his clients. Kircher gave to Shulman the annual report for 1960, and the May 16, 1961, prospectus. In response to a question for more recent financial data, Kircher had Trilling bring to Shulman the working papers for the six-month statement for the period ending June 30, 1961. During the meeting Shulman “casually glanced” at the prospectus. In his deposition Shulman stated that: This meeting was an exploratory meeting, at which time we were given information to acquaint us with it. He [Kircher] asked innumerable questions pertaining to Victor, and we told him, and then arranged to meet about a week later in Philadelphia to see the plant and go into further discussion Coleman was not present at this meeting. On August 3, 1961, the parties met again, this time in Philadelphia. The purpose was two-fold: (1) to give the officers of BarChris the opportunity to see the physical plant, and to go over any statements if Kircher so desired; and to give Vincent Sharbo and Lanza a chance to ask any questions that they wanted to ask after having had a week to study the prospectus. This meeting ended with Shulman’s proposal of the terms of sale: plaintiffs would receive $350,000, long-term employment agreements, participation in the pension fund, and all the other benefits accruing to the officers of BarChris. Coleman was not present at this meeting. It was after this meeting that Shul-man decided to recommend the merger with BarChris to the plaintiffs. On August 17th Trilling sent to Shul-man the BarChris six-month statement and a copy of the 1960 annual report. On September 27, 1961, Shulman, in New York on other business, spoke to Kircher in the latter’s office for about one hour. According to Shulman, “I [Shulman] asked him, ‘How is Bar-Chris’ business?’ He says, ‘Good; and every day it’s getting better.’ And he said to me, ‘Well, let’s get down to cases,’ and we bargained.” This meeting concluded with Kircher’s assurance that while BarChris could not promise in the contract to provide working capital to Victor, the $100,000 requested by Victor would be forthcoming. While there were a few telephone conversations during October between Kircher and Shul-man, the latter did not ask Kircher for any further financial information concerning BarChris because he felt that he “had all the information [he] thought was necessary.” On November 3, 1961 Shulman met with Kircher and other officers of BarChris in New York to discuss details of the exchange contract. Coleman was not present at these meetings. On November 6, 1961, the BarChris board approved the Victor-BarChris exchange and passed a resolution empowering Kircher and Birnbaum to enter into an exchange contract with the Victor shareholders “in form considered and approved by this meeting.” (Minutes-of November 6, 1961.) Coleman was not present at this board meeting. The first time that Coleman heard of the proposed Victor acquisition (on approximately November 13th) was when he received in the mail the minutes of the November 6, 1961, meeting of the BarChris board of directors, which he had not attended. According to the minutes, Kircher and Birnbaum had summarized the acquisition for the board, and the board had passed a resolution empowering , Kircher and Birn-baum to enter into the necessary contract. On November 21, 1961, the Victor acquisition contract was presented to the board and approved. Coleman was present at this meeting. The contract was signed under date of November 27, 1961, by the three shareholder plaintiffs and by Vitolo. The closing took place on December 14, 1961, in Philadelphia. Coleman did not attend the closing. The record clearly supports Judge Frankel’s finding that “Coleman neither participated in nor knew of any deception practiced upon the plaintiffs” and, as the Judge noted: It is not suggested that Coleman himself ever communicated anything to plaintiffs or Shulman; that he ever in any sense “withheld” anything from them; or that he was ever advised of what things had been said or left unsaid in the negotiations with them. Thus, when the Victor-BarChris transaction first came to Coleman’s attention it was already a completed transaction, approved by the board, and it had been negotiated without any knowledge or participation on Coleman’s part as to any representations or omissions of material facts made by representatives of Bar-Chris. We turn now to the evidence relating to Coleman’s conduct as a director of BarChris and to his knowledge (or, better, his lack of knowledge) of the misstatements and omissions made by Kircher et al. to the plaintiffs. C. Coleman’s Conduct as a Director of BarChris We initially point out that the only documents concerning BarChris received by plaintiffs prior to the closing on December 14, 1961, were the 1960 annual report (dated March 10, 1961), the May 16, 1961, debenture prospectus, and BarChris’s financial statement for the six-month period ending June 30, 1961. Shulman also read in the Wall Street Journal news of the revision of the six months’ earnings from thirty to twenty cents per share. It was stipulated by the parties herein that as of May 16, 1961, the effective date of the debenture registration statement, Coleman had no knowledge of any untruth in the prospectus or of any omission of necessary fact. Apart from Coleman’s lack of knowledge of the Victor-BarChris transaction, reference should be made to his familiarity with BarChris’s financial affairs and his activities as a director thereof. We begin in August of 1961 when Coleman, while on vacation, read in the Wall Street Journal that BarChris had revised its published earnings for the first six months of 1961 from thirty to twenty cents per share due to the bankruptcy of a bowling alley customer. Coleman thereafter received the financial statement reflecting the revised earnings. This was the same statement that Trilling, BarChris’s controller, sent to Shul-man on August 17, 1961. Coleman believed that this revised financial statement was true. Coleman thereafter called Kircher for an explanation of the earnings revision. Kircher stated that Stratford Bowl, a customer of BarChris, had gone bankrupt and that owing to a deficiency in documentation, BarChris might be in an unsecured position. Kircher stated that BarChris hoped to be able to purchase Stratford from the bankruptcy trustee and resell the alley. Kircher explained that the bankruptcy of the alley had been caused by an incapable operator. At a board meeting on September 13, 1961, Coleman and Grant, director and outside counsel for BarChris, demanded that every effort be made to correct any deficiencies in documentation which could result in an unsecured position for BarChris on the bowling alleys of customers. At the board meeting of October 17, 1961, Birnbaum, secretary and house counsel of BarChris, reported that steps had been taken to correct such deficiencies and that BarChris’s potential exposure to loss had been reduced to approximately $100,000. At the September 13, 1961, meeting Coleman was advised that a contract had been signed for construction of the Bowl-A-Way alley, which he had first heard about in June of 1961. The contract price was $1,400,000, making it the largest single job in the history of BarChris. In late October Coleman saw a document entitled “An Important Report to the Financial Community.” This report is not relevant in this case since the plaintiffs never saw it and since they were awarded damages in the nature of restitution. However, Coleman’s reaction to it does illustrate the nature of his conduct as director. The report spoke in exaggerated terms of Bar-Chris’s earnings prospects and diversification program. Coleman believed that parts of this document were inaccurate and misleading, and decided to take corrective action. He discussed the matter with Grant to determine what steps should be taken. As a result Grant obtained from the board of directors at the meeting of November 6, 1961, a resolution providing that all financial information to be released by BarChris would be submitted to counsel for prior approval. At the board meeting of November 21, 1961, the Victor acquisition contract was presented and approved. Coleman was present at this meeting. Birnbaum summarized the terms of the contract, while Kircher explained the method of calculating the exchange ratio. Coleman remarked that, in his opinion, the $250,000 price for Victor seemed high, but Kircher explained that the billiard tables would be an additional recreational item to be placed in bowling alleys and would be a useful diversification for BarChris. There was no discussion of the negotiations which over the months had taken place with the plaintiffs. Coleman was never advised of what documents or other information had been given to them. At this time Coleman’s opinion of the business and financial condition of BarChris was that the outlook was good, although not as good as it had been at the time of the debenture offering. The nine month earnings figures — prepared by the accounting department and Kircher — were above the comparable figures for the previous year, although third quarter figures were roughly equal. BarChris was in a tight cash position, but it was still doing a lot of business. While Coleman knew of a few customer defaults and the fact that BarChris was operating some five alleys, he believed that on balance the outlook was good. As of this time BarChris had built some seventy-five alleys. 1. The point-of-crisis meeting. On December 6, 1961, one month after the Victor stock transaction had been approved and two weeks after the contract authorization, a special meeting of the BarChris board was called to consider the impending resignation of Vitolo as president and the installation of Russo in his place. At this meeting, attended by Coleman, Kircher read a prepared statement, endorsed by Birnbaum and Trilling, the purpose of which was to oppose the projected elevation of Russo and to expose underlying problems within the company. As summarized by Judge Frankel, this statement asserted that: (1) BarChris was then “at a point of crisis.” (2) “[C]ompetition [in the bowling industry was] becoming sharper and earnings [were] begin [ning] to wane.” (3) “Such factors as low down payments, poor credit risks, high financing costs, poorly written contracts, improper documentation, inadequate cost estimation and the like,” perhaps not material when the market was booming, were taking on new significance for BarChris as the industry entered darker days. (4) There was “a consistent pattern of organizational laxity and faulty judgment” apparent in the management of BarChris. (5) “[T]he practice of the execution by Mr. Russo of legal documents without legal representation” caused exposure to substantial losses. Examples of this mentioned were Stratford Bowl, “in which case an improperly executed document [had] resulted in the Company losing its position as a secured creditor in the bankruptcy proceeding * * Bridge Lanes, “where an underlying lease preclude [d] financing of the $400,000 interior package;” and T-Bowl International, where “an overriding agreement,” covering all the planned Bar-Chris-built bowling alleys, should have been, but had not been, executed before any construction contracts were entered into. (6) The announcement of $1 per share estimated earnings for the year ending December 31, 1961, reiterated at a meeting .of securities analysts in late November, was based on, unwarranted hopes or forecasts, including inaccurate predictions as to completion of jobs in progress and the ultimately unrealized possibility that sale and leaseback agreements producing substantial gains would be concluded before the end of 1961. (7) There was an “excessive concern over the price of the Company’s stock and the tendency to make decisions based on the reaction of the stock market to such decisions.” 2. Coleman’s response At the point-of-crisis meeting Coleman realized that a feud had developed within management. He thought that the situation could be corrected by securing outside help. At this meeting the board was informed first of a decline in earnings, but, as noted, Bar-Chris’s nine-month earnings report was better than that of the previous year. Second, the board learned that low down payments and high credit risks were taking on added significance as the industry entered darker days. Coleman did inquire of Kircher what he had meant by low down payments; Kircher replied that as competition in the industry became keener, and because Bar-Chris’s customers were not affluent, it was important for BarChris to obtain larger down payments. Third, the board was told of organizational laxity. Coleman-, concluded that BarChris needed a management consultant. Such a consultant was retained at the meeting held on December 19, 1961. Fourth, while the board was informed that legal documents had been poorly drawn, Birnbaum reported to the board that he hoped to reduce the exposure resulting from such contracts up to $100,000. Fifth, the board was informed that the prediction made by Russo at a securities analysts’ meeting in November had been unrealistic. Coleman inquired of Kircher shortly thereafter as to what meeting he had referred to. Kircher replied that it had been a small meeting at the offices of Bar-Chris. The dollar projection made at the meeting was apparently never reported in the press. Finally, the Kircher group told the board that at BarChris there was an excessive concern with the price of the company’s stock. Coleman, however, testified that he disagreed with this observation, and that he had not noticed a pattern of actions or business decisions dictated by an excessive concern over the price of BarChris stock. Coleman respected and trusted Kireher’s integrity and competence, and he never had reason to doubt this judgment. As Judge Frankel concluded, “[t]he accounting devices of Kircher et al. deceived not only the investing public, but Coleman as well.” Coleman’s conduct was summarized by Judge Frankel as follows: Coleman was not aware or even suspicious that plaintiffs were being deceived during the negotiations with Kircher. At least until after the closing, he had no knowledge or belief that any hard figures published by BarChris were false or misleading. He knew of some negative developments — of customer defaults, declining new orders and the stringent cash situation. He came to know, too, a week or so before the closing, that there was dissension among the officers. He had no reason to suspect that Kircher had not disclosed all these facts to plaintiffs; on the contrary, after Kircher’s criticisms of the corporation at the “point of criáis” meeting, Coleman might well have looked upon him as the most capable and reliable member of management. Coleman had been aware that at least one public release, in October of 1961, had contained misleadingly optimistic statements — a fact about which he complained and on which he pressed, seemingly successfully, for administrative correction at a directors’ meeting on November 6, 1961. He had no reason to suspect that this was other than an isolated incident, that there was any concerted effort to mislead either the public or the plaintiffs. As other troubles became apparent to him, both before and after the October episode, he moved with other directors for corrective measures — demanding repair of loose contract practices, opposing Russo’s proposed elevation to the presidency, voting for the retention of a management consultant, and resisting what he viewed as an excessive stock dividend. In rejecting plaintiffs’ claim that Coleman violated Rule 10b-5, Judge Frankel concluded that: The claim fails because of two propositions — one of fact, the second of law: (1) Coleman neither participated in nor knew of any deception practiced upon the plaintiffs; (2) in the circumstances disclosed by the record, he was under no duty to investigate more than he did at the material times or to seek out and advise the plaintiffs in any way. We have no difficulty in affirming Judge Frankel’s finding of fact. Our review of the evidence demonstrates that the finding that Coleman did not know of, or knowingly participate in, any deception practiced upon plaintiffs is amply supported by the evidence and at the very least is not clearly erroneous. See Fed.R.Civ.P. 52(a). The debate thus comes to this: What duty, if any, does Rule 10b-5 impose on a director in Coleman’s position to insure that all material, adverse information is conveyed to prospective purchasers of the corporation’s stock where the director does not know that these prospective purchasers are not receiving all such information? (The term “adverse” is used only because the claim is made in the complaint that the financial condition of BarChris was worse than as represented by Kircher, Vitolo, and Russo.)’ We will frequently refer to this hypothetical duty hereinafter as the “duty to convey.” We conclude that a director in his capacity as a director (a non-participant in the transaction) owes no duty to insure that all material, adverse information is conveyed to prospective purchasers of the stock of the corporation on whose board he sits. A director’s liability to prospective purchasers under Rule 10b-5 can thus only be secondary, such as that of an aider and abettor, a conspirator, or a substantial participant in fraud perpetrated by others. Because Coleman owed no duty as a director to insure that they received information not conveyed to them by Kircher et al., and because Coleman was not an aider and abettor of, a conspirator in, or a substantia] participant in the fraud perpetrated upon these plaintiffs, the complaint against Coleman and Drexel & Company was properly dismissed. IV. The history of Section 10(b) and the history of the entire 1934 Act makes it clear that the essence of the Rule is that anyone who, trading for his own account in the securities of a corporation has “access, directly or indirectly, to information intended to be available only for a corporate purpose and not for the personal benefit of anyone” may not take “advantage of such information knowing it is unavailable to those with whom he is dealing” . . . . The promulgation of the Rule itself appears to have been prompted by an incident in which the president of a corporation was discovered to be buying his company’s shares while misrepresenting to sellers the earnings prospects of the company. The chief concern relative to the duties of directors evident in the legislative history of Section 10(b) of the 1934 Act — including the Pécora investigation report, the House Report on H.R. 9323, the Senate report on S. 3420, and the Conference report on the bill that became the 1934 Act — was a desire to . protect the interests of the public by preventing directors, officers, and principal stockholders of a corporation, the stock of which is traded in on exchanges, from speculating in the stock on the basis of information not available to others. With respect to the proper scope of the Rule, it has been stated that “both the general objectives of federal securities legislation, especially as reflected in those provisions of section 12(2) of the 1933 Act which closely parallels the language of 10b-5(2), and the common law background should be highly relevant in determining the proper interpretation of the Rule.” A. A Director’s Duty to Convey at Common Law The common law is relevant in interpreting Rule 10b-5 both because it was against a common law background that Section 10(b) was passed and because the duties of directors are still primarily defined by state and not federal law. There was as of 1934 no common law duty upon directors to insure that all material, adverse information be conveyed to prospective purchasers. Lord Halsbury’s famous opinion in Dovey v. Cory, provides an apt illustration of this principle. In Dovey the House of Lords affirmed a Court of Appeals decision discharging a director (Cory) of breach of duty with respect to the preparation of a fraudulent balance sheet and the payment of advances in violation of the bank’s articles of association. The balance sheet allegedly fraudulently overstated profits and led to the payment of dividends impairing the bank’s capital. It was admitted by the plaintiff that Cory had not been conscious of the fraud perpetrated by certain officers and other directors of the bank. Lord Halsbury analyzed Cory’s liability for neglect of his duties as follows: The charge of neglect appears to rest on the assertion that Mr. Cory, like the other directors, did not attend to any details of business not brought before them by the general manager or the chairman, and the argument raises a serious question as to the responsibility of all persons holding positions like that of directors, how far they are called upon to distrust and be on their guard against the possibility of fraud being committed by their subordinates of every degree. It is obvious if there is such a duty it must render anything like an intelligent devolution of labour impossible. Was Mr. Cory to turn himself into an auditor, a managing director, a chairman, and find out whether auditors, managing directors, and chairmen were all alike deceiving him? That the letters of the auditors were kept from him is clear. That he was assured that provision had been made for bad debts, and that he believed such assurances, is involved in the admission that he was guilty of no moral fraud; so that it comes to this, that he ought to have discovered a network of conspiracy and fraud by which he was surrounded, and found out that his own brother and the managing director (who have since been made criminally responsible for frauds connected with their respective offices) were inducing him to make representations as to the prospects of the concern and the dividends properly payable which have turned out to be improper and false. I cannot think that it can be expected of a director that he should be watching either the inferior officers of the bank or verifying the calculations of the auditors himself. The business of life could not go on if people could not trust those who are put into a position of trust for the express purpose of attending to; details of management. If Mr. Cory.was deceived by his own officers — and the theory of his being free from moral fraud assumes under the circumstances that he was — there appears to me to be no case against him at all. The provision made for bad debts, it is well said, was inadequate ; but those who assured him that it was adequate were the very persons who were to attend to that part of the business; and so of the rest. One other example should suffice. In Barnes v. Andrews an outside director was sued by a receiver, inter alia, for the expenses of printing pamphlets and circulars used in selling shares. The receiver alleged that the circulars had contained false statements. Judge Learned Hand denied recovery: Second, I do not think that Andrews is to be charged with such detail of supervision as was involved in going over the circulars personally. True, I have held him accountable for not acquainting himself with the conduct of the business more intimately than he did; but there is a limit. It seems to me too much to say that he must read the circulars sent out to prospective purchasers and test them against the facts. That was a matter he might properly leave to the officers charged with that duty. He might assume that those who prepared them would not make them fraudulent. To hold otherwise is practically to charge him with detailed supervision of the business, which, consistently carried out, would have taken most of his time. If a director must go so far as that, there will be no directors. It is argued that he had actual notice of the circulars, because copies were sent to him, as to all other stockholders. That, indeed, gave him an opportunity to learn the facts; but it did not charge him with any duty which had not theretofore existed. It might prove that he did know of the frauds, but that is all. No such proof was made. / At common law, then, there was no obligation upon directors to insure that all material, adverse information be conveyed to prospective purchasers of the company’s stock. As Professor, later Dean, Shulman wrote: A related, and similarly justified, principle of limitation [at common law] is that liability should be imposed for the consequences of one’s own misconduct, not vicariously for the misconduct of others. Denial of recovery to a plaintiff may, then, be rested upon a finding that the defendant did not personally participate in the misrepresentation. The defendant may have been an inactive director in the company which issued the statement. He may have lent his name simply to adorn the board without undertaking or being asked to undertake any duties of supervision. Or he may have become a director for the purpose of advising on limited, specific phases of the company’s business. Or he may have suited his own whim or convenience in his attention to company matters, attending to some and ignoring others. If, for whatever reason, the director took no part in the preparation, ratification or issuance of the false statement or circular, he is not liable, it has been held, to purchasers who acted on the faith of the statement. He has done nothing. And he is not to be held vicariously for the fraud or negligence of others, co-directors, executives or underwriters, unless he has constituted them his “agents.may be urged, as it has been held m other connections, that the director is not sought to be held liable vicariously for another’s tort, but directly for his own neglect properly to perform the duties of his office; that by consenting to be named a director he comes under certain affirmative obligations imposed by law which he must discharge at the pain of liability for his neglect; that the liability imposed is for his own disregard of the duties inseparably attached to his office^(But while there has been much preaching about the fiduciary character of the director’s office, the great trust and confidence invested in it by shareholders and others, and the sacred duty resting upon directors not to betray their trust and to discharge their duties well, non-participation in the issuance of a prospectus or circular has been for directors a quite invulnerable armor against civil liability. The “armor” of non-participation referred to by Dean Shulman is unquestionably forged by the proposition that a director’s first loyalty must be to the shareholders of the company on whose board he sits. It is simply inconsistent with this proposition to argue that, absent aiding and abetting, conspiracy, or substantial participation, a director of corporation A in negotiations looking to the exchange of stock with the stockholders of corporation B should concentrate not only on protecting the interests of the shareholders of A, but also on insuring that the shareholders of B receive all material, adverse information about corporation A. B. Section 11 of the 1933 Act Further indication that Congress did not intend Section 10(b) of the 1934 Act to impose a duty to convey on directors’ is found in the legislative history of Section 11 of the 1933 Act, the one section of the securities acts squarely directed to the obligation of directors to insure that accurate information is conveyed to prospective purchasers of a company’s stock. 1. The legislative reports. In proposing the passage of a Securities Act, President Roosevelt included in his message to Congress the following statement regarding the purpose of the legislation: “The purpose of the legislation I suggest is to protect the public with the least possible interference to honest business.” The House Bill, H.R. 5480, contained a provision substantially similar to present Section ll. The following passages from the House report on H.R. 5480 evidence the attitude of the House with respect to the duties imposed on directors by the section: The duty of care to discover varies in its demands upon participants in security distribution with the importance of their place in the scheme of distribution and with the degree of protection that the public has a right to expect. . [T]o require them [directors] to guarantee the absolute accuracy of every statement that they are called upon to make, would be to gain nothing in the way of an effective remedy and to fall afoul of the President’s injunction that the protection of the public should be achieved with the least possible interference to honest business. . . . The demands of this bill call for the assumption of no impossible burden, nor do they involve any leap into the dark. Similar requirements have for years attended the business of issuing securities in other industrialized nations. They have already been readily assumed in this country by honest and conservative issuers and investment bankers. Instead of impeding honest business, the imposition of liabilities of this character carries over into the general field of security selling, ethical standards of honesty and fair dealing common to every fiduciary undertaking. . The responsibility imposed is no more nor less than that of a trust. It is a responsibility that no honest banker and no honest business man should seek to avoid or fear. To impose a lesser responsibility would nullify the purposes of this legislation. To impose a greater responsibility, apart from constitutional doubts, would unnecessarily restrain the conscientious administration of honest business with no compensating advantage to the public. The Senate sharply disagreed. Its proposed civil liability provision was Section 9 of S. 875: Every person acquiring any securities specified in such statement and offered to the public shall be presumed to rely upon the representations set forth in the said statement. In ease any such registration statement shall be false or deceptive in any material respect, any persons acquiring any securities to which such statement relates, either from the original [sic] issuer or from any other person, shall have the right to rescind the transaction and to obtain the return, either at law or in equity, of any and all consideration given or paid for any such securities upon the surrender thereof, either from any vendor knowing of such falsity or from the persons signing such statement, jointly or severally. Every person acquiring any security by reason of any false or deceptive representation made in the course of or in connection with a sale or an offer for sale or distribution of such securities shall have the right to recover any and all damages suffered by reason of such acquisition of such securities from the person or persons signing, issuing, using, or causing, directly or indirectly, such false or deceptive representation, jointly or severally: . . ,. In explaining the stricter obligations that this bill imposed on directors,- the Senate report struck a balance between protection of the investor and interference with honest business, a balance which denied any weight to the latter interest: The committee has been confronted with the problem of the contrasted equities where untrue information as to material facts shall be given in any registration statement upon which the buyer presumably relies. This goes to the essence of the relief to the public. Shall the signers on behalf of the corporation be exempt from liability if it cannot be shown that they knew of the false or erroneous character of the representations made? The question is whether ignorance of an untruth should excuse the director and leave the loss upon the buyer. To do so in our opinion would fail to give the buyer the needed relief and fail to restore confidence. If one of two presumably innocent persons must bear a loss, it is familiar legal principle that he should bear it who has the opportunity to learn the truth and has allowed untruths to be published and relied upon. Moreover he should suffer the loss who occupies a position of trust in the issuing corporation toward the stockholders, rather than the buyer of stock who must rely upon what he is told. The committee believes it to be essential to accomplish the objects of the act to make the directors executing the registration statement liable for the consequences of untrue statements rather than to throw the loss on the buyer. Accordingly the registration of false information under the bill makes not only the issuer, but the directors who sign, civilly liable for return of the money which the purchaser paid for the security. If a director can excuse himself by saying that he has in good faith relied upon an accountant’s statement, or the statement of some other person, then the investor will continue in the same position from which the Nation is struggling to extricate him. It has been stated in prospectuses repeatedly that the information given is believed by the company to be true, but not guaranteed. But it is the issuer who is in position to learn the facts, not the public. This phase of the law will have a direct tendency to preclude persons from acting as nominal directors while shirking their duty to know and guide the affairs of the corporation. Upon the discharge of this duty the public and stockholders rely in good faith. We cannot but believe that many recent disastrous events in the investment world would not have taken place if those whose names have appeared as directors had known themselves to be under a legal, as well as a moral, responsibility to the investing public. The Act, as enacted, rejected the stricter approach toward directors’ responsibility urged by the Senate. In explaining why the conferees adopted the House approach the Conference Report provided: A point of difference between the House bill and the Senate amendment concerned the civil liability of persons responsible for the flotation of an issue. The Senate amendment imposed upon the issuer, its directors, its chief executive and financial officers, a liability which might appropriately be denominated as an insurer’s liability. They were held liable without regard to whatever care they may have used for the accuracy of the statements made in the registration statement. The House bill, on the other hand, measured liability for these statements in terms of reasonable care, placing upon the defendants the duty, in case they were sued, of proving that they had used reasonable care to assure the accuracy of these statements. The standard by which reasonable care was exemplified was expressed in terms of a fiduciary relationship. A fiduciary under the law is bound to exercise diligence of a type commensurate with the confidence, both as to integrity and competence, that is placed in him. This does not, of course, necessitate that he shall individually perform every duty imposed upon him. Delegation to others of the performance of acts which it is unreasonable to require that the fiduciary shall personally perform is permissible. Especially is this true where the character of the acts involves professional skill or facilities not possessed by the fiduciary himself. In such cases reliance by the fiduciary, if his reliance is reasonable in the light of all the circumstances, is a full discharge of his responsibilities. In choosing between these two standards of liability, the Senate accepted the standards imposed by the House bill. James M. Landis, one of the authors of the 1933 Act, contended that these words were intended to have more than the usual significance that is attached to legislative history: The Conference Report also deliberately contained language commenting upon the meaning of cértain of the most contentious provisions of the bill in the hope that that language as an expression of the “intent” of Congress would control the administrative and judicial interpretation of the act. This is particularly true with respect to the nature of the fiduciary obligations assumed by officers and directors of a registrant. It seemed impossible to define in statutory language the extent to which a fiduciary might lawfully delegate his duties to others. In lieu of such an effort, resort was made to general language in the report to indicate that a goodly measure of delegation was justifiable, particularly insofar as corporate directors are concerned. 2. The English Companies Act. In enacting the Securities Act, Congress explicitly relied upon similar provisions in the English Companies Act. Section 11 was closely patterned after Section 37 of the English Companies Act, 1929. Thus cases interpreting Section 37 have relevance in construing Congressional intent concerning the obligations imposed by Section 11 upon outside directors. In Stevens v. Hoare the Court of Chancery construed Section 37 as follows: [T]he case has been argued on the part of the plaintiff as if the statute had required of a director not merely reasonable, but sufficient, grounds for his belief. Indeed, it was rather suggested that a director is not entitled to rely upon the assistance or advice of solicitors or clerks, but that with his own hands and eyes he must search out and read every relevant document, and with his own mind judge of its operation and legal effect, and that he is not entitled to state anything in a prospectus that he could not depose to of his own knowledge in a Court of justice. If so he would be bound to do a great deal more than the most industrious and prudent man of business could think of doing, or in most cases would be able to do, in the conduct of his own affairs. In Adams v. Thrift, the Court of Chancery held directors liable under the section for failing to make any inquiry of the person who had prepared the prospectus and whose interest was adverse to the company’s. Section 11, unlike Section 37, imposes’ on directors an affirmative duty of reasonable investigation of the accuracy of a registration statement. The fact that Congress so changed the thrust of Section 37 buttresses the contention that Congress paid careful attention to common law doctrine concerning the duty of directors to insure that accurate information is conveyed to the purchasers of the company’s stock and reinforces the conclusion therefrom that if Congress intended Section 10(b) to change common law doctrine in a similar respect it would have said so in unmistakable terms. 3. The 1934 Amendments. In response to substantial criticism, in particular that directed to Section 11, Congress in passing the 1934 Act amended in several particulars the 1933 Act. While most of the amendments are not of great substance, the amendment to Section 15 of the 1933 Act is worthy of note. Prior to amendment, that section held control persons absolutely liable for the Section 11 or Section 12 violations of those whom they controlled. The amendment added the clause “unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is alleged to exist.” Senator Fletcher’s memorandum explained the purpose of a similar amendment to be to restrict the scope of the section so as more accurately to carry out its real purpose. The mere existence of control is not made a basis for liability unless that control is effectively exercised to bring about the action upon which liability is based. However, here, even if Coleman is deemed to be a “control” person, the trial court found that he did not exercise that “control” to bring about the action upon which liability is based. C. Sections 11 and 12(2) of the 1933 Act and Section 20(a) of the 1934 Act Plaintiffs could not have brought their action pursuant to Section 11 of the 1933 Act. They did not purchase registered securities and, even if they had, their claims are founded on several non-registration statement communications. Nor were the securities that they received required to be registered; they were exempt under the private offering exemption of Section 4(2). Nor could plaintiffs have brought the action pursuant to Section 12(2). That section requires privity or, in the absence of privity, scienter. As Professor Folk has observed: Under section 12(2), unlike section 11(a), liability does not result solely from signing a registration statement or occupying a status such as that of a director. Officers and directors may be directly liable under section 12(2) as “participants” in the sale, but such liability depends upon proof of the facts in each case and for each person, not merely upon a certain status. It is apparent that in passing the 1933 Act Congress could not have intended that purchasers of securities who could not sue directors under Section 11 could sue such directors (unless privity or scienter were found) under Section 12(2). Since the public interest in private offerings is less than that in public offerings, the duties imposed upon directors in private offerings were intended to be correspondingly less stringent. To impose a duty to convey upon directors under Rule 10b-5 would be to ignore this Congressional intent. It would take away from directors what is granted to them by the private offering exemption and by the limitation .of the due diligence duty to registration statements. It would also nullify the control section of the 1934 Act — Section 20. The intent of Congress in adding this section, passed at the same time as the amendment to Section 15 of the 1933 Act, was obviously to impose liability only on those directors who fall within its definition of control and who are in some meaningful sense culpable participants in the fraud perpetrated by controlled persons. Judge Adams’ remarks in his exhaustive review of the legislative history of Rule 10b-5 in Kohn v. American Metal Climax, Inc. are apposite in this regard: Essential to the elements intended by Congress are the requirements that the defendant has acted in other than “good faith” and that the plaintiff has “relied” on the misleading statement. . . . There is no evidence that Congress intended that under Section 10(b) anyone should be an insurer against false or misleading statements made non-negligently or in good faith. It seems clear from the discussion of the legislative history of Section 10(b) and the administrative history of Rule 10b-5 that Congress and the SEC both intended, before any liability for misrepresentation might attach, that the element of culpability be present. This intent was manifested by the constant usage of words such as “cunning,” “manipulative,” “deceptive,” “fraudulent,” “illicit,” “fraud,” and lack of “good faith,” and the absence of language indicating liability for negligent or non-negligent conduct. D. Case Law Development of Rule 10b-5 Rule 10b-5, however, cannot be construed solely on the basis of a close reading of legislative history. The law of the Rule has moved far from its original moorings. And we are aware that the Rule must be read flexibly, not technically and restrictively. But reading the Rule flexibly does not relieve us of the obligation to define the limits of liability imposed by the Rule and to adhere to common sense. Where a claim is made that is clearly beyond the scope of the Rule, even flexible reading will not legitimatize that claim. The cases brought to our attention and those which our research has discovered confirm the conclusion that the Rule does not impose upon directors a duty to convey. Those cases focus, not unexpectedly, on Sections 12(2) of the 1933 Act, Section 20(a) of the 1934 Act, or on secondary theories of liability such as aiding and abetting, not on Rule 10b-5. In Mader v. Armel plaintiff-shareholders of corporation A sued the officers and directors of corporation B alleging that the latter has fraudulently induced the plaintiffs to exchange their stock. The district court after trial dismissed plaintiffs’ ease against two directors of corporation B, Tibbals and Young. The party primarily responsible for the fraud perpetrated upon the plaintiffs was Armel, president, chief executive officer, and chairman of the board of corporation B. Both Tibbals and Young “had implicit confidence in Armel and . . . neither of them had any reason to doubt their confidence in him until after the events which are determinative in this case.” The Sixth Circuit affirmed both dismissals, holding that the case against Tibbals was properly dismissed because there was no evidence to support the conclusion that Tibbals either knew there was anything wrong or should have known that there was anything wrong, or in any way, factually or legally, controlled anyone who knew that or was in combination for any purpose with anyone who knew or should have known that anything was wrong. The dismissal as to Young was affirmed because, although found to be a control person for purposes of Section 20(a), he had established his good faith defense: [H]e did nothing directly or indirectly to induce the fraudulent proxy solicitation; . . . “he did not have the slightest idea anything was wrong until sometime in 1960 at the earliest;” and . . . “he relied fully on the Certified Public Accountants who bore a good reputation” and upon the annual published certifications of these accountants. The Ninth Circuit’s opinion in Wessel v. Buhler provides further indication of the distance we would travel were we to agree with plaintiffs that Rule 10b-5 imposes upon directors a duty to convey. In Wessel plaintiffs argued, inter alia, that an accountant retained by an issuer owes a duty pursuant to the Rule to disclose to prospective purchasers of the issuer’s stock his knowledge of the issuer’s adverse financial condition. The Court replied: There is not a scrap of authority supporting this extraordinary theory of Rule 10b-5 liability, and we will not supply any in this ease. We find nothing in Rule 10b-5 that purports to impose liability on anyone whose conduct consists solely on inaction. On the contrary, the only subsection that has any reference to an omission, as distinguished from affirmative action, is subsection (2) providing that it is unlawful “to omit to state a material fact necessary in order to make the statements made ■>:• * * not misleading,” i. e., an omission occurring as part of an affirmative statement. (See Brennan v. Midwestern United Life Insurance Co. (7th Cir. 1969) 417 F.2d 147, 154-155.) We perceive no reason, consonant with the congressional purpose in enacting the Securities and Exchange Act of 1934, thus to expand Rule 10b-5 liability. ... On the contrary, the exposure of independent accountants and others to such vistas of liability, limited only by the ingenuity of investors and their counsel, would lead to serious mischief. In this Circuit, Moerman v. Zivco. Inc.,’ supports the proposition that a director’s obligation to prospective purchasers is secondary, not primary, and must be found, if at all, in provisions other than Rule 10b-5 or in the doctrines of aiding and abetting, conspiracy, or substantial participation. In Moerman plaintiff sued officers and directors of an issuer who had sold stock to him in violation of Section 12(1) and, allegedly, Section 12(2) and Rule 10b-5. The Section 12 claims were held time-barred by Section 13 of the 1933 Act. But the Court did find that the officer who had failed to inform the plaintiff, in conversations with him, of all material information was liable under the Rule. In analyzing the liability of the other directors, the Court did not even mention the possibility that these directors might be liable to plaintiff directly under the Rule: “Since Moerman had no significant contact with any defendant other than Sam Nasser [the officer referred to above], the liability of the other defendant officers and directors must rest solely on Section 20 of the Securities Exchange Act . . . . [Referring to the responsibility of directors for the acts of corporate officers, the Court concluded:] Directors cannot be expected to exercise the kind of supervision over a corporation president that brokers must exercise over salesmen.” While the issue of the liability of the directors under Rule 10b-5 was not raised on appeal, this Court said in an opinion denying a petition for rehearing: “Since the opinion of Judge Judd appealed from, some 20 pages in length, dealt fairly and in a reasoned fashion with all of the issues in the case, af-firmance was upon that opinion.” Even the broker-dealer cases, which, as Judge Judd observed in Moerman generally hold that a broker-dealer must exercise stringent supervision over its salesmen, offer support for our conclusion that Rule 10b-5 does not impose upon directors a duty to convey. For example, in Kamen & Co. v. Paul H. Aschkar & Co., plaintiff claimed, inter alia, that a broker-dealer was liable under the Rule for fraud perpetrated by two of the defendant’s agents. The Ninth Circuit agreed with the lower court that the partners of the defendant did not know nor did they have reason to know of the fraud of their agents. Like the court in Moerman, the Ninth Circuit analyzed the defendant’s liability not in terms of the Rule but in terms of Section 20 of the 1934 Act. Other cases in this circuit clearly indicate that “facts amounting to scienter, intent to defraud, reckless disregard for the truth, or knowing use of a device, scheme or artifice to defraud” are essential to the imposition of liability (Mansfield, C. J., in Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 445, (2d Cir. 1971)). Underlying our decisions in SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969); Ruckle v. Roto American Corp., 339 F.2d 24 (2d Cir. 1964); Schoenbaum v. Firstbrook, 405 F.2d 215 (2d Cir. 1968) (en banc), cert. denied, 395 U.S. 906, 89 S.Ct. 1747, 23 L.Ed.2d 219 (1969); Globus v. Law Research Serv. Inc., 418 F.2d 1276 (2d Cir. 19,69), cert. denied, 397 U.S. 913, 90 S.Ct. 913, 25 L.Ed.2d 93 (1970), and Heit v. Weitzen, 402 F.2d 909 (2d Cir. 1968), cert. denied, 395 U.S. 903, 89 S.Ct. 1740, 23 L.Ed.2d 217 (1969), is a factual background that officers and/or directors, who participated in the transactions, had inside knowledge of situations which resulted in a fraud upon the other party to the transaction and to the advantage of themselves or their corporation. Thus, in Texas Gulf Sulphur the decision was based upon a failure properly to disclose “good news” and the reaping thereby of substantial financial benefits by certain defendants. In Ruckle and Schoenbaum liability to their corporation was imposed upon directors for knowingly selling stock at an unwarranted discount. In Globus the offering circular omitted material facts and this Court affirmed a plaintiff’s judgment because “Judge Mansfield’s charge clearly required a finding of scienter, albeit not using the magic words ‘intent to defraud’ ” and because this “instruction satisfied the scienter requirement imposed by prior cases” (Kaufman, C. J., 418 F.2d at 1291). In Heit the fraud emanated from the Annual Report of the Belock Instrument Company which report allegedly contained “ ‘materially false, misleading and untrue statements of Belock’s net assets and past and prospective income’ ” (402 F.2d at 911) and from documents filed by the individual defendants. We recognize that participation by a director in the dissemination of false information reasonably calculated to influence the investing public may subject such a director to liability under the Rule. But it is quite a different matter to hold a director liable in damages for failing to insure that all material, adverse information is conveyed to prospective purchasers of the company’s stock absent substantial participation in the concealment or knowledge of it. Absent knowledge or substantial participation we have refused to impose such affirmative duties of disclosure upon Rule 10b-5 defendants. In Levine v. SEC the revocation of a broker-dealer’s registration was affirmed on the basis of the broker-dealer’s actual knowledge of misrepresentations in a report used in the offer and sale of securities: Levine asserts that this intimacy gave him a right to rely on the statements of Cosnat’s [the company’s] management concerning its business affairs, that he had no reason to doubt the accuracy of [the company’s] statements and that he (or any broker-dealer for that matter) was not required to go behind these statements. Of course, absent actual knowledge or warning signals, a broker-dealer should not be under a duty to retain his own auditor to re-examine the books of every company, the stock of which he may offer for sale, even accepting the doubtful hypothesis that such permission would be granted. In SEC v. Great American Indus., Inc. we reversed the trial court for declining to issue a temporary injunction against a corporation and its officers who had more than negligently issued misleading press releases and who had failed to include in other releases and reports material information. We specifically declined even to consider the issue of whether the corporation or its officers had a duty under Sections 13(a) or 10(b) of the 1934 Act to disclose information which they neither knew nor had reason to know. A most thorough judicial treatment of the relationship between knowledge and an affirmative duty to convey is to be found in Judge Eschbach’s opinions Brennan v. Midwestern United Life Ins. Co. In Brennan persons purchasing Midwestern stock from a particular brokerage firm brought a class action under the Rule against Midwestern. The bro-, kerage firm had failed to deliver to the plaintiffs Midwestern stock for which they had paid, the firm having used plaintiffs’ purchase money as working capital for speculation and for other improper purposes. Plaintiffs claimed that Midwestern was liable for aiding and abetting the brokerage firm’s violation of the Rule by knowing of, but failing to report, the firm’s activities to the SEC or to the Indiana Securities Commission. In his opinion denying Midwestern’s motion to dismiss, Judge Eschbach analyzed Midwestern’s potential liability under the Rule as an aider and abettor. He was careful to begin by finding on the facts alleged a violation of the Rule by the brokerage firm. He concluded that the 1934 Act “cannot be held necessarily to exclude persons who do no more than aid and abet a violation of Section 10(b) and Rule 10b-5.” Support for this conclusion was found not only in prior cases but also in the proposition that common law principles should guide interpretation of the Rule. At common law one is liable [F]or harm resulting to a third person from the tortious conduct of another, . if he * -X- * * ■* * (b) knows that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself, . . . Midwestern contended that it could not be found liable under the Rule unless it had committed an affirmative act in furtherance of the brokerage firm’s violation. Judge Eschbach replied: Certainly, not everyone who has knowledge of improper activities in the field of securities transactions is required to report such activities. This court does not purport to find such a duty. Yet, duties are often found to arise in the face of special relationships, and there are circumstances under which a person or a corporation may give the requisite anee or encouragement to a wrongdoer so as to constitute an aiding and abetting by merely failing to take action. After trial Judge Eschbach concluded that Midwestern had in fact substantially assisted and encouraged the brokerage firm’s violation of Rule 10b-5. The evidence supporting this conclusion consisted, inter alia, of the following: (1) officers of Midwestern knew (a) of misrepresentations made by the agents of the brokerage firm, (b) that the brokerage firm was using money paid for Midwestern stock as working capital and (c) that this conduct by the brokerage firm was improper; (2) Midwestern had actually in one instance reported, and threatened at several points to report, the activities of the brokerage firm to the Indiana Securities Commission; (3) the officers of Midwestern viewed the sales efforts of the brokerage firm in Midwestern stock as a benefit and they elected to pursue this benefit; and (4) officers of Midwestern backed down from their threat to report the slow deliveries of Midwestern stock by the brokerage firm in the face of continued slow deliveries knowing that such a retreat would encourage the firm to continue its practices without fear of a report from Midwestern to the Indiana Securities Commission. In affirming Judge Esehbach’s judgment, the Seventh Circuit said: It is our view that the district court was correct in concluding that Midwestern’s acquiescence through silence in the fraudulent conduct of Dobich [major owner, president, and chief executive officer of the brokerage firm] combined with its affirmative acts was a form of aiding and abetting cognizable under Section 10(b) and Rule 10b-5. Here Midwestern’s failure to report Dobich after December 1, 1964 was more than omission; it was a signal to Dobich that further inquiries would not be handled as earlier threatened, and that Dobich would be given an opportunity to cover his non-deliveries. Plaintiffs also insist that Coleman is liable to them even absent an affirmative duty, as a director, to scrutinize the BarChris-Victor negotiations prior to giving his approval of the sale. Coleman knew many disquieting facts about BarChris, particularly certain adverse financial developments and the making of misleading statements to the financial community by BarChris officers. Thus it is argued that it was inexcusable for Coleman, armed with such knowledge, not to ascertain whether BarChris’s financial status had been fully and accurately disclosed to the prospective buyers. The plaintiffs suggest that if Coleman had inquired into the details of the BarChris-Victor negotiations, he would have discovered the fraud. In that event, Coleman could not have approved the sale of BarChris’s stock to the Lan-zas without incurring liability. Recognizing, however, that the record in this case cannot support a holding that Coleman’s failure to inquire was in any way willful or calculated, plaintiffs, and our dissenting Brothers, urge that liability exists under Rule 10b-5 for a “negligent” omission to state material facts. They rely heavily on language in SEC v. Texas Gulf Sulphur Co., supra, 401 F.2d at 855, stating that a review of other sections of the Act from which Rule 10b-5 seems to have been drawn suggests that the implementation of a standard of conduct that encompasses negligence as well as active fraud comports with the administrative and the legislative purposes underlying the Rule. Finally, we note that this position is not, as asserted by defendants, irreconcilable with previous language in this circuit because “some form of the traditional scienter requirement,” . . . sometimes defined as “fraud,” ... is preserved. This requirement, whether it be termed lack of diligence, constructive fraud, or unreasonable or negligent conduct, remains implicit in this standard .... (footnote omitted, emphasis in original) This language appears to recognize negligence as a standard for imposing liability under Rule 10b-5. Judge Waterman’s opinion in that case, however, did not deal with a private action, but with an SEC enforcement suit seeking injunctive relief. This distinction was underscored in the concurring opinions of Judges Friendly, Kaufman and Anderson and has been noted in subsequent decisions. See SEC v. Manor Nursing Centers, Inc., 458 F.2d 1082, 1096 & n.15 (2d Cir. 1972). Although one commentator recently stated that “The question whether scienter is a required element under rule 10b-5 . . . must be regarded as open at this time [because] [t]he circuit courts are either split or in confusion,” Ruder, Multiple Defendants in Securities Law Fraud Cases; Aiding and Abetting, Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120 U.Pa.L.Rev. 597, 631 (1972), our recent decision in Shemtob v. Shearson, Hammill & Co., supra, eliminated any doubt that proof, of scienter is required in private actions in this circuit. There, in the context of a private action for damages, we stated that no violation of Rule 10b-5 occurs “in the absence of allegation of facts amounting to scienter, intent to defraud, reckless disregard for the truth, or knowing use of a device, scheme, or artifice to defraud. It is insufficient to allege mere negligence.” 448 F.2d at 445. Under the Shemtob test, a plaintiff claiming a violation of Rule 10b-5 who cannot prove that the defendant had actual knowledge of any misrepresentations and omissions must establish, in order to succeed in his action, that the defendant’s failure to discover the misrepresentations and omissions amounted to a willful, deliberate, or reckless disregard for the truth that is the equivalent of knowledge. We recognize, of course, that other circuits have expressed approval of a “negligence” standard. See, e. g., Ellis v. Carter, 291 F.2d 270, 274 (9th Cir. 1961). But we do not find these statements persuasive. In addition to the inappropriateness of a negligence standard demonstrated by comparing liability under Section 10(b) of the Securities Exchange Act with liability under Section 11 of the Securities Act, supra, we believe the actual language of Section 10(b) bars adoption of a negligence standard. Rule 10b-5(b), the provision under which the Lanzas seek relief, makes it unlawful “to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading .” Yet the rule-making power granted to the Securities and Exchange Commission by Section 10(b) authorizes rules making it unlawful “[t]o use or employ . . . . any manipulative or deceptive device or contrivance .” (emphasis added). These words negate liability for a mere negligent omission or misrepresentation. Rather, “proof of fraud is required in suits under § 10(b) of the 1934 Act and Rule X-10 B-5 . . . .” Fischman v. Raytheon Mfg. Co., 188 F.2d 783, 786 (2d Cir. 1951). See VI Loss, Securities Regulation 3884-86. Moreover, despite the use of “negligence” language in Ellis v. Carter, supra, and other cases cited by our dissenting Brothers, the appellate courts have not yet imposed liability for mere negligence in private actions under rule 10b-5. Language embracing a negligence standard, or a standard less stringent than one of actual knowledge or reckless disregard for the truth, has in every instance been used in cases where the defendant’s conduct was clearly vi-olative of a higher standard, in cases arising on a motion to dismiss or in cases in which the court found an alternative reason to find no liability. In those few eases where defendant’s conduct might be said to constitute negligent behavior, but not knowing or reckless behavior, no liability has been found, (footnotes omitted) Bucklo, Scienter and Rule 10b-5, 67 Nw.U.L.Rev. 562, 590 (1972). In sum, we believe that proof of a willful or reckless disregard for the truth is necessary to establish liability under Rule 10b-5. Applying this standard to the record before us, we are unable to conclude that Coleman willfully closed his eyes to or turned his back on the fraudulent nature of the BarChris-Victor Billiard negotiations. On the contrary, Coleman, displaying an attitude not ordinarily found in outside directors, see M. Mace, Directors: Myth and Reality 186-88 (1971), played an active and concerned role in BarChris’s affairs. In August, 1961, he sought an explanation from Kircher for the revised earnings statement. On Coleman’s initiative, the board of directors required a review by counsel of all press releases issued after the October 13th statement, “Important Report to the Financial Community.” And it was Coleman who suggested hiring an outside management consultant after the December 6 point-of-crisis meeting, even after Kircher, in whom he placed great confidence, had given his personal assurance that Bar-Chris did not have any unweatherable problems. A director may have an obligation to maintain an awareness of significant corporate developments and to consider any material, adverse developments which come to his attention. But Coleman, in our view, more than met this standard of responsibility and his failure to discover the true nature of Kireher’s negotiations with the Lanzas cannot be characterized as willful or reckless. E. Sound Policy Supports the Conclusion that Rule 10b-5 Should Not Be Read to Impose a Duty to Convey As Professor Bishop has noted, “[t]here seems to be a general consensus that outside directors — i. e., directors who are not full-time employees of the corporation — are desirable.” A survey in 1966 of 456 manufacturing companies showed that only six had no outside directors; in two-thirds of the companies surveyed, outside directors constituted a majority of the boards of directors. The consensus as to the proper role of these non-officer directors is that they should supervise the performance of the management. Such supervision necessarily involves balancing a skepticism towards management’s assessment of its performance and a trust in the integrity and competence of management. The SEC has observed in its amicus brief: Corporate directors are not normally involved in the day-to-day conduct of the company’s affairs. Except in unusual circumstances, they are not expected to, nor do they, participate directly in the implementation of corporate policies. Routine managerial tasks are performed by, and are the responsibility of, the operating officers. Directors have a right to rely on the officers of the corporation to perform their functions in a lawful manner. The observations of Professor, now Justice, Douglas and Professor Bates are also to be noted: [T]here are a great many [directors], particularly of the larger and more complicated enterprises, who do [actively direct] and yet are not personally familiar with all details of operation. Nor could their services be obtained in most cases if they were required to investigate details of the enterprise. The experience and judgment of men of affairs is of great value to most of our more important corporations. To deprive enterprises of this asset would seem uneconomic in view of the slight gains which may be expected. As Judge Frankel said below: As in all lawsuits, we deal in the sometimes unreal certainties of hindsight. When we move toward the kind of novelty plaintiffs propose for one in the position of Coleman, it may not be amiss to recall the ambiguities of real life. A director like Coleman, not involved in the daily business, may think he “knows” things contrary to what he is told by the management upon which he must perforce rely. He may be wrong. His primary loyalties are familiar and stern ones. How and when he must — or may — run off to “warn” or advise outsiders dealing with his corporation could suggest questions of great refinement. At the very least, such action would violate the decorum of the management hierarchy; at most, it could cost him his seat on the board and a judgment for interfering with a corporate opportunity. If people of stature and creative potential are still wanted for corporate directorships, we must take care how agonizingly subtle their choices are to be. . In short, if the type of liability plaintiffs urge should ever be imposed, it ought to be reasonably clear that the wrong is palpable and that the balance of advantage lies in that course. As a practical matter, what should Coleman have done and said when the concluded Victor-BarChris stock exchange was presented to the board for approval ? Consider for a moment the practical aspects: Should Coleman have said: “Hold up all further proceedings. Disregard the closing date. I must personally examine all participants in this transaction from July to date — all Victor representatives and all BarChris representatives — as to all things said and done with respect to the exchange and no vote on my part can be made until I satisfy myself that all figures and representations are accurate.” Even if he had told the Victor shareholders that BarChris’ financial situation was bad and that there was dissension in the board, he might well have subjected himself to criticism. Furthermore, if this were Coleman’s duty, so was it the duty of all directors to quiz all participants as to their knowledge; establishing such a duty would create an intolerable situation. As to the deterioration of the Bar-Chris picture: the company had prospered under the initial impetus of the bonanza of leisure-time activities. At that time it was thought that a large segment of the population would retire early, on adequate pensions, and that those who actually did work would have three- or four-day work weeks with four or five hours of work each day. With all this leisure time available some sort of activity would have to be found to while away the time. What better -way than bowling, boating, skiing, etc. ? Thus spake the boosters of companies engaged in these areas. And bowling alleys did mushroom all over the country. But as in many other economic fields, over-expansion may produce a reaction which can manifest itself in bowling alleys as well as in potato and wheat productions. In short, there are good years and bad years even as in Biblical days. And depending upon the psychological make-up of the individual, there will always be prophets of doom as well as boom. Almost every corporation has its good periods and bad periods. When the market for its products and its earnings are good, its stock is likely to sell at levels higher than when the contrary situation prevails. One director might believe that the recession in the bowling alley business was temporary; others the opposite. The corporate minutes might well reflect the disagreement. Is the director who predicted lower earnings to be held liable to purchasers of the company’s stock for failure to announce his views (possibly minority views) to potential purchasers at public or private sale in the event the stock should go down in value in the future? The very question ought to supply the answer. If'not, then a review of the financial history of hundreds of corporations over the last few years will, whether the corporations be in the nursing home business, the manufacture of leisure time products, merchandising activities, etc. Even the natural resources fields, such as oil, minerals, and paper, have not been impervious to wide fluctuations. In many cases questionable management has been replaced or improved. To hold individual, nonoffieer directors personally liable for fraud by officers in their corporate negotiations was never the intendment, Congressional or otherwise, of Section 10(b) of the 1934 Act nor of Rule 10b-5. Coleman should not be forced under legal edict to hold himself out publicly as a prophet or a modern Cassandra. His own views as to the company’s prospects, expressed or unexpressed, should not be made the basis for legal liability. Actually any prophecies of doom would have misrepresented Coleman’s own views and, had the Victor transaction failed because of any such misrepresentations, it could easily have resulted in suits which would have found Coleman liable to both Victor and BarChris. In this action penalties have been visited upon those meriting them. The District Court has held liable those who made false representations. He has exonerated those who were not participants. In so doing, he has fulfilled the function of a Judge, which is to serve justice. Congress was quite aware of the “agonizingly subtle” choices continually facing directors when it passed the securities acts. As President Roosevelt made clear in his message to Congress and as the committee reports attest, duties were to be imposed upon directors for the protection of the public “with the least possible interference to honest business.” Congress chose to impose upon directors through Section 11 of the 1933 Act a duty to insure that all material, adverse information is conveyed to prospective purchasers of the company’s stock. The history of the section demonstrates that the matter was carefully considered and the duties were precisely defined. To argue that a section of the 1934 Act, which neither by its terms nor its history manifests a similar attention to the careful balance struck in Section 11, and which would impose upon directors the same duties as Section 11 and more, is to thwart, not serve, the purpose of Congress and the dictates of sound policy: “To impose a greater responsibility [than that imposed by Sections 11 and 12] . . . would unnecessarily restrain the conscientious administration of honest business with no compensating advantage to the public.” We conclude that Coleman in his capacity as director and as a non-nartici-p^gjit in the transaction owed no duty to insure that all material, adverse information was conveyed to prospective purchasers of BarChris stock. Because Coleman owed no duty as a director to convey to plaintiffs information not conveyed to them by Kircher et al., and because Coleman was not an aider and abettor of, a conspirator in, or a substantial participant in the fraud perpetrated upon these plaintiffs, the complaint against Coleman and Drexel & Co. was properly dismissed. / Kircher’s Demand for a Jury Trial Appellant Kircher appeals the denial of his demand for a trial by jury following an initial waiver of that right. The original complaint, filed November 23, 1964, alleged that defendants had violated Section 10(b) and Rule 10b-5; it contained no demand for a jury trial. Defendant Kircher did not make a timely demand for a jury trial, and his failure to do so constituted a waiver of the right to a trial by jury. Fed.R.Civ.P. 38(d). On November 10, 1966, the court granted plaintiffs leave to file an amended complaint which specifically alleged that the May, 1961, prospectus was false on the date of issuance. Within ten days of the filing of the amended complaint Kircher filed a demand for a jury trial. In May, 1967, Kircher moved for an order transferring the case from the non-jury to the jury calendar “pursuant to timely demand. . . .” The motion was denied on the ground that plaintiffs’ “amendment did not introduce a new issue or change the nature of the action.” In April, 1969, plaintiffs further amended the complaint to allege that the defendants’ conduct violated Section 17(a) of the Securities Act of 1933 and to demand punitive damages. Kircher then filed an answer demanding a jury trial. On May 29, 1969, Kircher again applied for a jury trial; the district court denied the application. At the opening of trial, Kircher moved to reargue the latest denial, and his motion was denied. Under Rule 38(d), the failure to demand a jury trial within the period designated by Rule 38(b) constitutes a waiver of that right as to all issues raised in the complaint. If the original complaint is subsequently amended, the right to demand a jury trial is revived in an action such as this only if the amendment changes the issues. Western Geophysical Co. of America, Inc. v. Bolt Associates, Inc., 440 F.2d 765, 769 (2d Cir. 1971). Appellant Kircher claims that the amendments alleging violation of Section 17(a) and claiming punitive damages raised for the first time the issues of the falsity of the May, 1961, prospectus as of the date of issuance and the willfulness of Kireher’s conduct. The amendments did not raise new issues within the meaning of Rule 38 such as would entitle Kircher to demand a jury trial as of right. The case involved, and the original complaint raised, one basic issue: Whether plaintiffs were fraudulently induced to exchange their Victor stock- Kircher’s failure to demand a jury trial waived his right as to all issues relating to this general area of dispute. The amendment added no new issues: the same conduct and the same allegedly false documents constituted the basis for any claim under Rule 10b-5, Section 17(a), or common law fraud. The willfulness and falsity as of a particular date merely clarified “the same general issues” raised in the original complaint. Moore v. United States, 196 F.2d 906, 908 (5th Cir. 1952). Kircher had been put on notice of the underlying facts and basic legal theory fraud—upon which plaintiffs sought relief, and the character of the suit was in no way changed by the amendments. Even assuming, however, that the issues of willfulness and falsity as of a particular date might have been “new” had they not been alleged in the original complaint, we think that complaint is sufficiently broad to be fairly construed as including both these issues. The original complaint specifically charging fraudulent conspiracy put in issue the willfulness of all the defendants’ actions surrounding the acquisition of the Victor stock. The original complaint also specifically alleged that plaintiffs were given “a Prospectus dated May 16, 1961,” and two paragraphs later, that the “aforesaid representations and financial statements, releases, reports, brochures, and documents were materially false at the time they were made” (emphasis added). In view of the breadth of these allegations, we agree with Judge Frankel that the issues were raised in the original complaint and the right to a jury trial waived. The judgment is affirmed. HAYS, Circuit Judge, concurring in part and dissenting in part in separate opinion with whom J. JOSEPH SMITH, OAKES and TIMBERS, Circuit Judges concur. TIMBERS, Circuit Judge concurring in part and dissenting in part in separate opinion with whom OAKES, Circuit Judge also concurs. HAYS, Circuit Judge (concurring in part and dissenting in part): I concur in the denial of appellant Kircher’s motion for a jury trial. I dissent on the issue of the liability of Bertram D. Coleman and Drexel & Co. I believe that Coleman’s conduct with respect to the sale of BarChris stock was a violation of § 10(b) and Rule 10b-5 and that Coleman and Drexel should be held liable for the damages sustained by the plaintiffs. I. Factual Background A. Coleman’s Initial Involvement with BarChris Defendant Coleman was a partner of Drexel & Co., a brokerage and investment banking firm located in Philadelphia. Drexel was the principal underwriter of the 1961 public sale of the BarChris debentures at issue in Escott v. BarChris Const. Corp., 283 F.Supp. 643 (S.D.N.Y.1968). In April, 1961, after Drexel had decided to underwrite BarChris’s debenture offering, Coleman became a director of BarChris. Drexel wanted to have one of its partners in a position to oversee the activities of a company in which Drexel was going to make a substantial investment. Coleman remained on BarChris’s board of directors until March 22, 1962, when he resigned. He returned as chairman of the board in May, 1962, and resigned again in October, 1962, after BarChris instituted bankruptcy proceedings. In late 1960 a representative of Bar-Chris approached Drexel seeking financial advice. Alternative types of financing were discussed, and Drexel then sought preliminary information about the bowling industry in general and BarChris in particular. The record discloses that during this initial contact between Drexel and BarChris, Coleman was one of two or three Drexel representatives who discussed the financing with BarChris’s representatives, Russo, Kircher, and Vitolo. Coleman was apparently the senior Drexel representative involved in the BarChris financing. Drexel decided to underwrite the financing in early 1961, and Coleman was made a member of BarChris’s board of directors in April of that year. The district court’s finding that Coleman, in assuming a BarChris directorship, was acting on behalf of Drexel, is not challenged on this appeal. The registration statement covering the BarChris issue of debentures was filed with the Securities and Exchange Commission in March, 1961, and became effective on May 16. In Escott, the court found the prospectus contained in the registration statement to be false and misleading in the following respects: (A) Unfilled Orders on the books of BarChris as of March 31, 1961 were overstated by $4,490,000 or more. (B) The statement that since 1955, BarChris had been required to repurchase less than % of 1% of customers’ promissory notes discounted with unaffiliated financial institutions, was incomplete and inaccurate as of May 16, 1961, in that it did not disclose that: (1) the primary obligors of notes of Dreyfuss Bowling Enterprises, Inc., Federal, 947 Bowling Corp. and Stratford Lanes, Inc. that had been discounted by BarChris with James Talcott, Inc. had prior to May 16, 1961, defaulted or were delinquent in the payment of their obligations; and (2) as of May 16, 1961, it had been the practice of James Talcott, Inc. to require the repurchase of notes discounted with it that were in default. (C) The Prospectus does not disclose the following with respect to the description of BarChris’s business as of May 16,1961: (1) that BarChris intended to operate Bridge Lanes, Yonkers Lanes and Woonsocket Bowl; and (2) that BarChris contemplated operating Harlem Lanes, Strat-ford Bowl, Leader Lanes, Federal Lanes and Hart Lanes. (D) The statement of Application of Proceeds is inaccurate and incomplete as of May 16, 1961 in that: (1) the net proceeds of the debenture offering are totally allocated in the Prospectus to construction of a new plant, development of a new equipment line, a loan to BarChris Financial Corporation and additional working capital, and it did not disclose that BarChris intended to apply at least 60% of the proceeds allocated to additional working capital, to the repayment of prior debts and other commitments; (2) BarChris intended to use approximately $1,187,736 of the net proceeds of the debenture offering for the payment of prior debts ($1,067,736) and other commitments ($120,000), namely: (a) for payment of checks drawn against BarChris’s account with Lafayette National Bank, which amounted to $825,736 as of May 31,1961; (b) for payment of $242,000 borrowed from the Manufacturers Trust Company; and (c) for a loan of $120,000 to St. Ann's, Inc. B. The Victor Acquisition Frank Lanza, Jr., met BarChris representatives at a trade meeting in March, 1961 and inquiries were made concerning a possible acquisition of Victor by BarChris. Victor was interested in the prospect of receiving manufacturing space and additional capital from Bar-Chris, and BarChris was interested in diversification, believing that billiard tables would be a suitable complement to the recreational facilities of the bowling alleys it constructed. On July 28, 1961, the first of five formal meetings between representatives of BarChris and Victor was held to negotiate the terms of the exchange. Kircher represented BarChris at all these meetings. The representative and negotiator for the Victor shareholders was Sidney Shul-man, who was present at all five meetings. Shulman had been Victor’s accountant for a number of years and had been retained to represent the Victor shareholders in the negotiations. At the July 28 meeting, Kircher gave Shulman a copy of the false and misleading May 1961 prospectus, as well as an unaudited six-month earnings statement. Kircher asserted that BarChris's earnings per share would be $1 by the end of 1961. During the second meeting on August 3, Kircher told Shulman that BarChris’s. backlog of unfilled orders amounted to between $6,000,000 and $7,000,000. The district court’s finding that this figure was a “gross overstatement” is not challenged on this appeal. On August 17, Shulman was sent copies of BarChris’s six-month financial statement and 1960 annual report. The district court found that these documents contained some of the same misstatements and omissions as the May 1961 prospectus; that the six-month statement made additional misrepresentations ; and that the “enthusiastic reference” in the annual report of Bar-Chris’s construction projects and plans in Europe “was seriously misleading.” Two more meetings, on August 27 and November 3, were held to complete the negotiations and to draft the exchange agreement. The terms of that agreement provided that the Victor shareholders would exchange their shares for $250,000 of BarChris stock, that Clara Lanza would receive $10,000 in cash, and that the Victor managers would be employed by BarChris and would participate in the BarChris pension plan. Because the BarChris shares to be exchanged were not covered by a registration statement, the contract further provided that the Victor shareholders could elect by March 1962 to have BarChris file a registration statement covering those shares that the new shareholders desired to sell. The BarChris board of directors approved the acquisition on November 21. The contract was signed on November 27, and the closing took place on December 14, 1961. C. Developments Within BarChris from May to December 1961 During the second half of 1961 Bar-Chris experienced serious business reversals as well as intracorporate discord over managerial deficiencies in the operation of the business. BarChris’s techniques of financing the construction of bowling alleys relied heavily on the financial success of the alleys to enable the operators to meet lease or note payments. The failure of some of the alleys forced BarChris to assume control and to attempt to operate them profitably. Prospects, despite some large orders, were not as rosy as BarChris’s representatives had lead Shulman and plaintiffs to believe. The district court found that the following developments were not disclosed to plaintiffs. “(1) Hart Lanes and Linden Lanes were at least six months delinquent in their payments as of November, 1961. The existence of this situation had been omitted from the prospectus, rendering false and misleading its statement that since 1955 BarChris had been required to repurchase only one-half of 1% of its customers’ promissory notes. The continued and growing rate of repurchases due to delinquencies was concealed from the plaintiffs. (2) Talcott advised BarChris in April, 1961, that it would not make any new purchases of notes or other obligations of BarChris’s customers; Talcott maintained that position thereafter. (3) Plaintiffs were not told that prior to the closing in 1961, BarChris was operating at least eight bowling centers and that all of these were operating at a loss. The operation of bowling alleys by BarChris was concealed throughout the negotiations with Shulman. The omission of any reserves for contingent liabilities and the inclusion of a reserve for the Stratford bankruptcy gave the false and misleading impression that Strat-ford was the only facility which was in trouble and likely to be taken over by BarChris. In fact, BarChris was faced during the early period of negotiations with a substantial prospect that it would have to take over operation of a number of other bowling alleys; that prospect materialized well before the closing with the Lanzas, but nothing was ever said to correct the misleading impressions conveyed by the documents given to Shulman. (4) It was also undisclosed that BarChris was attempting to sell and lease back two parcels of real estate in order to obtain much-needed working capital and that the estimated earnings figure of $1 per share for 1961 depended in large measure on the completion of such sales and leasebacks by the end of that year. (5) Neither plaintiffs nor their representatives were told that some time after May, 1961, Pugliese loaned BarChris $90,000 or $100,000. Nor was it disclosed that early in December, 1961, Russo and Vitolo loaned the company $48,000 and $50,000, respectively. These non-disclosures were especially deceptive since the prospectus had stated that during the three years ending February 28, 1961, the officers of BarChris had made advances to the company totalling $155,615 and that all such advances had been repaid. As of the date of the prospectus the actual advances were $430,615, of which only $4,000 had been repaid. Deepening the earlier deception via the prospectus, the later non-disclosures concealed the very poor cash position of BarChris. (6) Neither plaintiffs nor Shulman learned at any time before the closing that the BarChris general ledger relating to its accounts with its banks showed negative cash balances on or about November 30, 1961, totalling over $600,000. The largest among these was the negative balance in the ledger account for Lafayette National Bank of $442,234.64 representing checks drawn but not cashed beyond the $119,490.60 balance shown on that bank’s statement.” Despite these adverse business developments, six press releases and reports were issued by BarChris, the context of which varied from questionable optimism to downright misrepresentation. The intracorporate conflicts and criticisms peaked in December. On November 30, Vitolo announced that he intended to resign the presidency of BarChris; the board was considering Russo to fill that post. On December 6, at a special meeting of the board of directors, at which Coleman was present, Kircher presented a statement, endorsed by two other officers, Birnbaum and Trilling, which contained the following: “It is our considered judgment that Mr. Russo has been thrust into the position of being considered for [the presidency of the company] as a result of management’s refusal to recognize, evaluate and solve the underlying management problem, rather than being positively chosen on the basis of the recognition that he possesses the capabilities required to serve in this office. On this premise we cannot, in good conscience, concur with any recommendation which would permit him to exercise the powers and responsibilities of the office of chief executive. One might say that the success of BarChris to date belies any weakness in management. On the contrary, the success of the Company and its rapid expansion as a result of a booming industry have contributed to concealing these weaknesses, which only now begin to show up when the industry is losing its explosive growth, competition is becoming keener and earnings begin to wane. Such factors as low down payments, poor credit risks, high financing costs, poorly written contracts, improper documentation, inadequate cost estimation and the like, which, when they appear in a booming industry, tend to be lost in the shuffle, take on a different light in today’s market. We make no criticism of occasional errors of judgment, which result in losses or excessive costs. However, when a consistent pattern of organizational laxity and faulty judgment become apparent, we believe that management must appraise the situation and initiate such action as is deemed necessary in the circumstances to correct the deficiencies noted. Some of the past mistakes that have recently come to light and have damaged or may damage the Company include the practice of the execution by Mr. Russo of legal documents without legal representation. Of a number of examples, one which was recently brought to the attention of the Board of Directors was Stratford Bowl, in which ease an improperly executed document resulted in the Company losing its position as a secured creditor in a bankruptcy proceeding and resulting in the exposure to substantial loss. This lack of legal representation has resulted in improper filings and other deficiencies which placed the Company in an unsecured position as against any Trustee in Bankruptcy in situations having an aggregate value in excess of |1,000,000. Fortunately, the former condition was resolved with a minimal loss to the Company, and the latter condition has been substantially remedied through the efforts of our legal department. This same lack of legal representation has contributed to the signing of a turnkey contract— Bridge Lanes — where an underlying lease precludes financing of the $400,000 interior package, because of provisions in the lease which prohibit the filing of chattel mortgages, conditional bills of sale or bailment leases, which are the instruments through which such sales are financed.” [There follows a description of specific instances of what were alleged to be serious mistakes in the management, particularly by Russo, of various aspects of the business. Kircher then continued:] “The weaknesses of BarChris are the result of a lack of strong, effective leadership. Some symptoms of this basic problem are evidenced by the following conditions: 1. Refusal to accept the fact that basic problems exist within the Company; 2. The acceptance of the thought that all of the Company’s ills can be cured by additional cash coming into the Company; 3. The inability of top management to make prompt decisions which results in confusion and lack of accomplishments at lower echelons; 4. The complete lack of long-range planning; 5. The excessive concern over the price of the Company’s stock and the tendency to make decisions based upon the reaction of the stock market to such decisions. We feel that BarChris is at a point of crisis. This crisis cannot be solved by wishful thinking of [sic] the perpetuation of ineffective leadership. The Board of Directors must exercise its responsibilities by recognizing the management’s inability to cope with the existing problem, and must take such action as it considers necessary to prevent the continuation of ineffective leadership which ultimately can only result in substantial damage to the Company and its stockholders.” It is to be noted that this statement was made at the board meeting of December 6, eight days before the closing of the Victor transaction. The plaintiffs were never informed of the conditions revealed by the statement or of the existence of strife within the Company. Coleman made no attempt to ascertain whether these matters had been or would be disclosed to plaintiffs. II. The Decision of the District Court The district court held that plaintiffs were fraudulently induced by various misstatements and by failure to disclose material facts to exchange their Victor stock for that of BarChris, and it would be difficult to find a record more replete with evidence of such fraud. Indeed the fraudulent nature of the transaction is not challenged on this appeal. The issue on appeal is the determination of who is liable for the fraud. The district court held that Vitolo, Russo, and Kircher were liable under § 10(b) and Rule 10b-5, § 20(a), and the doctrine of common law fraud; that Pugliese was not liable under § 10(b) and Rule 10b-5 and that he had established a “good faith” defense to the imposition of liability under § 20(a). The court further held that plaintiffs had not established that there was a conspiracy among Pug-liese, Friedman, and Ballard to deceive plaintiffs after the December 14 exchange so as to delay their action for rescission. These holdings are not challenged. The district court found — and the majority affirms — that Coleman and Drex-el were not liable for the misrepresentations and omissions of the BarChris management in their information to the Victor shareholders. The district court’s ruling was based upon two conclusions, one of fact and one of law. The plaintiffs argued below that Coleman knew or should have known that misstatements and omissions to state material facts about BarChris’s business and financial position had characterized the information disseminated by corporate officials to the public, that Coleman nevertheless voted to approve the Victor acquisition, and that Coleman is liable because he did not advise plaintiffs, or see to it that they were advised, of BarChris’s true position. The district court found as a matter of fact that “Coleman neither participated in nor knew of any deception practiced upon the plaintiffs . . . .” The record clearly shows that Coleman made no affirmative misstatements to plaintiffs or to Shulman. As for the facts surrounding the negotiations of the exchange, as the majority opinion notes, the district court found: “Coleman was not aware or even suspicious that plaintiffs were being deceived during' the negotiations with Kircher. At least until after the closing, he had no knowledge or belief that any hard figures published by BarChris were false or misleading. He knew of some negative developments — of customer defaults, declining new orders and the stringent cash situation. He came to know, too, a week or so before the closing, that there was dissension among the officers. He had no reason to suspect that Kircher had not disclosed all these facts to plaintiffs. . . . ” The district court concluded that Coleman’s inquiries and investigations were sufficient as a matter of law to satisfy the requirements of § 10(b) and Rule 10b-5. [Coleman] was under no duty to investigate more than he did at the material times or to seek out and advise the plaintiffs in any way. In addition, the district court found that Coleman was a “controlling person” within the meaning of § 20(a) of the 1934 Act, but that he had established a good faith defense to the imposition of liability for the acts of the other defendants. III. Liability Under Section 10(b), Rule 10b-5, and Section 20(a) The question presented to this en banc court is whether the director of a corporation should be liable to the purchasers of that corporation’s shares when he fails to make any inquiry about the actions of his co-directors and the Company’s officers with respect to the representations made in connection with the sale of stock. It is not profitable in considering a case such as this merely to characterize the allegedly unlawful conduct as either negligent or wilful and to impose liability only if the conduct was wilful. Neither the Act nor the Rule creates such a simple dichotomy. The purposes of the Act and the Rule are not furthered by a mechanical application of labels. • The relationship of the parties and the transaction involved must be analyzed in order to determine whether the Act and the Rule impose a duty on one party with respect to the other and the nature of that duty. In making this analysis Section 10(b) and Rule 10b-5 “must be read flexibly, not technically and restrie-tively” so as to further Congress’s broad remedial purpose in enacting the statute. Superintendent of Insurance of the State of New York v. Bankers Life and Casualty Co., 404 U.S. 12, 92 S.Ct. 169 (1971). Section 10(b) and Rule 10b-5 imposed upon Coleman, as a member of the board of directors of the corporation selling the securities, a duty toward these plaintiffs. Ruckle v. Roto American Corp., 339 F.2d 24 (2d Cir. 1964); Schoenbaum v. Firstbrook, 405 F.2d 215 (2d Cir. 1968) (en banc), cert. denied, 395 U.S. 906, 89 S.Ct. 1747, 23 L.Ed.2d 219 (1969); SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969). These provisions impose upon a director of a corporation that is selling its shares the obligation not to defraud the purchaser by either misstating or omitting to state material facts. A director cannot escape that duty by failing to inform himself of the facts and developments relevant to the sale of securities. Coleman was added to the BarChris board at the behest of Drexel. His assignment was to oversee BarChris’s business and financial operations with a view to protecting Drexel’s substantial investment in BarChris securities. The fact that Drexel had a representative on the board was important to these plaintiffs. The district court found that “Coleman was a respected and weighty member of the BarChris board” and that he was a “controlling person” within the meaning of § 20(a). He was probably the most sophisticated member of the board in terms of financial and business experience. As a director Coleman had voted for the acquisition of the Victor stock. During the negotiation period Coleman knew that BarChris had experienced reverses. He learned at the “point of crisis” meeting, eight days before the closing, of the details of Bar-Chris’s unfavorable position and of the intracorporate dissension. Despite Coleman’s experience, important corporate position, and knowledge of corporate adversity, he made no attempt to inquire as to the course of the negotiations Kircher was conducting with plaintiffs and Shulman or as to the information about BarChris being conveyed to the Victor shareholders on which the negotiations were based. He did not inquire at the “point of crisis” meeting or subsequent thereto, whether the Victor shareholders had been informed of the unfavorable position of BarChris. Coleman argued that because he was an “outside” director with respect to the negotiations with Victor, he had no duty to intervene. I disagree. The distinction between an “inside” and an “outside” director is irrelevant in this context, because Coleman did nothing at all. As a director, Coleman had a duty to keep himself adequately informed as to the activities of the corporation. He could no more close his eyes to the purchase of Victor than he could to other important corporate developments. SEC v. Frank, 388 F.2d 486, 489 (2d Cir. 1968). See Levine v. SEC, 436 F.2d 88, 90 (2d Cir. 1971). Cf. SEC v. Great American Industries, Inc., 407 F.2d 453, 463 (2d Cir. 1968) (en banc) (Hays, C. J., concurring), cert. denied, 395 U.S. 920, 89 S.Ct. 1770, 23 L.Ed.2d 237 (1969). Although Coleman knew that Bar-Chris’s condition had worsened considerably, he made no effort to ascertain whether Kircher had conveyed that information to the Victor shareholders. Coleman’s vote to approve the exchange of shares was a representation to plaintiff purchasers that he had sufficiently inquired as to the facts upon which the negotiations were based and that he was satisfied with the correctness of those facts. The representation was false. The appellees vigorously urge and the majority holds that decisions of this court have established that liability in damages for a violation of § 10(b) and Rule 10b-5 cannot be predicated upon the defendant’s mere negligence. Close examination of the decisions of this court reveals that this question has not previously been decided. In Fischman v. Raytheon Mfg. Co., 188 F.2d 783 (2d Cir. 1951) and O’Neill v. Maytag, 339 F.2d 764 (2d Cir. 1964) the negligent failure to fulfill a duty was not in issue. Any language in those cases indicating that active fraud is a requisite in a 10b-5 suit is irrelevant to the instant case. In List v. Fashion Park, Inc., 340 F.2d 457, 464 n. 5 (2d Cir.), cert. denied, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965), the question was specifically left undecided. An oft-quoted statement that a private damage suit under § 10(b) cannot be based on negligence but requires “some” scienter appears in SEC v. Texas Gulf Sulphur Co., supra, 401 F.2d at 855. However as to the individual defendants, the court necessarily found scienter and the question of the corporation’s liability for negligent misstatement was left unresolved. In Heit v. Weitzen, 402 F.2d 909 (2d Cir. 1968), cert. denied, 395 U.S. 903, 89 S.Ct. 1740, 23 L.Ed.2d 217 (1969), the court, in passing on the legal sufficiency of a 10b-5 claim for relief, held that the allegation of the individual defendants’ actual knowledge of the falsity of certain statements in a corporation’s annual report was sufficient. Statements in the opinion concerning the possible insufficiency of allegations based on negligence were therefore unnecessary to the decision. In Globus v. Law Research Service, Inc., 418 F.2d 1276 (2d Cir. 1969), cert. denied, 397 U.S. 913, 90 S. Ct. 913, 25 L.Ed.2d 93 (1970), this court held that there was sufficient evidence of actual fraud to support the jury verdict. It was therefore not necessary to decide whether a charge to the jury requiring a finding of negligence alone would have been correct, and the court specifically said that it did not deal with that issue. Id. at 1291. See also Moerman v. Zipco, Inc., 302 F.Supp. 439, 446 (E.D.N.Y.1969), affirmed on opinion below, 422 F.2d 871 (2d Cir. 1970). Finally, in Shemtob v. Shearson, Hammill & Co., 448 F.2d 442 (2d Cir. 1971), the court, while stating in dictum that “it is insufficient to allege mere negligence,” actually held only that the complaint failed to state a claim for relief under 10b-5 on the ground that the suit was a “garden-variety customer’s suit against a broker for breach of contract . . . . ” Id. at 445. Thus this court has not yet adjudicated the scienter-negligence issue. Other circuits have ruled that scienter is not a necessary element of a 10b-5 claim for relief. See Ellis v. Carter, 291 F.2d 270, 274 (9th Cir. 1961); Royal Air Properties, Inc. v. Smith, 312 F.2d 210, 212 (9th Cir. 1962); Stevens v. Vowell, 343 F.2d 374, 379-380 (10th Cir. 1965); Myzel v. Fields, 386 F.2d 718, 734-735 (8th Cir. 1967), cert. denied, 390 U.S. 951, 88 S.Ct. 1043, 19 L.Ed.2d 1143 (1968); City National Bank v. Vanderboom, 422 F.2d 221, 229-230 (8th Cir.), cert. denied, 399 U.S. 905, 90 S.Ct. 2196, 26 L.Ed.2d 560 (1970). Cf. SEC v. Van Horn, 371 F.2d 181, 185 (7th Cir. 1966). The legislative purpose behind the enactment of § 10(b) and the promulgation of Rule 10b-5 — the protection of investors by requiring the full disclosure of correct information in connection with the purchase and sale of securities —would be advanced by requiring a person in Coleman’s position to acquaint himself with developments in important intercorporate negotiations. The fact that he did nothing to inform himself of the progress and character of the negotiations, at least after the “point of crisis” meeting, was a breach of a duty he owed as a director and a “controlling person” to the Victor shareholders. That Coleman’s failure to act was negligent as opposed to calculated should not insulate him from liability when action on his part might have prevented the fraud perpetrated by the corporation whose activities he was under a duty to supervise. I would hold, therefore, that Coleman’s negligent “omission to state material facts” to the purchasers of BarChris stock was a violation of § 10(b) and Rule 10b-5, and that Coleman should be held liable for the damages which the plaintiffs suffered. The district court held that Drexel could be liable only for the failures of its nominee and agent Coleman on a theory of respondeat superior, and that, as Coleman had been exonerated, Drexel won “its case by virtue of the dismissal against both Coleman and Ballard.” Because of my view on Coleman’s liability I would also reverse the district court’s determination with regard to the liability of Drexel & Co. Section 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a) (1970) provides: Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. It seems clear that this section was designed to govern the type of relationship that existed between Coleman and Drex-el as well as the kind of transaction that is involved in this case. Coleman was placed on BarChris’s board of directors at the behest of Drex-el to protect Drexel’s financial stake in the operations of BarChris. The relationship between Drexel and Coleman constitutes control by Drexel within the meaning of § 20(a) and establishes that Drexel did in fact induce Coleman to act or not to act. Myzel v. Fields, supra, 386 F.2d at 738, quoted with approval in Moerman v. Zipco, Inc., supra, 302 F. Supp. at 447. IV. Reliance Coleman and Drexel contended on this appeal that reliance is a necessary element of a claim for relief under § 10(b) and Rule 10b-5, and that the district court’s finding that plaintiffs, through their agent Shulman, relied on the oral and written misrepresentations is clearly erroneous. The liability which I find in this case results from the failure of Coleman to speak. In this type of 10b-5 case, affirmative reliance is not necessarily an element of the claim for relief. See Affiliated Ute Citizens v. United States, 406 U.S. 128, 153, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972). “In nondisclosure cases, reliance has little if any rational role.” 2 A. Bromberg, Securities Law —Fraud: SEC Rule 10b-5 at 209 (1967). See 6 L. Loss, Securities Regulation 3876-80 (1969). Even assuming, however, that reliance is a distinct element of the claim for relief in all 10b-5 cases, I believe that had Coleman fulfilled his obligations as a director, plaintiffs and Shulman might well have acted differently. List v. Fashion Park, Inc., supra. V. Conclusion I would reverse the dismissal of the complaint as to defendants Coleman and Drexel & Co. TIMBERS, Circuit Judge, with whom OAKES, Circuit Judge, joins, concurring in part and dissenting in part: I concur with the majority in affirming the denial of Kircher’s motion for jury trial, but I dissent from the majority’s affirmance of the dismissal of the complaint as to Coleman and Drexel & Co. I join in Judge Hays’ eminently sound opinion. In view of this appeal’s rather long gestation period, during which there have been a number of decisions in our Court under § 10(b) and Rule 10b-5 and related antifraud provisions of the federal securities laws, I should like to make clear my position with respect to the standard which I believe should be the basis for the imposition of liability upon Coleman and Drexel. In short, since I believe that Coleman’s conduct constituted reckless disregard for the truth, I would hold Coleman and Drexel liable on that basis under the settled law of this Circuit, without the necessity of reaching the question whether liability may be imposed here for mere negligent conduct. The following facts in my view demonstrate that Coleman acted in reckless disregard for the truth. He was added to the BarChris board of directors at the behest of Drexel to protect its substantial investment in BarChris. He was the most experienced member of the board with regard to financial and business matters. He was aware that Bar-Chris was acquiring Victor through an exchange of stock since he had voted for the acquisition in his capacity as a director. He was aware that BarChris had suffered many business reversals and that it suffered from severe intra-corporate dissension. Yet he did not know whether this unfavorable position had been disclosed to Victor. It became clear at the “point of crisis” meeting held on December 6, 1961 that one of the symptoms of BarChris’ lack of effective leadership was a “refusal to accept the fact that basic problems exist[ed] within the Company”. Until that time not even the board of directors had openly recognized “the management’s inability to cope with the existing problems”. Moreover, it was revealed at that meeting that only recently had certain mistakes and problems “come to light”. Coleman’s experience should have told him that, since neither the board nor the management of Bar-Chris would openly admit to themselves until the “point of crisis” meeting that they had serious problems, and since certain mistakes and problems had just recently been discovered, management obviously had not revealed these matters to outsiders such as Victor. But Coleman made no effort whatsoever to discover whether such information had been disclosed. One of the most significant facts hidden from Victor was that BarChris was suffering internal strife. The very nature of this fact should have caused Coleman to suspect that it had not been revealed to Victor. Intracorporate dissension is a sensitive and delicate matter which management typically (although improperly under the circumstances of this case) considers to be within the confidence of the corporation. There is a natural reluctance to expose the matter to “outsiders”. Moreover, all concerned usually experience an optimism (unjustified in the present case) that the problem is not as serious as it seems and promptly will be resolved. Under these circumstances, there was reason to suspect that the disputing parties — the management of BarChris — had not informed Victor of the problem. Yet Coleman, who was not a party to the internal strife, made no attempt to determine whether Victor had been apprised of this crucial fact. These facts, as well as others more fully set forth in Judge Hays’ opinion, make it clear to me that Coleman’s conduct constituted reckless disregard for the truth. Circumstances known to Coleman put him on notice that certain material facts in all likelihood had not been disclosed to Victor. Moreover, Coleman had ready access to sources of information which, had he used them, would have apprised him that these material facts had not been disclosed. We have held that such conduct subjects a person to liability under the antifraud provisions of the securities laws. Cohen v. Franchard Corp., 478 F.2d 115, 123 (2 Cir. 1973), slip op. 2819, 2834 (April 11, 1973); Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341, 362-364 (2 Cir. 1973), slip op. 4897, 4929-33 (March 16, 1973); Shemtob v. Shearson, Hammill & Co., 448 F.2d 442, 445 (2 Cir. 1971). A person cannot avoid liability by pleading ignorance where his knowledge and experience tell him that certain events or circumstances known to him require that further inquiry be made. Chris-Craft Industries, Inc. v. Piper Aircraft Corp., supra, 480 F.2d at 369-373, slip op. at 4944-51. Coleman should be held liable even though he may not have definitely known whether the material facts had been misstated or omitted because it was evident that he had seen “the seagulls on the water” and had ignored them. Finally, in not reaching the scienternegligence issue in the instant case, I wish to make it clear that I do not necessarily disagree with Judge Hays’ views on that issue. Since the record before us so clearly demonstrates Coleman’s reckless disregard for the truth, I would limit our holding to that basis of liability in this case. SEC v. National Securities, Inc., 393 U.S. 453, 465 (1969). And I would leave to another day the adjudication of the scienter-negligence issue — in a case where the only basis for imposition of liability in a private action for damages under § 10(b) and Rule 10b-5 is negligence. This is not that case. . The opinion below is reported in [1970-71 Transfer Binder] CCH Fed.Sec.L.Rep. ¶ 92,826 (S.D.N.Y.1970) at 90,089 [here inafter cited as Lanza], Citations will be to page numbers. . For the purposes of this ease, Judge Frankel below considered that the requirements for a private cause of action under § 17(a) were identical to those under Rule 10b-5. Lanza, supra note 1, at 90,101 n. 14. We do likewise. The theories of common law fraud and prima facie tort were suggested to the court in a post-trial memorandum. . Judge Frankel dismissed plaintiffs’ theory of prima facie tort as follows: “Their cursory argument on this subject is not substantial.” Lanza, supra note 1, at 90,101 n. 13. . Kircher's appeal is not submitted to the en hanc court. We include the panel’s unanimous opinion affirming Judge Frankel’s denial of Kireher’s motion for a trial by jury infra. Defendants Vitolo and Pugliese have reached a settlement with the plaintiffs. Defendant Russo’s appeal was dismissed by this court as untimely. While plaintiff-appellants’ notice of appeal indicates that they challenge Judge Frankel’s dismissal of the complaint as to defendant Ballard, they have not argued to this Court that that dismissal was erroneous. . SEC v. National Securities, Inc., 393 U.S. 453, 465, 89 S.Ct. 564, 571, 21 L.Ed. 2d 668 (1969). . 283 F.Supp. 643, 653-654 (S.D.N.Y. 1968) (footnotes omitted). . Coleman returned as chairman of the hoard in July, 1962, and stayed on in that capacity until October, 1962, when BarChris petitioned for an arrangement under Chapter XI of the Bankruptcy Act. See Lanza, supra note 1, at 90,091, 90,098. . Id. at 90,091. . Id. at 90,092. . Deposition of Sidney Shulman, Plaintiffs’ Exhibit No. 150, at 18 [hereinafter cited as Exh. No. 150]. This deposition was received into evidence at the trial. . Id. at 25. . Id. at 27. . Lanza, supra note 1, at 90,094, n. 3. . Exh. No. 150, supra note 10, at 30. '. Id. at 54. . Lanza, supra note 1, at 90,104. . Transcript of Trial at 2985. . On the basis of Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), decided subsequent to the date that the three-judge panel heard the appeals herein, plaintiffs claim that the court below should have awarded damages based upon the difference between the actual value of the BarChris securities issued to plaintiffs and the value those securities would have had in the absence of any deception. The appraisal of the value which the stock market might have put on thig knowledge would have been highly speculative. In light of our disposition of plaintiffs’ appeal, we do not consider this argument. . Testimony of Coleman: [Document handed to the witness] I consider this release to be one which was puffy in tone. It doesn’t say anything of great importance. It doesn’t overestimate sales, at least it didn’t to my way of thinking at the time. It didn’t overestimate earnings. It did have something on the back of it like three balls in the area here, A, B, BC, the A standing for American Machine & Foundry, the B standing for Brunswick, two of the largest in the industry, and BC standing for BarChris. Now you could imply, “And now there are three,” that there is some similarity in size between these three. Now it is true that BarChris was probably the third force in the bowling industry at this time, but very much smaller than the other two. It is that type of thing that is sort of— The Court: Now, you have said several times, and counsel make a good deal of this, and I think perhaps the record ought to show at least your view of it, that something can be inaccurate but not false. And I take it that is the thing to which you are applying it. In what respect was it inaccurate? The Witness : It was an exaggeration. The Court: And a thing, if it is a characterization is inaccurate but not necessarily false, is that what you are saying? The Witness: That’s my general context. . Transcript at 2735-37. . Testimony of Coleman : My general opinion of the financial condition of BarChris at this time was that although it was in a tight cash position it was still doing a lot of business. They were building a number of alleys. I knew the fact that they were building a number for T-Bowl under contract. They were building some others in New England, they were building the Bowl-A-Way job for the Feldman brothers ; an alley I believe in Toronto. I knew that at this time they were still buying sites, in fact I think in the fall of 1961 they bought half a dozen sites in areas which they considered to be favorably situated in North Carolina and Florida, District of Columbia and I believe one in Arizona. I also knew at this time that there were at least three defaults that had taken place but I would say that on balance I thought that the outlook, although not as good as it had been at the time of the debenture offering, was still good. Id. at 3020-21. . Lanza, supra note 1, at 90,097. . Testimony of Coleman : Q. My question to you now is did you change your opinion of the business and financial condition of BarChris as a result of hearing that statement, and, if so, tell us in what ways ? A. No, I don’t think I changed my opinion of the business, my opinion of the financial condition of BarChris. I certainly felt that there was a management crisis at hand. Transcript at 3023. . Testimony of Coleman : The Court: In the meeting of December 6, 1961 did you believe that this was a grave accusation, important for you in your role as a director? The Witness: I thought the whole accusation was grave, yes, sir. The Court: And did you feel that you ought to take steps to save yourself one way or another on the issues raised by Mr. Kireher’s charges against Russo and others? The Witness : I don’t think I thought I had to make a specific investigation of each charge. I think that I thought that this thing represented a crisis in management, that one group of the management had obviously come to an impasse with the other group, and that we ought to get some outside help to see what could be done about putting the company’s affairs in order. Id. at 2877. . Testimony of Coleman reviewing the minutes of the point-of-crisis meeting: Mr. Kircher goes on to say such factors as low down payments, poor credit checkings, high financing costs, poorly written contracts, incomplete documentation, inadequate cost estimation when they appear in a booming industry tend to be lost in the shuffle take on a different light in today’s market. As to low down payments I didn’t understand what Mr. Kirchner meant there, whether he thought that BarChris wasn’t getting their 15 or 25 percent. I did ask him shortly after this meeting, I don’t know the exact date, what he meant, and Mr. Kircher stated that he thought the down payments, even of 15 to 25 percent, were too low in an industry such as the bowling industry where you are dealing with non-affluent customers. He also indicated that it became increasingly important to have a higher equity position and higher down payment. Id. at 2883-84. . Id. at 2890. . Testimony of Coleman : On the stock question, I had not noticed any actions or business decisions which in my opinion were dictated by concern over the price of the stock at this time, and I didn’t notice any up until the time of the Eseott case. When we got the Eseott minutes, I did see one minute of an executive committee meeting, I believe it was in March or February of 1960, which was prior to the prospectus, which spoke of the negotiation or the possible negotiation with Brunswick of a $15 million or $16 million contract, and Russo at that time indicated that he wanted this contract signed, sealed and delivered with great hast [sic] because he said it will make the most marvelous publicity. Now, as far as I know that is the only instance that came to my attention where a business decision was dictated by concern over the price of the stock. Id. at 2893-94. . Lanz, supra note 1, at 90,105. . Id. . Id. at 90,104. . See Ruder, Multiple Defendants In Securities Law Fraud Cases: Aiding and Abetting. Conspiracy, In Pari Delicto, Indemnification, and Contribution, 120 U.Pa.L.Rev. 597 (1972). . SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir. 1968) (en banc), cert. denied, 394 U.S. 976, 89 S.Ct. 1454, 22 L.Ed.2d 756 (1969), quoting Chairman Cary in Cady, Roberts & Co., 40 S.E.C. 907, 912 (1961); Speed v. Transamerica Corp., 99 F.Supp. 808, 829 (D.Del.1951) (Leahy, Ch. J.), modified and aff’d, 235 F. 2d 369 (3d Cir. 1956): The duty of disclosure stems from the necessity of preventing a corporate insider from utilizing his position to take unfair advantage of the uninformed minority stockholders. It is an attempt to provide some degree of equalization of bargaining position in order that the minority may exercise an informed judgment in any such transaction. . One of the primary purposes of the [1934 Act] was to outlaw the use of inside information by corporate officers and principal stockholders for their own financial advantage to the detriment of uninformed public security holders. . It was one day in the year 1943, I believe. I was sitting in my office in the S.E.C. building in Philadelphia and I received a call from Jim Treanor who was then the Director of the Trading and Exchange Division. He said, “I have just been on the telephone with Paul Rowen,” who was then the S.E.C. Regional Administrator in Boston, “and he has told me about the president of some company in Boston who is going around buying up the stock of his company from his own shareholders at $4.00 a share, and he has been telling them that the company is doing very badly, whereas, in fact, the earnings are going to be quadrupled and will be $2.00 a share for this coming year. Is there anything we can do about it?” So he came upstairs and I called in my secretary and I looked at Section 10(b) and I looked at Section 17, and I put them together, and the only discussion we had there was where “in connection with the purchase or sale” should be, and we decided it should be at the end. We called the Commission and we got on the calendar, and I don’t remember whether we got there that morning or after lunch. We passed a piece of paper around to all the commissioners. All the commissioners read the rule and they tossed it on the table, indicating approval. Nobody said anything except Sumner Pike who said, “Well,” he said, “we are against fraud, aren’t we? ” That is how it happened. Freeman, Conference on Codification of the Federal Securities Laws : Administrative Procedures, 22 Bus.Law, 793, 891, 922 (1967). The quotation is taken from remarks made by Mr. Freeman in a discussion following the presentation of his paper at a securities law symposium, . Senate Comm, on Banking & Currency, Stock Exchange Practices, S.Rep.No.1455, 73d Cong., 2d Sess. (1934). This report, some 394 pages in length, devotes 13 pages to the activities of corporate directors. The only point it makes relevant to our inquiry is summed up as follows : The Securities Exchange Act of 1934 aims to protect the interests of the public against the predatory operations of directors, officers, and principal stockholders of corporations by preventing them from speculating in the stock of the corporations to which they owe a fiduciary duty. Id. at 68 (explaining the purpose of section 16(b)). . H.R.Rep.No.1383, 73d Cong., 2d Sess. (1934). This report lists six purposes of the proposed legislation: (1) control of credits ; (2) control of manipulative stock market practices (e. g., wash sales, matched orders, stock market pools) ; (3) the provision of adequate and honest reports to security holders by registered corporations; (4) control of unfair practices by corporate insiders ; (5) control of exchanges and over-the-counter markets; and (6) administrative reform. Id. at 7-16. . S.Rep.No.792, 73d Cong., 2d Sess. (1934). This report likewise contains no evidence of any attention to the obligations of directors to insure that all material, adverse information is conveyed to prospective purchasers of the company’s stock. Indeed, this report’s explanation of the civil liability provisions of the bill gives rise to the inference that no such duty was intended: [T]lie bill provides that any person who unlawfully manipulates the price of a security, or who induces transactions in a security by means of false or misleading statements, or who makes a false or misleading statement in the report of a corporation, shall be liable in damages to those who have bought or sold the security at prices affected by such violation or statement. In such case the burden is on the plaintiff to show the violation or the fact that the statement was false or misleading, and that he relied thereon to his damage. The defendant may escape liability by showing that the statement was made in good faith. Id. at 12-13 (explaining §§ 9 and 18 of the hill). . H.R.Rep.No.1838, 73d Cong., 2d Sess. (1934) (to accompany H.R. 9323). . S.Rep.No.792, 73d Cong., 2d Sess. 9 (1934). . Comment, Negligent Misrepresentations Under Rule 10b-5, 32 U.Chi.L.Rev. 824, 828 (1965). See III L.Loss, Securities Regulation 1430-42 (2d ed. 1961), [hereinafter cited as Loss], VI Loss 3534-53 (Supp.1969). . [1901] A.C. 477. . Id. at 485-86. Accord, Prefontaine v. Grenier, [1907] A.C. 101, 109-11 (P.C. 1906) (Quebec). . 298 F. 614 (S.D.N.Y.1924). . Id. at 620. . Shulman, Civil Liability and the Securities Act, 43 Yale L.J. 227, 240-41 (1933) (footnotes omitted). For the common law view of liability for negligent misrepresentation as of 1934, see Bohlen, Should Negligent Misrepresentations Be Treated As Negligence or Fraud 1.8 Va.L.Rev. 703, 707 (1932): It is safe to prophesy that no such duty [to use reasonable care to disclose those dangerous conditions of which one is aware] will be imposed where the transaction is a commercial or financial one. Commercial ethics have improved but it is doubtful whether during the lifetime of any man now living they will reach a peak of perfection which requires those who play the commercial or financial game to lay their cards face upward on the table. . Pepper v. Litton, 308 U.S. 295, 306, 60 S.Ct. 238, 84 L.Ed. 281 (1939); Seaboard Indus., Inc. v. Monaco, 442 Pa. 256, 276 A.2d 305 (1971); Diamond v. Oreamuno, 24 N.Y.2d 494, 301 N.Y.S.2d 78, 248 N.E.2d 910 (1969); 3 W. Fletcher, Corporations § 838 (rev. vol. 1965). . See 2 A. Bromberg, Securities Law— Fraud—SEC Rule 10b-5, § 8.4 (505), at 204.106 (1971): “If there is a Congressional intent [as to the elements of a private cause of action under the Rule], it must be inferred from the words of § 10(b) and the Rule ... or from the juxtaposition of § 10(b) and the Rule with other portions of the 1933 and 1934 Acts In his article analyzing Bseott Professor Folk raises questions concerning the § 11 duties of directors that strikingly foreshadow the issue in today’s decision: [M]ust directors verify information in the sense that they must go beyond a careful, probing, primarily oral inquiry into the facts stated? To what extent may he [a director] rely upon reports of officers and other responsible corporate personnel? Folk, Civil Liabilities Under the Federal Securities Acts: The BarChris Case, 55 Va.L.Rev. 1, 199, at 69, 39 (1969) [hereinafter cited as Folk]. . Letter from Franklin D. Roosevelt to Congress, Mar. 29, 1933, reprinted in I Loss, supra note 38, at 127. This letter is in both House and Senate reports. H.R.Rep.No.85, 73d Cong., 1st Sess. 1 (1933); S.Rep.No.47, 73d Cong., 1st Sess. 6 (1933). . H.R. 5480, 73d Cong., 1st Sess. § 11 (1933). The section is described in essentially its present form (it was slightly amended in 1934) in H.R.Rep.No.85, 73d Cong., 1st Sess. 21-23 (1933). . H.R.Rep.No.85, 73d Cong., 1st Sess. 9, 5, 9-10 (1933). . S. 875, 73d Cong., 1st Sess. § 9 (1933), 77 Cong.Rec. 2981 (1933). . S.Rep.No.47, 73d Cong., 1st Sess. 4-5 (1933). . H.R.Rep.No.152, 73d Cong., 1st Sess. 26 (1933). . Landis, The Legislative History of the Securities Act of 1933, 28 Geo.Wash.L. Rev. 29, 47-48 (1959) (footnotes omitted). . Id. at 34; Folk, supra, note 45, at 13-17. See H.R.Rep.No.85, 73d Cong., 1st Sess. 9 (1933) : “The Committee is fortified in these sections [§§ 11 and 12] by similar safeguards in the English Companies Act of 1929.” . Section 37 provides in relevant part: (1) Where a prospectus invites persons to subscribe for shares in or debentures of a company— (a) every person who is a director of the company at the time of the issue of the prospectus; . . . shall be liable to pay compensation to all persons who subscribe for any shares or debentures on the faith of the prospectus for the loss or damage they may have sustained by reason of any untrue statement therein, or in any report or memorandum appearing on the face thereof, or by reference incorporated therein or issued therewith, unless it is proved— (i) that having consented to become a director of the company he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; or (ii) that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue he forthwith gave reasonable public notice that it was issued without his knowledge or consent; or (iii) that after the issue of the prospectus and before allotment thereunder, he, on becoming aware of any untrue statement therein, withdrew his consent thereto, and gave reasonable public notice of the withdrawal, and of the reason therefor; or (iv) that— (a) as regards every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, he had reasonable ground to believe, and did up to the time of the allotment of the shares or debentures, as the case may be, believe, that the statement was true; Companies Act, 1929, 19 & 20 Geo. 5, c. 23, § 37(1). . 20 T.L.R. 407 (Ch.1904). . Id. at 409. . [1915] 1 Ch. 557, affd, [1915] 2 Ch. 21 (C.A.). . The proceeds from the sale of stock were to be used to purchase two companies. The promoter of the purchases prepared the prospectus. Liability was predicated on a finding of gross neglect of duty: Unfortunately, the defendants collectively did nothing. On the evidence, as it stands, no inquiries were made, no proofs were called for, no questions were asked, no advice was taken, and no investigation whatever was made by the board. As a board they seem to have treated the settling and approving of the prospectus, prepared and put before them by the man whose interest it was to exaggerate and inflate the value of everything the company was about to acquire, as a mere formality. [1915] 1 Ch. at 565. . Compare 1933 Act § 11(b)(3)(A) (15 U.S.C. § 77k (b) (3) (A)) (“he [the director] had, after reasonable investigation. [sic] reasonable ground to believe and did believe”) with English Companies Act, 1929, 19 Sc 20 Geo. 5, c. 23, § 37(1) (“he [the director] had reasonable ground to believe, and did up to the time of the allotment of the shares . . . believe”). . 78 Cong.Rec. 10185 (1934) (remarks of Senator Byrnes); Folk, supra note 45, at 18; III Loss, supra note 38, at 1725. See, e. g., 78 Cong.Rec. 4984, 8710 (1934) (remarks of Senator Thomas). . 1934 Act, ch. 404, §§ 201-09, 48 Stat. 905-08. . 1934 Act, ch. 404, § 208, 48 Stat. 908. . Every person who, by or through stock ownership, agency, or otherwise, or who, pursuant to or in connection with an agreement or understanding with one or more other persons by or through stock ownership, agency, or otherwise, controls any person liable under section 11 or 12, shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable. 1933 Act, ch. 38, § 15, 48 Stat. 84. . 78 Cong.Rec. 8669 (1934). The amendment offered by Senator Fletcher read: [insert after last word of 48 Stat. 84] unless the act for which such controlled person is alleged to be liable under section 11 or 12 was not performed at the direction of the controlling person nor to enable such controlling person to evade liability under said sections. S. 3420, 73d Cong., 2d Sess. § 208 (1934), 78 Cong.Rec. 8668 (1934). . We rely without discussion on the proposition that the 1933 and 1934 Acts are to be construed in pari materia. VI Loss, supra note 38, at 3915-17. . See III Loss, supra note 38, at 1719-20, VI Loss at 3836-41, and cases cited therein. . Barnes v. Osofsky, 373 F.2d 269, 272 (2d Cir. 1967) (dictum). For the rationale for permitting actions under § 12 (2) when scienter is shown, see III Loss, supra note 38, at 1716. . Folk, supra note 45, at 206. . H.R.Rep.No.85, 73d Cong., 1st Sess. 5 (1933); Landis, supra note 52, at 37. . 458 F.2d 255 (3d Cir.), cert. denied, 409 U.S. 874, 93 S.Ct. 120, 34 L.Ed.2d 126 (1972). . 458 F.2d at 280 (concurring and dissenting) . . See Demarco v. Edens, 390 F.2d 836 (2d Cir. 1968) (finding an issuer not liable under § 15, 1933 Act, for the material omissions of its best-efforts underwriter); Gould v. Tricon, Inc., 272 F.Supp. 385, 392 (S.D.N.Y.1967) (finding that a director has no duty under § 12(2) to inquire into the background of a co-director whose biography was included in a prospectus and which contained a material omission). . 461 F.2d 1123 (6th Cir.), cert. denied, 409 Ü.S. 1023, 93 S.Ct. 465, 34 L.Ed. 2d 315 (1972). . 461 F.2d at 1125. . Id., quoting Judge Hogan’s findings below. . Id. at 1126, quoting Judge Hogan. . 437 F.2d 279 (9th Cir. 1971). . Id. at 283 (citation omitted). . 302 F.Supp. 439 (E.D.N.Y.1969), aff’d on opinion below, 422 F.2d 871 (2d Cir.), petition for rehearing denied by opinion, 430 F.2d 362 (2d Cir. 1970) (per curiam). . 302 F.Supp. at 446-447. The court dismissed the Rule 10b-5 claims against all of the directors because “[t]he uncontra-dicted evidence is that none of the defendants knew or in any way induced Nasser’s fraud. While other defendants participated in the sale of unregistered securities for which they may have incurred personal liability under Section 12(1), no plan or conspiracy to defraud purchasers was shown.” Id. . The issue on appeal was Judge Judd’s finding that defendants had violated Connecticut’s Blue Sky Law. See 302 F. Supp. at 448-451. . 430 F.2d at 363. . See III Loss, supra note 38, at 1712-19; VI Loss at 3834-40. . 382 F.2d 689 (9th Cir. 1967), cert. dismissed, 393 U.S. 801, 89 S.Ct. 40, 21 L.Ed.2d 85 (1968). . See 382 F.2d at 697. SEC v. Texas Gulf Sulphur Co., supra, 401 F.2d at 862. . 436 F.2d 88 (2d Cir. 1971). . Id. at 90. We found both actual knowledge and warning signals. Id. at 91. . 407 F.2d 453 (2d Cir. 1968) (en banc), cert. denied, 395 U.S. 920, 89 S.Ct. 1770, 23 L.Ed.2d 237 (1969). . 407 F.2d at 459. . 259 F.Supp. 673 (N.D.Ind.1966) (motion to dismiss denied), 286 P.Supp. 702 (N.D.Ind.1968) (on merits), aff’d, 417 P.2d 147 (7th Cir. 1969), cert. denied, 397 U.S. 989, 90 S.Ct. 1122, 25 L.Ed. 2d 397 (1970). . 259 F.Supp. at 676. . See 259 F.Supp. at 680, quoting Restatement of Torts § 876(b) (1939). . 259 F.Supp. at 681-682. . See 286 F.Supp. at 708-724. . 417 F.2d at 154-155. . Recent decisions of the Supreme Court applying Rule 10b-5 have stressed the “fraud or deceit” aspects of the Rule and have all involved active participants in the fraud. In SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 84 S.Ct. 275, 11 L.Ed.2d 237 (1963), the defendants in their Investment Service recommended certain securities for purchase, knowing that their recommendation would cause the securities to advance in price. They then, prior to publication of their Service, bought these same securities for their own account. After the price increase had been achieved, they sold the securities at a profit. The defendants were active participants in the scheme. In Superintendent of Ins. of N.Y. v. Bankers Life & Cas. Co., 404 U.S. 6, 92 S.Ct. 165, 30 L.Ed.2d 128 (1971), the defendants held liable were actively involved in the fraudulent scheme which resulted in the purchase of Manhattan’s stock out of its own assets. As the Supreme Court said, “The crux of the present case is that Manhattan [Casualty Co.] suffered an injury as a result of deceptive practices touching its sale of securities as an investor.” 404 U.S. at 12-13, 92 S.Ct. at 169. Finally, in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), the Court held liable individual defendants who, as bank employees, were actual participants in inducing sales of stock without disclosing material facts which could have been expected to influence the sellers’ decisions to sell. . In determining was constitutes “willful or reckless disregard for the truth” the inquiry normally will be to determine whether the defendants knew the material facts misstated or omitted, or failed or refused, after being put on notice of a possible material failure of disclosure, to apprise themselves of the facts where they could have done so without any extraordinary effort. Chris Craft Indus., Inc. v. Piper Aircraft Corp., 480 F.2d 341, 363-364, 396-399 (2d Cir. 1973). The answer to the inquiry will of course depend upon the circumstances of the particular case, including the nature and duties of the corporate positions held by the defendants. . Bishop, Sitting Ducks and Decoy Ducks: New Trends in the Indemnification of Corporate Directors and Officers, 77 Yale L.J. 1078, 1092 (1968). . Id., citing J. Bacon, Corporate Directorship Practices 6 (Nat’l Indus. Conference Bd. 1967). . Bishop, supra note 99, at 1092-93. In addition, of course, they should establish objectives for management to achieve. . Brief for SEC as Amicus Curiae at 5. The SEC urges us to remand the case to Judge Frankel for further findings of fact on whether Coleman had reason to believe that a misleading picture of Bar-Chris’s affairs was being conveyed to plaintiffs. We reject the position implicit in this request that a director owes a duty of diligence to prospective purchasers to insure that all material, adverse information is conveyed to such purchasers, and therefore deny the Commission’s request. . Douglas & Bates, The Federal Securities Act of 1933, 43 Yale L.J. 171, 195 (1933) (footnotes omitted). . Lanza, supra note 1, at 90,105 n. 18. See Folk, supra note 45, at 70, 75 (discussing a director’s § 11 duties): [ Verification should be expected of any director if he has reasonable suspicions concerning the integrity of the officers, or if their representations conflict with facts he knows or documents he is familiar with, or are self-contradictory or inconsistent with statements of other responsible persons. * * * sfc * [A] general verification requirement for directors would be difficult to define, unpleasant to administer, and in some instances unfair in result. State legislatures apparently were equally aware. State blue sky laws universally exempt directors from liability for fraud perpetrated by corporate officers unless the directors are in some meaningful sense culpable participants in the fraud. There arc generally two types of statutes. First, there are those modelled after § 410(b) of the Uniform Securities Act (as amended 1958) (7 Uniform Laws Ann. 691, 770-71 (1970)): Every . . . director of such a seller [who, inter alia, offers or sells a security by means of an untrue statement of material fact, etc. ...]... [is] also liable jointly and severally with anti to the same extent as the seller, unless the non-seller who is so liable sustains the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. Notice that there is no affirmative duty of investigation. See Ala-Code tit. 53, § 45(2) (b) (Supp.1971); Alaska Stat. § 45.55.220(c) (1962); Ark.Stat.Ann. § 67-1256 (b) (1966); Cal.Corp.Code § 25504 (West Supp.1973); Col.Rev.Stat. § 125-1-21(2) (1963); Conn.Gen.Stat. Ann. § 36-346(b) (1969); D.C.Code Ann. § 2-2413 (b) (1967); Idaho Code § 30-1446(2) (1967); Ind.Stat.Ann, § 23-2-1-19 (b) (Burns Code ed. 1972); Kan. Stat.Ann. § 17-1268(b) (Supp.1972); Ky.Rev.Stat.Ann. § 292.480(2) (Supp. 1972); La.Rev.Stat. § 51:715B (West Supp.1973); Md.Ann.Code art. 32A, § 34 (b) (1967); Mich.Comp.Laws Ann. § 451.810(b) (1967); Mo.Ann.Stat. § 409. 411(b) (Supp.1973); Mont.Rev.Code Ann. § 15-2022(2) (1967); Neb.Rev. Stat. § 8-1118(2) (1970); N.J.Stat.Ann. § 49:3-71(b) (1970); Ore.Rev. Stat. § 59.115(3) (1971); S.C.Code § 62-310 (1962); Utah Code Ann. § 61-1-22(2) (1968); Va.Code § 13.1-522 (b) (1973); Wash.Rev.Code Ann. § 21.20.430 (2) (Supp.1972); Wis.Stat.Ann. § 551.-59(4) (Supp.1973); Wyo.Stat.Ann. § 17-117.22 (b) (1965). The second general type of statute exempts the director unless he “participates” or “personally participates” in the violation. See Fla.Stat.Ann. § 517.21(1) (1962); Ga.Code Ann. § 97-114 (1968); Hawaii Rev.Stat. § 485-20(a) (1968); Ill.Ann.Stat. ch. 121½, § 137.13A (Smith-Hurd 1960); Iowa Code Ann. § 502.23 (1949) (participation must be knowing); N.Mex.Stat.Ann. § 48-18-31 (1966); N.C.Gen.Stat. § 78-22 (1965); N.Dak.Century Code § 10-04-17 (1960); Okla.Stat.Ann. tit. 71, § 408(b) (1965); S.Dak.Comp.Laws Ann. § 47-31-133 (1969); Tenn.Code Ann. § 48-1645 (1964). New York, Delaware, and the Model Business Corporation Act specifically sanction good faith reliance by directors on financial statements of the corporation represented to them to be correct by the president, controller, or a public accountant. Del.Code Ann. tit. 8 § 141(e) (Supp.1970); N.Y.Bus.Corp.Law § 717 (McKinney 1963). See ABA-ALI Model Bus.Corp.Act § 48(c) (West 1971). . H.R.Rep.No. 85, 73d Cong., 1st Sess. 10 (1933). See also a discerning analysis of the business and legal problems facing the outside director in Blough, The Outside Director at Work on the Board, 28 Record of N.Y.C.B.A. 202 (1973). . See note 4, supra. . Contrary to Kircher’s assertions, none of the complaints alleges claims for relief for common law fraud or prima facie tort under New York law. These theories of recovery were apparently suggested to Judge Frankel in a post-trial memorandum. The question of whether Kircher could have demanded a trial by jury as of right, if the amendments specifically alleged the legal conclusion that plaintiffs could recover under a theory of prima facie tort, is moot since Kircher was not found liable on that ground. The second amendment to the complaint alleged defendants’ willfulness; there is no specific allegation of common law fraud. The allegation of willfulness was apparently included as the basis for the prayer for punitive damages. . Escott v. BarChris Construction Corp., supra, at 693. . In the instant action Judge Frankel ruled that the defendants were collaterally es-topped from contesting these findings, a ruling that is not challenged on this appeal. . “(1) The 1960 sales figure was overstated by $653,900. (2) The figure for 1960 net operating income was stated to be $1,746,347 whereas it should have been $1,496,196. (3) The figure for total current assets was stated to be $4,581,963; it should have been $3,914,332. (4) The figure for contingent liability on the alternative method of financing (sale-leaseback) as of December 13, 1960, was stated to be $750,000. An additional $457,045 should have been included relating to Asbury Lanes and Torrington Lanes. The sum of $81,250 relating to Capitol Lanes should n.ot have been included because this was a direct liability of BarChris, not contingent. The contingent liability figure, after these additions and subtractions, was understated by $375,795.” . “(1) As with the annual report and the prospectus, the net sales and gross profit figures in the earnings statement were overstated. (2) Current assets were overstated in the balance sheet because there was a grossly inadequate reserve in accounts receivable against customers’ defaults. This is true even if we accept, as the court does, that this is a matter on which there is latitude for variable accounting judgments. The purported judgment reflected in the BarChris six-month statement is well below any a rguable lower limit. (3) The earnings statement showed an operating income of $617,229. This figure was overstated, again because of the inadequate reserve against customer defaults. Similarly lacking was a reserve for notes on which BarChris was contingently liable. (4) The statement of net earnings (listed as $237,007) and the earnings per share figure (20 cents per share) were grossly inflated. If the undisclosed adverse circumstances had been taken into account, the earnings for the period would have been sharply reduced or erased. (5) The financial statement told about some non-consolidated subsidiaries (note 1), but failed entirely to mention other such subsidiaries which had been set up to operate repossessed bowling centers or alleys built “on speculation” and never sold. (6) The financial statement was misleading in that a substantial amount of customers’ notes were already past due, thus increasing the possibility that Bar-Chris would become directly liable if the customers defaulted.” The district court also found that at the November 3 meeting Kircher orally represented that BarChris’s financial situation would be better than that for the previous year. . The number of shares received by plain-by the mean value of the BarChris stock tiffs was arrived at by dividing $250,000 for 30 days prior to the closing. . The following reports were issued: June 20, 1961: Letter to Shareholders July 19, 1961: “Record Sales and Earnings Reported by BarChris for First Six months” August 2, 1961: “BarChris Issues Explanation of Revised Six Months Statement” October 3, 1961: “An Important Report to the Financial Community” October 31, 1961: “BarChris Reports Record Sales, Earnings for Nine Months Ended September 30” November 22, 1961: “BarChris Declares 4% Stock Dividend” Plaintiffs admit that they neither saw nor relied upon these documents. The district court held that as plaintiffs’ claims for damages were based on the amount they paid to the trustee for the return of the stock, not the market price of BarChris stock which might have been artificially raised by the statements in these reports, plaintiffs could not base their damage claim on misrepresentations in documents they never saw. . Securities Exchange Act of 1934 § 20(a), 15 U.S.C. § 78t(a) (1970). . Judgment was entered in the district court on October 13, 1970. The appeal originally was argued before a panel of this Court on September 16, 1971. It was reargued before this Court sitting en banc on November 1, 1972. . As experienced mariners know, well in advance of a storm seagulls assume a V-formation on the surface of the water, heading into the wind to weather the storm. When old salts see this, they take heed and prepare for the storm. . Especially since it is well recognized that Judge Hays’ views on the meaning of Rule 10b-5 for years have been in the vanguard of important developments in this area. See, e. g., Superintendent of Insurance v. Bankers Life and Casualty Co., 404 U.S. 6 (1971), unanimously rev’g 430 F.2d 355 (2 Cir. 1970) (Hays, C. J., dissenting) ; Schoenbaum v. Firstbrook, 405 F.2d 215 (2 Cir. 1968) (en banc opinion by Hays, C. J., reversing panel decision from which Hays, C. J., dissented), cert. denied, 395 U.S. 906 (1969).

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2024-08-24T03:29:51.129683

RING POWER CORPORATION, Plaintiff-Appellee, v. OIL SCREW TUG “SNIPE”, etc., Defendant-Appellant. No. 73-1258 Summary Calendar. United States Court of Appeals, Fifth Circuit. May 24, 1973. Rehearing Denied June 26, 1973. Gary B. Tullís, C. Wayne Alford, Jacksonville, Fla., for defendant-appellant. Clark W. Toole, Jr., E. Dale Joyner, Jacksonville, Fla., for plaintiff-appellee. Before GEWIN, COLEMAN and MORGAN, Circuit Judges. Rule 18, 5 Cir.; See Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York, et al., 5 Cir. 1970, 431 F.2d 409, Part I. PER CURIAM. This appeal stems from the recognition of a maritime lien on the Oil Screw Tug “Snipe” in favor of Ring Power Corporation by the district court for the Middle District of Florida sitting in admiralty without a jury. The owners of the “Snipe” appeal. We affirm. The basic question in this appeal is whether or not the evidence was sufficient to establish that the true owners of the tug, Transportation Equipment Leasing Corporation, authorized certain repairs to the vessel and waived a “no lien” provision in its contract with the charterer so as to create a lien under 46 U.S.C. § 971. The court found that TEL had authorized the repairs, either expressly or implicitly through its actions. There is ample evidence to support this finding. We agree with the language of an earlier opinion from this circuit dealing with this same problem of authorization in which the court stated: Consequently we think this case — a swearing match between live swearers whose credibility had to be, and was, resolved by the Judge — must end with the trial Court since these findings were not clearly erroneous, (citations omitted) Yacht, Mary Jane v. Broward Marine, Inc., 5 Cir. 1963, 313 F.2d 516, 517. Therefore, the judgment of the district court in this cause is Affirmed.

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2024-08-24T03:29:51.129683

JEWEL COMPANIES, etc., et al., Plaintiffs-Appellants, v. FEDERAL TRADE COMMISSION, Defendant-Appellee. No. 72-1382. United States Court of Appeals, Seventh Circuit. Argued Jan. 19, 1973. Decided March 15, 1973. Joseph F. Ryan, Boston, Mass., Alex Akerman, Jr., Washington, D. C., Theodore A. Groenke, Chicago, 111., for plaintiffs-appellants. Harold D. Rhynedance, Jr., F. T. C., Washington, D. C., Alvin L. Berman, Robert E. Duncan, Attys., F. T. C., Washington, D. C., James R. Thompson, U. S. Atty., William T. Huyck, Chicago, 111., Alan S. Rosenthal, Dept, of Justice, Washington, D. C., for defendant-appellee. Before CASTLE, Senior Circuit Judge, and FAIRCHILD and SPRECHER, Circuit Judges. ORDER PER CURIAM. On July 10, 1969, the Federal Trade Commission issued five administrative complaints against the present plaintiffs-appellants. The complaints were issued by a 3-2 vote of the Commission and alleged a violation of Section 2(c) of the Clayton Act, as amended by the Robinson-Patman Act. Thereafter, plaintiffs-appellants filed suit in district court seeking a declaration that the administrative complaints were void and an injunction restraining the Commission from conducting administrative proceedings pursuant to the complaints. The Commission moved to dismiss the complaint for failure to exhaust existing administrative and judicial remedies. In denying this motion, the district court certified the order for appeal pursuant to 28 U.S.C. § 1292(b). This court granted leave to appeal and ultimately determined that the district court did have jurisdiction to consider plaintiffs’ allegations as set forth in Count II of their complaint. Count II in essence alleged that one of the commissioners, Commissioner MacIntyre, had improperly interpreted his statutory obligation as a commissioner in voting for issuance of the complaint. Therefore, recognizing that “[wjithout Commissioner MacIntyre’s vote the complaint could not have issued since two commissioners dissented”, the cause was remanded for proceedings “not inconsistent” with this court’s opinion. See Jewel Companies, Inc. v. F.T.C., 432 F.2d 1155, 1159 (7th Cir. 1970). Following remand, the Commission on December 28, 1970, moved to hold in abeyance and stay for 90 days the pending court proceeding so as to permit “the Commission to reconsider its decision to issue the administrative complaints involved in the case”. The brief which accompanied the motion stated that the Commission sought a chance to review its action not only because of the decision of this court, but also because of a change in the membership of the Commission. (At the time the motion was filed, the two dissenting commissioners had been succeeded by two new commissioners.) Plaintiffs did not oppose this motion, but did, on January 6, 1971, file a motion for summary judgment. In their brief accompanying the motion, plaintiffs argued that no factual issues remained because this court had determined that Commissioner MacIntyre had construed his obligation as permitting no exercise of discretion in the public interest. They therefore urged the district court to hold that administrative discretion may be exercised in deciding whether to issue complaints and that Commissioner MacIntyre’s allegedly erroneous interpretation of his statutory obligation entitled them to a permanent injunction against the administrative proceedings. On January 21, 1971, the district court entered an order providing that the Commission would have until May 15, 1971, to file a response to plaintiffs’ motion for summary judgment and that, during the pendency of plaintiffs’ motion, the Commission could reconsider its decision to issue the administrative complaints, provided • that plaintiffs were afforded the opportunity to be heard in connection with the reconsideration. On February 5, 1971, the Commission notified plaintiffs of its determination to reconsider its decision to issue the five administrative complaints and indicated that plaintiffs could file briefs on this question. Thereafter, plaintiffs pressed their position regarding the appropriateness of issuance of the complaints both by filing extensive briefs and by participating in oral arguments before the Commission. On April 12, 1971, the Commission, with all five members participating, ruled unanimously that issuance of the challenged administrative complaints was in the public interest and reaffirmed its decision to issue the complaints. Accompanying the order was a separate statement by Commissioner MacIntyre wherein he indicated that at the time the complaints were originally issued he had considered the public interest and was convinced that issuance was in the public interest. On May 24,1971, the Commission filed with the district court a motion to dismiss the complaint on the ground that this action had become moot, various exhibits to the motion including the Commission’s order and separate statement of Commissioner MacIntyre, and a memorandum brief in support of its motion and in opposition to plaintiffs’ motion for summary judgment. Thereafter, plaintiffs filed a brief in further support of their motion for summary judgment and in opposition to the Commission’s motion to dismiss. Finally, the Commission filed a reply to plaintiffs’ brief. On March 17, 1972, the district court entered a judgment from which the instant appeal was taken. While recognizing that the Commission had not yet filed an answer, the court concluded no further pleadings were required before the “ultimate relief” which both parties had sought in their respective motions could be granted. After reviewing the history of this litigation, with particular regard to the Commission's order and separate statement of Commissioner MacIntyre, the district court held: (1) that this action had not become moot, despite the Commission’s unanimous re-affirmance of its decision to issue the complaints; (2) that discretion must be exercised by the Commission when it contemplates issuance of administrative complaints; and (3) that “Commissioner MacIntyre had made it as clear as he can that, originally and at the time of reaffirmance, he exercised discretion in voting to issue the complaints”. Accordingly, the court ordered the entry of judgment in favor of the Commission on Count II, since in its view there was “no genuine issue of fact”. We conclude, however, that as soon as the Commission, after proceedings in which the plaintiffs participated, unanimously reaffirmed its decision to issue the complaints with a specific finding that issuance was in the public interest, the required foundation for the administrative proceeding was supplied or repaired, even if absent or defective earlier, and Commissioner MacIntyre’s original, and allegedly defective, vote was no longer of significance. Thus, the instant action had become moot, thereby depriving the district court of subject matter jurisdiction. Flast v. Cohen, 392 U.S. 83, 94-95, 88 S.Ct. 1942, 20 L.Ed. 2d 947 (1968). Accordingly, the district court should have dismissed the action on that ground. Even if the district court had found that Commissioner MacIntyre did not properly interpret his statutory obligation at the time the complaints were originally issued, this would not have entitled plaintiffs to a permanent injunction against all further proceedings concerning the practices which are the subject of the challenged complaints. At best, plaintiffs would only have been entitled to a declaration of the invalidity of the challenged complaints — the Commission’s power to issue superseding complaints, or perhaps, as was done here, reconsider issuance of the challenged complaints, could not have been diminished. Federal Power Commission v. Idaho Power Co., 344 U.S. 17, 20, 73 S.Ct. 85, 97 L.Ed. 15, 20 (1952); Federal Trade Commission v. Morton Salt Co., 334 U.S. 37, 55, 68 S.Ct. 822, 92 L.Ed. 1196, 1208-1209 (1948); Securities and Exchange Commission v. Chenery Corp., 332 U.S. 194, 200-201, 67 S.Ct. 1575, 91 L.Ed. 1995, 2001 (1947). The clerk of this court is directed to enter judgment modifying the judgment appealed from so as to dismiss Count II for mootness, and affirming the judgment as so modified. Costs on appeal are allowed to appellee.

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FIDELITY AND DEPOSIT COMPANY OF MARYLAND, Plaintiff-Appellee, v. SCOTT BROTHERS CONSTRUCTION COMPANY et al., Defendants, City Bank of Goodwater, Alabama, Defendant-Appellant. No. 72-2994. United States Court of Appeals, Fifth Circuit. July 2, 1973. Rehearing and Rehearing En Banc Denied Aug. 7, 1973. N. Lee Cooper, Sydney F. Frazier, Jr., co-counsel, Birmingham, Ala., for defendant-appellant. James E. Clark, Birmingham, Ala., for Fidelity. John H. Morrow, Birmingham, Ala., for Alexander Bank. C. C. Torbert, Jr., Opelika, Ala., for Scott. William I. Byrd, Alexander City, Ala., for Alexander City. Before BELL, GOLDBERG and SIMPSON, Circuit Judges. PER CURIAM: The legal and factual issues raised in this appeal are indistinguishable from those raised in the companion case of Fidelity & Deposit Co. of Md. v. Scott, etc., 5 Cir. 1972, 461 F.2d 640. The teachings of the opinion . in that case compel that we reverse the judgment of the District Court with directions that judgment be entered in favor of The City Bank of Goodwater. Reversed and rendered.

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UNITED STATES of America, Plaintiff-Appellee, v. Morris THOMAS, Defendant-Appellant. No. 73-1516 Summary Calendar. United States Court of Appeals, Fifth Circuit. July 24, 1973. Neil L. Heimanson, Atlanta, Ga. (court-appointed), for defendant-appellant. John W. Stokes, Jr., U. S. Atty., P. Bruce Kirwan, Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee. Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges. Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5th Cir. 1970, 431 F.2d 409, Part I. PER CURIAM: In compliance with the mandate set forth in Anders v.. California, 1967, 386 U.S. 738, 87 S.Ct. 1396, 18 L.Ed.2d 493, we have carefully reviewed this cause in its entirety, and conclude that there is no arguable merit in the appeal. It is therefore ordered, that the motion filed by Neil L. Heimanson, Esquire, for leave to withdraw as court-appointed counsel for Appellant is granted, and the appeal is dismissed as frivolous. See Local Rule 20. See also United States v. King, 5th Cir. 1972, 456 F.2d 1243; United States v. Mills, 5th Cir. 1971, 446 F.2d 1397; United States v. Minor, 5th Cir. 1971, 444 F.2d 521.

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UNITED STATES of America and Gerald T. Culver, Special Agent, Internal Revenue Service, Plaintiffs-Appellees, v. E. O. BUCK, Receiver for W. L. Moody and Company, Bankers, Defendant, v. Shearn MOODY, Jr., Intervenor-Appellant. No. 73-1431. United States Court of Appeals, Fifth Circuit. July 23, 1973. Rehearing Denied Aug. 13, 1973. Benjamin R. Powel, Galveston, Tex., for intervenor-appellant. Scott P. Crampton, Meyer Rothwacks, Asst. Attys. Gen., James H. Jeffries, III, Daniel F. Ross, Attys., Tax Div., Dept, of Justice, Washington, D. C., Anthony J. P. Farris, U. S. Atty., William L. Bowers, Jr., Asst. U. S. Atty., Houston, Tex., for plaintiffs-appellees. Charles Sapp, Houston, Tex., for other interested parties. Before AINSWORTH, GODBOLD and INGRAHAM, Circuit Judges. PER CURIAM: After consideration of the briefs, trial record, and memorandum opinion of the District Judge (356 F.Supp. 370), we conclude that the district court should be affirmed.

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Daniel P. MURPHY, Petitioner-Appellant, v. Hoyt C. CUPP, Respondent-Appellee. No. 71-2203. United States Court- of Appeals, Ninth Circuit. July 12, 1973. Howard R. Lonergan (argued), Portland, Or., for petitioner-appellant. John W. Osburn, Sol. Gen. (argued) Lee Johnson, Atty. Gen., Jim G. Russell, Asst. Atty. Gen., Salem, Or., for respondent-appellee. Before ELY and HUFSTEDLER, Circuit Judges. . Senior Judge Jertberg, who participated in this court’s original opinion, is now deceased. Since the Supreme Court’s opinion charts the only course which can now be taken, this opinion is being issued by the two surviving judges of the original three-judge panel. OPINION PER CURIAM: In a previous opinion concerning the subject cause, we reversed the judgment of the District Court. Murphy v. Cupp, 461 F.2d 1006 (9th Cir. 1972). Thereafter, the appellee’s petition for certiorari was granted, and the Supreme Court, reversing our judgment, has now remanded the cause to this court, “for further proceedings in conformity with the opinion of this Court.” Cupp v. Murphy, 412 U.S. 291, 93 S.Ct. 2000, 36 L.Ed. 2d 900 (1973). The Supreme Court’s mandate has now issued. Pursuant to that mandate, we now hold that the District Court’s judgment should be, and it hereby is, Affirmed.

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PENN YAN BOATS, INC., Plaintiff-Appellant, v. SEA LARK BOATS, INC., et al., Defendants-Appellees. No. 72-3027. United States Court of Appeals, Fifth Circuit. March 30, 1973. Rehearing Denied May 31, 1973. Before WISDOM, GEWIN and COLEMAN, Circuit Judges. PER CURIAM: Affirmed. See Local Rule 21. We adopt the opinion of the district court as the opinion of this Court. 359 F.Supp. 948. . See NLRB v. Amalgamated Clothing Workers of America, 5 Cir. 1970, 430 F.2d 966.

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ASSOCIATES DISCOUNTS CORPORATION, Plaintiff-Appellant, v. Louis RAY, Defendant-Appellee. No. 73-1009. United States Court of Appeals, Fifth Circuit. June 22, 1973. Louis D. Smith, Monroe, La., George E. Herendeen, South Bend, Ind., for plaintiff-appellant. Hewitt B. Johnson, Don H. Johnson, Robert C. Cudd III, Monroe, La., for defendant-appellee. Before GEWIN, THORNBERRY and SIMPSON, Circuit Judges. PER CURIAM: For reasons adequately stated in the opinion of the district court, 359 F.Supp. 73 (W.D.La.1973), the judgment is affirmed.

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BURNETT ELECTRONICS LAB., INC. v. The UNITED STATES. No. 489-71. United States Court of Claims. June 20, 1973. Donald H. Seifman, Washington, D. C., attorney of record, for plaintiff. David R. Schlee, Washington, D. C., with whom was Asst. Atty. Gen., Har-lington Wood, Jr., for defendant. Before COWEN, Chief Judge and DAVIS, SKELTON, NICHOLS, KASH-IWA, KUNZIG, and BENNETT, Judges. OPINION PER CURIAM: This case comes before the court on defendant’s motion, filed April 17, 1973, and plaintiff’s consent thereto, filed May 1, 1973, requesting that the court adopt in its entirety the report and recommended decision filed March 8, 1973, by Trial Commissioner David Schwartz pursuant to Rule 166(c) on plaintiff’s motion and defendant’s cross-motion for summary judgment. Upon consideration thereof, without oral argument, since the court agrees with the decision, as hereinafter set forth, it hereby affirms and adopts the same, granting defendant’s said motion of April 17, 1973, as the basis for its judgment in this case. Therefore, plaintiff is not entitled to recover, defendant’s cross-motion for summary judgment is granted, plaintiff’s motion for summary judgment is denied and the petition is dismissed. Cf. Astro Science Corporation v. United States, 471 F.2d 624, 200 Ct.Cl. - (Jan.1973). Opinion of Commissioner SCHWARTZ, Commissioner: Cross-motions for summary judgment require decision on two alternative claims by a Government contractor under a completed contract with the Navy. The first is a Wunderlich Act challenge to a determination of the Armed Services Board of Contract Appeals that the terms of the contract unambiguously required that a preproduction sample to be submitted by plaintiff-contractor conform strictly to the specifications — that the contract did not, reasonably interpreted, permit the sample to be merely representative of the units later to be produced in accordance with the specifications. The issue presents a question of law on which this court is free to make its own decision. The second prays for reformation of the contract, and for damages for breach of contract as reformed. The reformation desired would rectify an alleged mistake in the contract, to provide that the preproduction sample of the units to be produced under the contract might be “representative” of units conforming to specifications, and thus need not conform strictly to specifications. This claim, not within the Board’s jurisdiction (and not made before the Board), is entitled to a full, sometimes called de novo, hearing in which, however, any relevant findings of the Board are binding. United States v. Utah Constr. & Mining Co., 384 U.S. 394, 412-413, 418-419, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). The parties are in agreement that this claim may be decided on the record made before the Board. I Plaintiff was the low bidder on a fixed price contract awarded on December 19, 1962 for the supply to the Navy of 48 hand-held sonar sets for use by underwater divers, at a price of $921 each. The contract provided that plaintiff was, as a new supplier of such sets, required to submit a preproduction sample, fully tested by the contractor at its plant. Ninety days were allowed, after delivery of the sample, for the Government to test and conditionally to approve or disapprove. Following approval, production could take place. Prior to the advertisement of the contract, plaintiff had designed and produced a hand-held sonar set for underwater swimmers, called in the case the “off-the-shelf” unit, which plaintiff believed to be the best set yet developed. Plaintiff planned to submit the off-the-shelf unit as the preproduction sample under the contract and apparently expected that it could thereby begin production promptly after the award. After the award was made, the Navy’s technical representatives found that the off-the-shelf unit did not conform to the specifications for the set specified in the contract, and the Navy insisted that in compliance with the contract plaintiff design and produce a preproduction sample, and thereafter production units, in conformity with the specifications. This plaintiff eventually did, but at costs greater than it would have incurred had it been permitted to submit its off-the-shelf unit as the preproduction sample. These extra costs are now in suit. The Board found that the off-the-shelf unit did not conform to the specifications and that the contract clearly required the preproduction sample to conform strictly to the specifications; the contract language was implicitly held to be unambiguous. Burnett Electronics Lab., Inc. ASBCA No. 13663, 70-2 BCA Para. 8536, rehearing denied, June 15, 1972. Of the several contentions made to the Board and repeated in the petition, only one requires resolution — that the contract is ambiguous and was reasonably interpreted by the plaintiff to allow the required preproduction sample to be merely “representative” of the production units, without conforming strictly to specifications for the production units. The claim is based on the following quoted language, in which the words “preproduction equipment” refer to the preproduction sample and the words “production equipment” mean the 48 units to be produced in accordance with the specifications in the contract: SPECIFICATIONS AND SPECIAL PROVISIONS: PREPRODUCTION EQUIPMENT: 1 equipment under Item 1 (herein called the “preproduction equipment”), conforming in every respect to the requirements set forth under the heading “PRODUCTION EQUIPMENT” and manufactured with tools, materials and methods which are the same as or representative of those which will be used in the manufacture of the equipment to be furnished under Item(s) 1 (herein called “production equipment”), shall be submitted by the Contractor for approval by the Government. Said equipment shall not be submitted until after it has been fully tested by the Contractor at its plant to determine compliance with the aforesaid specification and preliminarily accepted by the cognizant Naval Inspector * * *. * * * * * * * -x- -» PRODUCTION EQUIPMENT: Equipment shall be in accordance with Military Specification MIL-D-22702-(SHIPS), dated 3 November, 1960 * * *. Plaintiff relies primarily on the words “manufactured with tools, materials and methods which are * * * representative of those which will be used in the manufacture” of the production units. Tools and methods used in the manufacture of the sample may vary from those used in the manufacture of the production units. Accordingly, plaintiff says, “materials” may also differ from the materials called for in the specifications and may merely be “representative.” The difficulty with this interpretation is that earlier in the quoted clause the preproduction sample is unmistakably described as a unit “conforming in every respect to the requirements” of the specifications for the production units. The whole sentence requires both that the sample conform “in every respect” to the specifications for the production units and that the sample be “manufactured with tools, materials and methods which are the same or representative of those” to be used in the manufacture of the production units. The provisions concerning manufacture relate to the process of making, not to compliance of the finished products with specifications, and do not derogate from the earlier-stated requirement that the sample conform in every respect to the specifications. If further evidence were needed, it is found in the next sentence, which provides for testing by the contractor “to determine compliance with the aforesaid specification,” and in the further provision, elsewhere in the contract, for a period of 90 days following submission of the sample, in which the Navy would itself test the sample for compliance with the specifications. It should be expected that a new supplier’s preproduction sample, on whose acceptance and approval production may begin, will be required to conform to specifications, and the contract language here abundantly so provided. There is no ambiguity. The contract is plain against plaintiff. The claim does not get past the first of the several hurdles for such claims of ambiguity — that there be in fact an ambiguity, and that the claimant’s interpretation be reasonable. Bishop Engineering Co. v. United States, 180 Ct.Cl. 411 (1967); Southern Constr. Co. v. United States, 176 Ct.Cl. 1339, 364 F.2d 439 (1966). If there were any ambiguity from the clause beginning with the word “manufacture,” the companion clause — '“conforming in every respect to the requirements” of the specifications — made the ambiguity so patent that plaintiff could not resolve the ambiguity in its own favor without bringing the matter to the attention of the Government’s officers. Having failed to do so, plaintiff assumed the risk of what is now seen to be its error in interpretation. Space Corp. v. United States, 470 F.2d 536, 200 Ct.Cl. - (1972). There are other defects in plaintiff’s case. One is that plaintiff has not shown and indeed, makes no effort to show that its unit was in fact “representative,” as plaintiff says it believed it was — that is, that the set departed so minimally from the specifications that plaintiff could and did in good faith believe it to be “representative” of the production units and thus a preproduetion sample permissible under plaintiff’s claimed interpretation. The Board found on good evidence that the plaintiff’s unit departed from specifications by reason of nonstandard electronic component parts, method of assembly and protective coatings. Plaintiff does not explain how a unit may depart from specifications in such obviously substantial respects and still be “representative” of units which comply with specifications. Absent such a showing, there is no foundation laid for the claim that plaintiff in the course of its bidding actually held to and relied upon the interpretation it now espouses. See Young Associates, Inc. v. United States, 471 F. 2d 618, 200 Ct.Cl. - (1973). Plaintiff’s president repeatedly testified that its off-the-shelf unit did in fact conform to specifications, and, in almost the same breath, that there were “minor” departures from specifications which he expected to eliminate following its conditional approval. The Board found that plaintiff did in fact realize that its set did not comply. The evidence, including this finding, which is well-supported, indicates that plaintiff, knowing that its off-the-shelf unit did not comply, nevertheless hoped somehow to sell it to the Navy as a substitute for complying units. One effort in this direction was an “alternative proposal” submitted with the bid, in which plaintiff offered the Navy its off-the-shelf unit at a price $66 lower per unit than the price quoted for the unit described by the specifications. The proposal was submitted in response to an invitation, in the bid papers, to submit cost saving proposals “for changing the drawing, specification or similar contractual requirements applicable to the supplies to be furnished under this contract,” which “would result in less costly supplies than those specified herein without impairing any of their essential functions and characteristics.” The already-designed, off-the-shelf unit, plaintiff said, was “more desirable for the Navy than any other unit yet produced” and would meet “all necessary requirements” of the specifications for the advertised unit. In this alternate proposal plaintiff was all but admitting that its off-the-shelf unit was different from that called for by the specifications and was urging it upon the Navy in preference to the specified unit. After rejection of the alternate proposal, plaintiff continued, vainly, to seek acceptance of the off-the-shelf unit under the contract. Before the award a Government officer came to stirvey plaintiff’s plant, to determine plaintiff’s capacity to perform the contract. Plaintiff told him that it would begin production based on the preproduction sample which it had ready, and that it could go into production almost immediately. The officer reported that: “Based on the bidder having the preproduction unit on item 1 completely designed and the tooling for the enclosure completed, production can begin two to three days after receipt of the contract.” The pre-a-ward-survey officer was no engineer. He recorded no interpretation by plaintiff that a non-complying, merely representative unit could pass muster as the preproduction sample. He was not there to, and did not, pass on the off-the-shelf unit as a preproduction sample. He was there to gather data on whether plaintiff could perform in the specified time. Plaintiff was either naive or misleading when it advised him that the preproduction unit was “completely designed” and that it could begin production immediately, if only because the off-the-shelf unit had never been tested, as required for compliance with the specifications. The episode proves no element of plaintiff’s claim, but only that plaintiff, new to Government business, impractically held to a plan to submit the off-the-shelf unit in performance of the contract. Even after the contract award, plaintiff apparently still hoped to sell its set to the Navy, by means of a waiver of the specifications. When a Government inspector visited plaintiff’s plant soon after the award, plaintiff’s president told him that he intended to use the off-the-shelf unit as the required pre-production sample — and, further that he wanted military specificatiom MIL-D-22702 — the specification for the production units — “deleted from the contract.” The juxtaposition of the statement of an intention to present the off-the-shelf unit as the preproduction sample with a request that the sample be freed from compliance with the specifications corroborates that plaintiff had little belief in or reliance upon an interpretation of the contract by which the off-the-shelf unit could be accepted as the preproduction sample. II The claim for reformation, too, must fail. Reformation is appropriate to rectify a plain mistake — usually clerical or arithmetical — in the formation of a contract, to conform the words of the contract to those the parties actually intended. Bromion, Inc. v. United States, 188 Ct.Cl. 31, 35, 411 F.2d 1020, 1022 (1969); Space Corp. v. United States, supra. The remedy has been extended from its traditional area of application —mutual mistake by the parties — to include cases where the Government knew or should have known of a mistake in a bid costly to the bidder. Southwest Welding & Mfg. Co. v. United States, 179 Ct.Cl. 39, 51, 373 F.2d 982, 989 (1967); Chernick v. United States, 178 Ct.Cl. 498, 504, 372 F.2d 492, 496 (1967); Ruggiero v. United States, 190 Ct.Cl. 327, 335, 420 F.2d 709, 713 (1970). The theory of these cases is that the Government should share in the risk of loss as a matter of equity (National Presto Indus., Inc. v. United States, 167 Ct.Cl. 749, 764-769, 338 F.2d 99, 108-112, cert, denied, 380 U.S. 962, 85 S.Ct. 1105, 14 L.Ed.2d 153 (1965); Tombigbee Constructors v. United States, 190 Ct.Cl. 615, 626-627, 420 F.2d 1037, 1043 (1970)) or that the Government overreached the bidder or otherwise acted unconscionably (see Doke, Mistakes in Government Contracts — Error Detection Duty of Contracting Officers, 18 Sw.L.J. 1, 10, 40-43 (1964)). There is no trace here of any mutuality of mistake, and the conduct of the Government’s officers gives no ground for any charge that they acted unconscionably or otherwise overreached the plaintiff in the treatment of the bid, the award of the contract, the preaward-survey or otherwise. The preaward-survey officer did no wrong; he did not mislead plaintiff or estop the Government, and he did not learn of any mistake by plaintiff, in contract interpretation or otherwise. When the bid arrived, a request was made to the contractor that he verify it because the price appeared to be too low; it was promptly verified. No wrongful conduct is shown. Finally, there is no evidence that the Government intended to be bound to the contract as plaintiff would rewrite it, and little or no evidence that even plaintiff intended to be bound by the version it seeks now. There is in short no evidence of any mistake for which reformation would be appropriate. Plaintiff speculated unsuccessfully on its ability, by one method or another, to substitute its unit for the specified unit. Put most favorably to plaintiff, the evidence is that plaintiff made a unilateral, unreasonable misinterpretation of the contract. No remedy lies for such mistakes. The Government’s motion for summary judgment is granted, the plaintiff's motion denied, and the petition dismissed. The necessary facts are stated in the opinion. . No effect is made to support vague intimations of error by the Board in findings of fact.

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PUTNAM MILLS CORPORATION v. The UNITED STATES. No. 357-70. United States Court of Claims, June 20, 1973. Martin N. Whyman, New York City, attorney of record, for plaintiff. Albert Lyons, New York City, of counsel. Gerald L. Schrader, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant. Before DAVIS, Acting Chief Judge, DURFEE, Senior Judge, SKELTON, NICHOLS, KASHIWA, KUNZIG, and BENNETT, Judges. ON PLAINTIFF’S MOTION AND DEFENDANT’S CROSS-MOTION FOR SUMMARY JUDGMENT BENNETT, Judge: The plaintiff now before the court, Putnam Mills Corporation (Putnam), seeks to recover $14,480.22 from the United States, alleging that it has either an express or an implied contract with the defendant through its agent, the Small Business Administration (SBA), as guarantor or escrow promisor of amounts due Putnam as a subcontractor-supplier of the Sorensen Manufacturing Company (Sorensen). Putnam seeks the cost of goods delivered to So-rensen for which Putnam has never received payment from either Sorensen or the United States. For reasons to be detailed, the court holds that, even if it is assumed for the purposes of this discussion that a contract of some type existed between the plaintiff and the Government, the plaintiff has failed to show that it substantially performed its obligations under the contract; therefore, it has not presented a claim redressable under 28 U.S.C. § 1491. There is no genuine issue as to any material fact. The case is before the court on motions for summary judgment. In late 1967, the Air Force awarded the Sorensen Manufacturing Company two contracts for the manufacture of parachutes at a total price of $389,321.-69. A cash flow analysis of Sorensen’s financial situation revealed that the contractor would require a maximum of $140,000 in financing. The Small Business Administration was prepared to loan the contractor $100,000 (the maximum amount the SBA had authority to loan), in order to help meet this financing requirement. The balance of the financing could be avoided as unnecessary if Sorensen’s suppliers would agree to 60-day credit terms instead of the usual 30-day terms for payment on the goods received by Sorensen. Sorensen, on December 5, 1967, entered into a subcontract with the plaintiff, Putnam, for the supply of specified quantities of four colors of nylon ripstop parachute cloth. The contract called for the delivery of one-third the total quantity of each color ordered to be shipped at monthly intervals for 3 months. By shipping the order in percentage lots the contractor could apparently start production immediately, without the necessity of inventorying large quantities of cloth until a supply in the right proportions was achieved. The proceeds of a $100,000 loan made by the SBA to Sorensen were held by the SBA in an escrow-type arrangement to be used to pay Sorensen’s suppliers direct. The SBA likewise received payments from the Air Force as the contract was completed in order to assure disbursements to the suppliers as their bills became due. The plaintiff, uneasy about the requested 60-day credit terms, exchanged correspondence with SBA officials seeking to obtain a guaranty of payment for the cloth it was to supply the contractor. The precise nature of this correspondence will be detailed infra in an attempt to define the terms of the alleged express or implied agreement created by these letters. Suffice it to say at this point that the plaintiff apparently agreed to go along with the 60-day credit terms and began to ship the fabric. The deliveries, however, did not arrive in the proportions specified. By March 15, 1968, the date on which the second of the three shipments was to have arrived and 66 percent of each col- or should have been delivered, the plaintiff had sent 100 percent of the sand colored fabric, 25 percent of the natural colored fabric, and only 0.4 percent and 1.4 percent of the international orange and olive green fabrics, respectively. As of May 1, 1968, the contractor had received the vast majority of the quantities ordered of the sand, international orange and olive cloth, but Putnam had sent only 30 percent of the natural colored fabrics. Part of the quantity of natural fabric that was sent had to be returned since it did not comply with the width specifications of the contract. The end result of this confusion and failure to deliver the correct quantities of goods was that Sorensen’s production slowed and eventually stopped since it did not have sufficient quantities of all the colors of fabric that went into each parachute. Putnam never sent the rest of the natural colored cloth since the contractor had not fully paid for the amounts shipped up to that point. So-rensen’s inability to pay was a direct result of its failure to keep up the production schedule and thereby receive progress payments from the Air Force. The contractor was clearly caught in a vicious circle of nondelivery leading to nonproduetion and leading to nondelivery again. The contract was eventually completed, but only when Sorensen obtained the balance of the needed natural colored fabric from another supplier at a higher price. On November 29, 1968, Sorensen finally paid Putnam $28,726.-09, which amount represented the contract price of the fabric actually delivered by Putnam for which it had not yet been paid, less $12,628.89 as a setoff, which included the excess reprocurement costs Sorensen had to pay for the bulk of the natural fabric, and consequential damages representing the cost to Soren-sen of the plant shutdowns occasioned by Putnam’s late, improper and incomplete deliveries. The amount Putnam is now seeking in its claim before this court is the amount of the setoff, plus interest, $14,480.22. Pursuant to an arbitration clause in its contract with Sorensen, the plaintiff instituted arbitration proceedings before the American Arbitration Association in New York City in an attempt to recover the amount of the setoff. Sorensen, located in the State of Utah, did not defend its interests in the arbitration action because of lack of funds for travel and legal fees. A default judgment for Putnam resulted, based on the uncontested evidence presented by it to the arbitrators. The arbitration decision, awarding plaintiff $14,480.22, was confirmed by the Supreme Court of New York, in an action in which Sorensen likewise took no part. In neither case was the United States served with notice of the proceedings. Thereafter, the plaintiff attempted to execute its judgment against Sorensen, but was unable to collect any portion of the amount owed, since by this time Sorensen had gone out of business. Putnam next attempted to recover the judgment in a suit against the United States brought in the United States District Court for the Southern District of New York, alleging that it had either an express or an implied contract with the United States, through its agent, the SBA, as guarantor or escrow promisor of amounts owed by Sorensen to its suppliers under the Air Force contracts. The District Court dismissed the case for lack of subject matter jurisdiction, which decision was affirmed on appeal to the United States Court of Appeals for the Second Circuit. In a per curiam opinion, dated October 6, 1970, the Court of Appeals stated: * * * Although plaintiff apparently has no enforceable claim on an express guaranty, he may well have an enforceable promise to hold the funds in escrow, either on a promissory es-toppel theory [citations omitted], or because the plaintiff’s promise to supply the fabric constituted conventional consideration. [432 F.2d 553, 554 (1970).] The Court of Appeals went on to conclude : It is our view that plaintiff has pleaded a claim which may well entitle it to recovery in contract. However since the claim exceeds $10,000 it must be asserted in the Court of Claims. * * *. [432 F.2d at 554.] This dicta, taken literally by plaintiff, has provided the impetus for the present suit alleging the same cause of action plaintiff had pressed before the District and Circuit Courts. It is clear that, unless the plaintiff can provide evidence of the existence of some type of contract between it and the United States, it cannot, as a subcontractor, recover directly from the United States for amounts owed to it by the prime. United States v. Munsey Trust Co., 332 U.S. 234, 241, 67 S.Ct. 1599, 91 L.Ed. 2022 (1947); United States Fid. & Guar. Co. v. United States, 475 F.2d 1377, 201 Ct.Cl. - (March 1973). Both parties deal extensively with the language in the correspondence between the plaintiff and the SBA in an effort to prove or disprove the existence of a contract. The plaintiff is using the correspondence to allege that an express contract or one implied in fact, over which this court has jurisdiction, existed between it and the United States. Whether or not an enforceable contract arose out of the language of the letters could be a complicated problem. Contrary to what the plaintiff has argued, representations or agreements made by an agent of the Government in his representative capacity will not necessarily bind the United States if such an agreement is beyond the agent’s authority. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 92 L.Ed. 10 (1947); Housing Corp. of America v. United States, 468 F.2d 922, 199 Ct.Cl. 705 (1972). In addition, the Government is not estopped from later denying the agent’s lack of authority. California-Pac. Util. Co. v. United States, 194 Ct.Cl. 703, 720 (1971). Due to the complications involved and the fact that this case presents an alternative basis for reaching a decision resolving the matter, the court refrains from dealing with these issues and will assume arguendo that the SBA agent had the authority to, and did, enter into a binding contract with the plaintiff. At this point it then becomes necessary to examine the language contained in the correspondence between the parties in an effort to determine the precise nature of the alleged contract and to clarify the nature of the obligations contained therein. The first link in the chain of letters sent between the SBA and Putnam Mills, dated January 10, 1968, was a letter written by an SBA official, recommending Sorensen for credit. It stated in pertinent part: •» * * Loan proceeds and the proceeds from the Air Force to be assigned, will be escrowed. Disbursement on purchases and expenses will also be controlled by our Agency. This will place us in a position to guaranty [sic] payment of funds to you. The plaintiff’s president responded by letter on January 18, 1968, by saying that plaintiff would extend Sorensen the requested 60-day credit terms “provided that you [the SBA] first deliver to us the guarantee of payment” to cover amounts due for the goods to be delivered to Sorensen. The SBA then sent a second letter, dated February 2, 1968, which redescribed the nature of the escrow arrangement and concluded: “This puts us in a position to guaranty [sic] payment of all materials and costs arising out of the contract.” Putnam’s cautious president did not feel that this letter constituted the express guaranty of payment that he had requested in response to the first letter from the SBA, and on February 14, 1968, asked that the SBA provide an express guaranty of payment. By a letter dated February 21, 1968, the same SBA official responded saying: * * * We are sorry but it is impossible for this Agency to legally give you an unconditional guaranty of payment for’ material supplied to the Sorensen Manufacturing Company. However, we can give you reasonable assurance that within 60 days you will receive payment * * *. In an apparent attempt to reassure the plaintiff that its bills would be paid, the letter continued: The Defense Contract Administration in our area has assured us that Soren-sen Manufacturing Co. will be able to perform satisfactorily on the contracts mentioned. Should this be the case, we can foresee no reason why you will not be paid for materials shipped as agreed. [Emphasis added.] Based upon the language in these letters, the plaintiff contends that the defendant, by an express or an implied contract, promised to pay Putnam the full amounts due for the quantity of goods received by Sorensen. Subsequent to defendant’s disclaimer on February 21, 1968, of any unconditional guaranty but of only “reasonable assurance” of payment “for materials shipped as agreed,” plaintiff made deliveries to So-rensen and extended credit to Sorensen therefor. The language of the letters just described, and the nature of the arrangement as a whole, makes it clear that if any guaranty of payment existed between the defendant and the Putnam Mills Corporation, it was subject to the condition that the defendant would only pay “for materials shipped as agreed.” If the language in the letters is read to make the United States the holder in an escrow arrangement, its obligation to pay the money to the plaintiff would not have arisen until the fulfillment of a necessary condition precedent. In this case the condition was, once again, the plaintiff’s shipment to the contractor of conforming goods, according to the schedule called for in the contract between the plaintiff and Sorensen. Under either the guaranty or the escrow characterization, the plaintiff does not appear to have met the prerequisite condition of proper and timely delivery. The plaintiff has not denied that it shipped the goods in the manner described by the Government in its affidavits, and summarized swpra. Such deliveries would seem to constitute a patent noncompliance with the terms of the contract. In addition, the improper and incomplete deliveries Were the root cause of Sorensen’s production difficulties, which might justify the withholding of damages for the excess costs of repro-curement and the costs of the unscheduled shutdowns. From the facts unchallenged on their merits by the plaintiff, it seems clear that under either an escrow or a guaranty characterization of the pertinent facts, the defendant’s alleged obligation to pay would never have matured. On the failure of the condition to occur, any money still held by the defendant would belong to Sorensen. Plaintiff’s remedy would be against So-rensen for any amounts it feels were wrongfully withheld. The fact that such a judgment was obtained but is uncollec-tible is not a concern of the Government. All of this follows, of course, unless the plaintiff is correct when it argues that the issue of its compliance or noncompliance with the terms of the contract was an issue dealt with in the New York arbitration litigation; therefore, it would be an issue closed to reexamination by this court due to the doctrines of res judicata and collateral estoppel. Lockheed Aircraft Corp. v. United States, 426 F.2d 322, 325, 192 Ct.Cl. 36, 43 (1970); Forrest Village Apts., Inc. v. United States, 371 F.2d 500, 178 Ct.Cl. 490 (1967). The United States contends that since it was not given notice of the arbitration proceedings, was not allowed to protect its interests before the arbitrators, and the alleged guaranty contract was before neither the arbitration panel nor the New York state court, it cannot be bound by their decisions. Normally the res judicata effect of a judgment does not reach parties who were not adversaries in the initial action. Restatement of Judgments § 82 (1942). The plaintiff, however, would attempt to bind the United States by classifying it as a privy of the Sorensen Manufacturing Company and, therefore, bound by the arbitrators’ and the New York Supreme Court decisions, just as Sorensen would be bound. The Restatement of Judgments § 83 (1942) states: § 83. Privies — General Rule. A person who is not a party but who is in privity with the parties in an action terminating in a valid judgment is, to the extent stated in §§ 84-92, bound by and entitled to the benefits of the rules of res judicata. The problem, therefore, reduces to the simple question — Is the defendant, on these facts, in privity with the Sorensen Manufacturing Company for the purposes of res judicata and collateral estppel ? The defendant, through the Department of the Air Force, had a contract with Sorensen; it was therefore in privity of contract with Sorensen. The words “privity” or “privy,” however, are not necessarily interchangeable between the contract and res judicata contexts. While the defendant may be in privity of contract with Sorensen, it may not be a privy of Sorensen for the purposes of res judicata. The Restatement defines various types of privies for res judicata purposes and the extent to which each might be bound by the initial judgment, but each definition turns on the nature of the over-all relationship between the parties involved. It would seem that regardless of whether the contract is termed an" escrow or a guaranty agreement, the plaintiff is attempting to cast the defendant in a role like that of a surety. In effect, the obligation arose out of the subcontract between Putnam and Sorensen making Sorensen primarily liable for payment, while the defendant is alleged to be a co-obligor along with Sorensen and therefore secondarily liable. If this conclusion is accepted, then the Restatement of Judgments § 97 (1942) would define the res judicata effect to be given the New York arbitration decision under these facts. Section 97, in pertinent part, reads: § 97. Successive Actions Against Co-Contractors Where Duty of Indemnity. (1) Where two persons are under a contractual or quasi-contractual duty to the same person, but one of them, the indemnitee, if required to pay damages for the breach of duty, would be entitled to indemnity from the other, the indemnitor, and the obligee brings an action against the indemnitor, because of such breach of duty, a valid judgment for * -x- -x- * ■>:■ * (b) the plaintiff binds him as to the amount in a subsequent action by him against the indem-nitee, but does not bind the in-demnitee in any respect. Thus, in the usual situation in which two parties may be liable for the same obligation, a judgment for the creditor in an action against one of the obligors (indemnitor) has no binding effect on the indemnitee in a subsequent suit between the creditor and the indemnitee, except for the limitation on the amount. In most situations of the type described by the Restatement, the two obligors would probably be in privity of contract with each other, but it is clear that this is not even a factor the Restatement considers in assigning res judicata effect to a judgment between one of the co-obligors and the creditor. The application of this view to the facts now before the court would serve to block the plaintiff’s argument and permit the defendant to raise the plaintiff’s improper and incomplete performance as a defense. There is another factor that must be considered in attempting to resolve the issue of whether the arbitrators’ decision must be deemed final in this case. The judgment received by Putnam in New York against Sorensen was nothing more than a default judgment. While this might make no difference as far as Sorensen is concerned, it can make a difference if the judgment is sought to be used against other parties as Putnam is attempting to do in this case. The Restatement of Security § 139 (1941), for example, treats the issuance of a default judgment against a debtor independently from a judgment entered after a trial on the merits: § 139. Judgments between Creditor and Principal: Effect as Proof of Principal’s Liability in Action by Creditor against Surety. * -X- -X- -X- * -X- (3) Where, in an action by a creditor against a principal, judgment is obtained by default or confession against the principal, ánd the creditor subsequently brings an action against the surety, proof of the judgment against the principal is evidence only of the fact of its rendition. Application of this section of the Restatement once again leads to the conclusion that the plaintiff should not be permitted to interpose the New York arbitrators’ decision in an attempt to prevent this court from considering the plaintiff’s compliance or noncompliance with the terms of its contract with So-rensen. See also Motor Vehicle Acc. In-dem. Corp. v. National Grange Mut. Ins. Co., 19 N.Y.2d 115, 278 N.Y.S.2d 367, 224 N.E.2d 869 (Ct.App.N.Y.1967). There is still a final factor to consider which militates against agreement with the plaintiff’s position. As pointed out by the defendant, Federal Rule of Civil Procedure 55(e) limits the entrance of default judgments against the United States as party defendant. While application of the New York arbitration decision to the issue in this case would not constitute entrance of a default judgment against the United States as such, it would serve to achieve the same result. That is, the application of Putnam’s New York default judgment to the case at hand would serve to foreclose the examination of the compliance issue in this case, an issue central to the Government’s defense. Rule 55(e) counsels a policy of caution when a court is asked to enter a judgment against the United States in a case in which the evidence has not been adequately presented. Campbell v. Eastland, 307 F.2d 478 (5th Cir. 1962). The Court of Claims Rules do not contain a rule parallel to F.R.C.P. 55(e), but this court has in the past noted, as instructive, portions of the Federal Rules having a bearing on issues before the court. Seminole Indians v. United States, 471 F.2d 614, 615, 200 Ct.Cl.-,-(Jan. 1973). There seems to be no reason why the court should not likewise consider the general policy inherent in F.R.C.P. 55(e) as instructive, along with the other authority cited supra, in reaching the conclusion that the facts of this case do not present a situation suitable to the proper application of the doctrine of collateral estoppel. In neither the affidavits nor the briefs accompanying its motion for summary judgment did the plaintiff contest the truth or validity of the Government’s assertions that its deliveries did not comply with the terms of the contract between it and Sorensen. Plaintiff had ample opportunity to do so, but instead chose to rely only on its res judi-cata defense, which, for the various reasons already cited, cannot be followed in this case. As a result, there appears to be no issue of fact as to the nature of the plaintiff’s deliveries to Sorensen. The court does not feel obligated to give the plaintiff another opportunity to contest this matter when the Government’s position was clear from the briefs and affidavits it filed originally. Court of Claims Rule 101(f). Therefore, the court holds that on the facts shown, the plaintiff did not comply with the terms of its contract with Sorensen. This failure relieved the United States of any liability with which it might have potentially been charged under the language of the alleged contract created by the letters sent between the SBA and the plaintiff. For all of the above reasons, the defendant’s cross-motion for summary judgment is granted while plaintiff’s motion for summary judgment is denied. The petition is dismissed. . Contract Nos. F41608-68-C-6835 and F41608-68-C-6847. . The contract called for the delivery of: 71.500 yards of natural cloth; 71.500 yards of international orange cloth; 28.700 yards of sand cloth; 28.700 yards of olive green cloth. . To the extent the plaintiff’s suit rests on the allegation that it had a contract implied in law (quasi-contract) with the United States, this court is without authority to hear the issue. National Bank of No. America v. United States, 456 F.2d 754, 757-758, 197 Ct.Cl. 948, 956 (1972); Algonac Mfg. Co. v. United States, 428 F.2d 1241, 1255, 192 Ct.Cl. 649, 673 (1970), and cases cited therein. . See Restatement (Second) of Agency § 14 D (1958). “Comment: “a. Nature of escrow. An escrow is a deed, money or chattel delivered to a person, the holder, by another and which the holder contracts to retain until the happening or non-happening of an event; if the event happens, or fails to happen, before a specified time, the escrow is to be delivered to a third person; otherwise he is to return it to the depositor. * * . Since the court has concluded that the United States is not bound as a party or privy to the New York arbitration decision, plaintiff’s attempt to use that decision against the defendant affirmatively, as a sword, would not present a basis for an exception to the doctrine of mutuality of estoppel. For a discussion of cases and situations in which exceptions to the mutuality rule have been considered, where the prior decision is used defensively as a shield by the nonparty to the prior action, see generally Technograph Printed Circuits, Ltd. v. United States, 372 F.2d 969, 178 Ct.Cl. 543 (1967) [the mutuality rule followed in a patent case], and F. James, Civil Procedure § 11.31 (1965). . “(e) Judgment Against the United States. No judgment by default shall be entered against the United States or an officer or agency thereof unless the claimant establishes his claim or right to relief by evidence satisfactory to the court.”

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SYLVANIA ELECTRIC PRODUCTS, INC. v. The UNITED STATES. No. 378-70. United States Court of Claims. June 20, 1973. Allan J. Joseph, San Francisco, Cal., for plaintiff. Walter F. Pettit, San Francisco, Cal., attorney of record for plaintiff. Sidney J. Cohen, San Francisco, Cal., Haig J. Shalvarjian, Mountain View, Cal., and Miller, Groezinger, Pettit, & Evers, San Francisco, Cal., of counsel. Leslie H. Wiesenfelder, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASH-IWA, KUNZIG, and BENNETT, Judges. ON PLAINTIFF’S MOTION AND DEFENDANT’S CROSS MOTION FOR SUMMARY JUDGMENT KUNZIG, Judge: This is a contract action wherein this court, by cross motions for summary judgment, has been asked to review a decision of the Armed Services Board of Contract Appeals (the Board) in accordance with the standards of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1970). In issue is whether the Board’s decision that the Government is entitled to a price reduction of $239,913.75 pursuant to the Defective Pricing Clause of the contract is supported by substantial evidence and is correct as a matter of law. We affirm the Board’s excellent decision in favor of the Government. We hold the conclusions of the Board withstand a Wunderlich Review: I. The plaintiff-contractor failed to disclose accurate, complete and current cost and pricing data. II. The data not disclosed involved significant sums, III. The Government relied upon the inaccurate data thus establishing a causal relationship between the incorrect data and the final negotiated contract price. These conclusions of the Board involved mixed questions of law and fact. We do not deem it necessary to attempt to distinguish the two, since final disposition of this case does not require such delineation. On April 30, 1964, plaintiff-contractor responded to a previously issued Request for Proposal (RFP) for the production of the electronic’s portion of two special receiving sets. Plaintiff quoted a firm fixed price of $6,385,325. On October 2, 1964, the last day of the negotiations, plaintiff executed the required Certificate of Cost and Pricing Data. It provided ; (i) complete cost and pricing data, current as of 30 April 1964, has been considered in preparing Sylvania Proposal 300-PR-03 and submitted to the Contracting Officer or his representative; (ii) all significant changes in the above data which occurred since the aforementioned date through 2 October 1964 have been similarly submitted; and no more recent significant change in such data was known to the undersigned at the time of executing this certificate; etc. (iii) all data submitted are accurate. Final price negotiations were held between September 28, 1964 and October 2, 1964, based upon plaintiff’s submissions. At the outset, the parties were approximately $3,000,000 apart. After many changes in their respective positions, they differed by only about $600,000. It was mutually agreed to split the difference, which resulted in a final contract price of $4,614,000. In 1966, as a result of events not relevant to this case, the General Accounting Office (GAO) opened an inquiry into plaintiff’s compliance with the Truth in Negotiations Act. The GAO found that the contract price of $4,614,000 had been increased by significant sums because plaintiff had failed to disclose to the Government accurate, complete and current cost and pricing data. The GAO report further found that proper disclosure before final price negotiations would have revealed plaintiff’s use of incorrect quantities in computing the cost of some parts and components, and the use of non-current price quotations in computing the cost of others. On the basis of these findings, the GAO recommended that the Government seek a downward adjustment of $254,000 in the contract price. Accordingly, on August 28, 1968, the Air Force contracting officer ordered the contract price reduced by $254,304. This figure represented defective pricing under the Truth in Negotiations Act as follows: a. GPI Receivers (duplication) ---------------------- $104,752 b. Cable (939) (lower quotations) -------------------- 12,165 c. Cable (216) (307) (lower quotations) ______________ 10,173 d. Adapters and Connectors (duplication) ------------ 35,927 e. Goniometers (lower quotations) __________________ 17,500 f. Power Supply Units (lower quotations) ------------ 18,820 g. Rack Hardware (lower quotations) ---------------- 15,636 Total ------------------------------------------ 214,973 To this amount, 6% for general and administrative expense and 11.6% for profit, were added, giving a total of $254,304. On appeal to the Board, the contracting officer’s decision was upheld to the extent of $239,913.75. Plaintiff subsequently sued for this figure, filing a petition in this court on November 3, 1970 and seeking a review of the Board’s decision pursuant to the standards of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1970). The instant contract contained a Defective Pricing Clause identical in content to ASPR § 7.104-29 in effect at the time of the contract and promulgated pursuant to the Truth in Negotiations Act. The clause reads in pertinent part: (a) If The Contracting Officer determines that any price, including profit or fee, negotiated in connection with this contract was increased by any significant sums because the Contractor, or any subcontractor in connection with a subcontract covered by (c) below, furnished incomplete or inaccurate cost or pricing data or data not current as certified in the Contractor’s Certificate of Current Cost or Pricing Data then such price shall be reduced accordingly and the contract shall be modified in writing to reflect such adjustment. (b) Failure to agree on a reduction shall be a dispute concerning a question of fact within the meaning of the “Disputes” clause of this contract. (e) The Contractor agrees to insert the substance of paragraphs (a) and (c) of this clause in each of his cost-reimbursement type, price redeterminable, or incentive subcontracts hereunder, and in any other subcontract hereunder in excess of $100,000 unless the price is based on adequate price competition, established eatelog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law of regulation. * * * (Emphasis added.) Compliance or lack thereof with this provision raises three distinct issues: I. Whether the plaintiff-contractor disclosed accurate, complete and current cost and pricing data? II. Whether the disputed data qualified under the “significant sums” criteria? III. Whether the Government sustained its burden of proof in showing that it relied upon the disputed data and that there was a subsequent causal relationship between the data and the increased negotiated contract price ? I Disclosure The purpose of the Truth in Negotiations Act is to avoid situations in which inaccurate, incomplete, or noncur-rent information is known by the contractor, but withheld from the Government to its detriment. Cutler-Hammer, Inc. v. United States, 189 Ct.Cl. 76, 84, 416 F.2d 1306, 1311 (1969). Judge Durfee clearly held in Cutler-Hammer that current and accurate information, if known, must be furnished. He reiterated this point in Lockheed Aircraft Corp. v. United States, 193 Ct.Cl. 86, 432 F.2d 801 (1971), when he stated that the only way to further the purpose of the statute is to require complete disclosure of actual costs known to the contractor. In the instant action, there is substantial evidence to warrant the Board’s conclusion that, as to all but one of the items listed in the GAO report, the contractor was aware of the accurate figures prior to or during price negotiations, yet failed to inform the Government. This we consider to be nondisclosure in violation of the Defective Pricing Clause of the contract and the Truth in Negotiations Act. As to the following items, the evidence is clear that plaintiff had knowledge prior to the price negotiations of October 2, 1964 of lower quotations, yet failed to fully disclose them: Rack Hardware — Plaintiff’s supplier lowered prices to plaintiff on September 15, 1964. This was acknowledged by plaintiff by issuing a purchase order on September 18, 1964. The information was not transmitted to the contractor’s negotiating team that was meeting with the government representatives. Power Supply Units — Plaintiff received a lower quotation from supplier’s successor on September 10, 1964. Although a new subcontract was not awarded until November, plaintiff knew before the negotiating sessions with the Government that it had no choice but to award the subcontract to this supplier. Cables RG 216 and 307/u — There was no question that early in May 1964, plaintiff received lower price quotations for the quantities needed and did not incorporate them in its proposal. Goniometers — On or about August 13, 1964, plaintiff gained a price reduction because it negotiated the purchase of an increased quantity to satisfy other contracts, and failed to notify the Government. Plaintiff specifically argues as to the Rack Hardware data and the Power Supplirs data that the information was not “reasonably available”. Plaintiff admits that the new information regarding the Rack Hardware was known to a branch of plaintiff-corporation approximately one week before the negotiating sessions, but that it takes “approximately thirty to thirty-seven days” for this information to make its way to the firm’s negotiators. This position we find untenable, even ludicrous. A simple telephone call could have obviated the situation. Plaintiff attempts, equally unsuccessfully, to raise the same defense (not reasonably available) as to lower prices for Power Supply Units. The excuse for failure to disclose the new information in this instance relates to alleged unfinished evaluation of plaintiff’s proposed supplier. However, the Board found this to be a lame excuse indeed. The competitive situation of the moment gave plaintiff no choice but to award supplier the contract. We agree. When a contractor is considering using a lower quotation, that possibility should be reported to the Government. Cutler-Hammer, Inc. v. United States, supra 189 Ct.Cl. at 89, 416 F.2d at 1314. Thus as to both of these items there is substantial evidence to support the Board’s conclusion that the data was reasonably available. Regarding the Goniometers, the Board’s conclusion that the Government was never informed of the price reduction is supported by substantial evidence. The contractor obtained a lower quotation from its supplier because of an increase in the quantity ordered to satisfy another government contract. It was regarding this second, unrelated contract, that the contractor quoted the correct figures to the Government. The contractor argues that, having told the Government about the lower price of the second contract, the Government should have known that this related to the instant contract also. This argument we cannot accept. Plaintiff similarly contends that it “more than likely” did inform the Government of a lower price quotation for the RG 216 and 307 Cables. The Board found that the government estimator did not recheck the figures after the initial proposal and thus the government negotiators were not aware of the lower quotations. The estimator should not have to specifically and continuously reeheck on a daily basis every figure submitted. The contractor, if there is a new quotation, must clearly and specifically disclose it. Thus as to the Cables 216 and 307 and the Goniometers, we similarly affirm the Board’s findings. As to the Adaptors and Connectors and the GPI Receivers, the Board found that the incorrect data resulted from duplications of the quantities required. Plaintiff admits that it mistakenly doubled the quantity of the Adaptors and Connectors, but contends that data furnished reflected the error and that the Government should have discovered it. The Board made a finding to the contrary: Appellant has, however, argued that the error was discoverable by a comparison of parts numbers on the manufacturing cost sheets (Appt. Ex. A-26, A-27) and on the unpriced bill of materials in the proposal (Appt. Ex. A-36). At least on such inspection as we are able to make, this conclusion cannot be drawn from these documents with any degree of certainty. This conclusion of the Board is binding upon the court since we find it to be a reasonable conclusion based upon the evidence, despite the fact that there may be other evidence which refutes it. United States v. Cario Bianchi & Co., 373 U.S. 709, 715, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963). The final item involves the duplication of the GPI Receivers. Plaintiff contends that this duplication was corrected during the negotiating sessions and represented one of the reductions in its proposal. This argument we find to be of little consequence. A unilateral rearrangement of figures during a 1964 negotiation, first revealed to the opposing government negotiators in a 1967 GAO Report, demonstrates a monumental failure of compliance with the Truth in Negotiations Act. Mere correction of figures without timely disclosure of such correction to the Government does not satisfy the requirements of the Act. Without disclosure the Government would be relying upon erroneous data during the negotiations while the contractor is relying upon the correct data. This type of unbalanced situation is the antithesis of the Truth in Negotiations Act and cannot be condoned. The plaintiff also argues as to this duplication that the Government had information which would have revealed the error. The Board found otherwise and we again uphold its findings under the Wunderlich standards. The evidence shows that the plaintiff did give “some information” to an Air Force Administrative Contracting Officer (ACO) but that it was in relation to other contracts. This ACO who received “some information” did not participate in any active way in the negotiation and preparatory activities of the present contract. Thus the alleged disclosure certainly did not help the negotiators who were responsible for the instant agreement. In general, as to all of the above items, plaintiff has argued that mere submission of data satisfied the requirement of disclosure. We do not agree. In order that there be effective disclosure of cost and pricing data by the prospective contractor the Government must be clearly advised of the relevant cost and pricing data. This is particularly true after the Government has analyzed the data and the contractor then receives reduced quotations from its suppliers. If the Truth in Negotiations Act is to have any force and effect then the Government must be clearly and fully informed. This can only be achieved by complete disclosure of the item or items in question. II Significant Sums Plaintiff’s second major contention is that the Board erred in concluding the data in issue was “significant”. Plaintiff’s position is based on two interdependent arguments: first, that the “significance” of each item must be viewed individually; and, second, that in this case, a $21,000.00 item, viewed individually, is not a significant sum. The element of “significance” relates to the effect of the disputed quotations on the final negotiated contract price. Cutler-Hammer, Inc., supra 189 Ct.Cl. at 91, 416 F.2d at 1315. If there is a logical nexus between the nondisclosed pricing data and the possibility of a lower negotiated contract price, then the data is to be considered significant and subject to disclosure. Plaintiff’s primary argument is that the data should be viewed on an individual rather than an aggregate basis. If this were to be adopted in every case, then the spirit of the Truth in Negotiations Act would easily be circumvented. The potential effect upon the final negotiated price is of major concern. Whether the disputed data is considered individually or cumulatively is of little consequence if the end result in either instance is to cause an unwarranted increase in the contract price. There is nothing in the legislative history to indicate that Congress intended the data to be solely considered individually. There is, however, an abundance of information indicating that Congress intended that the final contract price reflect current and accurate pricing data. This cannot be accomplished if consideration of disputed data is to be viewed strictly on an individual basis. Accordingly we find that there is substantial evidence to support the Board’s finding that “ . . . all of the items discovered by the GAO audit and included in the contracting officer’s decision are significant in that, if disclosed, they would in all likelihood have led to a lower negotiation base and, hence, contract price.” III Reliance Plaintiff argues finally that the Board adopted a new and erroneous standard of burden of proof on the issue of reliance. Such is not the case. This burden was clearly discussed by the Board in a previous case, American Bosch Arma Corp., 65-2 BCA ¶ 5280. While that Board recognized that the responsibility of proving nondisclosure or use of inaccurate and noncurrent data falls upon the Government, it held that once this burden has been satisfied it would be the natural and probable^ consequence that such nondisclosure would result in an overstated negotiated contract price. This is a logical presumption, for it is reasonable to assume that the government negotiators relied upon the data supplied by the contractor and that this data affected the negotiations. Thus although the Government has the burden of proof as to the issue of nondisclosed data, which it met in this case, the burden of persuasion on the issue of relying upon that data has shifted to the contractor. He must show nonreliance on behalf of the Government in order to rebut the natural and probable consequences of the existence of the nondisclosed or inaccurate data. This the contractor has not done in this case. Accordingly the presumption stands and there was a causal relationship between the disputed data and the final negotiated price. Having found that the Board was correct in concluding: (1) that the plaintiff-contractor failed to disclose accurate, complete and current cost and pricing data; (2) that the data not disclosed involved significant sums; and (3) that the Government relied upon the inaccurate data thus establishing a causal relationship between the incorrect data and the final negotiated contract price, we hold that the Board’s decision withstands a Wunderlich Review. The Board’s findings of fact are supported by substantial evidence and its legal conclusions are correct as a matter of law. Accordingly, the plaintiff’s motion for summary judgment is denied and the defendant’s cross motion for summary judgment is granted. The petition is hereby dismissed. . Sylvania Electric Products, Inc., 70-2 BCA ¶ 8387. . This contract clause has been added to government contracts pursuant to the Truth in Negotiations Act, 10 U.S.O. § 2306(f) (1970), which reads: “A prime contractor or any subcontractor shall be required to submit cost or pricing data under the circumstances listed below, and shall be required to certify that, to the best of his knowledge and belief, the cost or pricing data he submitted was accurate, complete and- current— “(1) Prior to the award of any negotiated prime contract under this title where the price is expected to exceed $100,000; “(2) Prior to the pricing of any contract change or modification for which the price adjustment is expected to exceed $100,000, of such lesser amount as may be prescribed by the head of the agency; “(3) Prior to the award of a subcontract at any tier, where the prime contract and eacli higher tier subcontractor have been required to furnish such a certificate, if the price of such subcontract is expected to exceed $100,000; or “(4) Prior to the pricing of any contract change or modification to a subcontract covered by (3) above, for which the price adjustment is expected to exceed $100,000, or such lesser amount as may be prescribed by the head of the agency. “Any prime contract or change or modification thereto under which such certificate is required shall contain a provision that the price to the Government, including profit or fee, shall be adjusted to ex-elude any significant sums by which it may be determined by the head of the agency that such price was increased because the contractor or any subcontractor required to furnish such a certificate, furnished cost or pricing data which, as of a date agreed upon between the parties (which date shall be as close to the date of agreement on the negotiated price as is practicable) , was inaccurate, incomplete, or non-current: Provided, That the require- ments of this subsection need not be applied to contracts or subcontracts where the price negotiated is based on adequate price competition, established catalog or market prices of commercial items sold in substantial quantities to the general public, prices set by law or regulation or, in exceptional cases where the head of the agency determines that the requirements of this subsection may be waived and states in writing his reasons for such determination. “For the purpose of evaluating the accuracy, completeness, and currency of cost or pricing data required to be submitted by this subsection, any authorized representative of the head of the agency who is an employee of the United States Government shall have the right, until the expiration of three years after final payment under the contract or subcontract, to examine all books, records, documents, and other data of the contractor or subcontractor related to the negotiation, pricing, or performance of the contract or subcontract.” . The Board held that the plaintiff should recover as to the 939 Cable. Although the net effect of plaintiff’s estimate turned out to be too high, it resulted from an agreement between the parties which overestimated the need for this cable. Accordingly, the Board reduced the initial figure of $254,304 to $239,913.75 to compensate for recovery of the 939 Cable and its related general and administrative expenses and profit. . Id. . For example, a $5.00 item, viewed individually, may be of little import; however, if there were to be 10,000 of these items, then, when viewed in the aggregate, this same item could comprise an identifiable percentage of the contract price. . Having concluded that in this case, the figures must be considered cumulatively, for to do otherwise would violate the spirit and intent of the Truth in Negotiations Act, we find it unnecessary to discuss plaintiff's argument that a $21,000 item, viewed individually, is insignificant. . This presumption has subsequently been codified by its adoption in the Armed Services Procurement Regulations in 1970: “In establishing that the defective data caused an increase in the contract price, the contracting officer is not expected to reconstruct the negotiation by speculating as to what would have been the mental attitudes of the negotiating parties if the correct data had been submitted at the time of agreement on price. In the absence of evidence to the contrary, the natural and probable consequence of defective data is an increase in the contract price in the amount of the defect plus related burden and profit or fee; therefore, unless there is a clear indication that the defective data was not used, or was not relied upon, the contract price should be reduced in that amount.” 32 CFR § 3.807-5 (a) (2).

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

MANEY AIRCRAFT PARTS, INC. v. The UNITED STATES. No. 191-70. United States Court of Claims. June 20, 1973. Nichols, J., filed dissenting opinion. Frederick T. M. Crowley, Silver Spring, Md., attorney of record for plaintiff. Michael J. Rubin, Washington, D.C., with whom was Asst. Atty. Gen. Har-lington Wood, Jr., for defendant. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHI-WA, KUNZIG and BENNETT, Judges. ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DEFENDANT’S CROSS MOTION FOR SUMMARY JUDGMENT SKELTON, Judge. The facts in this case are set forth in detail in our prior opinion in Maney Aircraft Parts, Inc. v. United States, 453 F.2d 1260, 197 Ct.Cl. 159 (1972), and for that reason will not be repeated here, except to the extent deemed necessary for this opinion. This is a contract case in which the contract was terminated for default by the contracting officer. The contract contained the usual disputes clause requiring the contractor to appeal the decision of the contracting officer to the Armed Services Board of Contract Appeals (the Board) in writing within 30 days from the date of receipt of the decision, otherwise the decision of the contracting officer shall be final and conclusive. The contracting officer sent his decision by telegram to the contractor’s principal place of business on Saturday, June 21, 1969. The contractor’s place of business was not open for business on Saturdays, but on this particular day an accountant of the contractor was at the contractor’s place of business doing some work and received the telegram and signed a receipt for it. The accountant did not ordinarily receive the contractor’s mail or telegraphic messages. The telegraphic decision was not brought to the attention of any responsible official of the contractor until the following Monday, June 23, 1969. The contractor sent a telegraphic appeal to the Board on July 22, 1969, which was 31 days after the contracting officer’s telegraphic decision was delivered to the contractor’s accountant at its place of business. The Board dismissed the appeal on the ground that it was untimely and that because of such late filing the Board had no authority, jurisdiction, or power to consider it. The plaintiff appealed to this court, claiming that the appeal was timely. Both parties filed motions for summary judgment. We suspended all proceedings including action on both motions for 90 days for reasons set out below. However, we held that “[W]e find no error of law, no arbitrariness, or any lack of substantial support for the underlying factual findings in the holding [of the Board] that plaintiff’s appeal was out-of-time.” [Id., 453 F.2d at 1262, 197 Ct.Cl. at 162-163.] In so holding we said: Nevertheless, we are constrained to point out once again that the Board is not powerless to waive or extend the 30-day period specified in the contract — as the Board still seems to believe, see L & V Machine & Tool Works Inc., ASBCA No. 15243, 71-2 BCA ¶ 9035. We indicated in Moran Bros. Inc. v. United States, 346 F.2d 590, 593, 171 Ct.Cl. 245, 250, (1965), that such time limits are not jurisdictional and may be waived in proper cases. In our order of June 11, 1965 in Maitland v. United States, Ct.Cl.No. 74-62, suspending proceedings here so that plaintiff could ask the Board to waive the time-limit, we cited Moran Bros, and said: “We see no reason why the Board, in its sound discretion, may not elect to entertain this appeal and avoid a harsh result, if the allegations of plaintiff are as stated.” In Schlesinger v. United States, 383 F.2d 1004, 1008, 181 Ct.Cl. 21, 28-29 (1967), we again recognized the discretion of the Board to toll or waive the contractual time-limit for appeal. We remain of the same view. * * * Although we have held that we cannot overturn the Board’s finding of untimeliness, we do feel that “the Board ha[s] leeway to find that the 30-day provision should * * * be considered tolled or waived.” Schlesinger v. United States, supra, 383 F.2d at 1008, 181 Ct.Cl. at 29. While we do not hold that the Board must exercise its discretion favorably to plaintiff, we think that it should consider that possibility squarely, and not simply deem itself powerless to act. [Footnote omitted.] [Id., 453 F.2d at 1262-1263, 197 Ct.Cl. at 163-164.] We suspended proceedings for 90 days to allow the plaintiff to seek a discretionary waiver of the contractual time limit for its appeal from the Board. Thereafter, the plaintiff filed a petition with the Board asking for “a discretionary waiver of the contractual time limit of 30 days and for the right to proceed to try its appeal on the merits.” The Board, in a decision dated April 28, 1972, signed by 12 of its members, with one member dissenting, refused to exercise its discretion to waive the requirement of appeal within 30 days of receipt of the contracting officer’s final decision, as suggested by this court, saying: * * * However, in this instance, the Board must respectfully decline to follow the Court of Claims’ suggestion concerning its discretion to waive the requirement of appeal within thirty days of receipt of the contracting officer’s final decision. * * *. Consistently, from the time of the Charter creating the Board’s predecessor, the War Department Board of Contract Appeals, on 8 August 1942, the present Board and its predecessor Boards have held that the filing of a timely notice of appeal is a condition precedent to the Board’s authority to consider an appeal on its merits. * * * [Id. at 3.] The Board concluded by saying: •x * x [T]he Board is unwilling to make such a reversal of its uniform, long-standing decisions as to take discretionary jurisdiction over untimely appeals. Appellant’s petition for discretionary waiver of the contractual time limit is denied and the reinstated appeal dismissed. [Id. at 4-5.] Thereafter, both parties returned to this court and urged their motions for summary judgment. The plaintiff says that the Board erred in refusing to exercise its discretion to waive the 30-day time limit for the contractor’s appeal in this ease as suggested by this court in our prior opinion. The defendant argues that the action of the Board should be upheld, and that, in any event, the Board did in fact exercise its discretion. We agree with the plaintiff. It is clear from the above-quoted language from the Board’s opinion that it flatly refused to exercise its discretion as to a waiver of the 30-day time limit for plaintiff’s appeal, as suggested by the court. Therefore, the only question to be decided is whether the Board erred. We think the Board was sincere in its belief that it did not have the power nor authority to waive the 30-day time limit for the plaintiff’s appeal, in the exercise of its discretion. However, we made it perfectly clear in our prior opinion in this case that it did have such power and authority. Other decisions of this court support this principle. In Moran Bros., Inc. v. United States, 346 F.2d 590, 593, 171 Ct.Cl. 245, 250 (1965), we held: Defendant vigorously argues that the time limit is jurisdictional and may not be waived by the contracting officer, the appeals tribunal, or the head of the agency. This position has been taken by several, if not all, of the contract appeals boards; see e.g., Keenan Pipe & Supply Co., 1962 BCA 17110 (ASBCA 1962). We do not agree that this provision may never be waived. In Arthur Venneri Co. v. United States, 381 F.2d 748, 180 Ct.Cl. 920 (1967), we stated that the disputes clause is contractual rather than jurisdictional (381 F.2d at 751, n. 3, 180 Ct. Cl. at 925, n. 3). In Schlesinger v. United States, 383 F.2d 1004, 181 Ct.Cl. 21 (1967), we indicated that the Board could in its discretion waive the 30-day requirement for good cause. We held in Burnett Constr. Co. v. United States, 186 Ct.Cl. 953 (1968), that where the Board considered plaintiff’s appeal, the 30-day requirement was waived even if the appeal was untimely. To the same effect is our decision in Whittaker Corp. v. United States, 443 F.2d 1373, 195 Ct. Cl. 161 (1971). We considered this question settled in our decision in Monroe M. Tapper & Assocs. v. United States, 458 F.2d 66, 198 Ct.Cl. 72 (1972), when we said: The major theme of the petition and of plaintiff’s argument is, first, that the Board had power to enlarge the appeal-period and waive the lateness of the filing, and, second, that that is what should have been done in this instance. We need not linger over the first point. The court has recently reaffirmed the rule that Boards of Contract Appeals have power, in proper circumstances, to waive or extend the appeal period specified in the usual disputes clauses. Maney Aircraft Parts, Inc. v. United States, 453 F.2d 1260, 197 Ct.Cl. 159 (1972). Cf. Schacht v. United States, 398 U.S. 58, 63-65, 66-69, 90 S.Ct. 1555, 26 L.Ed.2d 44 (1970). The Government’s rights under the clause do not “vest” until the Board refuses to take jurisdiction because of untimeliness. Thus, if the Board does take jurisdiction, it is not waiving a vested right because the right does not vest until and unless the Board refuses to take jurisdiction. If it awards relief, the disbursing officer can take comfort in the fact that he is not waiving a vested right. [Footnote omitted.] [Id., 458 F.2d at 68,198 Ct.Cl. at 76.] The Tapper opinion was handed down on April 14, 1972, which was two weeks before the Board issued its opinion in this ease. See also, SWH Company, DOT-CAB No. 72-29, 72-2 BCA ¶ 9570 (1972). We hold that a Board of Contract Appeals, such as the Board in the present case, has the power and authority, in its discretion, for good cause shown, to waive the requirement that a contractor must file his appeal with the Board within 30 days after he receives the decision of the contracting officer. The 30-day requirement is contractual and not jurisdictional and may be tolled or excused by the Board, in the exercise of its discretion, if the contractor has good cause for failing to file his appeal within such time period. Such good cause must be shown to exist not only during the 30-day period, but also up to the time the appeal is actually filed. The Board stated in its opinion that if it is to exercise this type of discretion it should be done under “clear-cut, explicit rules with appropriate safeguards.” We do not entirely agree with this statement, as we doubt that rigid rules could be established that would be workable. Of course, the Board can make its own rules in this regard, but in doing so it should be careful not to unduly limit or circumscribe its exercise of discretion in this area. The decision of the Board on this problem is essentially equitable rather than legal, with an objective to do justice under the circumstances. In order to accomplish this purpose, the exercise of discretion by the Board should be as free and unfettered as possible. It is not practical for this court to establish inflexible rules for the exercise of discretion by the Board, as we cannot anticipate the many problems that may arise in future cases. No doubt, the Board will have to solve the problem on a case by case basis. However, we can repeat and approve what we said in Tapper, supra. The burden rests on the contractor, who fails to comply with the requirement that an appeal be filed within the 30-day period, to persuade and convince the Board that under the circumstances of his case a waiver of the time limit should be granted. Prejudice to the government is a factor to be considered, but the lack of such prejudice does not automatically entitle the plaintiff to a waiver. Furthermore, carelessness or neglect on the part of the contractor is relevant, though not necessarily conclusive. In exercising its discretion, the Board should consider all facts and circumstances, including the conduct of both the contractor and the government and arrive at a decision that it considers fair, just, and equitable to both parties. Based on the foregoing, we conclude that the Board erred when it refused to exercise its discretion to waive the late filing by the contractor in this case. When we handed down our prior opinion, we did not have the authority to remand the case to the Board with instructions. Consequently, we suspended proceedings in the court to allow the plaintiff to go back to the Board and request a waiver. In the meantime, on August 29, 1972, Congress enacted Public Law 92-415, 86 Stat. 652, amending 28 U.S.C. § 1491, which provides as follows: Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the first paragraph of section 1491 of title 28, United States Code, is amended by adding thereto the following: “To provide an entire remedy and to complete the relief afforded by the judgment, the court may, as an incident of and collateral to any such judgment, issue orders directing restoration to office or position, placement in appropriate duty or retirement status, and correction of applicable records, and such orders may be issued to any appropriate official of the United States. In any case w’ithin its jurisdiction, the court shall have the power to remand appropriate matters to any administrative or executive body or official with such direction as it may deem proper and just.” Sec. 2. This Act shall be applicable to all judicial proceedings pending on or instituted after the date of its enactment. This statute authorizes this court to remand this case to the Board “with such direction as it may deem proper and just.” Accordingly, we remand the case to the Armed Services Board of Contract Appeals and direct it to exercise its discretion as to whether or not the plaintiff has shown good cause or a justifiable excuse, under all the facts and circumstances of the case, for failing to file its appeal within the 30-day time limit, and by virtue thereof the 30-day time limit requirement should be waived. In remanding the case, we do not mean to imply or suggest in any way that the Board should or should not allow the plaintiff a waiver of the time limit requirement. This is a decision that the Board itself must make in the free exercise of its discretion. Proceedings in this court are suspended for 90 days from this date pending action of the Board. NICHOLS, Judge (dissenting): My own attitude in this matter has been slow in jelling, which is regrettable ; if I had known what to do from the outset, I might have had more influence with my colleagues. In Monroe M. Tapper & Assocs. v. United States, 458 F.2d 66, 198 Ct.Cl. 72 (1972), I deplored the very existence of this branch of jurisprudence, and predicted, all too truly, that Judge Davis’ careful analysis would not contribute to the ultimate disposition of the case. Now we have Monroe M. Tapper & Assocs. back before us again, no nearer than 4 years ago to a decision as to whether their case can be heard on the merits, and if so, by whom. The Board’s decision of April 28, 1972, in the instant Maney Aircraft case and the appended dissent, deserve our careful scrutiny, for the learning displayed, the capability of its authors and signers, and the contribution it makes to the possible resolution of the problem. They reaffirm their belief that plaintiff has no contract right to a disputes clause appeal if, for almost any reason whatever, he fails to file it within 30 days. They allow rare instances of tolling. They also show that anyway, the Service Secretaries never intended to authorize them to exercise discretion in the premises. The first proposition reflects only their personal opinion, which is legally inoperative in view of several contrary court decisions. The second ought to give us pause. It is rested primarily on the Secretaries’ acquiescence, over the years, in the involved Board position. Also, they point out that complaints about about the shortness of the 30-day period were met by requiring that the contracting officer’s decision letter expressly state the contractor’s appeal rights and that the 30-day period was running. I think we ought to indulge in a strong if not conclusive presumption that a subordinate Department of Defense official is telling the truth if he says he is not authorized to do a particular thing. Presumably the Board operates under the Secretaries’ constant scrutiny. If it does what it was not authorized to do, or refuses to do what it was intended to do, they will no doubt at once take corrective action. In the circumstances, for any outsider, even an omniscient Article III court, to say oh no, the Secretaries really intended the Board to exercise discretion, is to take a position more courageous than prudent. The Secretaries need only state a contrary position to make us look absurd. Where the matter stands, in my view, therefore, is that a contractor delinquent in filing a 30-day appeal has a contract right to a discretionary decision whether he is to be allowed to appeal nevertheless, but the Department of Defense has provided no tribunal or official to exercise this discretion. Our former statements that Appeal Boards had discretion to receive late appeals rested on the assumption, now shown to be erroneous, that such Boards were intended to afford entire remedies wherever contracts created them. We do not, I think, even under Public Law 92-415, have the right to single out a body of government employees and say they are to do something they were not brought together to do. If I am wrong in this we could direct the ASBCA to correct military records and the BCMR to entertain contractor appeals. Technicality though it may be, if the Secretary of Defense has not created a tribunal to do what we think ought to be done, our remand under Public Law 92-415 should surely be addressed to the Secretary himself. The majority decision is clearly erroneous in this. The remand would be futile here for the further reason that the Board’s observations show that if compelled to exercise discretion, they would exercise it adversely to the contractor except in cases of a strength only rarely encountered in life. This particular case is not strong as such cases go. Tapper’s was better. Do I not see the court’s tongue in its cheek, as its hand waves the contractor back to a tribunal we all know will chop off his head ? In United States v. Anthony Grace & Sons, 384 U.S. 424, 430, 86 S.Ct. 1539, 16 L.Ed.2d 662 (1966), the Supreme Court indicates that the contractor is not required to exhaust the administrative procedure if it is “inadequate or unavailable.” I suggest the only tribunal that exists in the Department of Defense to pass on contractor appeals has clearly indicated not just its “unwillingness to act” in the Supreme Court’s words but its lack of authority to do so, also. Moreover, it is so hostile towards appellants in the position of this one, that even a clear directive to exercise discretion would likely be futile. Therefore, though we could remand the case to the Secretary with instructions to refer it to a new, unprejudiced tribunal of his creation, we are not required to do so. The Court’s exception allows us to take jurisdiction ourselves rather than to mandate new administrative procedures that would supplement those that are “inadequate or unavilable.” We don’t have to keep remanding forever. Plaintiff prays that this court exercise its discretion. It says that there are no facts in dispute. It does not add by offer of proof or affidavit any facts in addition to or contradicting those the ASBCA found in its decision of February 18, 1970. The notice of default termination was a formidable looking telegram. It included a full warning that the right of appeal to the ASBCA had to be exercised within 30 days. When it came under the eyes of plaintiff’s president, 28 days were left. No reason is even suggested still less shown, why 28 days were not enough. Judge Davis in Monroe M. Tapper & Assocs. for a unanimous court, says the burden is on the contractor to show that a waiver of the 30-day rule is warranted, and “carelessness or neglect on the part of the applicant is relevant.” Plaintiff here fails to meet this standard, and therefore only one finding is possible: it has failed to exhaust its administrative remedy, in not appealing within 30 days. The petition should be dismissed. . In the case of William Green Constr. Co. v. United States, Ct.Cl. 477 F.2d 930 at 937 decided May 11, 1973, we said “The time-limit for appeals to contract appeals boards is not beyond enlargement,” citing the first Maney Aircraft and Monroe M. Tapper opinions,

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2024-08-24T03:29:51.129683

Tom S. ACUNA et al. v. The UNITED STATES. Arthur C. ARCHIBALD et al. v. The UNITED STATES. Court P. ALLEN et al. v. The UNITED STATES. Cecil B. BARNETT et al. v. The UNITED STATES. Nos. 259-70, 292-70, 349-70 and 458-70. United States Court of Claims. June 20, 1973. Robert C. Baxley, San Diego, Cal., atty. of record, for plaintiffs; Jones, Baxley, Crouch & McCarty, John S. Rhoades, and Holt, Rhoades & Hollywood, San Diego, Cal., of counsel. Thomas E. Thomason, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant. Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASH-IWA, KUNZIG and BENNETT, Judges. ON DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT AND PLAINTIFFS’ CROSS MOTION FOR SUMMARY JUDGMENT SKELTON, Judge. The 336 plaintiffs in these four cases are suing to recover compensation for work performed by them as immigration inspectors for the Immigration and Naturalization Service, United States Department of Justice (hereinafter sometimes referred to as the Service), at several different ports in three of the Service’s four regions. Plaintiffs regularly work six days a week and receive the equivalent of seven days’ pay. They claim, however, that they are entitled by law to receive the equivalent of eight and one-half days’ pay. The case is before the court on cross-motions for summary judgment. In order to earn their annual salary, immigration inspectors are required to work a 40-hour week, normally comprised of five days, eight hours a day. The existing Immigration and Naturalization Regulations state that the eight hours a day shall be performed between Monday and Saturday. In addition to the regularly scheduled 40-hour week, all immigration inspectors have been regularly required to perform inspectional duties for eight hours on Sunday in connection with the examination of persons entering the United States. In effect, therefore, immigration inspectors are required to be on duty forty-eight hours a week, consisting of eight hours a day, six days a week, and one of those six days is always Sunday. Since 1931, plaintiffs have received preferential pay treatment with respect to other Federal workers in the form of “extra compensation” for overtime, Sunday, and holiday work. The Act of March 2, 1931 grants immigration inspectors two days’ extra compensation for Sunday and holiday duty. Subsequently, the Federal Employees Pay Act of 1945 was passed which provides generally that government employees’ working hours officially ordered or approved in excess of'40 hours in an administrative workweek, or in excess of eight hours in a day, are overtime and shall be paid for at a premium rate of one and one-half times the basic hourly rate. This latter act, however, contains an anti-pyramiding provision, the effect of which is to prevent an employee from receiving premium pay under the 1945 Pay Act for the same services for which he is paid under another listed statute. Listed therein are “sections 1353(a) and 1353(b) of title 8,” the Act of March 2, 1931. The Immigration and Naturalization Service has designated the seven consecutive days beginning Sunday at 12:01 a. m. and running through Saturday, midnight, as the administrative workweek. Further, they have designated Monday through Saturday as the basic workweek for immigration inspectors. The placing of Sunday outside the basic five-day 40 hour workweek and making it the sixth work day of the administrative workweek by the Service had the effect of preventing the immigration inspectors from receiving one and one-half days’ of premium pay under the 1945 Federal Employees Pay Act for the sixth day worked since they already receive two additional days’ pay for Sunday duty under the Act of March 2, 1931, for the same services. Plaintiffs work six days per week and receive the equivalent of seven days’ pay. Their basic workweek runs from Monday through Saturday, during which period they work five days and get one day off. It is within the basic workweek that they must work their 40 hour week as a credit towards their annual salary. Thus, during the basic workweek plaintiffs work five days out of six and receive five days’ pay. In addition, they are required to work on Sunday, which, under the present arrangement, is outside the basic workweek. Since Sunday is outside the basic workweek, Sunday work is not counted towards earning their annual salary. Plaintiffs do receive two additional days’ pay as extra compensation under the Act of March 2, 1931 for work performed on Sunday. They do not receive one and one-half days of premium pay under the 1945 Federal Employees Pay Act for “eight hours of work officially ordered or approved in excess of 40 hours in an administrative workweek” because those eight excess hours of work are considered to have been performed on Sunday (as a result of the manner in which the Service has scheduled the administrative workweek and the basic workweek) and the anti-pyramiding provision of the Federal Employees Pay Act of 1945 does not permit an employee to receive premium pay under that Act for the same services for which he is paid under the Act of March 2, 1931. The issue presented for decision in this case is whether the Immigration and Naturalization Service abused its discretion by scheduling Sunday outside of the basic workweek, where the administrative workweek commenced on Sunday, and plaintiffs were regularly and consistently required to work on Sundays, and the effect of such scheduling was to deny to plaintiffs premium pay under the Federal Employees Pay Act of 1945. Plaintiffs contend that the basic workweek should begin on Sunday, the same day on which the administrative workweek begins, and that the Service’s failure to so schedule the basic workweek is an abuse of discretion and an unreasonable interpretation of the relevant statutes. The effect of having the basic workweek commence on Sunday, as plaintiffs urge, is that the immigration inspectors would work a 40-hour period between Sunday and Friday, having one full day off, and then work overtime on Saturday. According to plaintiffs’ theory, they should receive three days’ pay for Sunday (one day’s pay as a part of the basic workweek and two additional days’ pay under the Act of March 2, 1931, for Sunday work) and one and one-half days’ pay for Saturday (time and a half for overtime work in excess of 40 hours a week). In other words, plaintiffs claim that they are entitled to receive the equivalent of eight and one-half days’ pay for six days of work. Defendant’s position is that the Service was given discretion to consider its costs and proper functioning in scheduling the basic workweek and that it has properly exercised its discretion by scheduling a basic workweek of five days during Monday through Saturday. We agree with the defendant and hold that there was no abuse of discretion on the part of the Service for all of the reasons set out below. The Federal Employees Pay Act of 1945, 59 Stat. 303, as amended by the “Fringe Benefits Bill,” 68 Stat. 1112, signed into law on September 1, 1954, subsequently amended and now codified as 5 U.S.C. § 6101(a) (1970), provides in pertinent part: § 6101. Basic 40-hour workweek; work schedules; regulations. (a)(1) * * * (2) The head of each Executive agency, military department, and of the government of the District of Columbia shall-— (A) establish a basic administrative workweek of 40 hours for each full-time employee in his organization ; and (B) require that the hours of work within that workweek be performed within a period of not more than 6 of any 7 consecutive days. (3) Except when the head of an Executive agency, a military department, or of the government of the District of Columbia determines that his organization would be seriously handicapped in carrying out its functions or that costs would be substantially increased, he shall provide, with respect to each employee in his organization, that— (A) assignments to tours of duty are scheduled in advance over periods of not less than 1 week; (B) the basic 40-hour workweek is scheduled on 5 days, Monday through Friday when possible, and the 2 days outside the basic workweek are consecutive ; (C) the working hours in each day in the basic workweek are the same; (D) the basic nonovertime workday may not exceed 8 hours; (E) the occurrence of holidays may not affect the designation of the basic workweek; and (F) breaks in working hours of more than 1 hour may not be scheduled in a basic workday. [Emphasis supplied.] *- -x- * -* * * The requirements contained in section 6101(a)(2)(A) and (B), that the head of the agency establish a basic workweek of 40 hours for each full-time employee and require that the hours of work within that workweek be performed within a period of not more than 6 of any 7 consecutive days are mandatory, as indicated by the use of the word “shall.” Moreover, the basic workweek established by the Service in this ease clearly met these mandatory requirements. On the other hand, the several provisions contained in section 6101(a)(3), including the provision that the basic 40-hour workweek be scheduled on 5 days, Monday through Friday when possible, and that the 2 days outside the basic workweek be consecutive,' are subject to the discretion of the agency head. The above-cited statutory language makes it abundantly clear that in scheduling the basic 40-hour workweek the head o.f an Executive agency was given discretion to vary from the usual Monday through Friday workweek, etc., where he determined that the functions of the agency would be impeded or where the costs would be substantially increased as a result of following the various prescriptions of section 6101(a)(3). By providing for such discretion, Congress recognized that the proper functioning of certain agencies would require more latitude in the scheduling of basic workweeks. 5 U.S.C. § 6101(c) (1970) provides: (c) The Civil Service Commission may prescribe regulations, subject to the approval of the President, necessary for the administration of this section insofar as this section affects employees in or under an Executive agency. The implementing regulations promulgated by the Civil Service Commission do not require that the agency follow guidelines other than those set forth in section 6101(a)(2) and (3). Concerning the establishment of a basic workweek, 5 C.F.R. § 610.102(c) (1970), “Definitions,” reads: (c) “Basic workweek,” for full-time employees, means the 40-hour workweek established in accordance with § 610.111. 5 C.F.R. § 610.111(a) (1970), “Establishment of Workweeks,” then provides in part: (a) The head of each agency, with respect to each group of full-time employees to whom this subpart applies, shall establish by regulation: (1) A basic workweek of 40 hours which does not extend over more than 6 of any 7 consecutive days. Except as provided in paragraphs (b) and (c) of this section, the regulation shall specify the calendar days constituting the basic workweek and the number of hours of employment for each calendar day included within the basic workweek. * * * * * * In accordance with these directives and under the delegation of authority from the Attorney General, 28 C.F.R. § 0.144 (1970), the Commissioner of Immigration and Naturalization has by Immigration and Naturalization Service Administrative Manual (I & N Service AM) at 2818.03 (May 15, 1962) established a basic workweek as follows: Definitions: * * * * * * The term “basic workweek” for full-time officers and employees means the 40-hour workweek which shall not extend over more than six of the seven days in the administrative workweek. The I & N Service AM, at 2818.04, further provides: Section 1c, Scheduling the Basic Workweek: Daily tours of duty in the basic workweek shall be established within a maximum of 9 continuous clock hours, with 1 hour for food and rest. Normally, each tour will consist of 8 hours of duty over a period of 8 hours and 30 minutes. The basic workweek for immigration officers performing inspection duties shall be established on weekdays, Monday through Saturday, including holidays occurring on those days, but excluding Sunday. When it is impracticable to prepare work schedules in advance for periods of not less than two weeks that coincide with pay periods, as provided in AM 2961, such work schedules for the basic workweek must be prepared and posted not later than the close of business on the Friday preceding the week for which the work schedules apply. [Emphasis in original.] With respect to the establishment of an administrative workweek, 5 C.F.R. § 610.102(a) and (b) (1970) state: (a) “Administrative workweek” means a period of 7 consecutive calendar days designated in advance by the head of an agency under section 6101 of title 5, United States Code. (b) “Regularly scheduled administrative workweek,” for full-time employees, means the period within an administrative workweek, established in accordance with § 610.111, within which these employees are required to be on duty regularly. For part-time employees, it means the officially prescribed days and hours within an administrative workweek during which these employees are required to be on duty regularly. 5 C.F.R. § 610.111(a)(2) (1970) provides further that the head of each agency shall establish: (2) A regularly scheduled administrative workweek which consists of the 40-hour basic workweek established in accordance with subpara-graph (1) of this paragraph, plus the period of overtime work, if any, regularly required of each group of employees. Except as provided in paragraphs (b) and (c) of this section, the regulation, for purposes of leave and overtime pay administration, shall specify by calendar days and number of hours a day the periods included in the regularly scheduled administrative workweek which do not constitute a part of the basic workweek. Consistent with these Civil Service Commission regulations, the Immigration and Naturalization Service in I & N Service AM at 2818.03 (May 5, 1962) has defined these terms as follows: The term “administrative workweek” means the seven consecutive days from 12:01 a. m. Sunday to midnight Saturday. ■Yt # * * *>:* * The term “regularly scheduled administrative workweek” for full-time officers and employees means the period within an administrative workweek when such officers and employees are required to be on duty regularly. The statute and implementing regulations thus describe an agency’s discretion to designate a seven-day administrative workweek, and, within such administrative workweek, a five-day period known as a basic workweek. Further, the regularly scheduled administrative workweek includes the 40-hour basic workweek, plus regularly scheduled overtime. While a preference is expressed for a basic workweek running from Monday through Friday, and for the two days outside the basic workweek to be consecutive, the head of an agency is given discretion to deviate from this preferred pattern where he “determines that the agency would be seriously handicapped in carrying out its functions or that costs would be substantially increased.” Since it is quite apparent that the Service was given discretion to consider agency functions and costs in scheduling the basic workweek, we must now consider whether it properly exercised that discretion. In a memorandum dated November 2, 1954, the Commissioner of Immigration and Naturalization stated to the Attorney General of the United States (the head of the agency) that broad application of certain provisions of the September 1, 1954, amendment to the Federal Employees Pay Act of 1945 (including the provision that the basic 40-hour workweek be scheduled on 5 days and that the 2 days outside the basic workweek be consecutive) “would not only substantially increase costs, but might well cripple the Service.” The memorandum requested that the Service be permitted to schedule and operate on hours of duty which deviated from those set forth in the 1954 amendment. In support of his request, the Commissioner attached to his memorandum a justification for exceptions from the provisions of the amendment. This justification contained an exhaustive discussion of the nature of work performed by immigrant inspectors and the inherent administrative difficulties in scheduling their hours of duty. The Attorney General granted the Commissioner’s request that Immigration and Naturalization employees be excepted from these provisions of the amendment to the Pay Act where operations would suffer or costs would be increased, and the District Directors of the Immigration and Naturalization Service were so notified on November 12, 1954. It is therefore clear that the Service, after carefully considering the mandate of the 1954 amendment and the discretionary exception therein contained, determined that an exception from the normal scheduling was justified, in view of agency functions and the costs involved. Plaintiffs apparently do not deny that the Service had discretion to schedule the basic workweek in a manner different from that prescribed in the 1954 amendment to the Federal Employees Pay Act of 1945. Rather, plaintiffs complain that it was an abuse of discretion to schedule a basic workweek the beginning of which does not coincide with the beginning of the administrative workweek, since the effect of such scheduling denies them premium pay for regularly scheduled overtime work under the Federal Employees Pay Act of 1945. Neither 5 U.S.C. § 6101(a) nor the Civil Service Commission’s implementing regulations contain any suggestion that the first day of the administrative workweek on which employees regularly work must be the first day of the basic workweek. On the contrary, 5 C.F.R. § 610.111(b) (1970) strongly implies that this is not required. It states: (b) When it is impracticable to prescribe a regular schedule of definite hours of duty for each workday of a regularly scheduled administrative workweek, the head of an agency may establish the first 40 hours of duty performed within a period of not more than 6 days of the administrative workweek as the basic workweek, and additional hours of officially ordered or approved duty within the administrative workweek are overtime work. The obvious implication to be drawn from permitting the first 40 hours of duty performed within the administrative workweek to be considered the basic workweek in a situation where it is impracticable to prescribe a regular schedule of duty, is that where a regular schedule of duty can be prescribed, as in the instant case, the basic workweek need not be the first 40 hours of duty performed. 5 C.F.R. § 610.111(a)(2) (1970), set out in full earlier in this opinion, merely states that the regulations established by the agency head, “for purposes of leave and overtime pay administration, shall specify by calendar days and number of hours a day the periods included in the regularly scheduled administrative workweek which do not constitute a part of the basic workweek.” There is no requirement in the Civil Service Commission’s regulation that work regularly scheduled beyond the 40-hour basic workweek be scheduled at the end of the administrative workweek, after the basic workweek has been completed. The requirement is simply that, once the agency has selected such period, its regulations specify the period by calendar day, etc., regardless of where in the administrative workweek it occurs. This is entirely consistent with the statute, wherein, as mentioned earlier, the only requirement not subject to agency discretion is that the agency head establish a basic workweek of 40 hours for each full-time employee and require that the hours of work within that workweek be performed within a period of not more than six of any seven consecutive days. Since the Service has established a basic 40-hour workweek over a period of six consecutive days, Monday through Saturday, and since its regulations clearly specify that Sunday is excluded from the basic workweek, the requirements of the statute and of the Civil Service Commission’s implementing regulations have been met. Moreover, there is no logical reason why an employee’s basic workweek should necessarily commence on the first day of the administrative workweek that he is scheduled to work. Both the scheduling actually used by the Service and that proposed by the plaintiffs seem equally appealing from a purely logical point of view. What plaintiffs are really arguing in this suit, when their argument is distilled to its purest form, is that the failure of the Service to schedule the basic workweek for immigration inspectors in a manner that would maximize all possible benefits under the pay statutes herein involved amounts to an abuse of discretion. This argument contradicts the plain meaning of section 6101(a) which permits the head of an agency to consider costs in scheduling work. If Congress had intended a result like that which plaintiffs are urging herein, it would obviously not have given such discretion to the agencies. Nor would it have included the anti-pyramiding provision in section 5549. The manifest intent of Congress in passing section 5549 was to preserve overtime benefits already possessed by groups like the immigration inspectors while preventing them from being paid under two different overtime statutes for the same services. With that congressional purpose clearly in mind, it seems more appropriate to view the plaintiffs’ proposed method of scheduling as a device to avoid the anti-pyramiding provisions then to view the Service’s actual scheduling as a scheme to avoid paying plaintiffs overtime under the Federal Employees Pay Act of 1945. Plaintiffs cite the case of Anderson v. United States, 136 Ct.Cl. 365 (1956) where this court stated, in reference to patrol inspectors of the Customs Border Patrol, as follows: * * * It may be that Congress would have been well advised to omit such employees from the Overtime Pay Act of 1945, or to make some different arrangement for their compensation. But Congress did not omit them, and their superiors were not authorized to deny to them the benefits of the act, on the ground that the administration of the act would be difficult, almost to the point of impossibility, or that money had not been provided to pay the employees what they were entitled to under the law. [Id. at 367.] Anderson, however, did not involve a claim for benefits under more than one overtime pay statute. The concern of the court there was that plaintiffs were compensated for overtime work. There is a vast difference between an agency acting to deprive its employees of pay benefits granted by a statute, and an agency exercising discretion conferred by statute in scheduling work so as not to maximize every conceivable pay benefit. The practice of the agency in establishing a basic workweek of five days from Monday through Saturday and an administrative, workweek from Sunday through Saturday is reasonable and in harmony with section 6101(a) and the implementing regulations thereunder. Where an agency’s long-standing administration and interpretation of existing statutes and regulations is reasonable and not contrary to the language of those statutes it is entitled to great weight. State of Alabama v. United States, 461 F.2d 1324, 198 Ct.Cl. 683 (1972); Barrington Manor Apartments Corp. v. United States, 459 F.2d 499, 198 Ct.Cl. 298 (1972); Malandra v. United States, 195 Ct.Cl. 11 (1971); DeLano v. United States, 393 F.2d 517, 183 Ct.Cl. 379, 388 (1968). (Immigration and Naturalization Service practice under the Act of March 2, 1931.) In order to add even more weight to its contention that the Service’s practice of excluding Sunday from its basic workweek was reasonable, the defendant points to the fact that the Bureau of Customs has, since 1944, followed a similar practice of excluding Sunday from its basic workweek. This practice has the effect of denying customs inspectors overtime compensation under the Federal Employees Pay Act of 1945, by virtue of the anti-pyramiding provision, since they receive special compensation for Sunday work under the Act of February 13, 1911, 36 Stat. 901, as amended, Act of February 7, 1920, 41 Stat. 402 as amended, 19 U.S.C. § 267 (1970), the act on which the Act of March 2, 1931 was patterned. Plaintiffs counter by asserting that, since the Bureau of Customs begins its administrative workweek and its basic workweek on the same day, Monday, its exclusion of Sunday from, the basic workweek, while proper, in no way aids the defendant’s position in the instant case. However, since the court has decided that the Service’s practice of excluding Sunday from its basic workweek was proper in its own right, we do not deem it necessary to consider the practice followed by the Customs Bureau or to comment on the propriety thereof. In conclusion, we hold that the Immigration and Naturalization Service properly exercised its discretion in excluding Sundays from the basic workweek. Furthermore, the Service’s long-standing interpretation and application of the pertinent statutes and implementing regulations is reasonable and is therefore entitled to considerable weight. Plaintiffs have already received all extra compensation due them and are therefore not entitled to recover in this suit. Accordingly, defendant’s motion for summary judgment is granted, plaintiffs’ cross motion for summary judgment is denied, and plaintiffs’ petitions are dismissed. . On March 1, 1971, this court ordered that these four petitions be consolidated pursuant to Rule 131(a). . Immigration & Naturalization Service Administrative Manual 2818.04, section 1c, dated May 15,1962. . For purposes of its motion, defendant has admitted that plaintiffs regularly worked eight hours on Sundays during the claim periods and that this work was officially ordered or approved within the contemplation of agency regulations implementing the Federal Employees Pay Act of 1945, as amended, 5 U.S.C. § 5542 (a)(1970). . 46 Stat. 1467, as amended, 8 U.S.C. § 1353a (1970), reads as follows: “§ 1353a. Officers and employees; overtime services; extra compensation; length of working day. The Attorney General shall fix a reasonable rate of extra compensation for overtime services of immigration officers and employees of the Immigration and Naturalization Service who may be required to remain on duty between the hours of five o’clock postmeridian and eight o’clock antemeridian, or on Sundays or holidays, to perform duties in connection with the examination and landing of passengers and crews of steamships, trains, airplanes, or other vehicles, arriving in the United States from a foreign port by water, land, or air, such rates to be fixed on a basis of one-lialf day’s additional pay for each two hours or fraction thereof of at least one hour that the overtime extends beyond five o’clock postmeridian (but not to exceed two and one-lialf days’ pay for the full period from five o’clock postmeridian to eight o’clock antemeridian) and two additional days’ pay for Sunday and holiday duty; in those ports where the customary working hours are other than those heretofore mentioned, the Attorney General is vested with authority to regulate the hours of such employees so as to agree with the prevailing working hours in said ports, but notiiing contained in tiiis section shall be construed in any manner to affect or alter the length of a working day for such employees or the overtime pay herein fixed.” . 5 U.S.C. § 5542 (1970), reads in pertinent part as follows: “§ 5542. Overtime rates; computation. (a) Hours of work officially ordered or approved in excess of 40 hours in an administrative workweek, or (with the exception of an employee engaged in professional or technical engineering or scientific activities for whom the first 40 hours of duty in an administrative workweek is the basic workweek and an employee whose basic pay exceeds the minimum rate for GS-10 for whom the first 40 hours of duty in an administrative workweek is the basic workweek) in excess of 8 hours in a day, performed by an employee are overtime work and shall be paid for, except as otherwise provided by this subchapter, at the following rates: (1) For an employee whose basic pay is at a rate which does not exceed the minimum rate of basic pay for GS-10, the overtime hourly rate of pay is an amount equal to one and one-lialf times the hourly rate of basic pay of the employee, and all that amount is premium pay. (2) For an employee whose basic pay is at a rate which exceeds the minimum rate of basic pay for GS-10, the overtime hourly rate of pay is an amount equal to one and one-half times the hourly rate of the minimum rate of basic pay for GS-10, and all that amount is premium pay.” . 59 Stat. 302, as amended, 5 U.S.O. § 5549 (1970) provides as follows: 5549. Effect on other statutes. This subchapter does not prevent payment for overtime services or for Sunday or holiday work under any of the following statutes— (1) section 394 of title 7; (2) sections 1353a and 1353b of title 8; (3) sections 261, 267, 1450, 1451, 1451a, and 1452 of title 19; (4) section 382b of title 46; and (5) section 154(f)(3) of title 47. However, an employee may not receive premium pay under this subchapter for the same services for which he is paid under one of these statutes.” . Plaintiffs do not make any claim based on the scheduling of a basic workweek over six days, rather than five.

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Calvin R. ALDRIDGE et al. v. The UNITED STATES. Thomas B. ADDLESBERGER et al. v. The UNITED STATES. Nos. 411-66 and 426-69. United States Court of Claims. Decided June 20, 1973. Jeffrey M. Glosser, Washington, D. C., atty. of record, for plaintiffs; Albert J. Joyce, Jr., Balboa, Canal Zone, and Pasternak, Kaufmann, Kaufmann & Gloss-er, Washington, D. C., of counsel. George M. Beasley, III, Washington, D. C., with whom was Asst. Atty. Gen., Harlington Wood, Jr., for defendant. Before COWEN, Chief Judge, LARA-MORE, Senior Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA and KUNZIG, Judges. OPINION PER CURIAM: These cases come before the court on plaintiffs’ exceptions to a recommended decision filed November 24, 1972, by Trial Commissioner Mastín G. White pursuant to Rule 134(h). The court has considered the cases on the briefs and oral argument of counsel. Since the court agrees with the decision, as hereinafter set forth, it hereby affirms and adopts the same as the basis for its judgment in this case. Therefore, plaintiffs are not entitled to recover and the petitions are dismissed. OPINION OF COMMISSIONER WHITE, Commissioner: In these two civilian pay cases, which were consolidated for trial purposes, a total of 89 plaintiffs are suing the defendant for additional compensation with respect to the period that began on January 9, 1964, and ended on June 1, 1964. It is my opinion that the plaintiffs are not entitled to recover. At the time that is involved in the present litigation, the plaintiffs were working as civilian policemen in the Canal Zone and were assigned to the Cristobal Police District. The entire Canal Zone, covering a geographical area of approximately 550 square miles, was divided into two police districts, the Cristobal Police District, on the Caribbean side of the Canal Zone, and the Balboa Police District, on the Pacific side of the Canal Zone. The Cristobal Police District covered an area of approximately 355 square miles. Because of incursions into the Canal Zone by riotous and destructive Panamanian mobs over a period of several days beginning on January 9, 1964 (see findings 4-6), and because of subsequent apprehension concerning the possible renewal of such trouble, the plaintiffs and other police personnel assigned to the Cristobal Police District (as well as police personnel assigned to the Balboa Police District) were required to perform many hours of overtime duty during the period that began on January 9, 1964, and ended on June 1, 1964 (see findings 7 and 8). Throughout this period, the plaintiffs received their regular pay for hours on duty up to 8 in a day and 40 in a week, and they received overtime pay for all time on duty in excess of 8 hours in any day or in excess of 40 hours in any week. The plaintiffs contend in the present action, however, that the restrictions which were imposed by competent authority on their personal activities during their off-duty time were of such a nature that, except for the time spent in eating and sleeping, they should be regarded as having been on “standby duty” all the time when they were technically off duty during the period January 9-June 1, 1964; and, therefore that all of their off-duty time during the period in question actually constituted com-pensable hours of work, with the exception of the time spent in eating and sleeping. Because it was thought necessary that policemen of the Cristobal Police District, while off duty during the period in question, should be available for an immediate call to duty if an emergency should arise, the following restrictions were imposed by competent authority on the personal activities of the policemen while in an off-duty status i (1) They were forbidden to go outside the geographical boundaries of the district. (2) They were required to be either at their quarters or at some other place within the district where they could be reached by telephone for an immediate call to duty. (3) A policeman, before leaving his quarters to go to another place that had a telephone, was required to telephone the Desk Sergeant at the Cristobal Police Station, inform him of such intention, and furnish him the telephone number of the place to which the policeman was going. (4) A policeman, upon returning to his quarters from another place, was required to telephone the Desk Sergeant and inform him of such return. With respect to geographical restriction (1) previously mentioned, the District Police Commander in charge of the Cristobal Police District had the authority to permit a policeman to leave the district if the official believed that such an exception was warranted by an emergency situation; and on one occasion the District Police Commander did permit a plaintiff to go into the Balboa Police District for a few hours on an off-duty day. Also, after April 2, 1964, policemen of the Cristobal Police District who were scheduled for leave in the United States were allowed to go to the United States in accordance with the schedule. As the plaintiffs and other policemen of the Cristobal Police District were forbidden during the period January 9-June 1, 1964, to spend off-duty time at places (even if within the district) that did not have telephones, the plaintiffs and their colleagues were denied the privilege of participating in such recreational activities within the district as hunting, fishing, boating, picnicking, and going to the beach while off duty. On the other hand, the plaintiffs (and their colleagues) actually had great freedom of movement and activity within the district while off duty during the period in question, since the Cristobal Police District covered approximately 355 square miles and there were many different types of places within the district which were equipped with telephones and to which off-duty policemen were free to go during their off-duty time, provided they notified the Desk Sergeant at the Cristobal Police Station in advance of such intention. Included among the places to which policemen were free to go and spend off-duty time were churces, commissaries (grocery stores), theatres, barber shops, cleaning and pressing shops, bowling alleys, social clubs, golf clubs, swimming pools, hobby shops, a clothing store, a first-aid station, a gymnasium, a library, a hospital, and a YMCA. In addition, virtually all of the civilian and military quarters located within the Cristobal Police District were equipped with telephones, and off-duty policemen were free to visit the homes of their friends within the district. Also, there were schools at each of the civilian communities within the Cristobal Police District, the schools were equipped with telephones, and policemen could visit the schools, if they had occasion to go there during off-duty time (e. g., to attend PTA meetings). If the off-duty time of the plaintiffs during the period January 9 — June 1, 1964, constituted “hours of work” because of the restrictions imposed by competent authority on the plaintiffs’ personal activities, the Canal Zone Government was obligated by 5 U.S.C. § 911 (1964) to compensate the plaintiffs for their off-duty time (with the exception of time devoted to eating and sleeping). However, it is my opinion that considerable violence to the English language would be done by a holding to the effect that the plaintiffs were engaged in “work” for the Government while they were attending church services, or making purchases at grocery stores, or watching shows at theatres, or visiting the homes of friends, or entertaining friends in their own homes or pursuing hobbies at hobby shops, or swimming at swimming pools, or participating in social activities at social clubs, or playing golf at golf clubs, or getting haircuts, or bowling at bowling alleys, or carrying on in their own homes whatever activities in the way of recreation, diversion, or relaxation that might suit their fancy. The plaintiffs’ situation is readily distinguishable from that involved in other cases where employees were required to remain at a specific place designated by the employer while awaiting a possible need for their services, and the courts held that the waiting time, although not productive, constituted compensable hours of work (e. g., Armour & Co. v. Wantock, 323 U.S. 126, 65 S.Ct. 165, 89 L.Ed. 118 (1944); Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944); Winsberg v. United States, 98 F.Supp. 345, 120 Ct.Cl. 511 (1951); Farley v. United States, 127 F.Supp. 562, 131 Ct.Cl. 776 (1955)). From the standpoint of the present litigation, the case of Rapp v. United States, 340 F.2d 635, 167 Ct.Cl. 852 (1964), is especially significant. The claimants in that case were employees of the Office of Civil and Defense Mobilization (and of its predecessor agency) during the period that was involved in the litigation, and they were suing for compensation with respect to the time when they severally served as duty officer for the agency during non-work hours. Generally speaking, the function of a duty officer was to receive telephone calls relating to natural disasters and other emergencies, to develop additional information if necessary, and either to take appropriate action himself or to telephone one of his superiors and request advice regarding the action to be taken. The duty officer function was performed for 16 hours after the close of business on a normal workday, or for 24 hours on a Saturday, Sunday, or holiday. During the initial phase of the period that was involved in the Rapp case, a duty officer performed this function at his home for the 16 hours or 24 hours of the assignment, and he was free to occupy his time at home as he saw fit while awaiting possible telephone calls concerning emergencies. He was not required to perform any other duties. Later, a duty officer was required to perform this function at the agency’s control center; and in addition to being available to receive possible telephone calls concerning emergencies, he was required to maintain a log, to make and receive regular telephone calls, and to test electronic equipment. Except for these duties a duty officer was free to read, eat, or sleep (on a cot provided by the agency). This court held in the Rapp case that during the time when duty officers performed the function at home, the hours devoted to such duty did not constitute compensable hours of work (340 F.2d at p. 642, 167 Ct.Cl. at p. 865), but that the hours of duty performed at the control center (except for the time spent in eating and sleeping) were predominantly for the benefit of the employer and, therefore, constituted compensable hours of work (340 F.2d at pp. 642-644, 167 Ct.Cl. at pp. 866-868). Our present plaintiffs had substantially greater freedom of movement and activity during their off-duty time than did the duty officers in the Rapp case while functioning in their homes. The plaintiffs rely principally upon Section 3.06 of Chapter H2 of the Canal Zone Government’s Personnel Manual. That section, at the time involved in the present litigation, declared that “standby duty” was compensable for civilian personnel of the Canal Zone; and “standby duty” was defined to mean “remaining, on orders from competent authority, at or within the confines of a duty station or designated area, in a state of readiness to perform actual work when the need arises or when called.” The term “duty station or designated area,” in turn, was defined in the following language: (1) An employee’s regular duty station. (2) In quarters or waiting rooms provided by the Panama Canal Company and Government, which are not the employee’s ordinary living quarters, and which are specifically provided for use of personnel required to stand by in readiness to perform actual work when the need arises or when called. (3) In an employee’s living quarters, whether public or private property, when specifically designated by competent authority. Section 3.06 does not appear to be applicable to the plaintiffs’ off-duty time during the period January 9-June 1, 1964, because the plaintiffs were not ordered by competent authority to “remain” during off-duty time in their “regular duty station,” or in “quarters or waiting rooms * * * specifically provided for use of [standby] personnel,” or in their own “living quarters.” Actually, the plaintiffs were not ordered to “remain” at any specific place. On the contrary, they were free during off-duty periods to go anywhere they wished within the 355 square miles of the Cristobal Police District, so long as the places to which they went had telephones and they kept the Desk Sergeant at the Cristobal Police Station informed as to their whereabouts. It necessarily follows, from what has previously been said in this opinion, that the plaintiffs have not shown their entitlement to recover, and that the petitions should be dismissed. . Similar restrictions were imposed on the personal activities of policemen assigned to the Balboa Police District. . The pertinent statutory provision is now codified as 5 U.S.C. § 5542 (1970). . The fact that police officials may initially have referred to “standby” and “standby alert” does not show that they were invoking Section 3.06. It seems plain that those terms were used colloquially and in a general sense, not in the specific meaning of the regulation. These officials later corrected themselves to refer to “on call” status. [Footnote by the court.]

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The UNITED STATES of America v. The KIOWA, COMANCHE AND APACHE TRIBES OF INDIANS, The Wichita Indian Tribe of Oklahoma and Affiliated Bands et al., Intervenors. Appeal No. 12-71. United States Court of Claims. June 20, 1973. As Amended on Denial of Rehearing Sept. 28, 1973. Durfee, Senior Judge, concurred in part and dissented in part and filed opinion in which Davis and Kunzig, JJ., joined. Bernard M. Sisson, Washington, D. C., with whom was Asst. Atty. Gen. Kent Frizzell, for appellant. J. Roy Thompson, Jr., Washington, D. C., attorney of record for The Kiowa, Comanche and Apache Tribes of Indians, appellees. Omer Luellen, Hinton, Okl., attorney of record for The Wichita Indian Tribe of Oklahoma, etc., intervenor. Paul M. Niebell, Washington, D. C., of counsel. Before COWEN, Chief Judge, DUR-FEE, Senior Judge, and DAVIS, SKEL-TON, NICHOLS, KUNZIG, and BENNETT, Judges. ON APPEAL FROM THE INDIAN CLAIMS COMMISSION NICHOLS, Judge. This case is before the court on appeal from the Indian Claims Commission (Commission) decision in its Docket No. 257. The Appellees’, Kiowa, Comanche and Apache Tribes filed a claim with the Commission in 1951 in which they claimed aboriginal title to areas of Texas, Oklahoma, New Mexico, Colorado and Kansas, and recognized title to the lands set out as Tracts 511 and 510 on Plate CLXIV, Texas and Portions of Adjoining States, Part II of the 18th Annual Report of the Bureau of American Ethnology, 1896-1897 (Royce Areas 510 and 511). This appeal involves only the claim of title to Areas 510 and 511 as allegedly recognized in the Treaty with the Comanche and Kiowa Tribes, concluded on October 18, 1865. The Appellee-Tribes filed a motion for summary judgment on the issue of recognized title on February 13, 1970. Before the Commission ruled, The Wichita Indian Tribe of Oklahoma and Affiliated Bands filed a motion for leave to intervene, originally claiming aboriginal title to the land in question and subsequently claiming recognized title under the Treaty of 1865. The Commission granted the motion for leave to intervene. Both Appellees — Kiowa, Comanche and Apache Tribes — and Appellant, United States, seek reversal of this Commission decision. It • granted the motion for summary judgment and the United States appeals. We reverse on both issues. We will first deal with the issue of the claimed recognized title of the Kiowa, Comanche and Apache Tribes and then will turn to the issues raised on the question of intervention by The Wichita Indian Tribe of Oklahoma and Affiliated Bands (intervenors). The Appellees’ claim of recognized title rests on the language of the Treaty of October 18, 1865, 14 Stat. 717, 718. Article II thereof reads: Article II. The United States hereby agree that the district of country embraced within the following limits, or such portion of the same as may hereafter from time to time be designated by the President of the United States for that purpose, viz: commencing at the northeast corner of New Mexico, thence south to the southeast corner of the same; thence northeastwardly to a point on main Red river opposite the mouth of the North Fork of said river; thence down said river to the 98th degree of west longitude; thence due north o'n said meridian to the Cimarone river; thence up said river to a point where the same crosses the southern boundary of the State of Kansas; thence along said southern boundary of Kansas to the southwest corner of said State; thence west to the place of beginning, shall be and is hereby set apart for the absolute and undisturbed use and occupation of the tribes who are parties to this treaty, and of such other friendly tribes as have heretofore resided within said limits, or as they may from time to time agree to admit among them, and that no white person except officers, agents, and employes of the government shall go upon or settle within the country embraced within said limits, unless formally admitted and incorporated into some one of the tribes lawfully residing there, according to its laws and usages. The Indians parties hereto on their part expressly agree to remove to and accept as their permanent home the country embraced within said limits, whenever directed so to do by the President of the United States, in accordance with the provisions of this treaty, and that they will not go from said country for hunting or other purposes without the consent in writing of their agent or other authorized person, specifying the purpose for which such leave is granted, and such written consent in all cases shall be borne with them upon their excursions, as evidence that they are rightfully away from their reservation, and shall be respected by all officers, em-ployés, and citizens of the United States, as their sufficient safeguard and protection against injury or damage in person or property, by any and all persons, whomsoever. It is further agreed by the Indians parties hereto that when absent from their reservation, they will refrain from the commission of any depredations or injuries to the person or property of all persons sustaining friendly relations with the government of the United States; that they will not while so absent encamp, by day or night, within ten miles of any of the main tra-velled routes or roads through the country to which they go, or of the military posts, towns or villages therein, without the consent of the commanders of such military posts, or of the civil authorities of such towns or villages, and that henceforth they will and do hereby relinquish all claims or rights in and to any portion of the United States or territories, except such as is embraced within the limits aforesaid, and more especially their claims and rights in and to the country north of the Cimarone river and west of the eastern boundary of New Mexico. The land described in the above article constituted Royce Areas 510 and 511. The origin of the controversy in this ease is the phrase “the district of country embraced within the following limits, or such portion of the same as may hereafter from time to time be designated by the President of the United States for that purpose * * * ”. The question of whether the 1865 Treaty recognized title in the Appellees gains particular import because in 1867 by another Treaty, 15 Stat. 581, the United States established a reservation for the Appel-lees which was comprised of only Royce Area 510, some 3,000,000 acres. Thus if title to both Royce Areas 510 and 511 was recognized in the 1865 Treaty the Appellees would have a claim to be compensated for the loss of Royce Area 511. The Commission, in an opinion signed by four commissioners, held that the Treaty recognized title to both Areas, but there was a dissent by Chairman Kuykendall. Appellant tells us that the Senate never intended to and did not ratify the recognition of title to Royce Areas 510 and 511 in the 1865 Treaty. We are told that a large portion of the Area in question was within the boundaries of the State of Texas, and that other Tribes had claimed portions of the Area. Texas retained its public lands upon entering the Union. Therefore, the Appellant points out that the United States cound not grant title to a good portion of the -land in question and it would be contrary to the presumption of good faith on the part of public officials to assume that such a grant was intended. The Appellant invites the court to inspect the language of the Treaty and asserts that in order for there to be a recognition of title there must be language of permanent use and occupation. Appellant would have the court interpret the language of the Treaty to be a temporary recognition of the right to occupancy subject to divestment at the order of the President. Events surrounding the signing of the 1865 and 1867 Treaties are seen by the Appellant as support for its interpretation of the Treaties, especially the alleged fact that the Indian signatories did not make specific protestations prior to the 1867 Treaty that the land vested in them in 1865 was being divested. Finally, the defendant views the- Treaty of 1867 as the Presidential action called for in the 1865 Treaty. Appellees point out that in the Treaty of 1865 the Indian Tribes ceded their claims to some 100,000,000 acres of land. In return the United States set aside the 39,680,000 acres described in Article II of that Treaty. The Appellees contend that the allegation by Appellant that the United States did not have title to the Area in question is of no import in the issue of the Indians’ right to be compensated for land the United States purported to grant. The Appellees view the language of the 1865 Treaty as recognizing permanent title in the Areas of Royce Area 510 and 511 and point out that the language of recognition in the 1865 Treaty is substantially similar to the language of the 1867 Treaty, which in prior litigation has been deemed to have recognized title to Royce Areas 510 in these tribes. See, United States v. Kiowa, Comanche and Apache Tribes of Indians, 163 F.Supp. 603, 143 Ct.Cl. 534, aff’d on rehearing, 143 Ct.Cl. 545, 166 F.Supp. 939 (1958), cert. denied, 359 U. S. 934, 79 S.Ct. 650, 3 L.Ed.2d 636 (1959). Appellees also say that Appellant misreads the events surrounding the 1865 and 1867 Treaties, and views them as supporting their position. Appellees point out that failure to protest a Treaty has been held not to deprive Tribes of the rights lost by that Treaty, and note that even a passing reference to the statements made by the Chiefs present at the Treaty negotiations would reveal their displeasure at the treatment they were receiving at the hands of the United States. The Appellees note that neither the events leading up to the 1867 Treaty nor the language of that Treaty indicate that it was to be an implementation of the Treaty of 1865. Conversely the Appellees argue that the language of the 1867 Treaty indicates a recognition of the permanent title vested by the 1865 Treaty. On this point the Appel-lees say that the 1865 Treaty called for Presidential action while the 1867 Treaty was entered into as the result of the activities of a Congressionally appointed commission. Finally, the Appel-lees contend that the acceptance of Appellant’s interpretation of the 1865 Treaty would result in the Tribes having ceded to the United States 100,000,000 acres of land in exchange for nothing in 1865 and finally in exchange for some 3,000,000 acres of land in 1867. Such a holding we are told would be contrary to fair and honorable dealings and fly in the face of the fiduciary duty assumed by the United States towards the Indians. In reaching our decision, we have found it unnecessary to consider all of these issues. The intentions of the parties to an Indian Treaty need not be demonstrated by formal language. Miami Tribe of Oklahoma v. United States, 175 F.Supp. 926, 146 Ct.Cl. 421 (1959). Therefore a court must take special care in interpreting such a Treaty so as to be able to understand what was intended. When a court endeavors to interpret a Treaty between the United States and an Indian Tribe it is bound by the unambiguous words of that Treaty and cannot rewrite them. United States v. Choctaw Nation, 179 U.S. 494, 21 S.Ct. 149, 45 L.Ed. 291 (1900); Northwestern Bands of Shoshone Indians v. United States, 324 U.S. 335, 65 S.Ct. 690, 89 L.Ed. 985 (1945). Where the words of the Treaty leave room for more than one interpretation the court is to interpret the Treaty in a manner not prejudicial to the Indians. Worcester v. Georgia, 31 U.S. (6 Pet.) 515, 8 L.Ed. 483 (1832). In interpreting the words of the Treaty, the proceedings leading up to the Treaty and the events which follow it should be examined if necessary in order to elucidate the intention of the recognizing party, the United States. Miami Tribe of Oklahoma, supra; Crow Tribe of Indians v. United States, 284 F.2d 361, 151 Ct.Cl. 281, cert. denied, 366 U.S. 924, 81 S.Ct. 1350, 6 L.Ed.2d 383 (1960). Thus in order to reach a conclusion as to whether the 1865 Treaty recognized title to Royce Areas 510 and 511 one must first attempt to ascertain the intention of the parties from the language of the Treaty. As stated by Judge Madden in The Miami Tribe of Oklahoma, 175 F. Supp. at 940, 146 Ct.Cl. at 445: * * * By “recognition”, the courts have meant that Congress intended to acknowledge, or if one prefers, to grant, to Indian tribes rights in land which were in addition to the Indians’ traditional use and occupancy rights exercised only with the permission of the sovereign. Those additional rights may be sufficient to spell out fee simple title in the Indians if that is what Congress wished, or they may result in something less than fee simple title. The extent of those new and additional rights and the accompanying obligations of the sovereign and the tribe will usually be determined by the Congressional enactment, the treaty, or the agreement, conferring them. * * * The language of the 1865 Treaty indicates that the Areas granted were subject to redefinition and diminution at the will of the President. The Tribes were granted Royce Areas 510 and 511 “or such portion of the same as may hereafter from time to time be designated by the President of the United States for that purpose.” It is true that the Treaty spoke of the land granted as the Indians permanent home; however, that does not detract from the fact that the extent of that grant was left to later determination. Therefore, without a demonstration of a contrary intention on the part of the United States the language of the 1865 Treaty would defeat the Ap-pellees claim. The Appellees point to a number of cases which hold that the language need not state formally that the United States intends to recognize title in order for recognition to be accomplished. In Miami Tribe of Oklahoma, for example, Judge Madden viewed the Tribe’s right to occupy the .land in question permanently or until they were disposed to sell it as tantamount to recognized title. In that case if the Indians chose to sell the land they could sell only to the United States, which Appellant urged diminished the nature of the title held. Judge Madden disposed of the Government’s argument by noting 175 F.Supp. at pp. 936, 938, 146 Ct.Cl. at pp. 439, 441, that: Where Congress has by treaty or statute conferred upon the Indians or acknowledged in the Indians the right to permanently occupy and use land, then the Indians have a right or title to that land which has been variously referred to in court decisions as “treaty title”, “reservation title”, “recognized title”, and “acknowledged title” * * * •X* # * -X- -X- -X- * * * an agreement to permit the Indians to occupy land permanently or until they were disposed to sell it to the United States seemed to the Commission, as it does to us, to be a clear indication of an intention on' the part of the United States to recognize in the Indian treaty parties more than aboriginal use and occupancy title to the land in question.. In the Miami Tribe of Oklahoma case the nature of the grant was the question before the court while, in the case at bar, the Treaty demands that the court also deal with the question of the extent of the grant. Thus the analogy to Miami Tribe of Oklahoma is of little aid to the Appellees because we cannot hold that the 1865 Treaty recognized permanent title in the Appellee Tribes without first answering the question: recognized title to what? We are faced with the language of the Treaty which allegedly, “recognized” title to Royce Areas 510 and 511 “or such portion of the same as may hereafter from time to time be designated by the President of the United States for that purpose * # * ft The court is aware that formal statements of recognition are not necessary in order that a Treaty be deemed to have recognized title in a particular Tribe. However, as stated in Tee-Hit-Ton v. United States, 348 U.S. 272, 75 S.Ct. 313, 99 L.Ed. 314 (1955), “there must be the definite intention by congressional action or authority to accord legal rights, not merely permissive occupation.” The court is also aware of those cases under which either the events surrounding the Treaty or action subsequent to the Treaty were deemed to have demonstrated the intention on the part of the United States to recognize title, notwithstanding the language of the Treaty. The case closest to the one at bar in which Treaty language was seen as overturned by subsequent action is Klamath & Moadoc Tribes v. United States, 85 Ct.Cl. 451 (1937), aff’d., 304 U.S. 119, 58 S.Ct. 799, 82 L.Ed. 1219 (1938). In that case the Tribe had entered into a Treaty in 1864 which permitted them to occupy certain territory “until otherwise directed by the President * * * ”. Shortly thereafter a portion of the territory granted to the Tribe was mistakenly granted to the State of Oregon which in turn sold the land. The Attorney General of the United States sued to recover the land for the Tribe but was unsuccessful. Whereupon the United States arranged for the exchange of the original tract for a smaller one from the reservation and the payment to the Tribe of $108,750 for the second tract. The purchaser of the second tract sold the lumber th'ereon for $3,700,000. The Tribe brought suit under a special act for increased compensation for the land taken including the value of the lumber. The United States defended in part by contending that in the 1864 Treaty the President had retained the power to divest the Tribe of portions of the reservation. The court noted that over the 44 year period in which the events above described transpired the Government had acted in a manner only consistent with its recognition of title to the land in the Tribe. Contrary to the President acting to repossess the land, his inaction and Congressional action to pay for the land taken from the Tribe clearly indicated a recognition of title in the Tribe. The real point about this Klamath case is that the limitation language there involved: “until otherwise directed by the President” did not expressly relate to the territorial extent of the grant, as the corresponding language does here. This court did not speculate, nor did it need to, as to what direction “otherwise” the President might have given. Apparently, by other Treaty provisions, he might have moved other Tribes on the same reservation, or perhaps, he might have put the Klamaths on some other reservation. In either event, suppose they thought of the grant as conveying specific property, there was nothing to suggest in the limitation language that they might be deprived of that property, or part thereof, without compensation. It was expressly spelled out that the location of other Tribes on the reservation would not forfeit any rights guaranteed to the Treaty parties; It was reasonable for this court to conclude, after non-exercise of the Presidential power over 40 years, that it had lapsed, and was no longer a factor in determining the extent of the Klamaths’ property interest. The Government, too, had repeatedly since recognized the Kla-maths as owners. Here, on the other hand, the very language of the grant put the grantees on specific notice that the territorial extent of the grant was uncertain and yet to be determined. Instead of embracing a wide range of possibilities, the Presidential action was to focus on one thing only, the territorial extent. It does not seem that any reasonable grantee could have supposed he was getting a permanent grant of the entire tract. It is not suggested the Kiowas were so ignorant they actually misunderstood what they were getting, or could have done so. A long lapse of time might have allowed title to firm up to all the two Royee Areas, but no such lapse was allowed to occur. There was nothing to suggest that the President, if he acted, would deprive the Kiowas of anything, rather, he would for the first time define what it was they had, which until then they did not know. The Commission relied mistakenly on this Klamath case. Appellees can point to no action on the part of the President or Congress consistent with the recognition of title. The subsequent Treaty of 1867 unequivocally recognized title to only Royce Area 510. Appellees point to language in Article XI of the 1867 Treaty where reference is made to “the old reservation as defined [in the Treaty of 1865].” Such language simply supports the allegation that some Area was reserved to the Tribes in 1865 but does not dispose of the question of what Area was reserved in view of the phrase permitting the President to set the bounds of the reservation at a later date. Appellees also point to Article XVI of the 1867 Treaty where the Tribes retained the right to hunt on the “lands formerly called theirs”. However, in view of the fact that a similar provision was found in the 1865 Treaty it appears likely that this reference is to lands which the Tribes claimed by aboriginal title and not those allegedly recognized in the 1865 Treaty. The Appellees invite the court’s attention to the fact that the recognition of Area 510 in the 1867 Treaty which has been upheld by this court, Kiowa, Comanche & Apache Tribes, supra, was accomplished by substantially similar language as that used in the 1865 Treaty. We think it significant that absent from the language of the 1867 Treaty was the phrase which reserved the power in the President to set the bounds of the Area granted at a later date, the very phrase here to be construed. The negotiations leading to the Treaty of 1865 indicate that while it was intended that an Area be set aside for the Appellees, no agreement was reached as to the boundaries of that Area. In fact the Area described in the proceedings prior to the Treaty differs from that which was designated in either the 1865 Treaty or the 1867 Treaty. After the negotiation and before the ratification of the Treaty of 1865 the Commissioner of Indian Affairs, D. N. Cooley, writing to the Secretary of Interior stated in part: -X- * -X- -X- * * •x- * * As to the treaty with the Kiowas and Comanches. It will be observed, in regard to this treaty, that it does not undertake to limit the Indians to any small reservation, but includes a very large district of country, comprising about 62,000 square miles, which they are to be allowed to have ‘absolute and undisturbed use and occupation,’ ie: the tribes treated with and ‘such as they may agree to admit among them.’ This vast region, thus set apart, may be limited at the discretion of the President. (Emphasis supplied.) •X- -x- * * * * It thus appears from this contemporaneous interpretation that the United States did not intend to and did not recognize permanent title to the land in question in the 1865 Treaty. In attempting to interpret the 1865 Treaty this court is faced with a Treaty which by its words does not recognize permanent possession of the lands in question. The words reveal an intent to grant something less than recognized title in the entire Area described. This apparent intent was not contradicted by the proceedings prior to the Treaty nor by interpretations of the Treaty following its signing but prior to its ratification. No action was taken by the United States inconsistent with the apparent intent of the Treaty. Appellees contend that if this court should hold that the Treaty of 1865 did not recognize title in the Tribes we would be affirming a breach of fair and honorable dealings. This contention is based on the Appellees having had aboriginal title to 100,000,000 acres of land and losing all but 3,000,000 of that land by 1867 without any consideration being given for such loss. If, in fact, Appel-lees can prove in subsequent proceedings that they had aboriginal title to so much land, this very opinion will support their claim based on unconscionable consideration. However, at this juncture we are not being asked to rule on the question of aboriginal title. Finally, we are told that the phrase in question called for Presidential action and that the 1867 Treaty was not that action. It was negotiated by commissioners, pursuant to Congressional directive. Appellees seem to glean some significance from the fact that the Treaty of 1867 constituted action of the President with the advice and consent of the Senate, in a manner directed by Congress, instead of individual Presidential action without further Congressional participation. We do not find the distinction persuasive. Nothing in the 1865 Treaty directed the form of action the President was to take. The parties have devoted a great deal of interesting research to whether the 1867 Treaty constituted action by the Congress or by the President. The contending views may be found ably stated in the prevailing and dissenting opinions below. Actually, we think this is irrelevant. If, as we hold, the 1865 Treaty was not intended to grant recognized title to the entire tract, but to leave its territorial extent for later determination, the summary judgment was erroneously granted and the claim based on the 1865 Treaty must fail, whether or not the 1867 Treaty was intended as an exercise of the President’s 1865 Treaty power. Our holding is that no reeognition of title to any specifically bounded tract occurred in 1865, and the first such was in 1867. It does not follow that the Indians had nothing under the 1865 Treaty. They had a moral and equitable claim that the President’s power to delimit boundaries be exercised in a manner fair and just to them, in light of their needs and in light of what they had given up; also in light of the lawful claims of Texas and of other Tribes. Thus in Citizen Band of Potawatomi Indians v. United States, 391 F.2d 614, 622, 179 Ct.Cl. 473, 488 (1967), cert. denied, 389 U.S. 1046, 88 S.Ct. 771, 19 L.Ed.2d 839; 390 U.S. 957, 88 S.Ct. 1046, 19 L.Ed.2d 1152 (1968), we said, referring to a right reserved in the President to select 144,000 acres out of a tract granted those Indians: A fair interpretation of the treaty is that the President would select the 144,000 acres in his capacity as “Great White Father” of the Indians as well as head of the United States Government. A callous disregard of the interests of either would be an abuse of discretion. * * * A grant of Blackacre or such portion of Blackacre as the grantor might decide upon in his discretion would hardly be considered to convey a marketable title. It is only the peculiar mystique of Indian law that allows a question here. If the grantor of Blackacre stood to the grantee in the relationship of parent, guardian, or trustee, the grantee would have something, but he still could hardly describe himself as the owner of all Blackacre. Since the summary judgment on recognized title was erroneously granted, it must be reversed on defendant’s appeal. We now turn to the question of intervention by the Wichita Indian Tribe of Oklahoma and Affiliated Bands. As noted above the motion to intervene was filed with the Commission nearly twenty years after the Appellee Tribes filed their claim for relief. The original motion claimed aboriginal title to the area in question but was expanded to include a claim for compensation under the 1865 Treaty. The preceding portion of our opinion makes the attempted intervention in the claim for recognized title moot. Only the question of the right to intervene in the claim for aboriginal title remains of significance. In its brief on the question of intervention the intervenors go to great length to demonstrate that in the case of amended pleadings the amendment relates back to the original pleading if no new cause of action is presented and adequate notice was provided to the parties. We will not attempt to explore this line of reasoning because it is clear to us, that this is not a case of amended pleadings. The Appellees are not amending their pleadings to include the intervenors but have vigorously opposed their intervention. On the question of intervention the parties rely on the cases of Blackfeet & Gros Ventre Tribes v. United States, 162 Ct.Cl. 136 (1963), and Snoqualmie Tribe of Indians v. United States, 372 F.2d 951, 178 Ct.Cl. 570 (1967). (See, United States v. Northern Paiute Nation, 183 Ct.Cl. 321, 393 F.2d 786 (1968), Lipan Apache Tribe v. United States, 22 Indian Claims Commission 1 (1969) ). These cases do not show that a late intervenor may intervene in a claim where his interests are in direct conflict with those of the original claimant. In both the Blackfeet and the Snoqualmie cases we- took pains to show that no intervenor was claiming adversely to the timely claimant. In both cases the litigation involved Treaties to which the intervenors were joint parties. Nor do we see these intervenors as the real parties in interest in the Kiowa, etc., claim. One cannot contend that he is the real party in interest when his claim has been forfeited by his failure to timely file with the Commission. The result we would reach if we adopted the intervenors reasoning would be to allow a party, too late to file his own claim, to obtain a hearing by appending his claim to that of another party, timely filed, whose claim he seeks to defeat. It is not a question of one or the other party getting an award admittedly due someone. The proofs adduced on behalf of the Wiehitas could easily demonstrate that no one had exclusive control of the tract to which the Kiowas and their group claim aboriginal title, or of parts thereof. The Wichita Indian Tribe of Oklahoma and Affiliated Bands could have timely filed their claim with the Indian Claims Commission. They did not. It would work an injustice to allow them to join in a timely filed suit by the Appellees when the result of that intervention may be the defeat of the Appellees claim, and of any claim. Intervenor has moved to have the court strike that portion of the Government’s appeal which challenges its right of intervention. Intervenor argues that the Commission order permitting intervention was an interlocutory order which was not appealed within three months as called for by the Act, and that therefore the Appellant’s right to appeal from said order has lapsed. The section of the Act, 25 U.S.C. § 70s(b) (1970 Ed.), which is in question reads as follows: In similar manner and with like effect either party may appeal to the Court of Claims from any interlocutory determination by the Commission establishing the liability of the United States notwithstanding such determination is not for any reason whatever final as to the amount of recovery; and any such interlocutory appeal shall be taken on or before January 1, 1961, or three months from such interlocutory determination, whichever is later: Provided, That the failure of either party to appeal from any such interlocutory determination shall not constitute a waiver of its right to challenge such interlocutory determination in any appeal from any final determination subsequently made in the case. On said appeal the Court shall determine whether the findings of fact of the Commission are supported by substantial evidence, in which event they shall be conclusive, and also whether the conclusions of law, including any conclusions respecting “fair and honorable dealings”, where applicable, stated by the Commission as a basis for its final determination, are valid and supported by the Commission’s findings of fact. In making the foregoing determinations, the Court shall review the whole record or such portions thereof as may be cited by any party, and due account shall be taken of the rule of prejudicial error. (Emphasis supplied.) Appellant argues in part that the interlocutory order here in question did not establish the liability of the United States and is therefore not covered by the three months time limit. We need not consider this assertion for it is clear from the above language that Appellant’s failure to appeal the order of the Commission was not a waiver of its right to appeal thát ■ order in its appeal of the Commission’s final determination on Docket 257. The emphasized portions of the above cited section of the Act permit this court to review the question of intervention in this case. Accordingly, the decisions of the Indian Claims Commission are reversed, both as to its summary judgment as to recognized title, and as to its order allowing the Wichita Tribe of Oklahoma, et al., to intervene. The cause is remanded to the Commission for further proceedings consistent with this opinion. Reversed and remanded. DURFEE, Senior Judge, (concurring in part and dissenting in part): I concur with the majority in reversing the decision of the Indian Claims Commission which allowed the Wichita Tribe of Oklahoma Affiliated Bands to intervene in this case. However, I respectfully dissent from that part of the majority decision which reverses the order of the Indian Claims Commission for summary judgment for recognized title by appellees Kiowa, Comanche and Apache Tribes to Royce Areas 510 and 511 under the Treaty of 1865. The majority holds (1) that “the 1865 Treaty was not intended to grant recognized title to the entire tract” described therein, “but to leave its territorial extent for later determination * * * and the claim based on the 1865 Treaty must fail, whether or not the 1867 Treaty was intended as an exercise of the President’s 1865 Treaty power”; (2) “that no recognition of title to any specifically bounded tract occurred in 1865, and the first such was in 1867”; and (3) whether the 1867 Treaty constituted action by the Congress or by the President “is actually irrelevant.” These conclusions by the majority are squarely in conflict with the relevant findings and decision of the Indian Claims Commission, with which I concur. In my opinion the grant of title in the 1865 Treaty to the Kiowa, Comanche and Apache Tribes meets the standards of recognized or reservation title, as the Commission determined in citing Miami Tribe of Oklahoma v. United States, 175 F.Supp. 926, 146 Ct.Cl. 421, 439 (1959) where this court summarized these standards as follows: * * * ■* -* * Where Congress has by treaty or statute conferred upon the Indians or acknowledged in the Indians the right to permanently occupy and use land, then the Indians have a right or title to that land which has been variously referred to in court decisions as “treaty title”, “reservation title”, “recognized title”, and “acknowledged title.” As noted by the Commission, there exists no one particular form for such Congressional recognition or acknowledgment of a tribe’s right to occupy permanently land and that right may be established in a variety of ways. Tee-Hit-Ton v. United States, 348 U.S. 272, 75 S.Ct. 313, 99 L.Ed. 314; Hynes v. Grimes Packing Co., 337 U. S. 86, 69 S.Ct. 968, 93 L.Ed. 1231; Minnesota v. Hitchcock, 185 U.S. 373, 22 S.Ct. 650, 46 L.Ed. 954. This court further, in Miami Tribe, held that the grant of the right to permanently occupy and use the land ceded by the Treaty until the Miami Tribe should be disposed to sell that land to the United States was “recognized title” and that whether it was held under recognized title or so-called Indian title or under fee simple title, the land should be valued the same way. For the purpose of clarity, let us first consider what the United States actually granted the Tribes under the 1865 Treaty before we consider the effect of the Treaty alternative for a limitation of the actual grant by Presidential designation. The majority finds that “the very language of the grant put the grantees on specific notice that the territorial extent of the grant was uncertain, and yet to be determined.” In my opinion, the language of the grant itself was certain and specifically described, by a careful metes and bounds description, a tract of over 39 million acres for an Indian reservation. In the language of the Treaty this tract was the “country embraced within said limits,” which the Indians agreed “to remove to and accept as their permanent home,” and which was “set apart for the absolute and undisturbed use and occupation of the tribes who are parties to this treaty.” Articles III, IV and V of the Treaty refer to this tract as the Indians’ “reservation.” Upon these solemn assurances by their Government in the Treaty, the Indians agree to “relinquish all claims or rights on and to any portion of the United States or territories, except such as is embraced within the limits aforesaid” including their claim of aboriginal title to over 60 million acres. Let us now consider the effect of the clause following the territorial grant: Article II. The United States hereby agree that the district of country embraced within the following limits, or such portion of the same as may hereafter from time to time be designated by the President of the United States for that purpose, viz: * * *. (Emphasis supplied.) The Indian Claims Commission interpreted that clause as an alternative, granting the President discretionary power to establish such a smaller reservation by Executive Order if at some indefinite future time the circumstances might, in his discretion, require such action. I agree with this interpretation by the Commission. The use of the word “or” at the very beginning of the clause clearly means that it was an alternative to an otherwise unconditional territorial grant, an alternative which the President “may” exercise, in his discretion. The Commission has found that “[t]his was never done”, 26 Ind.Cl.Comm. at 112, and I agree. The majority has attempted to distinguish the case of Klamath & Moadoc Tribes v. United States, 85 Ct.Cl. 451 (1937), aff'd, 304 U.S. 119, 58 S.Ct. 799, 82 L.Ed. 1219 (1938), and has stated the facts therein, which need not be repeated except as noted herein. The majority states that in Klamath, “the Tribe had entered into a Treaty in 1864 which permitted them to occupy certain territory ‘until otherwise directed by the President * * *’ ”. This Treaty did not merely permit the Klamath Tribe to occupy the territory. Article I of the Klamath Treaty provided : That the following described tract, within the country ceded by this treaty, shall, until otherwise directed by the President of the United States, be set apart as a residence for said Indians [and] held and regarded as an Indian reservation * * *. 85 Ct.Cl. at 454. The present majority opinion states that “the real point about this Klamath case is that the limitation language there involved: ‘until otherwise directed by the President’ did not expressly relate to the territorial extent of the grant, as the corresponding language does here.” I cannot agree; all that I can conclude from reading the language of Article I of the Klamath Treaty as quoted is that the limitation did expressly and unmistakably relate to the territorial extent of the grant. In the Klamath case, the United States contended that the Indian title to 87,000 acres included in the 1864 Treaty was not permanent or exclusive, but merely a right to occupy the lands, and subject to termination by certain articles of the Treaty of 1864. The court there said: “It is asserted that inasmuch as the treaty provisions set aside the delimited reservation to plaintiff Indians, they to occupy the same ‘until otherwise directed by the President of the United States’, the act of Congress taking the 87,000 acres was an exercise of this power. We cannot assent to the proposition. The President did not exercise any such power if he possessed it. On the contrary, Congress recognized the Indians’ right to the lands and sought to pay for them.” * * * 85 Ct.Cl. at 463, 464. (Emphasis added.) The factual difference between the present case and the Klamath case is apparent, but in both cases the Treaty required delimitation of a reservation by the President. In effect, the Klamath case says that action by the Congress is not action by the President as required by the Treaty, and to this extent the case is in point here. The majority opinion notes that the parties have conflicting views as to whether the 1867 Treaty constituted action by the Congress or by the President. However, the majority of the court concludes that: “Actually, we think this is irrelevant”, since no recognition of title to any specifically bounded tract occurred in 1865 and the first such was in 1867. I cannot agree. The majority reasons that: “It is not suggested that the Kiowas were so ignorant they actually misunderstood what they were getting, or could have done so.” This majority conclusion would require us to believe that the Indians could have understood that the 1865 Treaty grant was a mere permissive use of their reservation until the President acted. They must have also understood that the grant in the 1865 Treaty of a “reservation” of 39 million acres “for their permanent home * * * set apart for the absolute and undisturbed use and occupation of the tribe” was an empty facade of meaningless words, with no substance behind it. I cannot agree that these illiterate “blanket” Indians could have understood this when they agreed to the 1865 Treaty. In my opinion, they understood these words as translated to them, to mean what they mean in plain and unmistakable English. In my opinion, they had good reason to understand and believe that in 1865 they got recognized title to a 39 million-acre reservation, unless and until the President delimited its area. The majority points out that: “It is only the peculiar mystique of Indian law that allows a question here.” Actually it is not Indian law that allows a question here. It was the white man’s law for Indians, which by 1946 had become so unjust and inequitable to the Indians as to require the creation of the Indian Claims Commission. This Commission was given power to determine whether Indian treaties were to be revised on several grounds, including mutual or unilateral mistake, unconscionable consideration, violation of fair and honorable dealings, etc. Acting under this authority, the Commission has made its decision in favor of the Kiowa, Comanche and Apache Tribes. We are now to reverse this decision basically and in essence because of what the majority thinks the Indians understood or could have understood what they were getting in the 1865 Treaty. There is no peculiar mystique of Indian law that allows a question here, nothing esoteric or mystical about what Indian tribes must understand that they are getting in a treaty with the United States. The Supreme Court of the United States has spelled this out clearly in Peoria Tribe v. United States, 390 U.S. 468, 472, 88 S.Ct. 1137, 1139, 20 L.Ed.2d 39 (1968). The Supreme Court, in reversing this court’s judgment stated: As the dissenters in the Court of Claims rightly pointed out, “Indian treaties ‘are not to be interpreted narrowly, as sometimes may be writings expressed in words of art employed by conveyancers, but are to be construed in the sense in which naturally the Indians would understand them.’ United States v. Shoshone Tribe, 304 U.S. 111, 116, 58 S.Ct. 794, 82 L.Ed. 1213 (1938). ‘[T]hey are to be construed, so far as possible, in the sense in which the Indians understood them, and “in a spirit which generously recognizes the full obligation of this nation to protect the interests of a dependent people.” Tulee v. Washington, 315 U.S. 681, 684-685, 62 S.Ct. 862, 86 L.Ed. 1115 * * *’ ” 369 F.2d at 1006-1007, 177 Ct.Cl. at 771. Our court has recently ruled on an interpretation of Indian treaties: Hebah v. United States, 428 F.2d 1334, 1338, 192 Ct.Cl. 785, 791 (1970), “* * * Indian treaties should be read, where possible, generously in favor of the Indians. Peoria Tribe v. United States, 390 U.S. 468, 472-473, 88 S.Ct. 1137, 20 L.Ed.2d 39 (1968); Choctaw Nation v. Oklahoma, 397 U.S. 620, 631, 90 S.Ct. 1328, 25 L.Ed.2d 615 (1970)”; and Gila River Pima-Maricopa Indian Community v. United States, 467 F.2d 1351, 199 Ct.Cl. 586 (1972), “Indian agreements are to be read as the Indians understood and would naturally understand them.” The closest the majority has come to any recognition of these broad and generous principles of Indian treaty interpretation in favor of the Indians is that “the court is to interpret the Treaty in a manner not prejudicial to the Indians.” It is in this .spirit of strict interpretation that the majority concludes that since no recognition of title to any specifically bounded tract occurred in 1865, and the first was in 1867, the contentions between the parties as to whether the 1867 Treaty constituted action by the Congress or by the President “is irrelevant,” (perhaps just as irrelevant as the majority apparently considered the language of the 1865 Treaty referring to the “absolute and undisturbed use and occupation” of a “permanent home” for the appellees). The majority quotes from Citizen Band of Potawatomie Indians v. United States, 391 F.2d 614, 179 Ct.Cl. 473 (1967), on another point but the quotation is also relevant here as to whether the President or the Congress must act. A fair interpretation of the treaty is that the President would select the 144,000 acres in his capacity as “Great White Father” of the Indians as well as head of the United States government. A callous disregard of the interests of either would be an abuse of discretion. (Emphasis supplied.) 391 F.2d at 622, 179 Ct.Cl. at 488. This relationship of the President as “The Great White Father” to his Indian children has been understood by them ever since their first meetings with officials of the United States, when Lewis and Clark summoned them in 1805 to tribal conferences along the expedition’s historic route of exploration to the Pacific Ocean. The Indians were told then, and have been told ever since that it is their Great White Father (the President) who will punish them if they are bad, and reward them if they are good. I know of no legal authority, and none has been cited by the majority for its unique proposition that it is irrelevant whether the 1867 Treaty constituted action by the President or by the Congress. In my opinion it is clear that the Indians did not understand this. The Treaty of 1867 was accomplished by a bill (Act of July 20, 1867, 15 Stat. 17) to establish peace with a large number of Indian tribes, including the appel-lees, as directed by the Congress. No reference was made to the 1865 Treaty in the 1867 proceedings or in the Act. In dissenting from the majority decision of the Indian Claims Commission, Chairman Kuykendal has nevertheless made this point: The two year period between the signing of the 1865 Treaty and the signing of the 1867 Treaty, although a brief period, is included within a longer period (the tenure of President Andrew Johnson) when the animosity of Congress toward the President was the greatest this country has ever experienced. As we have seen, during the last seven months of this period the President was bereft of power to enter independently into any treaties with Indian tribes or to incur any expense in negotiating a treaty. * * * 26 Ind.Cl.Comm. at 128. Indeed, when the bill under which the 1867 Treaty was finally accomplished was under consideration by the Senate, it was only because two Senators called attention to the constitutional and legal powers of the President in making Indian treaties that he was even included in the Act as finally adopted (as Chairman Kuykendal points out in his review of its legislative history). In such an atmosphere of unparalleled hostility between the President and the Congress, I cannot agree that it was “irrelevant” as to which one acted under the Act of 1867. At least it was not irrelevant to the Indians, who had been unequivocally assured in the 1865 Treaty that the President would act, and it was upon this specific assurance that they ceded their claim of aboriginal title to 60 million acres of land. It seems late in the day now to tell them for the first time that this was a mere irrelevant consideration after reducing their claim of aboriginal title to 100 million acres to 39 million acres in 1865, and then in 1867 to three million acres. Both the United States and the Commission dissent contended that the Treaty of 1867 was an “implementation” of the Treaty of 1865 and constituted action by the President in compliance with the 1865 Treaty in designating the reservation as Royce Area 510. The Commission, after a well-reasoned review of the record, concluded that the President never acted under the 1865 Treaty clause to designate a smaller reservation, and that the 1867 Treaty was not intended to constitute implementation of that clause. Since the majority opinion has in legal effect, disregarded this aspect of the case, because it is “irrelevant” whether the President or the Congress acted, no further discussion is now called for by me in regard to the effect of the 1867 Treaty, except to say that I agree with the above conclusion of the Indian Claims Commission on this point. Finally, I accept the conclusion of the Indian Claims Commission that the Treaty of 1865 was “a treaty of recognition, the effect of which was to recognize the title of plaintiff tribes and other friendly tribes to Royce Areas 510 and 511.” Accordingly, I would affirm the grant of the motion of appellee Kiowa, Comanche and Apache Tribes of Indians for summary judgment, leaving the remaining issues for further determination, except the claim of intervenor, the Wichita Tribe and Affiliated Bands and Groups of Indians which I agree with the majority opinion, should be denied. DAVIS and KUNZIG, JJ., join in the foregoing opinion concurring in part and dissenting in part. . Keservation for Indians who are parties hereto. . Boundaries. No whites, except, &e. to settle thereon, unless, &c. . Indians to remove thereto, and not leave, unless, &c.; . to refrain from depreciations ; . not to encamp within ten miles of, &c. . Claims to other lands relinquished. . Act of August 13, 1946 (60 Stat. 1049 et seq.)

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

Lloyd K. JOHNSON and Marion Johnson v. The UNITED STATES. No. 439-69. United States Court of Claims. June 20, 1973. David P. Sullivan, Duluth, Minn., attorney of record, for plaintiffs. Robert W. Boyd, Duluth, Minn., of counsel. William M. Cohen, Washington, D. C., with whom was Asst. Atty. Gen., Wallace H. Johnson, for defendant. John J. Cain, Washington, D. C., of counsel. Before CO WEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KUN-ZIG and BENNETT, Judges. OPINION PER CURIAM: This case comes before the court on defendant’s motion, filed May 8, 1973, in accordance with Rule 141(b), requesting that the court adopt the recommended decision filed March 13, 1973, by Trial Commissioner Franklin M. Stone pursuant to Rule 134(h) as the basis for its judgment in this case. Upon consideration thereof, and without oral argument, since the court agrees with the decision, as hereinafter set forth, it hereby grants defendant’s motion of May 8, 1973, and affirms and adopts the decision as the basis for its judgment in this case. Therefore, plaintiffs are not entitled to recover and their petition is dismissed. OPINION OF COMMISSIONER STONE, Commissioner: Plaintiffs, who are husband and wife, brought this action pursuant to the Fifth Amendment and the Tucker Act, 28 U.S. C. §§ 1346(a)(2) and 1491, seeking just compensation in the amount of $175,000 for the alleged “taking” by defendant of their asserted right of access to a certain tract of land owned by them situated in Cook County, Minnesota. In the interest of brevity, this land (which is more particularly described in finding 3(a), infra) hereinafter will be identified and referred to simply as “Lot 5.” The east and north boundary lines of Lot 5 abut the Pigeon River, which is the meandering International Boundary Line between the United States and Canada in this area; and the portions of said Lot of primary concern are in the immediate vicinity of the Pigeon River International Border Crossing between these two countries. Lot 5 is bisected by Minnesota State Highway No. 61, also designated and known as U.S. Highway No. 61 (hereinafter referred to as “U.S. 61”), which is constructed on a highway right-of-way easement held by the State of Minnesota (State), that extends through and across said Lot from the south in a northeasterly direction. The alleged taking commenced in June 1966 when defendant, as a part of new United States Customs Inspection Facilities constructed, operated and maintained by the Government, installed chain link fences within the State’s right-of-way, which extend from the United States’ side of the bridge at the above-mentioned border crossing along both sides of said U.S. 61 to terminal points located some distance short of the west boundary line of Lot 5. Although plaintiffs’ petition alleges a taking of only Lot 5, it is essential to a clear understanding of the discussion that follows to know and keep in mind the fact that plaintiffs own another tract of land (more particularly described in finding 3(c), infra), hereinafter identified and referred to in short form as Lot 2, which is located contiguous to the west boundary line of Lot 5; and that the State’s aforementioned highway right-of-way and U.S. 61 built thereon also extend clear across Lot 2. It will be apparent from the foregoing that portions of Lots 2 and 5 are located on both the north and south sides of U. S. 61 and front on the right-of-way. Plaintiffs contend that the alleged taking by defendant of their asserted right of access to Lot 5 substantially impairs the commercial development, and reduces the value, of not only said Lot and Lot 2 but also a total all together of approximately 12,000 acres of land owned by them situated in the United States and Canada in various areas within a 15-mile radius of the Pigeon River International Border Crossing. Of this total acreage, plaintiffs assert that approximately 1,200 to as much as 1,500 acres thereof are directly involved. However, the testimony and documentary evidence in the record considered as a whole indicate that in addition to Lots 2 and 5, the other lands owned by plaintiffs, which they seriously feel are affected to a substantial degree, include a tract of land identified as Lot 4, which lies south of, and is contiguous to, Lot 5; Lot 3 which lies in a northwesterly direction from, and is contiguous to, Lot 2; and an unspecified number of acres of other lands located north of Lots 2 and 3 in the vicinity of the Pigeon River. In my opinion, there has been no compensable taking of any of plaintiffs’ land or private property rights by defendant and they are not entitled to recover. Plaintiffs admittedly made arrangements for the purchase of Lots 2, 3, and 5 sometime in 1938 but did not obtain delivery of the deeds thereto until May 1942. At that time there were no roads through or to the lands now in controversy, and the nearest road was “old U. S. 61” which crossed the Pigeon River into Canada at a point approximately 7 miles upstream from the present location of the new U.S. 61. Since 1934, however, the Commissioner of the Minnesota State Highway Department and authorized State officials had proposed that the then existing U.S. 61 should be rerouted as now located. The highway relocation proposal was the subject of considerable controversy engendered by conservation groups, and studies in regard to the project were made by various representatives of the United States Government and the State of Minnesota, over an extended period of time before it was officially approved and authorized. As a result, it was not possible for contracts for construction of the new highway to be let and the roadwork started until 1958. Prior to that time, the State had acquired a necessary highway right-of-way easement from plaintiffs by condemnation. During 1958 an official of the General Services Administration (GSA) contacted plaintiff Lloyd Johnson to negotiate for the purchase of portions of plaintiffs’ lands, including shoreline land areas within Lot 5 and other sites therein, for use in connection with the planned new Customs Inspection Facilities and the construction of several houses to be occupied by Government employees assigned to duty at said facilities. Mr. Johnson indicated his lack of interest in any such sales of plaintiffs’ lands in stating that he intended to hold for commercial development, the property desired by the United States Government. However, at the same time Mr. Johnson offered to give the Government access and other rights to the frontage of Lot 5 located on both sides of U.S. 61 within the first 300 feet closest to the Pigeon River, i. e., the east border of said property, provided the Government agreed that proposed new U.S. Customs Facilities would be built within this 300 feet. This offer was not accepted by the Government, and all other negotiations for portions of plaintiffs’ property were dropped. In April 1959 the State of Minnesota filed a petition in the State District Court initiating a condemnation action against plaintiffs to obtain title in fee simple absolute and certain additional rights of access to other portions of the State’s aforementioned right-of-way land involved herein, owned in fee simple by plaintiffs, for trunk highway purposes. In October 1960 the State dismissed and discontinued these condemnation proceedings for reasons not disclosed in the record, with the result that there was no taking of any of plaintiffs’ remaining property rights by the State in said action. Construction of new U.S: 61 was finally completed in November 1968 and it was opened to the general public at that time. In the meantime, a temporary Customs and Immigration station was set up on a site located off on one side of this highway at a point approximately one-half mile from the new border bridge crossing over the Pigeon River, for use until a permanent facility could be established. In March 1965 the United States commenced condemnation proceedings for three small parcels of land lying entirely within the bounds of the State of Minnesota’s highway right-of-way easement, for use in connection with the establishment of permanent Customs Inspection and Immigration Facilities. Plaintiff Lloyd Johnson filed an answer in said proceedings alleging, inter alia, that the plans for construction of the facilities also involved denial of his right of access, and praying that the United States be required to include in said proceedings the condemnation of such additional property rights which the Government allegedly contemplated taking. Johnson’s claim was dismissed as being prematurely raised in the opinion of the court in the case of Certain Lands in óbunty of Cook, State of Minnesota, supra. , Thus, neither the State’s dismissed 1959 condemnation action nor the United States’ 1965 condemnation action determined the extent of plaintiffs’ right of access to U.S. 61 or their right to compensation, if any, for the alleged taking of said rights. The three small parcels of land were duly condemned by the United States, these being the only portions of land involved herein in which the United States holds title. The United States, acting through the GSA, applied to and received from the State of Minnesota, a permit dated June 10, 1966, approved and issued by the State’s Commissioner, Department of Highways, to construct, operate, and maintain United States Customs Inspection Facilities on the State’s right-of-way near the Pigeon River Border Crossing. Included in this permit, inter alia, was the right to place and maintain fences and related facilities within the State’s right-of-way on both sides of U.S. 61, as appurtenances to said customs facilities. Incident to the construction of said facilities in accordance with State approved plans and specifications, as changed in some instances at the direction of the State, chain link fences were duly installed by defendant along and entirely within the authorized areas of the State’s right-of-way on both sides of the highway where the facilities are presently located. These fences extend from the United States’ side of the aforementioned border crossing bridge in a westerly direction, a distance of 1,133 feet on the north side of the highway and 1,108 feet on the south side thereof. As best it can be determined from an incomplete and unsatisfactory record with respect to the distances of certain boundary lines of the lots and portions thereof involved herein, as well as between particular points within these areas of land, the fence on the north side of the highway terminates at a point a short distance west of the main customs inspection station buildings and parking area approximately 175 feet east of the nearest point in the west boundary line of Lot 5; and the fence on the south side of the highway terminates at a point just west of said station approximately 275 feet east of the nearest point in the west boundary line of Lot 5. It is important to note that the State’s right-of-way encompasses all of the land in Lot 5 situated on both sides of U.S. 61 within the first 300 feet closest to the border crossing bridge (said land is actually a narrow peninsula shaped in the likeness of an arrowhead with the bridge extending east from the easternmost point of the land). Therefore, in light of the aforestated lengths of the fences, it is apparent that they border on only roughly 800 feet of the some 2,000 feet of the portions of Lots 2 and 5, which front on the north and south sides of the highway. Thus, in excess of approximately 1,200 feet of the parts of said lots divided by the highway and fronting on each side thereof are unobstructed by defendant’s fences. The State of Minnesota Highway Department is initially responsible for designating and granting of access to adjoining land owners along trunk highways such as U.S. 61. Under the terms of the aforementioned permit, the United States has neither the right nor the authority to provide any gates, driveways, or other entrances in the fences for ingress and egress to and from the area encompassed by said fences, without first obtaining permission from the State of Minnesota Highway Department. Plaintiffs, whose property was still undeveloped woodland at the time of the trial, have never applied to said Department or the United States for access between U.S. 61 and their property, either at any point where the fences are located or beyond the ends of the fences. Notwithstanding this fact, in building the highway, which starts out from the border crossing bridge as an undivided double lane road but becomes divided in the immediate vicinity of the customs checkpoint station so that road lanes pass on the north and south sides thereof, the State provided stub-end entrances into plaintiffs’ property, as well as a turnaround through the median strip between the north and south lanes of the highway. These approaches are located at points in Lot 2 a distance of approximately 1,530 feet west of the bridge or roughly some 400 feet from the west terminal points of the fences. There is nothing in the record to suggest that the State would not provide or permit the construction of additional approaches at points closer to said terminal points if plaintiffs requested that the State take or approve such action. Mr. Leo H. Tscheda, a District Right-of-Way Engineer of the Minnesota State Highway Department, presented credible and unrebutted testimony on behalf of defendant to the effect that the State has an established policy of not permitting access to a State highway at a point within 800 to 900 feet from a bridge under normal circumstances, but the distance may be shorter or greater depending on the facts of the particular situation. This witness further stated that the aforementioned State permit issued to defendant allowed it to construct the approximately 1,100 foot fences, despite the fact they would deny a greater amount of access than the normal standard of 800 to 900 feet, because of the necessity of restricting and forcing persons entering the United States from Canada to pass through the Customs Inspection station. Plaintiff Lloyd Johnson testified that plaintiffs long have planned to develop their property adjacent to U.S. 61 with commercial, tourist-oriented facilities. He stated that plaintiffs “would expect to have” a motel, restaurant, gas service station, and related facilities located in an area on the south side of the highway at the east end of that part of Lot 5 which fronts on the Pigeon River; that a tavern, ice cream stand, Indian Village-Museum, gift and other type shops, parking areas for trailers and campers, excursion boats, and other miscellaneous facilities are to be located within the portions of Lots 2 and 5 lying on the north side of the highway; and that consideration had been given to providing other tourist attractions and facilities at various locations in areas which include historical sites and scenic views, particularly in the vicinity of the Pigeon River and certain falls situated within or in close proximity to the lands owned by plaintiffs. According to Mr. Johnson, such facilities would put plaintiffs’ property to its “highest and best use” as they would attract passing tourist traffic. Although the fences constructed by defendant obstruct only about 40 percent of the potential access to the divided portions of Lots 2 and 5, which front on the north and south sides of U.S. 61, plaintiffs contend that to attain the maximum tourist and other business potential of the planned development complex, it is essential that there be unlimited access through which the so-called “impulse stopper” traveler, i.e., one who will make an “impulse stop” after he first sees the development, can enter plaintiffs’ property from the highway. Plaintiffs further contend that the most important areas of access for attracting the “impulse stopper” are those portions of Lot 5 which are closest to the border crossing bridge, because these are the areas in which the motorist traveling on the highway can most fully view and appreciate the scenic topographical features of the site area, i.e., the river and its frontage. With respect to this contention, it is important to mention that Mr. Johnson testified that a person traveling east on the highway would not be able to see said site area until he reached a point east of the main customs inspection station building, which is located a distance of approximately 800 feet west of the bridge. Plaintiffs’ asserted loss of the impulse stopper business theory is not substantiated or corroborated by any other oral testimony or documentary evidence. Nonetheless, plaintiffs assert that because of the purported loss of the prospective “impulse stopper,” the consequences is a substantial diminution of the highest and best use of their property. As a result, they contend that the physical obstruction of a portion of their potential access constitutes a taking of private property by defendant for public purposes, for which they are entitled to just compensation in accordance with the Fifth Amendment to the Constitution. Defendant, in addition to denying that there has been a compensable taking, asserts that even if there was a taking, the United States is not liable because it acted only as a permittee of the State of Minnesota. Since the question of whether the United States or the State of Minnesota is liable for the taking becomes relevant only if there has in fact been a “taking,” consideration of the permittee issue will be deferred and it shall be assumed, arguendo, that the actions found herein are the direct responsibility of defendant. That a portion of plaintiffs’ access is physically obstructed by defendant’s fences is not denied. However, in Finks v. United States, 395 F.2d 999, 1004, 184 Ct.Cl. 480, 489, cert. denied, 393 U.S. 960, 89 S.Ct. 398, 21 L.Ed.2d 374 (1968), this court noted that * * * not every deprivation of use, possession, or control is a “taking”. It is the character and extent of an invasion of property rights which are determinative. [Cites omitted.] It is equally clear that not all takings of property are compensable. In Franco-Italian Packing Co. v. United States, 128 F.Supp. 408, 413-414,130 Ct. Cl. 736, 745-746 (1955), this court commented on noncompensable “takings” as follows: * * * [E]xercise of * * * [United States’] regulatory and police powers, * * * [does] not fall within the fifth amendment limitation, although taking of private property often resulted. [Cites omitted.] The distinction between an exercise of the eminent domain power that is compensable under the fifth amendment and an exercise of the police power is that in a compensable exercise of the eminent domain power, a property interest is taken from the owner and applied to the public use because the use of such property is beneficial to the public * * * [whereas] in the exercise of the police power, the owner’s property interest is restricted or infringed upon because his continued use of the property is or would otherwise be injurious to the public welfare. * * [Emphasis added.] In applying the foregoing principles to the facts of the instant case, it is apparent that defendant has a genuine, valid interest in controlling and regulating the flow of traffic that enters and leaves the United States. That the .fences are a necessary and justifiable part of this regulation cannot be seriously denied. The possibility of persons —particularly upon entrance — circumventing the inspection facility, if access roads were permitted between the bridge and said facility, suggests possibilities of abuse too obvious to bear further comment. Defendant has only imposed those 'restrictions on potential access which are necessary and reasonable under the circumstances. Plaintiffs’ contention that the fences are longer than necessary is unsupported by the evidence. The fact that defendant’s older Customs Inspection and Immigration facilities and fences provided there were closer to the border than the facilities involved herein is not persuasive. The demands of increased traffic and the need for greater efficiency makes it readily apparent that the length of the fences involved herein is not unreasonable or unduly oppressive in view of the intended purpose therefor. Goldblatt v. Town of Hempstead, 369 U.S. 590, 82 S. Ct. 987, 8 L.Ed.2d 130 (1962); Lawton v. Steele, 152 U.S. 133, 14 S.Ct. 499, 38 L.Ed. 385 (1894). Here, the plaintiffs’ potential access has not been “taken” and applied to the public use, but rather is “restricted” or infringed upon because their use of that access would be injurious to the public welfare. Thus, we are confronted with an exercise of the police power, and not an uncompensated exercise of eminent domain. Notwithstanding the necessity of restrictions promulgated pursuant to the exercise of the police power, it was recognized in United States v. Central Eureka Mining Co., 357 U.S. 155, 168, 78 S.Ct. 1097, 1104, 2 L.Ed.2d 1228 (1958) that: * * * action in the form of regulation can so diminish the value of property as to constitute a taking. [Cites omitted.] However, the mere fact that the regulation deprives the property owner of the most profitable use of his property is not necessarily enough to establish the owner’s right to compensation. [Emphasis added.] The general test of whether a restriction is so excessive as to result in a substantial diminution of property value must be applied in conjunction with those cases which have specifically dealt with the right of access. Specifically, it must be determined whether the plaintiffs in fact had a “right of access” in the obstructed area, which could be the subject of a taking, i.e., excessive regulation. Although the issue of what constitutes a “taking” is a “Federal question” which is governed entirely by Federal law, the meaning of “property,” as used in the Fifth Amendment, will normally obtain its content by reference to State law. United States v. Causby, 328 U.S. 256, 66 S.Ct. 1062, 90 L.Ed. 1206 (1946). Consequently, in considering whether plaintiffs’ potential access amounted to a compensable property right, the subsequent analysis will refer to Minnesota State law as well as Federal authorities. Plaintiffs contend that the “right of access” has been recognized throughout the United States as a property right which cannot be taken or materially interfered with without just compensation. Creasey v. Stevens, 160 F.Supp. 404 (W.D.Pa.1958), rev’d on other grounds, sub nom. Martin v. Creasey, 360 U.S. 219, 79 S.Ct. 1034, 3 L.Ed.2d 1186 (1959); Hendrickson v. State, 267 Minn. 436, 127 N.W.2d 165 (1964). On the other hand, defendant contends that the property owner is not entitled to more than one outlet from his property and cannot complain if he is not given the shortest way out. United States v. Alderson, 53 F.Supp. 528 (S.D.W.Va. 1944); State of Washington v. United States, 214 F.2d 33 (9th Cir.), cert. denied, 348 U.S. 862, 75 S.Ct. 86, 99 L.Ed. 679 (1954); Winn v. United States, 272 F.2d 282 (9th Cir. 1959); and Ralph v. Hazen, 68 App.D.C. 55, 93 F.2d 68 (1937). While seemingly the foregoing dicta represent somewhat conflicting positions, a study of the case law reveals to the contrary that the statements are readily reconcilable. An abutting landowner on a public highway has a special right of easement in the public road for access purposes, but the owner is not entitled to access to his land at any and all points in the boundary between it and the highway. United States v. Certain Land in the City of Newark, 314 F. Supp. 836 (D.N.J. 1970), aff’d 439 F.2d 670 (3d Cir. 1971). That is, the abutter’s easement entitles him to some means of access from the adjoining highway, “but such owner cannot insist on the right of ingress and egress at any place he sees fit as he holds his right subject to the superior right of the state [to impose reasonable regulations and restrictions].” King v. Stark County, 66 N.D. 467, 266 N.W. 654 (1936), cited with approval by the Minnesota Supreme Court in Petition of Burnquist, 220 Minn. 48, 19 N.W.2d 394 (1945). Accordingly, in instances where an abutting landowner is totally deprived of his access to an existing road, i.e., a “way of necessity,” the courts have generally found a compensable taking. See, e.g., Creasey v. Stevens, supra; Bickel v. Indiana Toll Road Comm., 145 F.Supp. 257 (N.D.Ind.1956); and Bydlon v. United States, 175 F.Supp. 891, 146 Ct.Cl. 764 (1959). Since plaintiffs have not been totally deprived of access to their property, it is clear that they do not come within the purview of these cases. In those situations where, as here, reasonable regulations and restrictions have been imposed upon the abutting owners, which obstruct portions of their access yet do not totally deprive such owners of access, the question becomes one of whether there remains a reasonably convenient and suitable alternative means of access under all of the existing facts and circumstances. Certain Land in the City of Newark, 439 F.2d 670 (3d Cir. 1971), aff’g 314 F.Supp. 836, supra; Hendrickson v. State, supra. Therefore, the “right of access” is not an unlimited right to access at any and all points in the boundary between an abutter’s land and the highway, but instead is a right to a reasonably convenient and suitable means of access. One of the crucial factors to be considered in determining the reasonableness of the access is whether the partial deprivation has resulted in a substantial diminution of value of the property, which, as noted previously, is also a determinative of whether a regulation is so excessive as to constitute a “taking.” Thus, if it is determined that plaintiffs’ land has not suffered a substantial diminution in value and plaintiffs, as a result, enjoy reasonably convenient and suitable access, then it must be concluded that (1) they did not have a “property right” in that which has been denied, and (2) there could not have been a “taking” since (a) plaintiffs have not been denied anything to which they were entitled, and (b) the regulation has not been proven to be excessive. Plaintiffs rely heavily on Hendrick-son, supra, in which a landowner had a motel on an existing highway which was subsequently converted to a limited access highway. Although a service road was provided that furnished the motel circuitous access in lieu of the direct access which he had previously enjoyed, the court noted: * * * The accessibility to the property from the highway and its proximity to the city of Rochester attracted the patronage of the traveling public and gave the property a special status which may entitle the owners to damages notwithstanding the circuitous access afforded by a service road. * * * [Emphasis added.] [127 N.W.2d at 171.] Plaintiffs contend that their property also has a special status which is impaired by the deprivation of complete access. However, in my view, Hendrick-son is readily distinguishable and, if anything, supportive of a contra conclusion. Plaintiffs in the present case, unlike the motel owner in Hendrickson, did not previously enjoy “accessibility to the property” or the “patronage of the traveling public,” which might create a “special status.” To the contrary, it has been shown that prior to the completion of the present route of U. S. 61, plaintiffs’ property was totally inaccessible; and it may be reasonably assumed that the same was of considerably lower commercial value than it now holds. Nor do the plaintiffs at bar have any type of commercial venture, which has enjoyed the “patronage of the traveling public.” As the court in Hendrick-son also stated, “a property owner has no vested interest in the continued flow of the main stream of through traffic, and the state.may divert it to a new location without being liable for consequential economic losses which owners abutting on the old highway sustain.” 127 N.W.2d at 170. It seems clear that if property owners with established businesses cannot recover for consequential losses resulting from diversion of traffic, except for unique situations as that presented in Hendrickson, plaintiffs herein are no more entitled to such damages when they have not even as yet put their property to commercial use. While plaintiffs have referred to cases in which property owners lost all or a portion of their previous access to an existing highway, the situation presented in the instant ease is found to be more analogous to those cases in which a new limited access highway or expressway has been constructed through property where no previous road existed, and the abutting property owners are denied access pursuant to the state’s regulatory, police power. Such cases have concluded that damages may not be awarded to landowners even where this may constitute a lack of consequential benefit. See State Highway Dept. v. Ford, 112 Ga. App. 270, 144 S.E.2d 924 (1965) and cases cited therein. Although cases such as Ford are concerned in part with the validity of state statutes pertaining to limited access highways, the underlying principle is the same regardless, i.e., the landowner cannot complain of a taking of that which he never had and the Sovereign refuses to give because the general public interest is best served by such denial. The situation herein is analogous to the new limited access highway cases in that it was apparent to all involved here that the rerouting of U.S. 61 would require new United States Customs Inspection facilities at the present Pigeon River Border Crossing bridge upon completion of said highway. That is, plaintiffs had no reason to expect that they would ever have entrance to their property in this area after the proposed new facility was provided. The fact that Mr. Johnson foresaw the probability of not having such access is evidenced, as previously mentioned, by his admitted attempt in 1958 to persuade the GSA authorities to place the facility within the first 300 feet closest to the Pigeon River Bridge, with the understanding that buildings would not be located further west of this point. Even though plaintiffs undoubtedly recognized that they would not have access in this area, they now present this court with a speculative scheme as to what the enhanced value of the property would be if not for the presence of the necessary United States’ facilities and its requisite, appurtenant fences. In effect, plaintiffs are willing to accept the appreciation in property value which the addition of this road brought, but are unwilling to accept the necessary limitations which are inherent in its existence. Under these facts, plaintiffs’ contention that they have suffered a substantial diminution in value of their property cannot be sustained for, as noted by the Supreme Court in United States v. Sponenbarger, 308 U.S. 256, 266-267, 60 S. Ct. 225, 229, 84 L.Ed. 230 (1939): * * * if governmental activities inflict slight damage upon land in one respect and actually confer great benefits when measured in the whole, to compensate the landowner further would be to grant him a special bounty. * * * The circumstances show sufficient nexus between the addition of U.S. 61 and the erection of defendant’s fences, such that plaintiffs cannot base a taking claim on the theory that they may garner the benefits conferred by the former without deduction for whatever detriment that may arise out of the presence of the latter. John B. Hardwicke Co. v. United States, 467 F.2d 488, 199 Ct.Cl. 388 (1972). The rule that the Sovereign must pay only for what it takes, not for the opportunities which the owner may lose, is applicable here. United States ex rel. Tenn. Valley Auth. v. Powelson, 319 U.S. 266, 283, 63 S.Ct. 1047, 87 L.Ed. 1390 (1943); A. G. Davis Ice Co. v. United States, 362 F.2d 934 (1st Cir. 1966). Under all of the facts and circumstances in this case, it is concluded that plaintiffs’ property has not sustained a substantial diminution in value and that they have reasonably convenient and suitable access, even in the light of the property’s highest and best use. Thus, it must be concluded as a matter of law that defendant is not liable for a com-pensable taking within the meaning of the Fifth Amendment. In view of the aforestated conclusion, it is unnecessary to consider whether the defendant acted solely as a permittee of the State of Minnesota. CONCLUSION OF LAW Upon the findings of fact and the foregoing opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiffs are not entitled to recover, and the petition is dismissed. Whereas the court adopts the Commissioner’s separate findings of fact, which are set forth in his report filed March 13, 1973, they are not printed herein since such facts as are necessary to the decision are contained in his opinion. . The trial of this case was limited to the issues of law and fact relating to the right of plaintiffs to recover, with the determination of the amount of recovery, if any, reserved for further proceedings; however, limited testimony concerning the highest and best use of the land involved herein and the reasonableness and suitability of plaintiffs’ access between said land and an adjoining U.S. highway, was received in evidence because such testimony was relevant to the questions of whether or not the alleged taking of plaintiffs’ property caused a substantial diminution of the value thereof and the reasons therefor, which were matters of proof inextricably related to plaintiffs’ theory of recovery and the liability issue raised for decision. Defendant introduced no evidence with respect to the issue of damages, taking the position that the introduction of evidence relative to said issue was premature and should be deferred pending the court’s resolution of the liability issue. (See finding 2 and n. 1, infra.) . Lots 3 and 4 are more particularly described in findings 4 and 5, respectively, infra. Lots 2, 3, and 5 are located and depicted as shown in solid green color on Plfs’ Ex. 2. Lot 4, which consists of 40 acres, is shown in light green colored hatch marks on said Exhibit. The record does not clearly disclose the number of acres of land included in Lots 2, 3, or 5; but the evidence does show that Lots 2, 4, and 5 comprise a total of approximately 120 aeres; and it would appear that none of the numbered lots mentioned above contain in excess of approximately 40 acres, or a total of 160 acres. Reference to Plfs’ Exhibits 2, 3, and 4 will be helpful in visualizing and orienting the locations of the several lots and land areas mentioned herein. . While plaintiffs technically retain a fee simple interest in the land, subject to the State’s highway easement, it was concluded by the United States District Court for the District of Minnesota, in United States v. Certain Lands in County of Cook, State of Minnesota, 248 F.Supp. 681 (D.Minn.1965), a case involving portions of this right-of-way, that plaintiffs’ remaining interest was substantially equivalent to a possibility of reverter and that they were entitled to only nominal damages for its taking. . This permit (Def’s Ex. 1 — see finding 15(a), infra) specifically superseded and voided all similar permits previously issued to defendant, specifically and especially a permit dated June 30, 1965. . It-is important to recall Mr. Tseheda’s unrebutted testimony, supra, that the policy of the Minnesota State Highway Department is always to deny access within the first 800 to 900 feet of a bridge, and even a longer distance where special circumstances merit such action. . See also United States v. Pewee Coal Co., 341 U.S. 114, 71 S.Ct. 670, 95 L.Ed. 809 (1951); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43 S.Ct. 158, 67 L.Ed. 322 (1922). . In this connection, see n. 5, supra.

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Caselaw Access Project

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2024-08-24T03:29:51.129683

Edwin H. FLYNN, Appellant, v. Stephen EARDLEY et al., Appellees. Patent Appeal No. 8865. United States Court' of Customs and Patent Appeals.- June 28, 1973. Rehearing Denied Aug. 16, 1973. Herman I. Hersh, Chicago, 111., John T. Reynolds, Indianapolis, Ind., and James H. Littlepage, Washington, D. C., attorneys of record, for appellant. Fred T. Williams, John J. Cavanaugh, Chicago, 111., J. William Pike, Washington, D. C., and Francis D. Thomas, Jr., Arlington, Va., attorneys of record, for appellees. Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation. BALDWIN, Judge. This appeal is from the decision of the Board of Patent Interferences awarding priority in Interference No. 96,095, to appellees Eardley et al. (Eard-ley). Appellant is involved on the basis of his application Serial No. 398,028, filed September 21, 1964, which was a continuation-in-part of Serial No. 220,855 (’855) filed August 31, 1962, which in turn was a continuation-in-part of Serial No. 115,612, filed June 8, 1961. Appellant copied the claims corresponding to the count from appellees’ U. S. Patent No. 3,280,118, issued October 18, 1966, on an application Serial No. 408,757, filed November 4, 1964. Appellees have been awarded priority under 35 U.S.C. § 119 based on the filing date of British application Serial No. 43,441, filed November 4, 1963, and that award is not contested by appellant. The counts are directed to the strong acid salts of cephaloridine. Count 1 reads as follows: Appellant’s application ’855 matured into U. S. Patent No. 3,218,318, which is the same Flynn patent treated in the case of In re Arkley, 455 F.2d 586, 59 CCPA 804 (1972). In that case, the issue before us was whether the disclosure in the Flynn patent was sufficient to anticipate a claim to the compound cephal-oridine. In the present case, the issue is whether cephaloridine was described in application ’855 within the meaning of 35 U.S.C. § 112. If it was, then appellant can prevail on the basis of that application’s filing date, for there is no question that the disclosure sufficiently describes the strong acid salts if cephal-oridine per se is sufficiently described. The disclosure of the Flynn patent is analyzed in depth in the opinions in the Arkley case. We see no need to repeat that analysis here. The only pertinent difference in disclosure between application ’855 and the Flynn patent is that the application additionally contained original claim 3, which was directed to a “cephalosporin compound of the class consisting of the heterocyclic-substituted acyl derivatives of the nuclei of the ceph-alosporin Ca compounds.” Original claim 4 was directed to the corresponding class of cephalosporin Cc compounds and original claim 5 was directed to the corresponding class of desacetylceph-alosporin compounds. The board found no clear support for the compound cephaloridine in the disclosure of the Flynn patent. During the course of its opinion it discussed essentially the same portions of that disclosure which were discussed in the opinions in Arkley. Opinion The board found, and we fully agree, that those skilled in the art could easily have made the claimed compounds, should they have desired to do so, from the ’855 disclosure. Nor does there appear to be any question that the skilled in the art would have known how to use the claimed compounds in light of that disclosure. Thus the question before us is purely whether the claimed compound is described in the ’855 application, as required by the first paragraph of section 112. We agree with appellant that it is not essential to name the claimed compounds, and further that preference for the specific- claimed compounds is not necessarily a requirement. However, the description requirement is not satisfied unless the specification contains adequate direction which reasonably leads the skilled in the art to the compounds which it is later desired to claim, and that is what is missing here. Of course a discussion of preferences for various aspects of the invention may be one way in which to supply such direction. Appellant points out the various parts of the disclosure which' would tend to head one in the general direction of the claimed compounds, which are adequately discussed in the Arkley opinions. We note that not only are there a large number of choices of substituents presented to the skilled in the art, thus making it more difficult to arrive at the claimed compounds, but also, there are other aspects of the disclosure which tend to counteract the suggestions argued by appellant. For example, while there is a qualified preference for compounds of the Ca type, the main thrust of the disclosure is that the improvement in properties over the known cephalosporin is due to appellant’s substitution at the 7 carbon of the nucleus. The effect of this is to minimize the role played by the substituent on the 3 carbon of the nucleus, which characterizes the Ca compounds. We additionally note that not a single Ca compound is described in a-working example or even specifically named anywhere in the disclosure. We conclude that the ’855 specification does not “convey clearly to those skilled in the art, * * * in any way, the information that appellants invented * * * ” the claimed compounds. It therefore fails to describe the claimed invention in the manner required by the first paragraph of section 112. In re Ruschig, 379 F.2d 990, 996, 54 CCPA 1551, 1559 (1967). Appellant raises another point, apparently dealing with the patentability of the counts to appellees. We agree with appellees that the point-was improperly raised for the first time before us and therefore decline to consider it further. Finding the reasoning of the board to be sound, we affirm its decision. Affirmed. . Before us, appellants occasionally erroneously refer to tlie principal opinion in Arkley as the “majority” opinion. There was no majority opinion in Arkley. There was only a decision by the majority that the board’s decision had to be reversed.

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Caselaw Access Project

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2024-08-24T03:29:51.129683

Application of P. FERRERO and C. S. p. A. Patent Appeal No. 8963. United States Court of Customs and Patent Appeals. June 21, 1973. Rehearing Denied Aug. 16, 1973. Almond, Senior Judge, filed a dissenting opinion, and Baldwin and Lane, JJ., concurred in the result. G. Franklin Rothwell, Washington, D. C. (Sughrue, Rothwell, Mion, Zinn & Macpeak, Washington, D. C.), for appellant. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents. R. V. Lupo, Washington, D. C., of counsel. Before MARKEY, Chief Judge, and RICH, BALDWIN, and LANE, Judges, and ALMOND, Senior Judge. RICH, Judge. This appeal is from the decision of the Trademark Trial and Appeal Board, abstracted at 168 USPQ 448 (1970), affirming the examiner’s refusal to allow appellant’s application serial No. 332,592, filed July 15, 1969, to register the word mark “TIC TAC” for “Candy,” because of likelihood of confusion with the prior registered word mark “TIC TAC TOE,” registration No. 809,357, issued May 31, 1966, for “ice cream and sherbet.” The application is based on an Italian registration. The statutory basis for the examiner’s refusal to register and the board’s affirmation was likelihood of confusion, mistake, or deception under section 2(d) of the Trademark Act of 1946 (15 U.S.C. § 1052(d)). We reverse. Appellant contended below, and in essence here, that differences in sound, appearance, and meaning of the marks, combined with the differences in the goods to which the marks are applied, would preclude any likelihood of confusion, etc. In affirming the rejection, the board said: When the marks are compared, it is obvious that they are similar in sound and appearance since applicant’s mark comprises the first two thirds of the mark of the cited registration. In addition, both marks are completely arbitrary in nature as applied to the food products involved and, additionally, “TIC TAC” may well call to mind the well known game “tick tack toe”, of which the mark of the registration is the phonetic equivalent. Upon review of the record, we are constrained to disagree with the board’s reasoning. It appears to have regarded only the marks, without their significance, and the broad goods descriptions, without the relation of the marks to the goods. The real significance of Borden’s mark TIC TAC TOE appears from the specimens filed to obtain the registration. As is well known, the Tic Tac Toe game is played on 9 squares. Borden’s ice cream, presumed to be sold under the specimen label, has a particular relation to the meaning of the word mark, as may be observed- in the following illustration: Not only are the letters of the mark arranged TIC TAC TOE fashion with vertical and horizontal lines between them as in the game but the product is so formed of different colors of ice cream as to produce checkerboard squares when sliced. The mark is thus tied to the product and in this sense the mark is far from “arbitrary,” as the board said it was. TIC TAC TOE is a trademark which also designates product type; it is not only an indication of origin. TIC TAC TOE ice cream is a particular kind of ice cream configuration and it seems most unlikely that the owner of that mark would apply it to other goods or that purchasers would expect the mark, or any variant thereof to be applied to different goods, such as candy. Neither is appellant’s mark TIC TAC “completely arbitrary,” as the board said; it is a dictionary term meaning a repetitive sound as of ticking, tapping, or the like as well as a device used to produce such a sound, and that is the sound of appellant’s hard mint candies, which are about 10 x 15 mm. in size with rounded-ends, rattling in their plastic boxes. We feel that the board has made too much of the indisputable fact that TIC TAC is two-thirds of TIC TAC TOE and that TIC TAC would “bring to mind” TIC TAC TOE. Neither fact determines the issue of likelihood of confusion. See our opinion in In re General Electric Co., 304 F.2d 688, 49 CCPA 1186 (1962) in which we held VULKENE registrable over VULCAN. The fact that one mark may bring another mark to mind does not in itself establish likelihood of confusion as to source. Compare Lever Brothers Co. v. Producers Chemical Service, 283 F.2d 879, 48 CCPA 744 (1960). The very fact of calling to mind may indicate that the mind is distinguishing, rather than being confused by, two marks. In Level Brothers we unanimously found SHUX registrable over LUX for like goods (off-the-shelf soap products) while fully conscious of the fact that purchasers seeing or hearing SHUX would almost certainly think of LUX— and at the same instant realize the distinction. Seeing a yellow traffic light immediately “calls to mind” the green that has gone and the red that is to come, or vice versa; that does not mean that confusion is being caused. As we are conditioned, it means exactly the opposite. The different marks before us applied to the different goods here, notwithstanding the fact that such goods might both emanate from a single source, are not, in our judgment likely to cause confusion as to source, or to cause mistake, or to deceive. The decision of the board is reversed. Reversed. BALDWIN and LANE, JJ., concur in result. ALMOND, Senior Judge (dissenting). With all due respect, I cannot agree with the decision of the majority. The opinion supporting that decision has stressed that in actual use the TIC TAC TOE trademark is applied to multi-flavored ice cream in which the different flavors are formed in blocks and packaged to create a pattern similar to that of a tick tack toe game. Presumably this ties the trademark so closely to the manner in which the ice cream is packaged that TIC TAC TOE ceases to be an arbitrary mark for the product. I cannot agree with this approach. The question of likelihood of confusion must be considered in light of the registered mark and there is nothing in that registration which precludes the owner from using any packaging scheme it desires. Furthermore, I believe the majority engages in unwarranted speculation when it suggests that it is unlikely that the owner of TIC TAC TOE would apply its mark to other products. For all the record reveals, the mark might very well be used with other goods. The majority has also placed too much emphasis on the relationship between appellant’s mark TIC TAC and the sound of the candy in the package. In the first place, I seriously doubt that the sound the candy makes is so well imitated by the mark that this association would be made by a purchaser. Secondly, there is nothing which would preclude appellant from packaging its candy in a manner which would not “rattle.” From the standpoint of the market place and the class of purchasers, I find it difficult to draw a viable distinction between candy and ice cream. Both are confections which appeal to similar tastes and are offered and displayed by vendors with a common appeal to the purchasing public. In view of these similarities and the resemblance between TIC TAC and TIC TAC TOE, as pointed out by the board, it is my view that a likelihood of confusion as to source is a likely result if the marks are used concurrently. I would affirm the board’s decision.

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Caselaw Access Project

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2024-08-24T03:29:51.129683

Application of Lawrence W. DAILEY. Patent Appeal No. 8936. United States Court of Customs and Patent Appeals. June 28, 1973. Baldwin, J., concurred and filed opinion. Edward J. DaRin, John P. Grinnell, Christie, Parker & Hale, Pasadena, Cal., John A. Finken, Wynne & Finken, Washington, D. C., attorneys of record, for appellant. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents. Jack E. Armore, Washington, D. C., John W. Will, Classification Division, U. S. Patent Office, of counsel. Before MARKEY, Chief Judge, and RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge. MARKEY, Chief Judge. This appeal is from the decision of the Board of Appeals, affirming the rejection under 35 U.S.C. § 103 of claim 1 in appellant’s application, serial No. 669,950, filed September 22, 1967, entitled “Method for Introducing Hydrogen into a Hydrogen Consuming Reactor Circuit,” as unpatentable over Jackson. Claims 3-15 have been allowed. We affirm. The Invention Claim 1, with reference numerals inserted, read in conjunction with the following excerpt from the application drawing, is illustrative of appellant’s claimed invention: 1. In a relatively high pressure hydrogen consuming process of the type wherein hydrocarbon feed material [28] is introduced into a hydrogen consuming reactor circuit [10] and converted in at least one reactor [26] to form a reactor effluent stream [30] containing reactor products with the conversion occurring in the presence of hydrogen from a vapor stream [40], an improvement in the method of introducing the hydrogen into the hydrogen consuming reactor circuit comprising the steps of: (a) producing a hydrocarbon diluent from the reactor effluent having a relatively high molecular weight compared to hydrogen; (b) combining the diluent with hydrogen at a relatively low pressure to form a resultant stream [20] having an average molecular weight which enables compression of such stream by centrifugal compression to an introduction pressure which is sufficient for the resultant stream to enter the hydrogen consuming reactor circuit; (c) compressing the resultant stream in at least one centrifugal compressor [24] to the introduction pressure; (d) introducing the compressed resultant stream into the hydrogen consuming reactor circuit; (e) separating at least a substantial amount of the diluent from the hydrogen ; and (f) introducing the hydrogen separated from the diluent into the vapor stream. Appellant further discloses in the specification that: In addition, the hydrocracker reactor circuit is important to illustrate the point and condition of resultant stream entrance into the circuit. The point of introduction [34] is where the pressure of the reactor effluent and resultant stream 20 are essentially equal. Moreover, the introduction point is preferably where the temperature of the reactor effluent stream and the resultant stream are also essentially equal. The liquid portion of the reactor effluent stream acts as a sponging medium to take out diluent and purify the vapor stream. The mixed stream 34 which includes “reactor products, recycle gas, possible recycle liquid, diluent, and hydrogen” is reduced in temperature in heat exchanger 36 for the separating step in separator 38 into the vapor stream 40 (“50 to 90 mol per cent hydrogen”) and liquid stream 42. The vapor stream 40 is compressed in compressor 44 to provide a sufficiently high partial pressure of the hydrogen as required in the reactor. The Prior Art Jackson discloses a process that is quite similar to appellant’s disclosed process and differs mainly in that the hydrogen-diluent mixture (“90% hydrogen”) after being compressed is introduced directly into the vapor stream that is introduced into the reactor. The effluent stream exiting from the reactor of Jackson which includes the reactor product, the diluent, and unreacted hydrogen is directed to a separator where unreacted hydrogen is separated and recycled into the vapor stream containing the compressed hydrogen-diluent mixture, and the diluent and reactor product are passed out of the reactor circuit. The Rejection As stated in the solicitor’s brief: The examiner stated in his final rejection that “while the Jackson reference discloses passing the hydrogen and diluent under higher pressure directly into the hydrogenation zone [reactor], since the diluent does not affect the reaction, it would be an obvious variant to separate the diluent under the high pressure by conventional means in order to avoid diluting the hydrogen required for the hydrogenation process,” and that “such an obvious variant over the teaching in the Jackson reference is within the skill of the art, not amounting to invention [unobviousness].” Since * * * [that] rejection was not reversed by the Board, * * * it is appropriately before [us]. In re Stephens, 47 CCPA 1028, 278 F.2d 980 [950] [126 USPQ 190]. The board held that claim 1 read directly on the Jackson disclosure and gave its reasoning as follows: That the copied claim, through step (d) thereof, reads upon the disclosure of Jackson does not appear to be controverted by appellant. Step (e) is performed in [the] separator * * * of the reference and step (f) by [the] hydrogen recycle * * *. Both appellant and the examiner seem to be reading limitations into the claims which are not present therein. A rule 132 affidavit, by one Beavon, stated that the effect of not removing the diluent as appellant discloses to be: (a) a greater amount of gas must be circulated to meet the hydrogen demand of the reaction system; or (b) the total pressure must be increased to obtain in a given volume the amount of hydrogen required for the reaction. Appellant concludes that the affidavit is evidence that the partial pressure of the hydrogen “is raised” by the diluent removal and accordingly, a lesser amount of hydrogen-diluent mixture must be compressed. The board considered the affidavit to be “not relevant” insofar as all the claimed steps are performed by the Jackson patent. The board additionally noted that the affidavit did not take the compressor 44 into consideration. In his brief appellant states: With reference to the drawing accompanying the application step (e) requires separating at least a substantial amount of the diluent from the centrifugally compressed hydrogen in separator 38 while step (f) calls for introducing compressed hydrogen after diluent separation into the vapor stream 40 for feed to reactor 26 within the hydrogen consuming circuit. In removing the diluent, the effective particle pressure of hydrogen is raised to substantially the pressure achieved during centrifugal compression of the resultant gas stream. From any reading of Jackson it is evident that the hydrocarbon diluent is never separated from the resultant stream following centrifugal compression to permit the result previously set forth. Yet, the Board found this teaching in Jackson from what is believed to be a patent misconstruction of the Drawing. OPINION It is abundantly clear, as noted in the above description, that Jackson separates the diluent from the effluent stream after and appellant before the hydrogen-diluent mixture passes through the hydrocracking reactor. But appellant’s reliance on his disclosure is misplaced. The claim does not require diluent separation ahead of the reactor and makes no distinction between diluent separation before and after introduction of the mixture into the reactor. Appealed claims in an application are given their broadest reasonable interpretation. In re Cummings, 390 F.2d 1018, 55 CCPA 951, 157 USPQ 47 (1968). Accordingly, we agree with the board that steps (a)-(e) of claim 1 are disclosed in the Jackson reference. Though the board’s rejection is couched in language evocative of 35 U.S.C. § 102, it sustained the examiner’s rejection under 35 U.S.C. § 103, as do we. A complete disclosure of the claim is the “ultimate or epitome of obviousness.” In re Kalm, 378 F.2d 959, 962, 54 CCPA 1466, 1470 (1967). If steps (e) and (f) were interpretable as appellant argues, i. e., to require separation before introduction to the reactor, the rejection under 35 U.S.C. § 103 would not be erroneous. Appellant submits no evidence probative of unexpected results. The affidavit plainly does not establish that the amount of hydrogen-diluent mixture required to be compressed in compressor 24 would be reduced. It is not apparent that the circulation of diluent through the reactor is of consequence with respect to the requirements of compressor 24. If the “effective or partial pressure” of the hydrogen is governed by Dalton’s Law on Partial Pressures as appellant states, we have been provided with no factual evidence that partial pressure “is raised” by the removal of the diluent. Moreover, we note, as did the board, that appellant employs compressor 44 between his separator and reactor. That the partial pressure of the hydrogen, as stated by the affiant, “will become essentially equal to the total pressure generated” during centrifugal compression of the resultant gas stream would hardly have been unexpected. It is elementary that the level of partial pressure would depend on the mol per cent of hydrogen in the resultant stream. The decision of the board is affirmed. Affirmed BALDWIN, Judge (concurring). I agree that claim 1 is obvious within the meaning of 35 U.S.C. § 103. Such being the case, I see no reason to read a section 102 rejection into the board’s opinion, which affirmed a section 103 rejection. Both Jackson and appellant are concerned with the use of diluent in order to render efficient the use of centrifugal compressors for introduction of hydrogen into what Jackson calls the “system 'loop’.” The difference between the system which appellant interprets his claim to cover and the specific system depicted in Jackson can best be appreciated by considering the portion of appellant’s drawing reproduced in the majority opinion, using appellant’s reference numbers for the identical apparatus shown in Jackson. In Jackson, the output line from the centrifugal compressor (24) is not fed into the loop prior to Jackson’s cooling system (36) as shown in appellant’s drawing. Rather, the hydrogen plus diluent is fed into the line (40) between Jackson’s separator (38) and his recycle hydrogen compressor (44). What the particular advantage may be to feeding the mixture into that line Jackson doesn’t say. In discussing the problem, Jackson states (again substituting appellant’s numbering): In general, the discharge from compressor [24], may enter the system at any suitable location retentive of the recycle. Thus, for example, the discharge from compressor 15, may be * * * introduced elsewhere into the system “loop,” as to the suction side of compressor [44], The most advantageous point for introduction of hydrogen makeup from compressor [24] into the system “loop” is subject to calculation for a given case in hand. In my view it would have been obvious for one of ordinary skill in the art, should he be bothered by the fact that Jackson, for. no apparent reason, puts his diluent through compressor 44, the reactor 26, and the cooling system before getting rid of it in separator 38, to obviate that problem by adding the mixture just prior to the separation system. The Beavan affidavit adds no support to appellant’s case. It does not suggest that all of the factors discussed therein were not either known or obvious to those skilled in the art at the time appellant’s invention was made. At best, the affidavit indicates that appellant’s system had an advantage over Jackson’s system, but it does not establish that that advantage would have been anything other than obvious to those skilled in the art. . U.S. 3,401,111, filed July 5,1966, issued September 10, 1968.

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COMPAGNIE FRANCAISE de PRODUITS CHIMIQUES et INDUSTRIELS du SUD-EST, Appellant, v. GAF CORPORATION, Appellee. Patent Appeal No. 8938. United States Court of Customs and Patent Appeals. June 14, 1973. J. Timothy Hobbs, G. Cabell Busick, Washington, D. C. (Mason, Fenwick & Lawrence, Washington, D. C.), for appellant. W. M. Webner, New York City, for ap-pellee. Before MARKEY, Chief Judge, RICH, BALDWIN, and LANE, Judges, ALMOND, Senior Judge. MARKEY, Chief Judge. This is an appeal from the decision of the Trademark Trial and Appeal Board sustaining the opposition of appellee to registration of HELIANE by appellant for “vat dyes utilized in dyeing of fabrics.” Appellee relied on its prior registrations and use of HELIO for dyes and dyestuffs and HELIOGEN for pigment dyestuffs. We affirm. OPINION The goods are substantially identical and are sold in overlapping channels. Though appellant’s brief emphasizes use of appellee’s dyes in “plastics, paints and inks,” the testimony of record establishes use on fabrics and for inking fabrics. Though appellant’s .brief lists numerous non-textile oriented magazines in which appellee advertises, the record includes appellee’s ads in “Textile World.” The marks, considered in their entireties and under all the circumstances of this case, are sufficiently similar to cause a likelihood of confusion, deception or mistake. Appellant argues strenuously that the common prefix “Heli” is descriptive of dyes, citing derivative definitions found in Webster’s Third New International Dictionary (1961). No evidence establishes familiarity of purchasers with those definitions or necessary application of those definitions by purchasers to appellee’s marks. Appellant then alleges that appellee’s marks are themselves substantially descriptive while its own mark HELIANE is arbitrary, coined and without meaning in the dye world. The record however contains appellant’s statement to the examiner that its mark “is from the Latin word ‘Helianine’ which has a meaning of a red coloring compound.” The record further establishes appellee’s and its predecessor’s exclusive use in the United States, beginning almost half a century ago, of marks beginning with “Heli” and appellee’s active and successful efforts to maintain that exclusivity. In 1965-66, annual sales approximated $76,000 under HELIO and $6,000,000 under HELIOGEN. The case is thus unlike those illustrated by Air Products, Inc. v. Marquette Manufacturing Co., Inc., 301 F.2d 348, 49 C.C.P.A. 973 (1962), wherein prefixes used by both parties and constituting terms of common descriptive connotation were disregarded in determining a likelihood of confusion. We think viewers of HELIANE who are familiar with the fact that marks beginning with “Heli” have for so long indicated a single source of dyestuffs could believe HELIANE to be another dye from that source. If there be doubt, the present case is an appropriate one for application of the practice of resolving doubt in favor of the long established user and against the newcomer to whom the entire lexicon is available for construction of an unquestionably distinct mark. Appellant argues strongly that the board erred in refusing its motion to strike appellee’s brief. Appellee filed a single brief, designated “Reply Brief,” after appellant had filed its brief. Appellant has not made its brief of record here and we cannot therefore judge whether appellee included material not properly in reply to it. The board, in denying the motion, said it would not consider anything in appellee’s brief which was not properly in reply to appellant’s brief. We find support in the record for each holding of the board and are thus convinced that the board did exactly as it said it would. The failure to file a timely main brief to which appellant could have responded is not to be encouraged. We do not feel, however, that the board was influenced by or made its decision in response to any “non-reply” type material in appellee’s brief and cannot see therefore how appellant was in any way prejudiced by the action of the board. Similarly, the board refused to allow appellant to rely on material introduced by appellee because (1) it was not introduced by appellant under the Trademark Rules and (2) because it was irrelevant, being related only to use of marks having the prefix “Heli” outside the United States. Since the board was clearly correct as to (2), appellant’s arguments regarding (1) are moot. For all of the foregoing reasons, we find no controlling error in any aspect of the decision below. Accordingly, it is affirmed. Affirmed. . Registration No. 180,180, issued February 26, 1924. . Registration No. 349,318, issued August 24, 1937.

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Application of William H. DUTT. Patent Appeal No. 9040. United States Court of Customs and Patent Appeals. June 21, 1973. Rehearing Denied Oct. 4, 1973. Joseph C. Sullivan, New York City (Kane, Dalsimer, Kane, Sullivan, Ku-rucz & Goldstein, New York City), for appellant. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents. Raymond E. Martin, Washington, D. C., of counsel. Before MARKEY, Chief Judge, and RICH, BALDWIN, and LANE, Judges, and ALMOND, Senior Judge. MARKEY, Chief Judge. This is an appeal from the decision of the Patent Office Board of Appeals sustaining the rejection, under 35 U.S.C. § 103 of claims 1 and 3-7 of appellant’s application serial No. 628,628, filed April 5, 1967, and entitled “Felt Having Reinforced Crosswise Yarns.” We affirm. The Invention The invention is a papermaker’s felt, comprising a multilayer fabric wherein the crosswise strands are formed of different yarn materials twisted together. The sole independent claim is claim 1: 1. A papermakers felt comprising a tightly woven multi-layer fabric in which first crosswise yarns are reinforced by twisting in combination with second crosswise yarns having superior tensile and compressive strength and in which means for securing the crosswise and lengthwise yarns against relative movement is provided. Claim 3 says the “means” is the tightness of the weave. Claim 4 specifies the “means” as bonding at the intersections of crosswise and lengthwise yarns. Claim 5 limits the lengthwise yarns to nylon and the crosswise yarns to asbestos twisted about monel wire and limits the fabric to two layers. Claims 6 and 7 call for bonding with cured re-sorcinol-formaldehyde resin and cured urethane resin, respectively. The Rejection Claims 1 and 3 were rejected as obvious in view of Barrell 2,098,993, disclosing a two-ply woven papermaker’s felt with crosswise yarns of twisted asbestos and cotton or asbestos with cotton braided thereon, and Hall 2,506,667, disclosing a twisted asbestos and nylon yarn for papermaker’s felts. Wagner 3,248,802, disclosing chemical bonding at yarn intersections in a papermaker’s belt, was' added in rejecting claims 4, 6 and 7. Bacheldor 1,811,573, disclosing a filter fabric having a yarn formed by twisting abestos about a wire, was added to Barrell and Hall in the rejection of claim 5. OPINION Appellant argues that his contribution lies in “displacing” the crosswise yarns “from the neutral axis” which creates “a base beam construction” or a “truss like structure.” Appellant’s difficulty is that the claims don’t say so, directly or indirectly. Appellant’s reply brief says the “multi-layer fabric” of the claims is understood in the art to mean a single fabric whereas Barrell discloses two fabrics fastened together. The record, however, contains no evidence of such understanding in the art. Barren’s plies are joined by a warp strand and his felt is described as “woven” in two plies. Appellant also argues that the prior art does not show “tightly” woven fabrics, yarns of “superior * * * compressive strength,” or “securing” by “tightness of the weave.” We agree with the examiner and the board that “tightly,” “superior,” and “securing” are nebulous terms incapable in this case of rendering the claimed structure unobvious over the prior art, the record containing no evidentiary basis for comparison of appellant’s weave tightness or yarn strength with those of the prior art. We find in the references the clear suggestion of their combination as rer lied upon by the tribunals below and no impediment thereto. Accordingly, the decision rejecting the appealed claims is affirmed. Affirmed.

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Application of KEEBLER COMPANY. Patent Appeal No. 8966. United States Court of Customs and Patent Appeals. June 14, 1973. A. W. Molinare, Chicago, 111. (Moli-nare, Allegretti, Newitt & Witcoff, Chicago, 111.,) attorneys of record, for appellant. Robert C. Williams, Chicago, 111., of counsel. S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents. John W. Dewhirst, Washington, D. C., of counsel. Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges and ALMOND, Senior Judge. LANE, Judge. This is an appeal from the decision of the Trademark Trial and Appeal Board, abstracted at 168 USPQ 608 (1970), sustaining the examiner’s refusal to register RICH ’N CHIPS for “cookies.” The specimen filed by appellant shows the use of the mark on a package of chocolate chip cookies, and it was the examiner’s position that the mark is merely descriptive of that product within the meaning of section 2(e) (1) of the Lanham Act, 15 U.S.C. § 1052 (e)(1), “because it indicates that there is an abundant supply of chips * * * [therein].” Appellant argued that the words “rich” and “chips” have many meanings in addition to those which would lead one to read RICH ’N CHIPS as though it said “abundant in chocolate chips.” However, the board held: [W]e consider what the entire phrase would be representative of in the market place where the purchaser is likely to consider the purchase of applicant’s chocolate chip cookies. [Citation omitted.] In this environment, it is believed that the designation “RICH ’N CHIPS”, as applied to chocolate chip cookies, would merely inform the buyer of the nature and quality of the goods and not the source thereof. It is not unusual for manufacturers to extol their products to indicate better quality or value over like products produced by competitors. Language which merely describes these attributes should be free for all to use. The board agreed with the examiner’s conclusion that the mark is merely descriptive, and we affirm the board’s decision. Appellant contends that where the average purchaser has to mentally sort through various meanings of the words which comprise the trademark to arrive at that meaning which is descriptive of the goods to which the mark applies, the mark cannot be considered merely descriptive in the sense of § 2(e). Such a proposition cannot be held to be either universally true or universally false. Where the descriptive meaning of a phrase derives from obscure or less prominent individual word meanings, a conclusion of mere descriptiveness may well be untenable. The board properly approached the analysis in the present case by viewing the mark in its entirety in conjunction with the goods it has been used to identify and attempting to assess the impression likely to be conveyed. We agree that as applied to chocolate chip cookies, the phrase RICH ’N CHIPS plainly conveys the impression that the cookies are abundant in the chips which they contain, i. e. chocolate chips. The phrase therefore describes to the consumer a purported quality of the product which would tend to entice the purchase of the product. As such, we agree that the phrase would not inherently serve to distinguish appellant’s goods from similar goods of others, but rather would be recognized as connoting a common quality which all such goods could be asserted to have. There is no evidence of secondary meaning within the purview of § 2(f) which would rebut these conclusions. Accordingly, we find no error in the refusal to register RICH ’N CHIPS on the ground of mere descriptiveness. The decision of the Trademark Trial and Appeal Board is affirmed. Affirmed. BALDWIN, J., dissents. . Application Serial No. 309,177 filed October 8, 1968.

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FORT WORTH INDEPENDENT SCHOOL DIST. v. ÆTNA CASUALTY & SURETY CO. No. 5962. Circuit Court of Appeals, Fifth Circuit. April 1, 1931. Rehearing Denied April 29, 1931. R. M. Rowland, of Fort Worth, Tex., for appellant. Robert W. Harrison and John T. Pearson, both of Fort Worth, Tex. (Hubert Blalock, of Hartford, Conn., and Lassiter, Harrison & Pearson, of Fort Worth, Tex., on the brief), for appellee. Before BRYAN and FOSTER, Circuit Judges, and DAWKINS, District Judge. DAWKINS, District Judge. The /Etna Casualty & Surety Company (hereinafter called surety company)'brought this suit in equity to recover of the Fort Worth independent school district (hereinafter called school district) the sum of $41,-985, alleging that, as surety upon the bond of H. K. Muse, contractor, for the erection of a school building of the school district, it had been compelled to pay to laborers and material men the said amount; that the school district had wrongfully turned over to the contractor funds which should have been applied to the satisfaction of said claims; that, under the contract and bond, defendant was required to retain in its hands 15 per cent, of the contract price of the work and all extras added thereto until the building was completed and all bills paid; and that plaintiff “became equitably entitled to and should receive from said defendant * * * the aforesaid retained percentage that should have been retained by the said School District.” Plaintiff prayed for an accounting and for judgment “for such sum with legal interest thereon, as plaintiff may he entitled to either in law or equity.” Defendant first pleaded in abatement of this suit the pendency in a state court of Texas of an action wherein certain" furnishers of material had sued it, the contractor, and the surety company upon their claims, previous to the filing of this bill, and averred that, after the surety company had appeared and answered, the school board had filed its cross-bill against said surety and “prayed that all interested parties * * * be required to plead and have adjudicated all their claims and demands; * * * ” that the subject-matter involved therein was and is the same as in the present suit; that the jurisdiction of the state court had attached and it had power to afford full relief to all concerned, and for which reasons the instant case should be abated. Secondly, defendant averred that the present proceeding was essentially an action .at law, and should be transferred to the law side of the court. Upon the merits, defendant justified its payment of the funds to Muse under the terms of the contract and bond, and prayed that, if it should be found that plaintiff was entitled to receive the sum of $7,129.90 still in its hands, the judgment be without costs. Both the plea in abatement and motion to transfer were denied. The case was submitted below upon an agreed statement of facts with attached exhibits, and there was judgment in favor of the surety company for the sum of $39,819.90, with 6 per cent, interest on $35,000 thereof from April 1, 1927. The school district has appealed. Appellant has made ten assignments of error — the first being to the overruling of the plea in abatement; the second to the refusal to transfer the ease to the law side of the docket; the third to ninth, inclusive, to the striking from the school board’s answer of certain allegations; and the tenth to the awarding of judgment in plaintiff’s favor upon the facts. As to the plea in abatement, we agree with the court below that it should have been overruled. There was no property or funds in the hands of the state court, neither did the present case seek to gain possession of either, but in eaeh instance the proceedings involve issues of the liability of the parties under the contract and bond. ' The suit, as originally instituted, was, as stated above, by materialmen to recover of the sehool board, contractor, and surety, the amount of their claims; the school board by its cross-action, under a statute of the state of Texas, sought to have the surety respond on its bond to these and all other claims which might be asserted against the contractor; the surety, feeling itself bound to pay the laborers and materialmen, discharged all such claims, took assignments thereof, and filed in the state court a dismissal on the part of all of said Creditors of the contractor, including W. B. Sloan, who had been drawn into it as indemnitor of the surety company, thus leaving as the only parties before the state court the sehool board, the contractor, and the surety company. So that as it remained at the time of filing the present suit, the case in the state court was merely a controversy between these parties as to their rights under the contract and bond. The bill in this ease was based upon the theory of equitable subrogation to the rights of the materialmen and laborers against the sehool board and for an accounting of the funds provided for the ereetion of the building. In this situation, we can see no conflict of jurisdiction or ground for abatement. The cause of aetion is in personam and arises from the alleged payment of the claims and the asserted right to equitable subrogation against the school board upon its obligations flowing from the contract and bond. It is not the same as the demand made by these creditors against the contractor, surety, and school district in the state court, or by the latter in its cross-action against the surety, but seeks to fasten upon the school district responsibility for its alleged diversion of the funds from the purpose to which they were dedicated. Kline v. Burke Construction Co., 260 U. S. 226, 43 S. Ct. 79, 67 L. Ed. 226, 24 A. L. R. 1077; U. S. v. The Haytian Republic, 154 U. S. 118,14 S. Ct. 992, 38 L. Ed. 930; Gordon v. Gilfoil, 99 U. S. 168, 25 L. Ed. 383; McClellan v. Carland, 217 U. S. 268, 30 S. Ct. 501, 54 L. Ed. 762; Groom v. Mortimer Land Co. (C. C. A. 5th Cir.) 192 F. 849; Slaughter v. Mallet Land & Cattle Co. (C. C. A. 5th Cir.) 141 F. 282; Ackerman v. Tobin (C. C. A.) 22 F.(2d) 541; International & G. N. R. R. Co. v. Barton, 24 Tex. Civ. App. 122, 57 S. W. 292. We are also of the view that the case was properly brought in equity. Prairie State Bank v. U. S., 164 U. S. 227, 17 S. Ct. 142, 41 L. Ed. 412; National Surety Co. v. County Board (C. C. A.) 15 F.(2d) 993. It is not a suit upon contract or express obligation to pay by the school board, but arises from equitable subrogation to the rights of laborers and materialmen (who, although not parties to the contract and bond, were nevertheless beneficiaries thereunder) as well as from the alleged duty of the school board to properly administer and account for the funds which were specially set apart to pay for this work. The subject-matter stricken from the answer and complained of in assignments 3 to 9, inclusive, had to do with the contention of the school board that, while it might have retained the 15 per cent, as stipulated under the contract, it w.as not compelled to do so; that the cheek for $35,000 was given to the contractor for the purpose of paying claims of laborers and materialmen, but that, when it was deposited in the Texas National Bank, the latter wrongfully appropriated it to the payment of a debt due by Muse, and the plaintiff in this case had its remedy against said bank; that the provision of the contract authorizing the architect to demand receipts of the contractor, showing payment of all claims, was optional; that at the time of said payment no claims had been filed, nor was there any reasonable evidence that any would be filed, nor had the contractor, so far as the architect and the school board knew, failed to pay all persons having claims against the building; and that in signing the bond, which made the contract a part thereof, plaintiff had authorized the school board and architect to alter the time and manner of payment to the contractor. However, sufficient was left of the answer to fully present what' we consider the principal issues of the cause, and we find nothing in these assignments to warrant us in disturbing the rulings of the court below. As we see if, the principal question presented is as to whether the school board was justified in paying to the contractor the $35,-000, as was done under the paragraph of the bond, which we quote as follows: “And provided, that any alterations which may be made in the terms of the Contract, or in the work to be done under it, or the giving by the Owner of any extension of time for the performance of the Contract, or any other forbearance on the part of either the Owner or the Principal to the other shall not in any way release the Principal and the surety or sureties, or either or any of them, their heirs, executors, administrators, successors or assigns from their liability hereunder, notice to the Surety or Sureties of any such alteration, extension or forbearance being hereby waived.” As stated earlier in this opinion, the facts are stipulated, and the circumstances under which the payment was made, were as follows: The contract price of the work was $254,-900, and the plaintiff became surety thereon to the extent of $84,970, and the contractor executed in favor of the surety company an agreement of indemnity, which was unknown to the school board. On April 1, 1927, the work had been substantially completed, “the unfinished work thereon having at that time an approximate value of $250.00, and shortly thereafter said work was fully finished and said contract completely and fully performed.” We quote further from the agreed statement of facts as follows: “5. On April 1, 1927, and before the work was fully completed and the contract fully performed, W. G. Clarkson & Company, architects named in the contract, issued and delivered to Muse their Certificate No. 28 in the sum of $35,000.00, and thereupon and on the same date the School District issued and delivered its cheek or warrant to Muse for the same amount; Including this check, the amount paid by defendant on this contract to Muse, up to and ineluding April 1, 1927, was $249,200.00, leaving a balance of contract funds in the hands of defendant of $5,700.00, plus the value of some extras, “6. When, ,and before, the aforesaid certificate and cheek for $35,000.00 wére given Muse on April 1, 1927, the architect required no evidence from Muse that payrolls, material bills and other indebtedness connected with the work had been paid, and Muse did not submit to the architect any evidence that such bills had then been paid. At that time Muse owed various material men and sub-contractors for materials and work .furnished for and used in the construction of said building an amount exceeding $45,000.-00.” At the time of the payment of the $35,-000, none of the creditors of the contractors had given'the school board any written notice of their claims, in compliance with (Acts of Texas 39th Leg. (1925) c. 17 (Vernon’s Ann. Civ. St. arts. 5472a, 5472b), as defendant contends should have been done. The money was deposited by Muse in the Texas National Bank, who .applied it to indebtedness due to itself, and no part thereof went to satisfy claims against the building. The school board still held in its hands the sum of $7,284.90, the balance due upon the contract price and for extras. The amount in controversy, being the 15 per cent, which plaintiff contends was required to be retained under the contract, and for extras, was $39,-819.90. The contractor was adjudged bankrupt on July 6, 1927, and his estate closed September 10, 1928. Prior to the institution of this suit, the trustee disclaimed any interest in the sub j echmatter. The original contract provided that Muse should be paid 85 per cent, of the value of labor and material as the work progressed on the 1st of each month, “and upon substantial completion of the entire work, a sum sufficient to increase the total payments to eighty-five per cent, of the contract price, and balance upon completion and acceptance of the work.” We quote further from the contract as follows: “Article 5. Acceptance and Final Payment. — Mnal payment shall be due ten days after substantial completion of the work provided the work be then fully completed and the Contract fully performed. “Upon receipt of written notice that the work is ready for final inspection and acceptance, the Architect shall promptly make such inspection, .and when he finds the work acceptable under the Contract and the Contract fully performed he shall promptly issue a final certificate over his own signature stating that the work provided for in thiji Contract has been completed and is accepted by him under the terms .and conditions thereof, and that the entire balance found to be due the Contractor, and noted in said final certificate, is due and payable. Before issuance of final certificate the Contractor shall submit evidence satisfactory to the Architect that all payrolls, material bills, and other indebtedness connected with the work have been paid.” The following is quoted from articles 24 and 32 of the general conditions annexed and made a part of the original contract, to wit: “Art. 24. Application for Payments. — ■ The Contractor shall submit to the Architect an application for each payment, and, if required, receipts or other youehers, showing his payments for materials and labor, including payments to sub-contractors as required by Art. 37. * * * “Art. 32. Idem. — Neither the final payment nor any part of the retained percentage shall become due until the Contractor, if required, shall deliver to the Owner a complete release of all liens arising out of this Contract, or receipts in full in lieu thereof and, if required in either ease, an affidavit that so far as he has knowledge or information, the releases .and receipts include all the labor and material for which a lien could be filed; but the Contractor may, if any subcontractor refuses to furnish a release or receipt in full, furnish a bond satisfactory to the Owner, to indemnify him against any lien. If any lien remain unsatisfied after all payments are made, the Contractor shall refund to the Owner all moneys that the latter may be compelled to pay in discharging such a lien, including all costs and a reasonable attorney’s fee.” Of course, this being a'public building, the article last quoted was inapplicable in so far as liens were concerned. It is well settled that a stipulation in a building contract that a percentage of the price shall be retained until the final completion and acceptance of the work, is as much for the benefit of the surety as for the protection of the owner, and a failure to comply therewith releases the former in so far as the rights of the latter are concerned. Prairie State Nat. Bank v. U. S., 164 U. S. 227, 17 S. Ct. 142, 41 L. Ed. 412; Globe Indemnity Co. v. United Railways Co. (C. C. A.) 272 F. 607; National Surety Co. v. County Board of Education of McDowell County (C. C. A.) 15 F.(2d) 993; Ætna Casualty & Surety Co. v. Robertson Lumber Co. (Tex. Civ. App.) 3 S.W.(2d) 895; Ætna Casualty & Surety Co. v. Russell (Tex. Com. App.) 24 S.W.(2d) 385; Commercial Casualty Ins. Co. v. Durham County, 190 N. C. 58, 128 S. E. 469; Williams v. Baldwin (Tex. Com. App.) 228 S. W. 554; Ryan v. Morton, 65 Tex. 258; Fidelity & Deposit Co. of Maryland v. Claiborne Parish School Board (D. C.) 35 F.(2d) 376, affirmed (C. C. A.) 40 F.(2d) 577. Did the peculiar provisions in the contract and bond in this case, quoted above, have the effect of relieving the school board from the duty of withholding 15 per cent, of the amount due, and permit it to pay the same before the completion of the work and without exacting of the contractor receipts or affidavits showing the payment of all bills for labor and material? Article 4 of the original contract provides that “upon substantial completion of the entire work (there shall be paid) a sum sufficient to increase the total payments to eighty-five per cent, of the contract price and balance upon completion and acceptance of the work.” Article 5 states specifically how and when the “final payment” shall become due and be made, that it shall be due “ten days after substantial completion of the work, provided the work be then fully completed, and the contract fully performed”; that “upon receipt of written notice” the architect shall inspect the building and if he “finds the work acceptable * * * and the contract fully performed, he shall promptly issue a final certificate” to that effect, “and that the entire balance found to be due the contractor and noted in said final certificate, is due and payable. * * * Before issuance of final certificate the contractor shall submit evidence satisfactory to the architect that all pay rolls, material bills and, other indebtedness connected with the work have been paid.” (Italics by the writer of this opinion.) Section 24 of the general conditions attached to the original contract undoubtedly has reference to payments which are made during the progress of the work, but in that case also the contractor was bound to furnish vouchers or receipts showing payment for the labor and material “if required” by the architect. There appears to be nothing inconsistent between this and' the clear requirement of articles 4 and 5 of the original contract that the work should have been “fully performed” and the contractor should submit “evidence satisfactory to the architect that all payrolls, .material bills and other indebtedness connected with the work had been paid.” Neither do we find anything in article 32 of the general conditions of the contract, quoted above, to change this duty. This article deals solely with liens, was for the protection of the owner, and obligated the contractor, “if required” by the architect, to deliver “a complete release of all liens * * * or receipts in lieu thereof, * * * ” showing payment for labor and materials. As above stated, this being a public building, there was no legal possibility of attaching a lien thereto. The clause was no doubt part of a printed form used in dealing with private persons. It is highly probable that the inability to fix .a lien against the building caused the school board to be less solicitous about claims for labor and materials than it otherwise would have been. Had this been a private transaction, it is reasonably certain that no such payment would have been made without exacting evidence of satisfaction by the contractor of his indebtedness. We can see no justification on the part of the school board in disregarding the provision for retaining a percentage of the price, which, as has been said, was equally for the protection of the surety; but, on the other hand, it was called upon to respect the rights of the surety and to not do anything which was reasonably calculated to increase its obligation or risk under the bond. What the board did in this instance has undoubtedly brought about that very result, for the money dedicated to the payment of the claims has been diverted to other purposes, the surety has been compelled to pay the creditors, and the contractor is bankrupt. It remains to be determined whether the paragraph of the bond quoted above can reasonably be said to have changed the requirement of the contract with respect to the retainage of 15 per cent. We think it cannot. That stipulation in the bond did not purport to authorize any substantial change in the contract, and we think was intended to prevent alterations “in the terms of the contract or in the work,” or because of “extensions of time or other forbearance on the part of either the owner or the principal” from operating as a “release * * *" of the surety * * * from * * * liability” under the bond; any such “extension or forbearance being hereby waived.” In the absence of such stipulation, the surety would have been released under the. facts of the case. See authorities above cited. Under the very terms of the bond itself, the surety bound itself to “pay all persons who shall have contracts directly with the principal for labor or materials,” .and this gave them the right to sue upon it in their own names. Federal Surety Co. v. City of Staunton, Ill., et al. (C. C. A.) 29 F.(2d) 9. So that, the quoted provision of the bond could have had no other reasonable object than to protect the school district against acts of the contractor, such as the failure to complete or abandonment of the work requiring outlays on the part of the owner, notwithstanding any forbearance toward him by it. A different interpretation would have the effect of destroying and rendering meaningless those provisions for the retainage, in so far as the surety was concerned, whereas the construction which we have adopted gives proper effect to all of the terms of the contract and bond. Affirmed.

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UNITED STATES v. MALLERY et al. No. 283. Circuit Court of Appeals, Second Circuit. March 16, 1931. R. M. Page, of Johnson City, N. Y., for appellant. Frederick E. Hawkes, of Waverly, N. Y., for appellees. Oliver D. Burden, U. S. Atty., of Syracuse, N. Y., for the United States. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. SWAN, Circuit Judge. George Sidney Mallery, a soldier in the American Army during the late war, on November 20,1917, took out insurance upon his life for $10,000 under the War Risk Insurance Act of October 6, 1917 (40 Stat. 398). He designated as beneficiaries of such insurance his mother for the sum of $5,000, and his father, the present appellant, for the sum of $5,000. He died in France in October, 1918, and thereafter‘payments on account of such insurance were made to his father and .mother, respectively, each receiving the sum of $28.75 monthly until the mother’s death on or about May 22,1922. Shortly thereafter .the question arose whether future installments on that half of the insurance of which the mother had been named beneficiary were payable to the father or to the deceased soldier’s estate. The soldier was survived by a widow and a minor daughter, who are appellees, as well as by his father and mother. By a nuncupative will duly-admitted to probate in a Surrogate’s Court for the county of Tioga, N. Y., he declared that he wanted his father and mother to have all his insurance and his wife to have none of it. The surrogate’s decree adjudged the will valid to pass personal estate, hut decreed that, since no provision had been made for the testator’s daughter, who was bom subsequent to the making of his will, she was entitled to the same portion of his estate as would have been distributable to her had he died intestate. This decree was affirmed on appeal without opinion. Matter of Mallery’s Will, 127 Misc. Rep. 784, 217 N. Y. S. 489, affirmed, 220 App. Div. 794, 221 N. Y. S. 859, and 247 N. Y. 580, 161 N. E. 190. The father does not claim the insurance as a legatee under his son’s will. He contends that the will operated as a designation of himself as beneficiary of installments falling due after the mother’s death; that is, he claims under the contract of insurance and the federal statutes applicable thereto, not under the will as a testamentary disposition. If the will is sufficient as a designation of the father to receive installments payable after the mother’s death on that portion of the insurance as to which she was named by the insurance certificate as beneficiary, it is apparent that the ground is cut from under the will as a testamentary disposition; no such installments are left to pass under it for they never became estate of the testator. The correctness of this contention is the principal question raised by the appeal. War risk insurance is of a peculiar nature, and differs from an ordinary policy of insurance payable to a named beneficiary. Under the ordinary policy, a beneficiary, who survives the insured, obtains a right to be paid the full amount of the policy; but a contract for war risk insurance, by virtue of the statutes authorizing it, provides only for a series of monthly payments to the beneficiary while he lives — in effect, a life interest— thus leaving a “remainder” not disposed of by the original designation. This so-called remainder will fall into the estate of the deceased soldier if no person within the permitted class of beneficiaries be designated “by the insured either in his lifetime or by his last will and testament.” Act Oct. 6, 1917, 40 Stat. 410 § 402; 43 Stat. 1310, 38 USCA § 514. Treasury Regulation No. 14 (T. D. 25 W. R.), applicable to war risk insurance, also provides that “a change of beneficiary” may be effected by the insured’s will. Thus both the statutes and regulations recognize the power of the insured to designate a beneficiary by will, and the question in the ease at bar. becomes one of construing the testator’s will to determine whether it expresses an intention to designate his father as beneficiary of the “remainder” of the $5,000 of insurance in which his mother had a “life interest.” The statements probated as the soldier’s will recite that he had made out his insurance to his father and mother equally “and wanted them to have it all if anything happened to him.” “Said if he did not come back the insurance would leave his father and mother pretty well fixed. Whatever he had coming, wanted it to go to them. That he wanted his wife to have none of it, nothing that was his.” These declarations were made both before and after the soldier signed his application for insurance, and the appellees contend that the earlier declarations merely state what he proposed to do, and the later what he had done, in respect to taking out insurance. Hence, it is argued they disclose no intention either to change or to add to the designation made in his application. Were this argument to prevail, it would prove that the declarations were not testamentary. Sataffs Estate, 275 Pa. 420, 422,119 A. 478. But that issue has been conclusively settled against appellees by the admission of these words to probate as the soldier’s will. They clearly indicate the testator’s wish that all the insurance be paid to his parents. He expressly excluded his wife. There is evidence indicating that he knew of the advent of the child and disclaimed it. While he could not disinherit his child as to estate passing under his will, he could exclude it from the insurance by designating his parents as sole beneficiaries thereof. It is true that the will does not in very words direct that installments on his mother’s half of the insurance shall after her death be paid to his father, but the use of technical words to create a joint tenancy, or a tenancy in common with cross-remainders raised by implication, is not necessary even with respect to ordinary property. See Overheiser v. Lackey, 207 N. Y. 229, 233, 100 N. E. 738, Ann. Cas. 1914C, 229; Purdy v. Hayt, 92 N. Y. 446, 454. Much less should it be necessary when War risk insurance is involved. There the courts have gone to great lengths to give effect to the soldier’s actual intent, however informally expressed — farther, perhaps, than we should be willing to. follow in some of the cases. In the case at bar it puts no strain upon the testator’s language to construe it as expressing an intent to have the father receive installments accruing on the mother’s share of the insurance after her death. We hold that the will was a valid designation of the father as beneficiary of such installments. The appellees contend that the father is' estopped to assert such a claim because of the surrogate proceedings which he initiated and in which he conceded that “the only estate left by the testator is the insurance.” The decree below adjudged that he was so estopped. With this conclusion we cannot agree. The issues before the surrogate were whether the decedent left a will and whether it was valid as. against his child for whom no provision had been made. On those issues the surrogate’s decree is conclusive. But whether the will could operate under the federal statutes as a designation of a beneficiary of the insurance is a question not before the surrogate, and one which the District Court was free to determine for itself. Nor did the surrogate adjudge what estate the testator left. Jurisdiction for probate of the will rested upon the residence of the testator (New York Surrogate’s Court Act, § 45), and what personal property comprised his estate was neither an issue, nor a fact material to any issue, before the surrogate. Hence it is impossible to see how anything which the parties may have stipulated as to insurance can estop the father from now asserting that the will operated as a designation of installments falling due after the mother’s death. Moreover, the concession will not bear the construction ascribed to it, for it was also conceded that the federal statutes relative to the war risk insurance are “to avail for all purposes in' this proceeding.” Hence it is apparent that rights conferred by such statutes were not intended to be waived; and the first-quoted portion of the concession may still be given effect, for, should the father die before receiving full payment of the insurance, unmatured installments, since there is no other designated beneficiary, will apparently, though the question is not now before us, fall into the son’s estate. Consequently the claim of the appellant was open for consideration by the District Court, and should have been decided in the manner above indicated. We are asked to‘ allow interest upon the unpaid-installments, but no statutory authority has been discovered to justify it% Cf. United States v. Woolen, 278 U. S. 665, 49 S. Ct. 249, 73 L. Ed. 571. The decree is reversed, and the cause remanded for further proceedings in conformity with the foregoing opinion. See Salzer v. United States, 300 F. 767 (C. C. A. 2); Cassarello v. United States (D. C.) 271 F. 486, affirmed 279 F. 396 (C. C. A. 3) ; United States v. Woolen, 25 F.(2d) 673 (C. C. A. 6); White v. United States, 270 U. S. 175, 46 S. Ct. 274, 70 L. Ed, 530. Construing valid wills. United States v. Napoleon, 296 F. 811 (C. C. A. 5); McCarty v. Haley, 36 F.(2d) 201 (C. C. A. 7); State Bank & Trust Co. v. United States, 16 F.(2d) 439 (C. C. A. 6); Reivich v. United States, 25 F.(2d) 670 (C. C. A. 6). Construing invalid or unprobated wills. Johnson v. White, 39 F.(2d) 793 (C. C. A. 8) ; Helmholz v. Horst, 294 F. 417 (C. C. A. 6); Schroeder v. United States, 24 F.(2d) 420 (D. C. Ohio). Construing letters, etc. Gregg v. United States, 15 F.(2d) 8 (C. C. A. 7); Claffy v. Forbes, 280 F. 233 (D. C. Wash.). Cf. Gifford v. United States, 289 F. 833 (D. C. N. J.) ; Chichiarelli v. United States, 26 F.(2d) 484 (D. C. Colo.).

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HAMILTON RUBBER MFG. CO. et al. v. STEWART et al. No. 5986. Circuit Court of Appeals, Fifth Circuit. April 1, 1931. Rehearing Denied April 29, 1931. John Davis and Hoyt A. Armstrong, both of Dallas, Tex. (Peyton A. Ellison and H. A. Armstrong, both of Dallas, Tex., on the brief), for appellants. Geo. T. Burgess and D. H. Hardy, both of Dallas, Tex. (Maco Stewart, of Dallas, Tex., on the brief), for appellees. Before BRYAN and POSTER, Circuit Judges, and DAWKINS, District Judge. DAWKINS, District Judge. Plaintiffs, alleging themselves to be judgment creditors of the United Tire Stores, Inc., with return nulla bona of executions thereon, brought this suit to recover of the defendants Elmo C. Tenison, Maco Stewart, Sr., and Maco Stewart, Jr., alleged unpaid subscriptions to the capital stock of said company. Plaintiffs further charged that' the corporation had been dissolved and its charter forfeited for failure to pay the franchise tax exacted by the state of Texas. Each of the defendants denied any liability for the»stock; Tenison averring that his stock had been paid for with property and merchandise conveyed to the company, and the other defendants claiming tlmt they had legally severed their connection with the corporation and been discharged from responsibility for the stock before the claims of the plaintiff arose, the details of which will be discussed later in this opinion. There was judgment for the defendants below, and plaintiffs have appealed. On August 30, 1926, Tenison and the two Stewarts executed a charter for the United Tire Stores, Inc., with an authorized capital of $100,000, consisting of 1,000 shares of $100 each, divided equally into common and preferred stock. Tenison subscribed $40,000' for 400 shares of the stock, Maco Stewart, Sr., subscribed for $49,900 of preferred and $5,000 of common stock, and his son, Maco, Jr., subscribed for $100 of preferred and $5,000 of common stock. The original charter, as filed with the secretary of state on September 3, 1926, showed that these subscriptions had been paid in cash. Shares of' stock for the full amount of $60,000 of preferred and common stock were delivered to Maco Stewart, Sr., by Tenison, and the latter executed a guaranty in favor of Stewart, Sr., against loss on the preferred stock. No cash was ever actually paid into the company for this stock. Stewart, Sr., delivered to his attorney his check for $5,000, to be turned over to the corporation only in event Tenison paid his subscription of $40,000 in cash. Tenison did not pay his subscription in cash, but claims to have turned over to the corporation merchandise and fixtures in settlement thereof. Having learned this fact, the Stewarts declined to go ahead with the formation of the eompány, and, after some negotiations with Tenison, it was agreed that the former should withdraw from the corporation. In carrying out the withdrawal of the Stewarts, there was first executed on December^31, 1926, an amendment to the charter, reducing the capital stock to $80,000) $50,000 of which was to be common and $30,-) 000 preferred stock. Attached to- this 'amendment was a statement of assets and liabilities ■showing merchandise, fixtures, etc., of the value of $80,686.82, and a list of creditors aggregating $686.82. The amendment, with lists, was fortified by affidavits of Tenison and the Stewarts and filed with the secret tary of state on January 24,1927. The cheek of Maco Stewart, Sr., for $5,000 was returned to him on December 21, 1926, with- advice from his attorney as to what was necessary to bring about the withdrawal of himself and son from the company, which was done by reducing the stock to $80,000, and TenU son conveying to the company merchandise; fixtures, etc., in payment therefor. The stock of the Stewarts was then assigned to Tenison and delivered to Stewart’s attorney with the assurance that it would not be surrendered until all liability therefor had been discharged. In the meantime, that is, between the beginning of negotiations for the formation of the corporation and the period when the amendment was filed and arrangements made to have the Stewarts withdraw, Tenison had incurred obligations at the North Texas National Bank for .$25,000' and at the Mercantile National Bank for $15',000, respectively, upon the first of which Maco Stewart, Jr., had given a guaranty of payment on behalf of himself and father, while the $15,000 note was the individual obligation of Tenison. Under date of January 14, 192-7, and before the Stewarts surrendered their stock, the Mercantile National Bank addressed to them a letter stating that Tenison had, arranged with it to take up both of said notes by giving his personal obligation, secured, by collateral, on the conditions (1) that the secretary of state should approve the amendment and reduction in the capital stock; (2) that all outstanding stock not held by Tenison (which of course was that held by the Stew-arts) be transferred to him; and (3), that the amendment of the charter should be filed without delay. These notes were afterwards paid or taken up by execution of new obligations of Tenison, the amendment was filed and approved, and the Stewarts were released from the transaction, before the accounts of the plaintiffs Hamilton Rubber Manufacturing Company and the Birmingham Tire & Rubber Company were incurred. They were also fully advised of the withdrawal of the Stewarts and of the fact that the business was in the hands of Tenison. The claim of the Cupples Company Manufacturers arose out of dealings with Tenison, personally, before the United Tire Stores Company, Inc., was formed. It was for a carload of cheap inner tubes, which were kept, separate from the other stock of the company, and had not been mixed therewith or taken over by it prior to the filing of the amendment to the charter and the withdrawal of the Stewarts. The representative of the Cupples Company was advised from time to time that this was a separate obligation of Tenison and the United Tire Stores Company, Inc., would not pay it. The latter company was discounting its bills and owed not in excess of $600 or $700 when the Stew-arts withdrew. The stock formerly held by them was transferred to Tenison on the books of the corporation, and the corporate records showed that they were without any further interest therein. These facts all appear to be conceded by the appellants, but they contend the Stewarts and Tenison are, liable notwithstanding, because of their original subscriptions and the fact that the same were not paid into the corporation in cash as recited by the original charter. . We agree fully with the suggestion of counsel for appellants that the subscriptions to the capital stock of a corporation constitute a trust fund for the benefit of creditors of the corporation, and upon its insolvency the subscribers may be compelled to pay the same in satisfaction of its debts.This is a necessary consequence of the protection and limited liability of stockholders who avail themselves of the corporate entity. But the-principle can have no greater force than^the reason for its existence. The charter is a contract between the state and incorporators for the protection of the latter and for the benefit of the creditors whose rights accrue in reliance thereon, but, if that relation on the part of any stockholder is lawfully ended before the rights of any given creditor arise, and he deals with, the new concern and its present stockholders with full knowledge of those conditions, then he must take the situation as he finds it and will not be permitted to exact, of those who in good faith have withdrawn at a time when he had no claim, the performance of an obligation which, by mutual consent of every one having an interest in the matter, to his knowledge, had ended before his rights accrued. Mathis v. Pridham, 1 Tex. Civ. App. 58, 20 S. W. 1024; Cole v. Adams, 19 Tex. Civ. App. 507, 49 S. W. 1052; First National Bank v. Gustin, 42 Minn. 327, 44 N. W. 198, 6 L. R. A. 676, 18 Am. St. Rep. 510; Handley v. Stutz, 139 U. S. 417, 11 S. Ct. 530, 35 L. Ed. 227. If the tubes of the Cupples Company were transferred to or converted by the United Tire Stores, Inc., or used by it after the withdrawal of the Stewarts, this did not render them liable therefor; neither did it render Tenison liable on his stock subscription, for the obligation of a stockholder to pay a subscription to satisfy corporate debts means contractual undertakings and not torts. See Schrader v. Manufacturers, 133 U. S. 67, 10 S. Ct. 238, 33 L. Ed. 564. In any event, we think the record shows very convincingly that Tenison had. paid his subscription to the stock by transferring to the corporation merchandise and fixtures well worth the amount thereof, which was permissible under the laws of Texas. See section 6, art. 12, Constitution of Texas; article 1308, Revised Statutes of Texas, title 32, chapter 2. Affirmed.

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AYER v. KEMPER et al. No. 217. Circuit Court of Appeals, Second Circuit. April 6, 1931. Archibald N. Jordan, of New York City, for appellant. Arthur M. Wickwire, of New York City, and Thomas H. Ray, of Boston, Mass., for appellee James C. Ayer. Merrill, Rogers, Gifford & Woody, of New York City (Charles L. Woody and Herbert P. Carter, both of New York City, of counsel), for appellee William T. Kemper. Before L. HAND, SWAN, and CHASE, Circuit Judges. SWAN, Circuit Judge (after stating the facts as above). The appellant contends that the court was not lacking jurisdiction to grant its motion, and this raises several questions upon which surprisingly little authority has been adduced. It is, of course, admitted that in general a court is without power to annul a judgment or decree after the expiration of the term at which it was entered, unless the proceeding seeking annulment was begun within the term. Delaware, L. & W. R. Co. v. Rellstab, 276 U. S. 1, 5, 48 S. Ct. 203, 72 L. Ed. 439; In re Metropolitan Trust Co., 218 U. S. 312, 320, 31 S. Ct. 18, 54 L. Ed. 1051; United States v. Mayer, 235 U. S. 55, 67, 35 S. Ct. 16, 59 L. Ed. 129. Under Rule 5 of the General Rules of the District Court “each term of court is extended for ninety days from the date of entry of the final judgment or decree.” The ninetieth day from-the decree of April 14, 1930, fell upon a Sunday, and the first dispute involves the effect to be accorded to that fact. The decision of this court in Maresca v. United States, 277 F. 727, is cited as establishing that, when the last day of the term falls on Sunday, the term is not extended to the following day. That case involved the time within which a bill of exceptions in a criminal ease must be signed and filed. As was carefully pointed out in the opinion, the right to a bill of exceptions in a criminal case in the federal courts is statutory, and consequently the rule previously laid down in Siegelschiffer v. Penn. Mutual Life Ins. Co., 248 P. 226, 227 (C. C. A. 2), with respect to the construction of the statutory period provided for suing out an appeal or writ of error was deemed applicable. The- Maresca Case does not purport to lay down a broader doctrine. While the cases are not entirely uniform, there is ample authority for the view that, when the last day fixed by court rule for taking any proceeding falls on Sunday, performance on the following day is a sufficient compliance. See Austin, Nichols & Co., Inc., v. Gilman, 100 Conn. 81, 123 A. 32; Simkin v. Cole, 2 W. W. Harrington (32 Del.) 271, 122 A. 191; Neiswander v. Brickner, 116 Ohio St. 249; 156 N. E. 138; Feuchtwanger v. McCool, 29 N. J. Eq. 151; Cock v. Bunn, 6 Johns. (N. Y.) 326; Morris v. Barrett, 141 Eng. Rep. 768; Daniell's Chancery Pleading & Practice (6th Am. Ed.), p. * 354. That is the rule adopted in the Equity Rules of the Supreme Court (28 USCA § 723), Rule 80 providing: “When the time prescribed by these rules for doing any act expires on a Sunday or legal holiday, such time shall extend to and include the next succeeding day that is not a Sunday or legal holiday.” Literally it may be said that “these rules” do not embrace Rule 5 of the District Court; but such a view seems to us too verbal. We believe that Rule 5 of the District Court, at least as applied to proceedings in equity, should be construed with reference to and in harmony with Equity Rule 80 (28 USCA § 723). Consequently, we think the appellant’s contention that the term included the ninety-first day is sound. The question then arises whether enough was done upon July 14th to give the court jurisdiction to annul the decree thereafter. Several Supreme Court decisions contain expressions which imply that to carry over a motion to a subsequent term it must be “filed and entertained” during the judgment term. See eases eited and discussed in Payne v. Garth, 285 F. 301, 303-309 (C. C. A. 8). But certainly in actions at law it is enough if the motion be filed within the term, though not brought to the court’s attention until later. Kingman & Co. v. Western Manufacturing Co., 170 U. S. 675, 680, 18 S. Ct. 786, 42 L. Ed. 1192; Payne v. Garth, supra. In all reason it would seem that the rule should be the same in equity as at law; but in Graham v. Swayne, 109 F. 366 (C. C. A. 5), it was held, in reliance upon Equity Rule 88, the predecessor of the present Rule 69 (28 USCA § 723), that a motion to reopen an appealable decree must be called to the court’s attention and some action thereon be taken during the term. Whether we should follow that decision in the ease of a petition for a rehearing, for which Rule 69 provides, we need not now determine. The present motion is essentially a motion to intervene, for, unless the mover’s right to become a party is recognized, he has no standing to seek vacation of the decree. Cf. Sage v. Central R. Co., 93 U. S. 412, 418, 23 L. Ed. 933. We shall proceed, therefore, upon the assumption that Rule 69 does not apply, and that the filing of such a motion within the term and its subsequent entertainment by the court would be as effective in a suit in equity as it would in an action at law. It is clear that serving notice on July 14 of the motion to be made on July 22d was neither the making nor the filing of a motion within the term. A notice of motion is but “a private paper in the hands of the party who gives it, and does not belong to the court until the motion is made.” Cheatham v. Howell, 6 Yerg. (Tenn.) 311, 313. See, also, Gunnells v. State Bank, 18 Ala. 676; Herrlich v. McDonald, 80 Cal. 472, 22 P. 299. But appellant did more than merely serve the notice on July 14th; the notice accompanied by an affidavit of service was left with the clerk of the court, who forthwith entered the motion in the motion book for July 22d, although he returned the notice with instructions to hand it up to the court when the motion was called. Under the practice prevailing in the Southern district of New York, appellant says it is not possible to file any motion papers, except a note of issue, until the argument of the motion. No note of issue was actually filed until July 18th, but the same result was accomplished on the 14th as though a note of issue had been filed on that date, namely, placing the motion upon the motion calendar. Hence, if filing a note of issue on July 14th would have been suffieient to give the court jurisdiction to consider the motion on the 22d, and we think it would, like effect should he given to the entry of the motion in the motion book. C'f. Gunnells v. State Bank, supra, apparently contra. It will be observed that the motion asked no action by the court during the term at which the decree was entered. It neither requested nor contemplated any action until after the term had expired. Hence it may be argued that nothing was initiated during the judgment term to be carried over for action by the court during the subsequent term. Moreover, if it be .sufficient to file a motion returnable eight days after expiration of the judgment term, then why not one returnable eight weeks or eight months thereafter? Thus might a losing party find a ready means to extend the time within which a judgment or decree against him would become final and appealable. No federal authorities have been adduced which diseuss whether the motion must be returnable within the judgment term, nor disclose its precise form. A few state eases seem to sustain jurisdiction although the motion was returnable after the term. Flanery v. Kusha, 147 Minn. 156, 179 N. W. 902 ; Bowman v. Bowman, 47 Nev. 207, 217 P. 1102. To make the power of the court turn on the form of the motion seems highly artificial. A motion that eight days hence the court will be asked to annul its decree may well be given a double aspect, being construed as a motion presently initiated, when filed or noted in the motion book, with-a request that it be brought on for argument eight days hence. So construed, both of the objections above noted are met, for there is a present motion to' be carried over to the next term, and, if the mover has too long postponed the date for argument, the opposing party may call it up for earlier'action. We conclude, therefore, that enough was done on July 14th to give the court power to consider the motion after the term expired. The notice of motion disclosed nothing as to appellant’s interest in the litigation; it asked annulment of the decree only upon the pleadings and prior proceedings in the suit. ' If the court were confined to papers filed within the judgment term, no basis whatever appeared for annulling the decree or allowing appellant, a complete stranger to the litigation, to intervene. However, if we are right in holding that the court had jurisdiction to consider the motion, we think it-also had jurisdiction to allow the motion papers to be, in effeet, amended after the term, and to consider the facts set forth in appellant’s petition, served on the attorneys of record on July 18th. Thus we reach finally the merits of the controversy involved in appellant’s motion. In brief, its contention is that the decree of dismissal “with prejudice” bars all members of the class of similarly defrauded noteholders, and hence should not have been entered without giving to it notice and an opportunity to object. But, properly speaking, Ayer’s suit was not a class suit. There is not a single interest held by all the former noteholders, as, for example, when shareholders sue in the corporate right, or when several plaintiffs are cotenants or the like. See Smith v. Swormstedt, 16 How. 288, 302, 14 L. Ed. 942; Beatty v. Kurtz, 2 Pet. 566, 585, 7 L. Ed. 521; Supreme Tribe of Ben Hur v. Cauble, 255 U. S. 356, 363, 41 S. Ct. 338, 65 L. Ed. 673. It is true that the bill charged that the defendant was in a fiduciary relationship to each of the former noteholders and that he dealt with them without disclosing information which would have influenced their sales .to him; but a separate wrong'was .committed against each noteholder when the defendant dealt with him without disclosing the facts, and each transaction was in reality the basis for a separate suit, depending for its outcome upon how much was disclosed to the noteholder in question and any other circumstances which might affect his right. Nor is there any single fund in which all must share; on the contrary, the trust fund is separable, and Kemper must hold all that he made on resale of each note as constructive trustee for the defrauded holder of that note. The defrauded noteholders had no common fund. We may agree arguendo that Ayer might, if he chose, unite others similarly situated, but they became parties only upon intervention. Thus jurisdiction of the court would depend upon the amount of Ayer’s claim and could not be aided by adding to it the claims of others. Lion Bonding & Surety Co. v. Karatz, 262 U. S. 77, 85, 43 S. Ct. 480, 67 L. Ed. 871; Cohn v. Cities Service Co., 45 F.(2d) 687 (C. C. A. 2). Ayer’s suit was a “spurious class suit” (1 Street, Fed. Eq. Prac. § 548), and the decree does not bind those who are not parties (1 Street, § 552). Indeed, even in a class suit, continuance of the litigation seems to remain in the hands of the parties plaintiff. Hirshfield v. Fitzgerald, 157 N. Y. 166, 51 N. E. 997, 46 L. R. A. 839; Piedmont, etc., Co. v. Maury, 75 Va. 508; Bernheim v. Wallace, 186 Ky. 459, 217 S. W. 916, 8 A. L. R. 950. But however that may be, in a suit of the kind now under consideration it is clear that the decree of dismissal will not prejudice any rights which appellant may have. Wabash R. Co. v. Adelbert College, 208 U. S. 38, 28 S. Ct. 182, 52 L. Ed. 379; Compton v. Jesup, 68 F. 263 (C. C. A. 6). Accordingly, appellant’s motion was properly denied, and the order is affirmed. See, also, the dictum in Cambuston v. United States, 95 U. S. 285, 288, 24 L. Ed. 448, where it is said, with a reference to the predecessor of Rule 69, that in suits-in* équity the practice is even more strict than at law. And in Giant Powder Co. v. Cal. Vigorit Powder Co., 5 F. 197, 201 (C. C. Cal.), Mr. Justice Field, who had entered the decree on circuit, said that the procedure to obtain a rehearing was to file a petition with the Circuit Court and procure an order on the opposite party to show cause.

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LONG v. SILVER LINE, Limited. No. 259. Circuit Court of Appeals, Second Circuit. April 6, 1931. MANTON, Circuit Judge, dissenting. Charles J. O’Connor, of Brooklyn, N. Y. (Richard F. Lenahan and James M. Gorman, both of New York City, of counsel), for appellant. Lord, Day & Lord, of New York City (Thaddeus G. Cowell and Thomas Daly, both of New York City, of counsel), for appellee. Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges. SWAN, Circuit Judge. Long was employed by Morse Dry Dock & Repair Company in the capacity of “passer boy” to a riveting gang working on appellee's ship. His injuries resulted from a fall into an open tank while he was on the between-decks on March 1, 1928. His libel charged the vessel owner with negligence in having left open the tank and in having failed to light the between-decks. Other charges of negligence also were alleged, but as such matters had nothing to do with Long’s fall they may be ignored. At the time of the accident, the vessel was lying at the Morse Company’s dock, but she was not out of commission and her officers and crew were on board. The repairs in question were to be made to the four deep tanks in hatch No. 3. They were of the usual construction. Each tank has an opening onto the between-deeks which can be closed by an iron cover that rests upon an eleven-inch combing surrounding the opening. The four openings are arranged in pairs near the center of hatch No. 3, and the combing surrounding them results in forming a fore and aft passageway along the floor of the between-decks between the openings to the port tanks and those to the starboard tanks, and asimilar passageway athwartships between the fore and after tank tops. The width, of the fore and aft passageway was four feet and that of the passageway leading athwartships forty inches. . Forward and aft of the tanks and also on their outboards sides there was considerable space on the between-deeks. In preparation for the repairs, the ship’s crew had removed the cover of each tank, placed it sidewise upon the combing, and lashed it down. This left each tank top uncovered for a space of about four feet fore and aft adjacent to the athwartships passageway. Tho covers had been in this position for a number • of days in order to give access to the tanks and to ventilate them (as was necessary) before work was done in them. A representative ó£ the Morse Company had seen the covers so arranged when he • inspected the tanks to determine what repairs were required before making the contract to perform them. There were no lighting fixtures in the between-decks. Two days before the accident, the Morse Company installed a portable lighting system for use in the tanks and between-decks. The electric current was conducted by a feed wire from the dock to a switch box on deck into which could be plugged wires carrying portable lights. On the day of the accident, when the day shift of workmen left at 4:30 p. m., three such lights were in use. Each was a 200-watt bulb suspended below a reflector which east the light downward. Two of them were hanging in the two port tanks and the third was suspended to the strong back of the hatch to give light in the between-decks. But when the night shift, ■ of which Long was a member, came on board at 4:50 p. m., this third light was hanging -in No. 3 tank; henee the between-decks was in darkness except for such natural light as came through the partly opened hatch. Corris, libelant’s foreman, says that when he entered the between-decks “we were just about able to see.” But when the aeeident happened at 6:40 p. m. ,the natural light in the between-decks was negligible. A forge had . been set up in the passageway athwartships, , but this gave no light except in its immediate ; vicinity. When Long came on board he proceeded from the main deek down to the between-decks and thence into tank No. 2. He saw Corris go into tank No. 1. Thereafter Long made several trips back to' the dock, and on one of these occasions, in company with Corns, hunted up the Morse Company’s electrician to ask for a light to hang in the between-decks. The electrician promised to come in a short time. Long then went back into tank No. 2 and was told by a fellow workman to go on deek and get a bloek of wood for use in the work. He proceeded to the between-decks, found a bloek of wood, and while returning with it fell into tank No. 4, the after tank on the starboard side. He has no recollection of how1 he came to fall. The only eyewitnesses say he was walking over the tankstops and stepped into the opening. The fault of the ship, if any, was in failing to supply a light in the between-decks. There was no negligence in leaving No. .4 tank open, for this was necessary for entrance to the tank- and for ventilation in preparation for the work. The ship had no control over •the order of the work, and for all appellee knew tank No. 4 would he the first tank worked upon. It is well settled that there is no negligence in leaving open a cargo hatch if the ship is awaiting cargo. Smith v. United States (D. C.) 18 F.(2d) 110, affirmed 18 F.(2d) 111 (C. C. A. 2); The Saratoga, 94 F. 221 (C. C. A. 2); The Kongosan Maru, 292 F. 801 (C. C. A. 9); The Louisiana, 74 F. 748 (C. C. A. 5). The situation here is analogous, where the ship was awaiting repairs to all four tanks and the order in which they were to be made was controlled by the repairman. With respect to lighting the between-decks, it should be noted that light was available if the light in No. 3 tank had been utilized. No work was being- done in that tank on the date in question, and that light could have been restored to the place where it was at 4:30 when the day shift left. How it came to be moved from there and why it was not replaced when Corris desired more light in the between-decks does not in aüy way appear. The situation is identical with that disclosed in The Hindustan (D. C.) 37 F.(2d) 932, affirmed by us in 44 F.(2d) 1015, except that there the ship supplied the lights which the contractor’s workmen failed to use, while here the contractor supplied them. That is not a valid ground-for distinction, unless we are prepared to say that the shipowner must stand by and see to it that the contractor’s workmen use the means ■ supplied by the contractor for their safety, though it need not do so when the means are 'supplied by the ship. : A majority of the court doe's not think the law imposes so extreme a duty. Although the Morse Company’s contract said nothing as to who was to supply the lighting, it had voluntarily undertaken to do so. No one asked, or expected, the ship to furnish the lights. See The Omsk, 266 F. 200, 201 (C. C. A. 4). Under the circumstances the utmost duty that the appellee could have owed Long was to warn him that it would be dangerous to walk about the between-decks in the dark. That knowledge Long already had. He had asked the Morse Company’s electrician for more light. He knew that two of the tank tops were open, and had no reason to assume the others were not in the same state. He could safely have gone to the main deek or the dock for the block of wood. There is no duty to keep a dark way safe if a light way is provided. Hardie v. N. Y. Harbor Dry Dock Corp., 9 F.(2d) 545 (C. C. A. 2). Although work had not yet begun upon ■ tank No. 4, we think the District Court correctly found that all four tanks-and the between-decks of hatch No. 3 were under the control of the Morse Company, and correctly held that the appellee was free from negligence. The ease is governed by the principles announced in such decisions as The Louisiana, supra; The Sara-toga, supra; The Jersey City, 46 F. 134 (D. C. S. D. N. Y.); The Clan Graham, 163 F. 961 (D. C. Or.); The Auchenarden, 100 F. 895 (D. C. E. D. N. Y.), and Willis v. Lykes Bros. S. S. Co., 23 F.(2d) 488 (C. C. A. 5), rather than by the eases relied upon by the appellant, all of which we regard as clearly distinguishable. Decree affirmed. MANTON, Circuit Judge, dissents.

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JACOBS et al. v. FIRST NAT. BANK OF SHREVEPORT et al. No. 6016. Circuit Court of Appeals, Fifth Circuit. April 1, 1931. Rehearing Denied April 24, 1931. See, also, 35 F.(2d) 227. Albert P. Garland and Samuel F. Hyman, both of Shreveport, La., and Charles E. Dunbar, Jr., of New Orleans, La. (Samuel F. Hyman and Albert P. Garland, both of Shreveport, La., and Spencer Gidiere, Phelps & Dunbar, of New Orleans, La., on the brief), for appellants. Elias Goldstein and H. C. Walker, Jr., both of Shreveport, La. (Blanchard, Goldstein, Walker & O’Quin, of Shreveport, La., on the brief), for appellees. Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges. SIBLEY, Circuit Judge. The appellant Mrs. Lotta F. Jacobs, joined by another as intervener, brought a bill as • minority stockholder in Florsheim Bros. Dry Goods Company, Limited, to recover judgment in behalf of the corporation against appellees First National Bank of Shreveport and six individuals, to wit, Andrew Querbes, Dave Mendelsohn, W. L. Young, O. L. Biedenham, J. H. Jordan, and Seymour L. Florsheim, because of misapplication of the funds of the corporation and damage done its business and good will by them. The decree was for the defendants, and the question here is the propriety of the decree under the evidence. The bill averred that the bank, its president, Querbes, and three others of its officers, Young, Biedenham, and Jordan, conspired in 1925 with Mendelsohn to get control of the corporation for the purpose of paying the bank a large pretended debt, and of then securing the property of the corporation for their own use, and that by threat of a receivership for the corporation in January, 1926, they compelled Mrs. Minnie Florsheim and other stockholders to transfer to said bank of-' fleers a majority of the stock and to substitute them and Mendelsohn as directors in lieu of the duly elected directors of the eompany, and thus to put control securely in them; that they had unlawfully kept charge of the corporation until December, 1928, when control had been yielded to Querbes and the bank, who had discharged the salesmen, stopped purchases, and disturbed the business as a going business to its damage in the sum of $225,000, and had diverted to the bank $133,000 in wrongful payment of the fictitious debt, with interest, and had wrongfully paid $1,100 to the attorneys of the bank, and $18,500 as salary to Mendelsohn for services as pretended president of the corporation since January, 1926. The only prayer was for a money judgment. The answer put all important allegations in issue. The evidence is voluminous, and only its general results can be stated. The bank in January, 1926, held the notes of the corporation for $110,000 principal. The consideration of the notes was not shown. It was proven that in 1912 and 1913 the bank had paid numerous checks amounting to $233,155, drawn in the name of the corporation against its deposit account by Edgar Florsheim, payable to his own order, or to cash, or to a certain firm known to the bank to be brokers of cotton futures. Edgar Florsheim was then in charge of the finances of the company, and had full authority to draw checks. It was not proven, but only suggested, that these cheeks were really misapplications of the corporate funds, nor was any connection shown between them and the notes held by the bank. The bank officers testified that they had paid the cheeks in good faith and without question. So far as appears, the payment was never challenged by the corporation, and, if the bank was liable for having assisted in a misapplication of funds in 1912 and 1913, the matter has long since been barred by limitation, if not in fact ratified. There is no evidence that the notes for $110,000 were not good and valid debts against the corporation in January, 1926. At that date the bank, being dissatisfied at recent losses of the corporation and at very heavy overdrafts on it by its stockholders, members of the Florsheim family, demanded payment of its notes, and had its attorneys prepare papers to secure a statutory receivership against the corporation. There is no proof that any other object was in view than to collect the bank’s debt. To avoid the receivership, Mrs. Minnie Florsheim, who held 252 shares out of a total of 300 shares of the stock, joined with her sons, Seymour, Louis, and Bernard Florsheim, who owned 14 shares, in an agreement with, the bank to assign 151 shares,, being a majority, in trust to Young, a director of the bank, and a share each to Jordan and Biedenham, two other directors, and a share to Mendelsohn, in order to qualify them to become directors of the corporation along with Seymour Florsheim; they to conduct the business of the corporation with a view to liquidating its debts and to continue it as a going concern, if it could be so operated without additional capital, or, if additional capital could be secured, the operation not to continue longer than a year unless agreed to by the bank and Mrs. Florsheim. The right to apply for a receivership was retained if the bank’s attorneys should at any time advise it to be necessary to the bank’s interest as a creditor, and the bank’s attorneys were to be paid their charges by the corporation. Mrs. Minnie Florsheim was to- be retained as vice president at a salary of $5,000, though inactive. Mendelsohn was a retired merchant from another city induced by the bank to come and take charge of the business as president and manager. He entertained at first a purpose of acquiring an interest in the business, but there is no proof of any corrupt conspiracy improperly to obtain the corporate property. The new directors were elected in stockholders’ meeting regularly called. The directors then elected the president and vice president as agreed, and fixed Mendelsohn's salary as president at $6,000 per year, giving him general supervision of the business, including the right to discharge and employ all employees. The directors had no salary. At the end of the year the agreement was extended for another year, and the same officers re-elected; Mrs. Florsheim’s salary as vice president being reduced to $3,000. During 1927 Mrs. Florsheim died, and on October 15,1927, the complainant and the intervener were admitted with others as heirs in the succession of her estate. This apparently is the source of their ownership of the stock in the corporation. It does not appear what occurred in January, 1928, at the second expiration of the agreement, but the management seems to have continued as before. In December, 1928, Samuel Hyman, the husband of one of Mrs. Florsheim’s daughters and owner of 10 shares of stock, demanded that the stock held by Young as trustee, and by Biedenharn, Jordan, and Mendelsohn, be returned to the heirs of Mrs. Florsheim that the corporate control might be changed. Up tó this time the business had been prosperously managed, all the corporation’s mercantile debts were paid, and its credit and good will were well established. The bank, however, had been paid nothing. A dispute, resulted from Hyman’s demand, as a consequence of which, while Young, Mendelsohn, Jordan, and Biedenharn professed a willingness to surrender their stock to Hyman upon a proper showing of authority from all the heirs to receive it, the bank again prepared to obtain a receivership against the corporation. Seymour, Bernard, and Louis Morsheim disavowed Hyman’s demand, and represented that the stockholders wished to continue the former management until the business could be liquidated sufficiently to pay the bank. A written agreement to this effect to be signed by all the stockholders was drawn up and sent out for signature. By it Querbes, the president of the bank, was to exercise control during the liquidation, and the bank was to have the right to a receiver if the bank decided it to be desirable. Querbes did have Mendelsohn, as president, to discharge the salesmen, discontinue purchases, sell sample cases, and announce a probable liquidation, and otherwise to reduce expenses, while Bernard Florsheim undertook to force collections. The agreement, however, though efforts to perfect it were active as late as January 30, 1929, was never signed up: Nevertheless the policy of liquidation was continued, and by March 14, 1929, the date of filing this bill, the bank and all other creditors had been paid off. The directors met on March 16, and ratified all that had been done. Mendelsohn resigned as president and Young as secretary-treasurer, and Seymour Florsheim and Bernard Florsheim were elected in their places. A meeting of stockholders was called to elect directors on April 6, 1929', and Mendelsohn, Young, Biedenharn, and Jordan resigned as such. Until December, 1928, we see no reason to doubt that every stockholder knew of, and acquiesced in, what was done, or that what was done was actually in line with the corporate interests. The corporation has no cause of complaint thereabout against its managing officers. The salary of Mendelsohn as president was regularly fixed, and was reasonable, being $1,500 less than was paid in 1925 and $4,000 less than paid in 1924. There is no case for recovery on that account. The conduct after December, 1928, of Querbes and the bank, acquiesced in and abetted by the managing officers of the corporation, was high-handed and unjustifiable, apart from the expected consent of the stockholders, which was never given. But a receivership, the lawful remedy, would have been more drastic, and proceedings under it would have been along the same line but more expensive and harmful to the business as a going concern, and there was no resulting damage as it actually turned out, for, while no doubt the business of 1929 was curtailed, the testimony is that that was a bad year for merchandise jobbers”, and the general business collapse following the stock market crash in the fall of 1929 we may judicially notice. The smaller the credit business done in 1929, the better the final results. This corporation, when its affairs were turned over to the stockholders April 1, 1929, had a new clean stock of merchandise, owed no debts worth mentioning, had comparatively little uncollected accounts, a surplus of some $5,000 above its capital stock at par, and a good credit. No damage has been established as done by its partial liquidation. The payment of the bank’s .debt, with interest, was, of course, not a thing the corporation can complain of; it being a just obligation. The interest accruing on it also was a legal demand against the corporation. That merchandise creditors were paid first is no matter for complaint, nor that by forcing collection earlier than was finally done is it certain that interest would have been saved. Presumably the uncollected accounts themselves drew interest after maturity. Forcing collection is not always a good business policy, and it is not to be assumed that the capital borrowed from the bank was not needed while the business was actively going on. The payments to the bank’s attorneys when the receivership proceedings were abandoned, $1,000 in 1926 and $100 in 1929, were agreed to by the corporation, and actually fixed by conference with Mr. Hyman. They were just one-tenth the amount the corporation would have had to pay if the bank’s attorneys had continued to collect by law the bank’s notes of $110,000, for the notes promised 10 per cent, as attorneys’ fees if thus collected. We think the decree for the defendants was fully warranted, and it is affirmed.

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CONTINENTAL NAT. BANK & TRUST CO. et al. v. FULLERTON. No. 8894. Circuit Court of Appeals, Eighth Circuit. March 13, 1931. Henry Pitts, of Chicago, Ill., and A. P. House, of Little Rock, Ark., for appellants. Prank H. Sullivan, of St. Louis, Mo., and Walter G. Riddick and Charles T. Coleman, both of Little Rock, Ark., for appellee. Before KENYON and BOOTH, Circuit Judges, and REEVES, District Judge. BOOTH, Circuit Judge. This is an appeal from a decree which adjudicated priorities between two mortgages as respects a certain derrick boat. The facts are largely undisputed, and are substantially as follows: In 1923 the Thane Lumber Company was engaged in the manufacture and sale of lumber in Arkansas City, Ark. It purchased that year and put into use a steel barge costing about $8,500. In March, 1924, the barge was tied up near the mill, where high water and a storm caused it to sink. When the water subsided, in the summer of 1924, the barge became visible, and it was bailed out and caused to float in December of that year. It was then used as a material barge and work barge. It was also used as a crib in connection with an inclined track from the river to the mill. In the summer or fall of 1925, the barge was cut in two; one-half of it was sold for $1,500, and the other half was converted into a derrick boat. The work of so converting it was done during the period commencing in the fall of 1925 or the winter of 1925-1926 and ending in the summer of 1927. The cost of reconstruction was seventeen or eighteen thousand dollars. November 1, 1924, the Thane Company executed a mortgage to the Continental National Bank & Trust Company and another, as trustees, to secure a series of. bonds amounting to $630,000. ' The mortgage was recorded January 10,1925. It covered lands, railroads, mill site, lumber and river equipment, fallen trees, and logs; and, among other property, “also all boats, barges and river equipment of every kind now or hereafter used or acquired for use by the Mortgagor in connection with its operations on the mortgaged property.” The mortgage also contained the following clause: _ ... _ a “It will at its own expense do all things the Trustees or Bankers may deem necessary to keep this Instrument a first lien on any and all of the mortgaged property and will promptly and duly execute and deliver to the Trustees any instruments which the Trustees or Bankers deem advisable for better carrying out the true intent hereof. It will not create or attempt or suffer to be created any lien or charge whatsoever on the mortgaged property or on any part thereof prior to or of equal rank with the lien hereof, or whereby the lien or security hereof might be impaired.’ February 25, 1926, the Thane Company, as first Party, made a contract with S. H. Fullerton, C. W. Reighard, and Bradley Investment Company, as second parties, by which the Thane Company agreed to buy from the second parties certain stock of the Thane Company owned by them. Payment was to be made by promissory notes executed by the Thane Company. It was further agreed that the second parties should have an equitable mortgage on all lumber manufaet-ured by the first party to secure said notes; said mortgage, however, to be subject to a mortgage held by the Chicago Lumber & Coal Company on said lumber as manufactured by said first party. The Chicago Lumber & Coal Company was the sales company of the Thane Lumber Company. By the contract between them, prior to February 25,1926, the Chicago Lumber Company agreed to advance $20 per thousand feet on all hardwood and cypress lumber No. 2, common or better, manufactured by the Thane Lumber Company, and take a mortgage thereon. j Subsequent to the making of the contract of February 25, 1926, the Thane Lumber Company agreed with the Bradley Investment Company that the Chicago Lumber *& Coal Company should take out of the proceeds coming to the Thane Lumber Company from lumber sold $4 per thousand feet, and pay it to the Bradley Investment Company to applied on the indebtedness owing by the Thane Lumber Company to the Bradley Investment Company. This arrangement was carried out. ' On October 25,1927, the Thane Company executed a mortgage to the Bradley Investment Company (later assigned to appellee Fullerton), covering real and personal property, including the following: „ ., „ , , . “A1f a11 boats’ bar^es and laver ment of, «Y®* kmd or befafter ^ed or acquired for use by the mortgagor m conneetion ^ its operation on the mortgaged Br0I)erfV ^ “And special mention and reference is made to toe * * * Derrick boat ‘Chestor. “ * * * All lumber that the grantee may manufacture or have on its yards at its mill plant in Arkansas City which yard is known as Thane Lumber Company Lumber yard, but subject, however, to the advances made by the Chicago Lumber & Coal Company. * * * ” The derrick boat Chester was the reconstructed boat here in controversy. This mortgage also contained the follow- ■ e]ause. ' „ . . . * This mortgage is executed sub-3eot to tbe terals and conditions of the mortentered f*0 b®twe.en toe Thane Lumber Company and the Continental & Commercial Timst & Savings Bank, and Calvin Fentress) wbieb mortgage is dated November 1st, 1924, and filed for record m the circuit clerk’s office 111 Desha County. Default having occurred in the. Bradley Investment Company mortgage, suit in equity was commenced to foreclose the same, The Continental National Bank & Trust Company et ah, as trustees under the mortSaSB of November 1, 1924, were made parties. They answered, and by cross-bill set up the mortgage of November 1, 1924, default thereunder, and prayed for appropriate retim- November 23, 1928, the court entered a decree under the cross-bill, foreclosing the mortgage of November 1, 1924, and ordering a sale of the property covered by said mortgage, except the steel derrick boat here in controversy. As to said boat, the court said: “ * * * That a certain steel derrick boat completed in the year 1927 now in possession of Thane Lumber Company be not sold and the priority of right to such boat of the aforenamed counterelaimants be hereinafter determined. * * * ” • The sale as to the other property was duly confirmed June 29, 1929, the court entered a decree in the Fullerton suit, foreclosing the mortnn , , oe .«ofv? j f ■ i gage of October 25,1927, and ordering-a sale 6«bM i , -a i. of the property covered by said mortgage. t f ♦ a xl ji n The decree contained the following: UTri, ,. „ . ., r. v , ‘‘The question of priority of lien as to the derrick boat ‘Chester* as between the plaintiff ci tt TTi n «. j , v , i . . S. H. Fullerton and the countercomplainant, n t> i pm . n i • Continental Bank & Trust Company, having , ,, . , , . j i ' been this day heard and taken under advise- , . j? • i . • ,, ment is reserved for further consideration.” The sale as to the other property was duly confirmed. January 21, 1929, the Continental National Bank & Trust Company et al. filed a petition for a sale of the derrick boat. February 19, 1930, a decree was entered containing the following: “ * * * The court, after argument of counsel, being well and sufficiently advised, finds that the Continental Bank & Trust Company of Chicago, and Wm. P. Kopf, Trustees, are entitled to a first lien for $1500 on the derrick boat ‘Chester’, and that S. H. Fullerton is entitled to any balance arising from its sale, said amounts to be credited on the decrees in favor of said parties respeetively.” A sale of the derrick boat and distribution of the proceeds were ordered. The present appeal followed; a severance as to the Thane Lumber Company being duly had. We.think it is set out that the mortgage of November 1, 1924, to the Continental National Bank & Trust Company by its granting clause covered the steel barge which at one tune was sunk but never abandoned; that said clause also covered, as a matter of law, any additions or repairs or alterations m said barge which did not amount to a change of identity. We think it is also clear, under said facts, that as between the Thane Company and the Continental National Bank & Trust Company, and laying to one side any rights of the Bradley Investment Company, the mortgage of November 1, 1924, to the Continental National Bank & Trust Company, reason of the after-acquired property e^ause> covered all additions and alterations whicb converted the barge into a derrick bo£d:- We pass to a consideration of the rights of the Bradley Investment Company in and derrick boat. Such rights must have their origin in (1) the contract of February l026’, (2) S0“6 Promise by the Thane L™ber Company to give to the Bradley Investment Company alien on the derrick boat; /ox v. r u ~ , oc 1f10(7 or (3) the mortgage of October 25, 1927, to ,, v> n -r a , ^ the Bradley Investment Company. J J • As to the first (contract of February 25, nrt0/>N , j , , f 1926)’ xt ?(urPor1t.ed to ^8> “0t a mortgaf or an equitable lien on the barge or on the . . , 7 , , , . . v , . n derrick boat (which, according to counsel tor • .. v . , « ,.. * n « appellee was not thought of until the fall of , , , «-.it 1926), but merely an “equitable mortgage . n, ... , *\T 0 ^ ^ t>&* against all lumber No. 2, Common and Better.manufactured by party of the first part [Thane Lumber Company]” to secure the payment of an indebtedness to the Bradley Investment Company represented by certain notes. Appellee contends that the money derived from the sale of lumber was not used by the Thane Lumber Company to pay the notes, but, instead, was used in constructing the derrick boat; and hence that the equitable mortgage on the lumber followed the proceeds and' attached to the derrick boat, There are several reasons why this contention cannot prevail: First, there is no suffieient proof that the proceeds of lumber which should have been devoted to the payment of notes to the Bradley Investment Company were diverted to the building of the derrick boat. The evidence shows that there was 110 default in tbe payment of such notes until about November 1, 1926, and, meanwhile, a very considerable sum had been spent on the derrick boat. Second, there has been no sufficient tracing of the proceeds of the lumber> on which the Bradley Company had an equitable mortgage, into the derrick boah The evidence shows that the moneys gpent on the boat eame from tbe general funds of the Thane Lumber Company. The evi¿enee ¿oeg n0(; show that the only source of tbeS6 ral funds was £rom the sale of Iumber eovered by the equitable mortgage. The equitable mortgage covered certain speeifled classes of lumber only. What the sales were of other classes is not shown. Further, it appears affirmatively that the Thane Company received $1,500 from the sale of one-half of the steel barge; and that it was entitled to 3 per cent, commission on sales of lumber made by it to parties calling at Arkansas City. What the amount of revenue from these sources was does not appear, nor whether there were still other sources. Furthermore, even conceding that some of the proceeds of the lumber covered by the equitable mortgage were diverted from the payment of the notes secured by the mortgage, yet it appears that other expenditures were made by the Thane Lumber Company, during this period, amounting to upwards of $17,-000, in repairing docks and barges and in installing a water system. It is not shown that the diverted funds did not go into these several improvements instead of into the derrick boat; nor is the exact amount of funds claimed to have been diverted shown. The tracing of diverted funds into the derrick boat is, therefore, very far from being made out. But such tracing must be clear before the equitable mortgage would attach to the boat, even if appellee’s theory be correct. Pomeroy, Equity Juris. (3d Ed.) vol. 3, § 1058; Empire St. Sur. Co. v. Carroll County, 194 F. 593, 604 (C. C. A. 8); Macy v. Roedenbeck (C. C. A. 8) 227 F. 346, 353, L. R. A. 1916C, 12 and note, page 21; Zenor v. McFarlin, 238 F. 721, 724 (C. C. A. 8), and cas es cited; Central State Bank v. McFarlin, 257 F. 535 (C. C. A. 8). Further, the arrangement above noted, by which the Bradley Investment Company received $4 per thousand feet of lumber, to be applied on the debt of the Thane Lumber Company, was a waiver of any equitable lien on the remaining proceeds. Finally, if any of the proceeds of the lumber covered by the equitable mortgage went into the derrick boat, it was with the consent of the mortgagee, the Bradley Investment Company. Counsel for appellee says in his brief: “Probably $5,417.36 of these funds were used before the Bradley Company discovered the diversion. A large part of the balance, $12,056.77, was used after Reighard complained of the diversion, but permitted such diversion to continue, under the assurance that the Bradley Company would have a first lien on the derrick boat, and that a mortgage covering it would be executed as soon as it was completed.” " . . . In view of the foregomg circumstances, we think that the lien of the equitable mortgage en the lumber did not attach to the derrick boat. Another contention of appellee is that the Thane Lumber Company promised that the Bradley Investment Company should have a lien on the derrick boat when completed, and that this promise was carried out by the execution of the mortgage of October 25, 1927. We think the evidence does not sustain the making of such promise; and, unless such promise was made, an equitable lien would not arise, under the circumstances here existing. 37 C. J. p. 315 et seq.; Westinghouse, etc., Co. v. Brooklyn, etc., Co. (C. C. A.) 263 F. 532; In re Interborough Consol. Corp. (C. C. A.) 288 F. 334, 349, 32 A. L. R. 932; Shooters Island Shipyard Co. v. Standard Shipbuilding Corp. (C. C. A.) 293 F. 706; Jackman v. Newbold, 28 F.(2d) 107,112, 62 A. L. R. 729 (C. C. A. 8). in July or August, 1927, and before the execution of the mortgage of October 25, 1927, the derrick boat was completed and in use. It had, therefore, come under the mortgage to the Continental National Bank & Trust Company; and the mortgage of October 25, 1927, could attach only as a second mortgage. This was recognized in the mortgage itself, in the clause above quoted. T In view of the foregoing, we think the court erred in not holding that the Continental National Bank & Trust Company had a grgj. j¡en on ¿¡errJck boat to the full amount of the indebtedness secured by its deed trust. The decree is reversed, with instructions to enter a decree in favor of appellant in aecordance with the views herein expressed.

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SOUTHWESTERN BELL TELEPHONE CO. v. EAST TEXAS PUBLIC SERVICE CO. No. 5914. Circuit Court of Appeals, Fifth Circuit. April 3, 1931. Nelson Phillips, of Dallas, Tex., and J. Q. Mahaffey, of Texarkana, Tex. (Jos. W. Jamison, of St. Louis, Mo., C. M. Means, of Dallas, Tex., and J. J. King, J. I. Wheeler,. and C. E. Bryson, all of Texarkana, Tex., on ; the. brief), for appellant. , James T. Casey, F. H. Prendergast and George Prendergast, all of Marshall Tex., £or appe};[ee Before BRYAN and POSTER, Circuit Judges, and DAWKINS, District Judge, Behearing denied May 4, 1331. BRYAN, Circuit Judge. This was tort action begun by R. E. John-son against Company to recover damages for personal injuries sustained by him as a result of his coming into contact with a cable which was heavily charged with electricity. The cable was used b the service company £or the purpose of raising and lowering an eleetric light at a street intersection, and was not designed or intended as a conductor of electrie current. But it had become charged with electricity as a result of the cutting or breaking of a guy wire which theretofore had been , , Va. • , , fastened by the service company at one end to Qne ^ electrie H M £ol¿ and at the other end to a teiephone pole of the Southwestern Bell Telephone Company. The loose end of the guy wire fell down on the service company’s wires that were charged with electricity and thus eontaet was made with the -,, •, • •, ' i , . ■. ■, cable which was-used to raise and lower the , . ... , , T , , ., ... street ^ Jolmson; engaged m a conversation and standing on the street by the pole to which the cable was fastened by a metal hook about six feet above ground, inadvertently rested his hand ón the hook, and as he did so received the electric shock which injured him. ■ The service company impleaded -the telephone company, alleging that the latter had removed the guy wire from the telephone pole without notice to it, and had therefore been guilty of active negligence, whereas its own negligence in failing to dis-n °,1° S’ ., cover and remove the guy wire trom its electric light pole was only passive. The , trial resulted m a judgment m favor of Johnson against the service company, and a direct- ed verdict m favor of the telephone company, . On appeal the judgment was affirmed by the Court of Civil Appeals. 300 S. W. 975. However, in the Supreme Court [6 S.W.(2d) 344] if. ^ in favor of Johnson as against the seryiee eom any; but reversed > sQ far ag it wag in £avor o£ the telephone Company_ Tbe cause was remanded for a new trial upon the issue whether the telephone company cut the guy wire, the Supreme Court holding that, if it did so without notice to’the1 service company, it would be liable for the amount of the judgment in favor of Johnson. While the case was pending for a new trial in the state trial court upon the issue thus made, it was removed by the telephone company to the federal District Court, on the ground of diversity of citizenship. It was shown without dispute that the service company, with the consent of the telephone company, originally placed the guy wire, that it had been attached to the telephone pole for a number of years, and that the telephone company removed its pole about forty days before the date on which Johnson was injured. Witnesses for the service company testified that the guy wire was in place within a month or two before the injury, that the wire appeared to have been cut recently, and that it was cut close to the telephone pole, The telephone company produced several witnesses who testified that when the telephone pole was removed there was no wire attached to it. Whether the telephone company caused the guy wire to be cut was therefore a question upon which the evidence was in conflict. At the close of all the evidence the telephone company moved for a directed verdict in its favor; but this motion was denied, and the jury returned a verdict upon which judgment was entered against the telephone company for the amount of the judgment recovered by Johnson against the service company. Upon tins appeal of the telephonq company, all assignments of error are leveled at the refusal of the court to give the requested peremptory instruction. On the question of disputed fact whether the telephone company caused the wire to be cut, the case in our opinion was properly submitted to the jury. While it is true that there was no direct evidence that the guy wire was cut by the agents or servants of the telephone company, yet the circumstantial evidence, as to the presence of the guy wire intact and uncut, a short time before Johnson s injury, as to the freshness of the cut, as to the distance of the telephone pole from the point where the guy wire was severed, and as to the removal of the pole itself, was sufficient to support the inference that the guy wire had been cut by those acting for the telephone company. The direct evidence in favor of the telephone company was insufficient to overcome as a matter of law the circumstantial evidence adduced on behalf of the service company. Assuming in favor of the verdiet that the telephone company caused the wire to be cut without notice to the service company, the legal question arises whether or not the service company is entitled to recover on the theory that its negligence was passive, and that the telephone company was the active Wrongdoer. That question is answered in the affirmative by the Supreme Court of Texas, not only by its opinion in this ease, but also in the eases of City of San Antonio v. Smith, 94 Tex. 266, 59 S. W. 1109; City of San Antonio v. Talerico, 98 Tex. 151, 81 S. W. 518. Whether we are bound in a removal ease, such as this is, by the decision of the Supreme Court of Texas before removal, it is not necessary to determine; for, as it seems to us, that decision and the two earlier ones just above cited correctly announce a rule of law which has the approval of the Supreme Court of the United States. The general rule is that there can be no contribution between joint tort-feasors, but to that rule there is a well-recognized exception to the effect that “one liable only on account of a breach of duty of care owing the plaintiff, but without active participation in a tort committed by another, may, whether in the original suit or by independent action, recover over against the active perpetrator of the wrong.” Shearman & Redfield on Negligence (6 Ed.) § 24b. Again, in section 301 of the same work, it is said: “Although the primary liability for injuries caused by a breach of corporate duty or the tortious acts of its agents rests on the corporation, its agents or third persons, who proximately caused the injury, are jointly liaj,je -^th it, and if it is obliged to pay damages for an injury so caused, it has a right 0f reeovery over against the actual wrongdoer.” This last statement of the rule is cited with approval by the Supreme Court in Washington Gaslight Co. v. District of Columbia, 161 U. S. 316, 16 S. Ct. 564, 40 L. Ed. 712. That was a ease in the District of Columbia, which was held ¡liable for an injury to a piaintiff who was injured byreason of a gas box on the sidewalk being ou£ 0£ repair; was permitted to recover over the gas company which was guilty of ¿he active wrongdoing. An earlier case involying the same principle of law was that of City of Chicago v. Robbins, 2 Black, 418, 17 L. Ed. 298. In the Supreme Court case first cited it was.said that the rale does not depend upon the peeuiiar or exceptional rigbts of munieipal corporations, but is generaJ in its nature; and the court .proceeds to cite with approval the ease of Gray v. Boston Gaslight Co., 114 Mass. 149, 19 Am. Rep. 324, which upheld the right of a prop-erty owner to recover the damages which he had been compelled to pay on account of a wire attached by the gas company to the chimney of the owner’s house. A case an-nouneing the same principle is that of the City of Astoria v. Astoria & Columbia River R. R. Co., 67 Or. 538, 136 P. 645, 49 L. R. A. (N. S.) 404. The doctrine underlying this apparent exception to the general rule is based on the principle that tort-feasors are not as between themselves in pari delicto. The service company was liable to Johnson , , ., i , , . , • , i only because it failed to maintain its cable in a safe condition, but that failure would not have resulted in the injury to Johnson but for the cutting of the guy wire by the telephone company and its failure to give notice to the service company that it had done so. As between the two companies, the telephone company was the actual wrongdoer. The judgment is affirmed.

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YOUNG et al. v. UNITED STATES. No. 5959. Circuit Court of Appeals, Fifth Circuit. April 10, 1931. WALKER, Circuit Judge, dissenting. John B. McNamara, of Waco, Tex., Edwin H. Grace, of New Orleans, La Sanford of Galveston, Tex and A. L. Cur tis, of Belton, Tex. Lovett, of Corsicana, Tex., on the brief), for appellants, John D. Hartman, U. S. Atty., of San Antonio, Tex. Before BRYAN, FOSTER, and WALKER, Circuit Judges. BRYAN, Circuit Judge. The indictment in this case charges a conspiracy to sell, and possess for sale, utensils and substances, including com chops, sugar, fruit jars, and charred barrels, designed and intended for use in the unlawful manufacture of intoxicating liquor; and to manufacture, possess, sell, and transport intoxicating liquor for beverage purposes. The appellants, McDanid, Young, Coates, Lee, Franklin, and Campbell, were convicted as charged. Evid«nae for,the government tended to show that McBame1’ manger of a wholesale business at Corsicana, Tex sold large quantities of the above articles described m the indictment to Young and Coates, and made deliveries at the village or town of Young, where Young and Coates had adjoining retail stores, with n T ,, . 7 a connecting door, in the same building, Young and Coates sold the articles purchased from McDaniel at retail. Lee, Franklin, and Campbell were among their customérs, and each of them made individual purehases but ther0 was n(> proo£ that tbey wer0 , T, , ,, , acting m concert. It was not directly shown ,, , n .. , J . tbat ^ of the arMes thus sold were used 111 connection with the manufacture of liquor, although there were many illicit distilleries in the neighborhood. The most that can be' claimed by the government is that the eircumstantial evidence was sufficient to show that McDaniel, Young, and Coates knew that the articles in question were being bought from Young and Coates by persons who intended to use them in connection with the unlawful manufacture of liquor. are °Plmon £5mt tbis evldmf was ^sufficient to prove the conspiracy alleged. McDaniel, the seller, could not have been a c0conspirator with Young and Coates, the purchasers, upon proof simply that he made sales to them; and in turn Young and Coates, whether aeting individually or as partners, could not upon similar proof have been coconspirators with those who purchased from them at retail. There must have been a conspiracy to do something unlawful after the sales were made in order to sustain the indictment. United States v. Katz, 271 U. S. 354, 46 S. Ct. 513, 70 L. Ed. 986. In Edenfield v. United States (C. C. A.) 8 F.(2d) 614, there were three indictments, efh ?ont™S coufte; th® firft count charging a conspiracy to manufacture liq-nor, and the second to manufacture liquor without making a permanent record. Eden-field was convicted and sentenced on both counts of each indictment. The judgment was affirmed in toto by this court in a memorandum opinion, which, while recognizing the principle of law that there must be evidence Beyond proof of sale, stated that “the evidence for the government tended to show that plaintiff in error furnished to his codefendants copper and other materials to be used in making a still, as well as sugar and meal to be used in the manufacture of liquor.” The case was reversed by the Supreme Court because of the conviction on the second set of counts which charged conspiracy to manufacture liquor without making a permanent record, on the authority of the Katz Case, supra; and it was remanded to the district court for resentence on the first counts. 273 U. S. 660, 47 S. Ct. 345, 71 L. Ed. 827. It is to be con-n , ,, o , ,, , ,, ceded. therefore, that the evidence was held , ’ ' r\ . . t. ^ • ,, by the Supreme Court to be sufficient to susj. n i » *i • > , -r> n tam the first count of each indictment. But the record in Edenfield’s Case affirmatively shows, though the memorandum opinion does not, that he not only, made the sales, but, aft-i, , , ... er they were made, that he actively partici- ... . • r.1 .»ii • 1 i.pated in manufacturing the stiffs, m loca mg them m places where it was unlikely that they would be found, and m disposing of the hquor after it was manufactured; and so we held that the jury was authorized “to mfer an agreement to do what was actually done. There is no similar proof here, but the evidence stops with the sales. The conviction of the sellers cannot be sustained on the ground that they had knowledge of the intention of the purchasers to use the sugar and other articles in connection with the unlawful manufacture of liquor. One cannot be held as a member of a conspiracy upon proof merely that he had knowledge of, or negatively acquiesced in, a crime that was about to be committed; but, in order to fasten guilt upon one accused of being a coeonspirator, it is necessary to prove that he actively partieipated in the conspiracy charged. Bishop’s Criminal Law (9 Ed.) § 633; 5 R. C. L. 1065; McDaniel v. United States (C. C. A.) 24 F. (2d) 303. There was no evidence that Lee, Franklin, and Campbell were acting in concert; for all that appears, each was acting only for himself. The conspiracy charged was not proved against any of the appellants- The judgment is reversed. WALKER, Circuit Judge ' (dissenting), ' I am nable to concur in conclusions stated in the foregoimg opinion. There was the foregoing opinion There was evxdence tending to prove that the appellant Mc-Danl®1’ actm? £or a corporation °f which he "as tbe onager, in selling for that corporatlon appeUante Young and Coates large pities of sugar, com chops, p;e pain, fruifs 3™» and cbarr?d bafels> and f trans’ P°rtmg pnd dejivering those articles fre^ently ^ the nighttime, and the appellants Joung and Coate m buying and selling tbose things, acted in concert between themsal!e® and otber appellants for the purpose o£bnngfg about or f aeihtatmgviolations by cha^®d °£ tbe National Prohibition Aet by unlawfully manufacturing, possess- . “d transporting intoxicating liquor. Jbe mdlet“fnt and the evidence showed more £ban concerted action between the sellers and ^m ™lawfulftes- “ that they showed ***** *b! seIlef aüd acted m eof'f with others charged, for the purpose of ex- » ,, , & o, ^ fectmg the unlawful manufacture, posses- • , , ... « . , . ’ . sion, and transportation of intoxicating liquor ' Though such sales in which the applelant McDaniel paticipated and such purchases and sales by appellants Young and Coates , . 1-, , were not in themselves illegal, they were rendered illegal if such pats of a scheme participated in by those thre0 ns and otherg aeeuged to bring. about the unlawful manufaeture, possession, gaJ and transportation of intoxicating liq.uor Tboge things may have been rendered unlawful by the plan or concerted purpose in pursuance of which they were done. They were capable of being designed or done for an unlawful purpose. Danovitz v. United States, 281 U. S. 389, 50 S. Ct. 344, 74 L. Ed. 923. An act, harmless when done by one, may become a public wrong when done by many, acting in concert for an unlawful purpose. Grenada Lumber Co. v. Mississippi, 217 U. S. 433, 30 S. Ct. 535, 54 L. Ed. 826; Bedford, etc., Co. v. Stone Cutters Ass’n, 274 U. S. 37, 54, 47 S. Ct. 522, 71 L. Ed. 916, 54 A. L. R. 791. “No conduct has such an absolute privilege as to justify all possible schemes of which it may be a part. The most innocent and constitutionally protected of acts or omissions may be made a step in a criminal plot, and if it is a step in a plot, neither its innocence nor the Constitution is suffieient to prevent tbe punishment of the plot by law.” Aikens v. Wisconsin, 195 U. S. 194, 206, 25 S. Ct. 3, 6, 49 L. Ed. 154. The above-mentioned acts, as evidence adduced tended to prove, being bound together as parts of a plan or concerted scheme to bring about or facilitate violations of the National Prohibition Act (27 USCA), are tainted with the criminality of that plan. Swift & Co. v. United States, 196 U. S. 375, 396, 25 S. Ct. 2,76, 49 L. Ed. 518; Badders v. United States, 240 U. S. 391, 394, 36 S. Ct. 367, 60 L. Ed. 706. The conspiring which evidence tended to prove being directed to violations of the National Prohibition Act, everything done in pursuance of it was illegal, and all participants in the plot or scheme were guilty as conspirators. Ford v. United States, 273 U. S. 593, 620, 47 S. Ct. 531, 71 L. Ed. 793. The decision in the case of Edenfield v. United States, 273 U. S. 660, 47 S. Ct. 345, 71 L. Ed. 827, had the effeet of affirming a conviction under counts of an indictment , • , , making charges similar to the charge made by the indictment in the instant ease, which charges were supported by evidence which, in my opinion, had no more tendency to support a charge made than the evidence in the instant ease. In that case a reversal was unsuecessfully sought because of the action of the trial court in giving an instruction to the jury to the effeet that, if Edenfield knew that the copper, sugar, meal, ami bran he furnished, in the quantities he furnished, were not usable, so far as he knew, except in the manufacture of liquor or the making of stills, and if he furnished those things with the knowledge that they were to be used for such purposes, then it was for the jury to determine as to whether, when he furnished those things to other persons accused, then knowing that those persons were going to use them in man-ufaeturing the liquor, that would constitute an agreement between him and those persons to violate the law against manufacturing liquor. It seems to me that the decision evidenced by the foregoing opinion is ineonsistent with that part of the decision in the case of Edenfield v. United States, supra, which had the effeet of affirming the conviction under counts of the indictment under which the accused was tried. The opinion in the ease of United States v. Katz, 271 U. S. 354, 46 S. Ct. 513, 70 L. Ed. 986, indicates that a charge of criminal conspiracy cannot properly be based on an agreement between the seller and buyer in a sale made for a criminal purpose, because such an agreement is an essential element of tbe sale itself, and the sale could not make a party to it guilty of a crime other than the one committed by the seller; but that opinion also indicates that the buyer and seller of things used in manufacturing intoxicating liquor properly could be charged with conspiring with others to bring about the unlawful manufacture of such, liquor by using those things, as the substantive offense conspired to be committed has an ingredient in addition to the sale, not requiring the agreement of two persons for its completion. A party to an agreement to bring about the commission of a crime is subject to be charged with criminally conspiring with others, though he was to do nothing in 'furtheranee of the agreement except to sell a thing intended to be used by another in committing the crime which was the object of the agreement.

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CORY v. LOGAN COAL & SUPPLY CO. No. 5854. Circuit Court of Appeals, Fifth Circuit. April 1, 1931. Rehearing Denied April 24, 1931. Robert R. Milam, of Jacksonville, Fla., J. J. Lynch and Carter J. Lynch, both of Chattanooga, Tenn. (James J. Lynch, of Chattanooga, Tenn., Robert R. Milam and Milam, Mellvaine & Milam, all of Jacksonville, Fla., and Lynch, Bachman, Phillips & Lynch, of Chattanooga, Tenn., on the brief), £or appellant. Crawford and Huhp S. May,both of Jacksonville, Pla. (J. T. G. Crawford and Philip S. May, both of Jacksonville, Fla., on the for appellee. Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges, SIBLEY, Circuit Judge. Cory sued Logan Coal & Supply Cornpany at law upon three contracts for the sale of coal, seeking damages for the refusal to accept part of the coal. After an adverse ruling upon a demurrer to the original counts of tbe declaration, and a refusal to allow a replication to be filed to certain pleas, and after submitting his evidence under amended counts, Cory was defeated by a verdict directed for the defendant, and he appeals, his assignments of error being directed to the three rulings indicated, Eaeb o£ the original counts sefc up a eontraet for tile purchase by defendant of a certain number of carloads of coal at a certain price per ton, but alleged nothing as bow many tons were in a carload. The allegations thereby entirely failed to set forth any certain contract or any basis for estimating damages. The demurrer was properly sustained. J The amended counts alleged that, by a ™f0m °f long standing in the trade, and well known to both parties the carloads were to be from forty to sixty tons eaeh, and to average fifty tons. These allegations remove uncertainty from the contract on that seore and the necessary quantity basis fQr d es b tie dS&amoe between contraetSand. market price as set out in the bill of particulars. Eaeh amended count set up a different written contract, respectively dated July 14, 1920, July 27, 1920, and July 28, 1920, for a total of two hundred cars of coal at differing prices. The shipping date specified was “As fast as we can” on the first, “S°on as possible” on the other two. O&erwise the contracts are alike. The other fUegations of the counts are similar; quotln/ f™m the first count; Un(lei’ term® of said contract said coal was to be snipped by tbe plaintiff to the defendant at Jackson- ^ ag fagt as plaintiff was able to ship same; that in pursuance of said contract the plaintiff shipped to the defendant and the defendant accepted from the plaintiff twenty-four cars of coal; that thereupon although the plaintiff was shipping said coal as fast as was possible for him to do in accordance with the terms of said contract, the defendant notified the plaintiff not to ship any more of the said coal until it should advise him further to do so; that the plaintiff was at all times ready, able and willing to ship said coal in accordance with the terms of said contract, and thereafter repeatedly offered to ship, and tendered the balance of said coal, and repeatedly requested further instruetions from the defendant to ship same until March 11th, 1921, when defendant positively refused to accept or pay for the balanee of said coal.” Besides the general issue numerous traverses were filed, denying separately that the plaintiff shipped the coal as fast as it was possible for him to do so, that plaintiff was ready, able, and willing to ship the remainder, and that defendant notified him not to ship any more until further ad-7lsed t0, d0 ,so- during the trial of these issues, the plaintiff sought to file a replication to the pleas, the offered pleading being only an elaboration of the facts already alleged about the request to cease shipments until further notice. The court disallowed the replication to the pleas, but gave no reasons. The reason urged m argument is that the replication was a departure in pleading, an effort to set up a right of action arising by a. new contract or by a waiver, in lieu of that arising from performance as set forth in the declaration. We think no such departure was proposed because the same substantial facts were set up in the declaration. The prior performance of plaintiff is there alleged rather by way of inducement introduced by an “Although,” while the defendant’s request for delay is directly averred, The declaration goes more positively on the allegations of requested delay than on those of prompt performance. But, if both are to be considered as counted on, either being sufficient, and therefore properly to be made the subject of separate counts, the fault is the fault of duplicity, and to be reached at common law only by special demurrer. 1 Chitty, Pleading, 228. Pleading over instead of. demurring waives the defect. 1 Chitty, Pleading, 671. And the pleas, to be good, must answer both matters. 1 Chitty, Pleading, 228. In Florida, the special demurrer is abolished. Rev. Gen. St. 1920, § 2627, and duplicity is apparently to be reached by a motion for compulsory amendment if the defendant is embarrassed in his defense thereby. Section 2630. This remedy not having been followed, we think the duplieity, if any, in the declaration was waived. Had the so-called replication been offered as an amendment of the declaration, which in substance it was, it might have been allowable. As a replication, it was not in order, because offered as a reply to pleas which set up no new matter but merely traversed the allegations of the declaration. The plaintiff in such case must join issue on the traverse and prove the truth of his declaration. There was no error in rejecting the replication. We think the plaintiff’s evidence tended to spstain tbe declaratioil and to sbow a ldo-bt to recover. The terms of the contracts flxing tbe time of sbipment; «As fast ^ we can„ and «Soon M possibie,” require eonstruction. We see no substantial difference ^ tbeir meaning. In contracts for the sale o£ merchandise, a time for delivery is usually &xei> and wben fixed; is of tbe essenee of tbe eontraet. if the contract is'silent, a reasonable time is supposed by tbe law to have been intended. In the present contracts a reasonabie time is not to be assumed because are not güent ag to tim6; Tbe lan^age used indicates a deliberate purpose not to flx a definite time, but, in recognition that tbere are or wiu be hindrances to delivery wHch wiu eauge del tbe struct is to be executed «As fast as we can” or “As soon as possible,” having reference to the hindrances, pbese hindrances are not stated in the contracts, but are made clear by the evidence of the circumstances under which the contracts were made. There was a coal miners’ strike in England, and a heavy demand for American coal, coupled with a shortage of coal cars, which were being apportioned to the mines, greatly restricting the power of the mines to make delivery on time. Plaintiff was a coal broker only and not a miner, and had no stocks of coal on hand, but bought at the mines in carload lots for direct shipment to his customers, having to take such sized cars as were allocated to the mines and were by the mines delivered on his orders. By reason of the shortage in ears and coal, the price on contracts for coal for future delivery was high; and “spot coal,” that is, coal already loaded on cars and ready to move, was much higher when it could be procured at all and was regarded in the trade as a separate thing from “contract coal.” The mines, of course, were tempted to sell their coal as “spot coal” rather than deliver it on their contracts. The consequence was that the brokers in contracting for future coal to cover their own contracts for future delivery (eontraet coal) were unable to name definite times for delivery of such coal, and were customarily wording their contracts like those in suit. This wording, construed in reference to the business involved and its circumstances, and those of the parties as above outlined, was intended to relieve the seller from delivery at any partieular time, but to require that he use diligenee and good faith in placing contracts, on his part to cover the coal and in securing prompt delivery of it to the defendant. Compare Pope v. Filley (C. C.) 9 F. 65; Virginia Iron, Coal & Coke Co. v. Woodside Cotton Mills Co. (C. C. A.) 6 F.(2d) 442; Christensen v. Gorton-Pew Fisheries Co. (C. C. A.) 8 F.(2d) 689; Albert v. Young, 80 Neb. 677, 114 N. W. 936; Williams v. Gridley, 110 App. Div. 525, 96 N. Y. S. 978. This obligation did not extend to the buy-e u . „ ,el1 ., , , mg of “spot coal” to fulfill the contracts, * i for that was m the trade a distinct eommod- ., , , , , , lty, and not contemplated by the contracting parties.' This conclusion is fortified by the fact that, pending the execution of these contracts, the plaintiff sold and delivered to defendant a number of cars of “spot coal” at a higher price, with no contention that they should be applied on these contracts. Under this construction of the contracts, the evidence tended to show that, prior to September 28, 1920, plaintiff had exercised diligence and good faith, although a little less than half of the total number of cars had been delivered. The fact that more in proportion had been credited on the two contracts carrying the higher price does not rebut good faith, because no ultimate gain to the plaintiff or loss to the defendant could re-suit. Had the cars been credited on the cheaper contract, the purchase money then collected would have been less, but the damages now due would be correspondingly greater. Moreover, the defendant by payment without protest consented to the crediting as made.. The confessed inability to deliver all the coal prior to September 28, 1920, shown to be due to the hindrances above outlined, did not negative the plaintiff’s ability to deliver in accordance with the terms of the contracts; that is, as fast as possible. Complete delivery became possible in October, and was then offered by a request for shipping instructions, and continuously afterwards. The serious trouble comes with the admission that between July 14 and September 28, 1920, plaintiff had handled more than two hundred ears of contract coal, and had allowed much of it to be prorated to other customers having similar contracts. In a sense, it would have been possible to have delivered all this coal to the defendant, but the testimony is that the defendant knew when its contracts were made that plaintiff was a broker, having many customers with as much right to claim prompt delivery as the defendant, and that the plaintiff’s obligation to these would form some part of the extraordinary situation contemplated in agreeing to a delivery “as soon as possible.” Perhaps the customers ought to have been served, in the order of their contracts, but the evidence does not show that the defendant would'have thereby gotten more coal. So it might indicate want of diligence or good faith for the plaintiff to take on new contracts after having bound himself to the defendant, but that he did this does not appear. The bare fact that plaintiff applied the equitable rule of equality to all , • . 1 J . persons having, so far as appears, equal , . . . „ . claims to his diligence and good faith, does , ,, °e , , „ °, ,. ’ not as a matter of law defeat him. ■ If, however, the plaintiff’s conduct before September 28, 1920, be found to be a breach of his obligation, nevertheless on that date defendant, without any expression 0f discontent at the slowness of delivery or 0f any purpose to discontinue the contracts, wrote plaintiff that it was “advising all shippers to discontinue shipments until further notice on áceount of an embargo impending at Jacksonville, therefore I must ask that you ¿0 not ship any more coal until I advise you.” Coal previously sent was paid for without complaint. On October 15th plaintiff asked for shipping instructions, as the mines were pressing to deliver. Defendant replied: “Account of congestion and possible embargo eannot give shipping instructions at the present time.” Coal had then become plentiful, and the price was falling, and plaintiff continued to seek to delivér until on March 11, 1921, when the contracts were repudiated by defendant. Under this evidence, uncontradieted and unexplained, it must be concluded that, if the defendant on September 28,1920, had a right to discontinue the contracts because of delay, it waived the right and elected to continue them, and requested a further delay until it should advise otherwise, This invited, if it did not require, the plaintiff to maintain his arrangements to deliver the coal sold, and prevented his reselling it to save himself from loss by a falling market, Whether on principles of waiver, election, or promissory estoppel (Williston on Contracts, §§ 856, 683, 688, 691), it is plain that the defendant cannot, after maintaining this position till the coal market broke, then change front and claim that the contracts were at an end on September 28th. See Christensen v. Gorton-Pew Fisheries Co. (C. C. A.) 8 F.(2d) 689; Pitch Pine Lumber Co. v. Wood Lumber Co., 57 Fla. 140, 48 So. 993; Mizell v. Watson, 57 Fla. Ill, 49 So. 149. If there be a commingling of two causes of action in the declaration, and if the proof fails as to one, the court may not ignore the other which the evidence supports: Page v. Page, 43 Wash. 293, 86 P. 582, 6 L. R. A. (N. S.) 914, 117 Am. St. Rep. 1054. A verdict should not have been directed for the defendant. Reversed for further proceedings.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

GOODMAN v. LANE, Deputy Prohibition Administrator. No. 8836. Circuit Court of Appeals, Eighth Circuit. March 9, 1931. Rehearing Denied April 15, 1931. William G. Boatright, of Kansas City, Mo. (I. J. Ringolsky and Harry L. Jacobs, both of Kansas City, Mo., on the brief), for appellant. Claude E. Curtis, Asst. U. S. Ally., of Kansas City, Mo. (William L. Vandeventer, of Kansas City, Mo., on the brief), for appellee. Before KENYON and BOOTH, Circuit Judges. BOOTH, Circuit Judge. This is an appeal from a decree dismisshig a bill in equity on the ground of lack of jurisdiction. The bill was filed February 10, 1930, and alleged, in substance, the following faets: Plaintiíf is a eitizen of the state o£ Missouri and a resident of Kansas City, in that state. Defendant is a Deputy Prohibition Administrator of the United States for the district which includes! Kansas City. Plaintiff is a member of the Kansas City Athletic Club, whieh is a private club having a club building located in Kansas City reserved exclusively for members and guests. Plaintiff had made reservation of a room at said club and a table in the dining room for himself and wife arid guests for the evening of December 31, 1929. They arrived at the club about 11:45 p.m. and checked in, in accordance with the usual custom, and were standing in a portion of the lobby of the club, which was reserved for members and their guests. Plaintiff was holding in his arms a package containing four bottles and contents^ his own property. The battles were securely and completely wrapped in paper and tied with a string so that the contents of the package could not be seen or observed. While plaintiff and his party stood in the lobby of the club, a prohibition agent of the United States, Lashbrook by name, a subordinate of defendant, forcibly took the package from plaintiff, and thereupon arrested plaintiff and caused him to be taken to the city hold-over and locked up for the night. The next morning, he was released on a cash bond conditioned that he report back to the hold-over January 2. He reported at that time, and was taken to the office of the United States Marshal, where he was confined until taken before the United States Commissioner the same day. The complaint before the Commissioner was made and sworn to by Lashbrook, and charged plaintiff with unlawfully transporting and possessing intoxicating liquor on December 31, 1929. Plaintiff pleaded not guilty. The Commissioner, after a hearing, dismissed the transportation charge, but held plaintiff and bound him over on the possession charge for action by the grand jury. Plaintiff was ad-nutted to bail. The United States Attorney for the district informed plaintiff that he would seek an indictment against plaintiff before the grand jury, which was to convene February 17, on charges both of transportation and possession; and that, upon a trial, conviction of plaintiff would be sought on both charges. The United States Attorney further stated that he would endeavor to obtain such indictment and conviction through the use, as evidence, of said bottles and the contents thereof, and that defendant .was keeping said bottles and contents for the purpose of producing the same at such times and places as requested by the United States Attorney for said purposes. Lashbrook, when he took said bottles from plaintiff’s person and possession, had no warrant for the arrest or search of plaintiff or any knowledge or information justifying the making of a search or an arrest; nor did he have any , „ i n • i 1 i 1 .1 t warrant tor a search ot said club building or for the arrest of any persons therein. Lash-1 ___ biook was not a member of said club nor a guest OX a. member at the time of the oeeurrence. Lashbrook delivered said bottles t,, í.aa1j?ta 1 j-i* it and the contents to defendant, who still had them at the time of filing the bill. The bill further alleged tbat Lashbrook, in taking said bottles from plaintiff, in arresting plaintiff, and in entering the part of said club reserved exclusively for members and i-r • ,, -3 ♦ii „n j • . i their guests, acted illegally and in Violation of the Fourth and Fifth Amendments to the Constitution of the United States. The « ,, , „ .. ,/TTT1 prayer of the bill was as follows: “Wherefore, plaintiff prays that defendant be ordered and directed to return said bottles and contents to plaintiff; that he and his subordinates be enjoined from taking said bottles and contents before any grand jury, petit jury or court or from testifying of how or where or by what means or from whom or at what time and place same were obtained, or of the contents thereof; that the use of said bottles and contents as evidence against plaintiff be suppressed and that, pending final judgment herein, temporary injunction and restraining order issue against defendant, and for such other relief as may be just and equitable.” Defendant- moved to dismiss the bill. stating as grounds: K(l) Plaintiff’s petition does not state sufficient facts to constitute a cause of action. “(g) Plaintiff’s'petition, on its face, shows that this court has no jurisdiction in this cause. (í(3) plaintiff has M ad te remedy at Iaw and is not entitled the relief ^ e¿t f , „ ™ ' . The order and deorfe ^missing the bill ls se^ oufcln margin. The present appeal followed on February 17, 1930. Application was made the same day to the trial court for an order preserving the status quo pending the appeal, but this was denied. Notice was at once given to the Assistant United States Attorney that a similar application would be made to this court. Arrang-ement was made with one of the judges of this court for hearing said application at 3 p. m., February 17. The United States Attorney was notified between 1 and 1:30 of the time fixed for the hearing, and said he -would appear. Hearing was had at the time fixed. An Assistant United States Attorney was present. At the conclusion of the hearing, the judges indicated a desire to consider the matter for a short while and suggested that, of eourse, nothing would be done meanwhile. The Assistant United States Attorney said that he had nothing to do with that matter, and was thereupon told by the court to inform the United States Attorney that nothing should be done until the court had passed on the application. Thereupon, counsel left the court’s chambers. About fifteen minutes later, the Assistant United States Attorney returned and stated that he had been advised that the matter had already been presented to the grand jury. The court direeted a written return to be made the next morning. A return was made, showing that the matter had been presented to the grand jury between the hours of 1 and 2 o’clock p. m., February 17, that Lashbrook appeared and testified, and that the grand jury voted an indictment which later was returned and docketed in the office of the clerk of the District Court.- The hearing in this court was thereupon continued until February 20, at which time neither counsel appearing, the application was denied. Appellee advances the proposition that equityhas no jurisdiction to stay criminal proceedings; cites authorities to that effect; admits that there are exceptions to the general rule; but contends that the case at bar is not within the exceptions. All this may be conceded, but it is not decisive, because the present ease is not one in which equity is invoked to stay criminal proceedings. The relief here asked, apart from return of the property, is that the defendant be enjoined from making use of certain evidence in any criminal proceedings against appellant. This is quite different from staying criminal proeeedings. The .relief asked'is somewhat-broader in scope, but of the same character as that asked in the usual motion in criminal eases to suppress evidence. The jurisdiction of equity to prevent the use in evidence of property illegally seized and/or to order a return thereof is well established. Such jurisdietion was involved or recognized in the following eases: Burdeau v. McDowell, 256 U. S. 465, 41 S. Ct. 574, 575, 65 L. Ed. 1048, 13 A. L. R. 1159; Cogen v. United States, 278 U. S. 221, 49 S. Ct. 118, 73 L. Ed. 275; United States v. Hee (D. C.) 219 F. 1019, 1021; Petition of Barber (D. C.) 281 F. 550; Friedman v. Yellowley (D. C.) 290 F. 248; Sims v. Stuart (D. C.) 291 F. 707; Dowling v. Collins (C. C. A.) 10 F.(2d) 62; Applybe v. United States (C. C. A.) 32 F. (2d) 873, rehearing denied (C. C. A.) 33 F.(2d) 897; United States v. Gowen (C. C. A.) 40 F.(2d) 593, reversed on other points, Go-Bart Imp. Co. v. United States, 282 U. S. 344, 51 S. Ct. 153, 75 L. Ed. -; United States v. Mahon (D. C.) 42 F.(2d) 571; Dock v. Dock, 180 Pa. 14, 36 A. 411, 57 Am. St. Rep. 617; Pressed Steel Car Co. v. Standard Steel Car Co., 210 Pa. 464, 60 A. 4. Burdeau v. McDowell, supra, was a suit. brought by McDowell against Burdeau, a special assistant to the Attorney General of the United States, to obtain return of certain books and papers, and to enjoin Burdeau and officers of the Department of Justice from usings them in criminal proceedings against him. No use had yet been made of the books ana papers. It appeared that the books and papers had been obtained from McDowell -wrongfully by a third person who had turned them over to Burdeau. No question was raised that a suit in equity was the proper procedure, and the court said: “We do not question the authority of the court to control the disposition of the papers.” And in the dissenting opinion, it was said: “That the court would restore the papers to plaintiff if they were still in the thief’s possession is not 9ue®fr°nad. , In Dowling v. Collins, supra,_ a smt to obtain return of property, consisting of liqsel?Led> and to suppress use of it as evidenee> * appeared that, prior to the «ranmencement of the suit, plaintiffs had made a motion to the same effect m a criminal action f1 ^ieh were defendants. The motion tad been denied. It was held that the order dei™ *he motion m criminal case was ^al, and, not having been appealed from, was binding on defendants and barred relief 111 equity suit. The practice of bringing a sult 111 e9ulty was recognized, In Cogen v. United States, supra, the s°le question was as to appealability of the order denying motion for return of papers a:n-d suppression of evidence. The papers bud been taken from the person of defendant without a warrant. The application was made after indictment and before trial. In the discussion .in the Supreme Court, the ease of Dowling v. Collins, supra, is referred to as an instance of plenary suit. In United States v. Gowen, supra, the court said, 40 F.(2d) loc. cit. page 598: “In Matter of Behrens [(C. C. A.) 39 F.(2d) 561], supra, we held that, when forfeitable property is seized and held by prohibition offleers, the legality of their seizure was to be determined in the forfeiture .proceedings, not on summary motion for an order directing return of the property. Where, as here, the property consists of papers held for evidence not for forfeiture, the legality of the seizure cannot be so determined. On general prineiples it would seem that replevin, unless some statute forbids it, or a bill in equity, since temporary relief is sought against a threatened use of information contained in the parpers, would be the appropriate remedy. See United States v. Casino, 286 F. 976, 978 (D. C. S. D. N. Y.); Sims v. Stuart, 291 F. 707, 709 (D. C. S. D. N. Y.); Applybe v. United States, 32 F.(2d) 873 (C. C. A. 9), rehearing denied (C. C. A.) 33 F.(2d) 897. We may assume, without the necessity of so deciding in the present ease, that section 934, Rev. St. (28 USCA § 747), forbids replevin, and that a bill in equity will lie to recover possession of papers illegally held by prohibition officers. See Sims v. Stuart, supra; 27 USCA § 45; Maryland v. Soper, 270 U. S. 9, 46 S. Ct. 185, 70 L. Ed. 449.” Under certain circumstances, a summary motion may be made in the United States District Court which has control of the preparatory and preliminary acts and steps lead-mg up to a criminal prosecution of the owner of the property. The full and complete js , ^ ^ üe a j -L t- ,. • relief, however, afforded by sueh motion is equitable in character. It consiste in enjoining the officers from making use of the property as evidence, and in ordering the property restored to its owner. See Go-Bart Importing Co. v. United States, 282 U. S. 344, 51 S. Ct. 153, 75 L. Ed. -. That case, however did not. Rnld tVint a nlernro- Rill in ever, cua not noia tnat a plenary bill m equity was not a proper method of procedure. It is to be noted that, m the case at bar, the bill alleged ownership by plaintiff of the proper tv seized For the nurnose of deter property seizea. r or me purpose 01 aeter mining the jurisdiction of the court, this allegation must be taken as true. It is to be further noted that the prop-L , . , ,, „ . J , . 1/110 4 1 erty was being held for evidentiary purposes only; that the remedy by replevin was obviously inadequate, even if that remedy was open; that the remedy provided by the National Prohibition Act (27 USCA) and the Espionage Act (40 Stat. 2L7) for vaca tion of a warrant improperly issued and for return of urouertv was not arvDliciilYIp for 77 pxüpeiby was nos appncaoie, xor the reason that no warrant had issued; that tha relief sought was not incidental to- anv , • _________. ir t\* i • i n f tnal or other proceeding m the Distnct Court, for no sueh trial or proceeding was pending in that court; that the defendant, appellee, , , , ’ -1 • Ji „ nad not appeared m the proceedmgs before the Commissioner. T . In view of all the facts in the ease, we think that, under the authorities above cited, remedy by bill in equity was proper, and that the court had jurisdiction to entertain such bill. Appellee urges that such procedure by bill in equity would tend to hamper and delay greatly criminal prosecutions. Even if this ■were true, it would afford no reason for denying litigants the right to make use of well-recognized methods of procedure. But we think the fear is not well grounded. Such fear is not stressed in the cases. The questions of return of property ilbgaily seized, and/or the suppression of the same as evidence, are presented to the courts b7 various methods of procedure. There is no. uniformity throughout the several cireu4ts, and oftentimes not within the same cireuit- Independent petitions, either before or after criminal proceedings are started, summary motions or petitions in criminal eases after indictment or information, indepelldent bills in equity, *are all recognized by fte eo.urts as proper. The practitioner wiu doubtless cb00S6 the method which best suits Mg paxtieular case. Delays may arise any method of procedure. But as criminal . , . . , . •, cases are given precedence in the tnal and ,, , & ^ , ,, aPPf ate courts, doubtless bills in equity relfted to f111 case8 eould precedence. But however this might be, the jurisdiction of the federal equity court cannot be made to depend upon such eonsiderations. „ „ . . .. We, of course* express no opinion on the merits ox the bill. Appellant requests this court to direct the trial court to dismiss the indictment returned against him in view of the fact that the proceedings before the grand jury and the returning of the indictment were had while application was being made to this court for an order preserving the status quo pending the appeal. Appellant insists that the indietment was procured by tactics which must be considered in disregard and in defiance ef the jurisdiction of this court. The United States Attorney denies this charge and states that the ease of appellant was presented to the grand jury in the ordinary course of procedure, and that the Assistant United States Attorney who presented it to the grand jury had no knowledge of the application to this court for an order to preserve the status quo pending appeal We shall aeeept the statement of the United States Attorney and shall consider the matters complained of as due to lack of co-ordination among the Assistant United States Attorneys. Nevertheless, the outcome was prejudicial to the appellant in his efforts to protect his alleged rights. We do not think it necessary to direct toe District Court to dismiss the indictment. We feel confident that, upon the going down of toe mandate in this case, the United States Attorney will recognize the impropmety of proceeding further under the present indictment, and will take the proper steps to have it dismissed. The decree dismissing the bill for want of jurisdiction must be reversed It is so ordered. on the 14th day of February, 1930, comes plaintiff, by his attorneys, Ringolsky, Friedman, Boatright & Jacobs, and in person and comes defendant in person and by Wm, L. Vandeventer, United States District Attorney and Claude E. Curtis, As!jiatant United States District Attorney, for the purpose of taking up and hearing plaintiff’s application for a temporary injunction and the parties agree in open court and with the consent of the Court that the case may be tried on its merits at this time; thereupon defendant asked and was granted leave to file a motion to dismiss; thereupon same is presented to the court and argued by councourt 18 of opinion that has 110 jurisdiction. “It is, therefore, ordered that the motion to dismiss be and is hereby sustained and plaintiff’s bill is dismissed without prejudice to his right to move in any proper manner to suppress evidence in any criminal proceeding or to pursue any other or different remedy that may be properly available to him, to all of which plaintiff is allowed his ex-ceptiona.” Godat v. McCarthy (D. C.) 283 F. 689; Cabitt v. Potter (D. C.) 293 F. 54; Voorhies v. United States (C. C. A.)299 F. 2751 Levin v. Blair (D. C.) 17 F. (2d) 151. In re Oryell (D. C.) 28 F.(2d) 639. Amos v. United States, 255 U. S. 313, 41 S. Ct. 266, 65 L. Ed. 654; Cogen v. United States, 278 U. S. 221, 49 S. Ct. 118, 73 L. Ed. 275; Brock v. United states, 12 F.(2d) 370 (C. C. A. 8); Johnson v. United States, 12 F. (2d) 374 (C. C. A. 8) Giles v. United States (C. C. A) 284 F. 208. Reyff v. United States (C. C. A.) 2 F.(2d) 39. Burdeau v. McDowell, 256 U. S. 465, 41 S. Ct. 574, 65 L. Ed. 1048, 13 A. L. R. 1159; Petition of Barber (D. C.) 281 F. 550: Friedman v. Yellowley (D. C.) 290 F. 248; Sims v. Stuart (D. C.) 291 F. 707; Dowlins T. Collins (C. C. A.) 10 F.(2d) 62. other eases along the same or similar lines or procedure are: Go-Bart Importing Co. v. United States v. MounDay (D. C.) 208 F. 186; United States v. Rykowski (D. C.) 267 F. 866; United States v. Kelih (D. C.) 272 F. 484; Connelly v. United States (D. C.) 275 F. 509; United States t. Alexander (D. C.) 278 F. 308; United States v. Descy (D. C.) 284 F. 724; United States v. Mattingly, 52 App. D. C. 188, 285 922. United states v. Vigneaux (D. C.) 288 F. 977; United States v. Dziadus (D. C.) 289 F. 837; Margie v. Potter (D. C.) 291 F. 285; United States v. Jensen (D. C.) 291 F. 668; United States v. Madden (D. c.) 297 F. 679; United States v. Gaitan (D. C.) 4 F.(2d) 848; United States v. Burns (D. C.) 4 F.(2d) 131; United states v. Smith (D. c.) 23 F.(2d) 929; Berkelhammer v. Potter (C. C. A.) 23 F.(2d) 375; Fabri v. United States (C. C. A.) 24 F.(2d) 185; In re Herter (D. C.) 30 F.(2d) 968, affirmed (C. C. A.) 33 F.(2d) 400; United States v. Slusser (D. C.) 270 F. 818.

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2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

WEEDIN, Com’r of Immigration, v. YEE WING SOON. No. 6336. Circuit Court of Appeals, Ninth Circuit. March 30, 1931. Anthony Savage, U. S. Atty., and Hamlet p. Dodd, Asst. U. S. Atty., both of Seattle, Wash. (John F. Dunton, U. S. Immigration Service, of Seattle, Wash., on the brief), for appellant. Stephen M. White, of San Francisco, Cal., and Hugh C. Todd, of Seattle, Wash., for appellee. WILBUR, Circuit Judge. The appellee claims to be the son of Yee K a eitizen of the United gtates of ^ CMnese raee. Appeliee was born in China &nd applied &r entry ^ ^ United gtates A ü 26 1930 aecompanied by bis ap j d fath Tee Kam. It is coneeded that y, ^ relationsHp 0f father and son exists M elaimed by the ,applicant and by Ms al. leg’ed. father that he is an American eitizen and entitled to admission as such. Appellee was ordered deported by the immigration authorities and was released by the District Court upon habeas corpus proceedings. The immigration commissioner appeals from this decision. The record shows a considerable number of discrepancies between the testi“°7,of the appeüee and two previously landed sons of Yee Kam. The appellee relies upon the- proposition that the witnesses are in accord upon such a multitude of details concerning their home and village and family life as to convince any reasonable man of the truth of their testimony as to their relationship. Appellee, while admitting that to? evidenee shows discrepancies between toe testimony of the father and the alleged son, claimed that such discrepancies are those reasonably to be anticipated in toe testimony of truthful witnesses. At the outset it must be coneeded that there is complete accord in the testimony upon such a multitude of details as would hardly he expected if the claim of relationship did not exist. Indeed, such a complete accord would hardly be anticipated if the relationship did exist unless there was some previous conference between the witnesses to refresh their memory upon the numerous details upon which they might reasonably expect to be examined. in the ease at bar, we have a multitude of agreements upon a great variety of details in the testimony which are quite consistent with the claimed relationship and point with great emphasis to the truth of the claim. On the other hand, we have a discrepancy that is diffieult if not impossible to reconcile with the alleged relationship. That discrepancy we will state in the language of the immigration authorities: “The alleged father testifies that his moth- * er died last year in his house, the claimed i * ,i . ini house of this applicant; that she had been .. . . , . , ** £ 9 to i living m his house for some time before her , ii it , t , ,i , ... .. , death; that he and the son who this applicant . . 9 . , . ,, , . , ,y . claims to be were m that house at the time „ , 1 . . , , i . ,, of her death, which occurred early in the • \ -i . . -, i morning; and that two feasts attended by . , , & \ , « . ., . ... J eight or ten guests from neighbonng villages were held m the day of the funeral. The apv , , .«/i .-i Y r.» , i -1 plicant testifies that his paternal grandmoth- * er died, not m his house, but in the house ,. , TTT. tt i 4.1 i. • . i his brother wing Hok; that prior to her death she always lived in Wing Hok?s house and never in his own; that he was not present when she died or in the same house where she died; that her death occurred about noon; and that no feasts were held and no one came from a neighboring village on the day of the funeral. This disagreement is sharpened by the testimony of the alleged brother that his paternal grandmother never lived in his house " In considering this discrepancy, which is clearly shown by the testimony, it should be noted that the applicant was living with his father, in their home at the time of the death of the grandmother; that he was then nearly twenty years old; and that the incident oecurred less than a year before appellee and his father were examined by the immigration authorities. It is difficult to see how there could be such a discrepancy between the testimony of the father and son if they were living together at the time of her death as they both testify. There is hardly any room for serious claim of forgetfulness or mistake, as the appellee testified definitely as to the fact of the grandmother’s death and the time of it. He remembers the circumstances attending the funeral and identifies her place of burial in accord with the testimony of the alleged father. On the other hand, the diserepancies as to whether or not there was a clock in the house, and whether or not the father carried a watch, taken alone, might well be disregarded as too trivial to justify the See.retary of Labor in his order. It is difficult to understand why the father and son, so re- ^ livinf “ their bome’ sh°^d disa^’ee “ *o whether the one dog about the h°us® was ,yhlte ”blaf- Thevffiage in h aPP®l e® and h\s allefed fatber elalnaed to have beaded consisted of nine houses; the ^atbef tes.tlflfd that were two water buffal°e®.f tbe village belonging to two of the inhabitants thereof, while the son testified ^ere were none. There are other discrepancies in the testimony which we will not pause to enumerate , i, , , except to say that one related to ownership * t , , X ,, * n * ¿i* w ox nee land by the father and the cultivation 7 _ ,, , , thereof by the mother and son and showed, *•„„„„ * , 1, , ,, , , ¿ disagreement which could hardly be expected *«¿7 T • j , j., . , ^ . if the claimed relationship did exist. In view * .1 .,A ,, ., ,, , of these discrepancies it cannot be said that ____ the proceedings before the immigration au,t _ 0 * . m, •, * thonties were unfair. The order of the Dis-, . , c . rPiPasÍTle. armPnPP rpW7.,prl uiiA/u v_/ulllu -Lcicdoiiji; auuciiee is x&vGrssQ, .. , 0 , , , 9 with directions to quash the wnt of habeas corpus, and remand the appellee to the cus-u -u Fi tory from whence he was taken,

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WHARTON v. ÆTNA LIFE INS. CO. No. 8846. Circuit Court of Appeals, Eighth Circuit. March 4, 1931. Rehearing Denied April 15, 1931. KENYON, Circuit Judge, dissenting. W. E. Patterson, of El Dorado, Ark., and T. J. Gaughan, of Camden, Ark. (Patterson & Rector and Walter L Goodwin; all of El Dorado, Ark., and Gaughan, Sifford, Godwin & Gaughan, of Camden, Ark., on the brief),. for appellant. Lasker Ehrman, of Little Rock, Ark. (Grover T. Owens, of Little Rock, Ark., on the brief), for appellee. Before KENYON and GARDNER, Circuit Judges, and MUNGER, District Judge, GARDNER, Circuit Judge. this action appellant as plaintiff be- , , , , rvi . low sought to recover on three life insurance polieies issued by tbe Mtn& Life Insurance Company, appellee, upon 'the life of John Hawkins Wharton. The answer pleaded that false statements and representations had been made by the insured in Ms application for insurance, and that the policies had not become effective because they were not delivered during the good health of the insured. The policies; so far as their provisions are concerned, are all alike, except that two of them are for $10,000 each, wMle the other is for $5,000. They are all of the same date, and the statements in the application for each are identical. The policies all bear date August -^-> 1928, and the applications all bear date 27,1928. The plaintiff is the beneficiary ^ P°^®es> an(f surviving widow of the insured. The insured died November 18, 1928> of aeute nephritis, commonly called Bright’s disease. Each policy contained the „ ,, . x J 8' “Au statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties, and no statement shall avoid the policy or be used in defense to a claim under it unless it is contained in ,, ... , , the written application herefor and unless a « -r* va* • ,, , n , copy of such application is attached hereto -C - j when issued. “This Poliey and the apphcation herefor, a copy of which application is attached her e- / ^ . \\ « w . to and made a part hereof, constitute the en- \ - .. •, ^ tire contract between the parties hereto,-and it sllall be incontestable after it has been in' force during the lifetime of the insured for a period of one year from its date of issue ex-eept for non-payment of premium.” Each policy had attached an application signed by the insured. At the bottom of the application, over the signature of the insured, appears the following certificate: “I hereby certify that the above answers and statements are made by me, that they are correctly and fully recorded by the Medical Examiner, and that no material circumstance or information has been withheld or omitted concerning my past and present state of health and habits of life.” It was urged on the trial that the insured had made false answers to interrogatories 9 and 10 contained in the application. The application was on the printed form furnished by the insurance company, spaces being left in which to write the answers to the interrogatories. At the top of the page on which in-, terrogatories 9 and 10 appear in the application, appear the following printed words in large type: “Application to the ¿Etna Life Insurance Company «•D . o /TT -B-1 1 T 1 n 1 m U “Part. 2. (Use Black Ink Only. To be Pho ographed). Subjoined to this, appears the following pertinent part of the application: “The following answers must be made to and written by the Medical Examiner who should see that each answer is full and satisfactory. Neither the agent nor any third person should be present. If necessary, use space provided under 'Additional and Explanatory Remarks.’ The answers to these interrogatories are in the handwriting of the defendant’s medical examiner, and each application was dated July 27, 1928, and it appears from the evidenee that on that date the insured, who was a resident of Union county, Ark., was solicited by an agent of the defendant company to take out life insurance. He was thereupon examined by the defendant’s examining physician, and in due time the policies issued lmder date August 11, 1928, and were delivered ^he insured August 21, 1928. At the conclusion of the evidence, the defendant interposed the following motion for a directed verdict: “We have moved for an instructed verdict in this ease on the ground that the applicant John Wharton made material misrepresentations in connection with the application in answer to No. 10, that he ^d notconsulted or been treated by a physicían wl™n years.” This motion was granted, and the plaintif£ saved an exception. On this appeal a number of assignments of error appear in the record, but counsel have abandoned all of them, except such as relate to the action of C01lx^ i11 directing a verdict, Where the evidence is of such a character as reasonable men may reach different conclusions, the ease should be submitted to the jury. Mutual Life Ins. Co. v. Hatten (C. C. A.) 17 F.(2d) 889; Crookston Lumber Co. v. Boutin (C. C. A.) 149 F. 680; United States Can Co. v. Ryan (C. C. A.) 39 F.(2d) 445; Gunning v. Cooley, 281 U. S. 90, 50 S. Ct. 231, 233, 74 L. Ed. 720. In eonsidering this question the eourt must assume that the evidence for the party against whom the verdict was directed, proves all that it reasonably may be found sufficient to establish. In other words, it must be accepted as true for the purpose of determining the eorrectness of the court’s ruling. The rule was stated by the Supreme Court in Gunning v. Cooley, supra, as follows: “And in determining a motion of either party for a peremptory instruction, the court assumes that the evidence for the opposing party proves all that it reasonably may be found sufficient to establish, and that from such fae.ts there should be drawn in favor of the latter all the inferences that fairly are dedueible from them. Texas & Pacific Ry. Co. v. Cox, 145 U. S. 593, 606, 12 S. Ct. 905, 36 L. Ed. 829; Gardner v. Michigan Central Railroad, 150 U. S. 349, 360,14 S. Ct. 140, 37 L. Ed. 1107; Baltimore & Ohio R. R. Co. v. Groeger, 266 U. S. 521, 524, 527, 45 S. Ct. 169, 69 L. Ed. 419. Where uncertainty as to the existence of negligence arises from a conflict in the testimony or because, the faets being undisputed, fair-minded men will honestly draw different conclusions from them, the question is not one of law but of fact to be settled oj tne jury. With this rule in mind, we turn to an examination of the testimony. First, it should be noted that the motion for a directed verdict was limited to one issue, to wit, whether the insured made material misrepresentations in answering interrogatory No. 10. It is the settled rule of this court that, in order to predicate error upon the refusal of a court to sustain a motion or request to direct a verdict, the motion or request “must be based upon a specific ground or grounds stated in apt words and brought sharply to the attention of the eourt. * * * A general motion stating no grounds is not sufficient.” Public Utilities Corporation v. McNaughton (C. C. A.) 39 F.(2d) 7, 8; Mansfield Hardwood Lumber Co. v. Horton (C. C. A.) 32 F. (2d) 851; Denver Live Stock Commission Co. v. Lee (C. C. A.) 20 F.(2d) 531. It would defeat the purpose of the rule and be manifestly unfair to the party against whom directed, if a motion for direction of a verdiet, based upon one or more specified grounds, should be held to embrace all possible grounds upon which the motion might be supported. As stated in Robinson & Co. v. Belt, 187 U. S. 41, 23 S. Ct. 16,19, 47 L. Ed. 65: “While it is the duty of this court to review the action of subordinate courts, justice to those courts requires that their alleged errors should be called directly to their attention, and that their action should not be reversed upon questions which the astuteness of counsel in this eourt has evolved from the reoord. It is not the province of this court to retry these eases de novo.” This court in Falvey v. Coats, 47 F.(2d) 856, in referring to this rule, said: “It was due to the lower court that its attention be specifically called to the grounds upon which the motion was based; it was due to opposing counsel so that they might have an opportunity, either intelligently to oppose the motion, or ask to reopen the case for the introduction 0f further testimony, or for leave to amend the pleadings, or to move for a nonsuit; it was due the appellate court so as to enable that court to see whether or not the grounds urged were the same as those presented to the trial eourt. Where a motion for a directed verdict, failing to state the grounds upon which it is based, is denied, it is unfair to the trial court and to the appellate eourt; hut where it is granted, it is unfair to the party against whom it is granted.” We> therefore, put to one side, as not presented by this record, the contention of t]le defendant that the policies were not depvered while the insured was in good health, Considerable testimony was introduced on this issue by appellee. This issue not having been covered by defendant’s motion, we must assume that it was conceded that this was a jury question. It appears from the record that the assured was forty-three years of age and had for many years been a resident of Union county, Ark., where he was employed as a salesman for a wholesale grocery company, During the five years immediately prior to 1928, with the possible exception of a few days when he was afflicted with influenza, he had lost no time from his work, and was apparently in excellent health. He was a man of good habits and. fine physical appearanee. In the late spring of 1928 he entered a campaign for sheriff of his county. During a strenuous campaign for sheriff he traveled over his county some three times. About the last of February or the first of March, 1928, the insured complained to his brother, Dr. J. B. Wharton, a practicing physician at El Dorado, Ark., that the night before he had a special meat dinner that unstrung him; that he felt very uncomfortable over night and was restless; that the next morning when he got up he seemed to have some disturbanee in his urinary affairs and had trouble with the bladder. He wanted the doctor to see him, and they went to the clinic where an analysis of his urine was made, also an X-ray picture of his urinary tract. Several analyses of the urine were made over about a period of a week. The first disclosed albumin, red blood cells, and pus cells. The doctor prescribed Mexican salts as a bowel eliminator and as a laxative, and this continued for about a week. After the first analysis, the albumin, blood cells, and pus cells disappeared from the insured’s urine, and, although the examination was kept up for a week or. ten days thereafter, there was no return of the conditions first found. During this time the insured did not go to bed and lost no time from his work, and soon after-wards entered the campaign above referred to- Dr. Wharton, on being asked whether his brother knew there was blood in his urine, said he thought so. A number of witnesses testified to the good physical condition of the insured for a period of five years prior to August, 1928; that he had not complained of feeling badly, and that during the year 1928 he made a very vigorous eompaign for sheriff of Union county, which concluded in August. On cross-examination, Dr. Wharton testified that he had prescribed for his brother on December 23, 1927, February 12, 1928, February 16,1928, May 9,1928, and July 24, 1928. _ These prescriptions consisted of antimalarial caps^ for cold, calomel, rhubarb, soda, and pepsin as a purgative, Epsom salts and citro carbonate as a laxative, Dovers powder, aspirin and caffeine for a cold, and tincture of aconite for a cold. Some of these prescnptions were signed by the doctor, and some were given over the telephone The doctor, m most instances, communicated with hm brother over the telephone. The doctor testified: “He (the insured usually called me up over the phone and asked me to fix up something lake a p^gative for a cold, and I would call up Mr. HaU and send it to him.” The prescriptions were usually given for a cold or a headache, to relieve constipation or some minor disposition or ailment. The doctor, being asked with reference to citro carbonate, said. “It comes in crystals like effervescing soda. It is pleasant to take. It is a laxative, I gave him that to carry with him. He liked it. I fixed that up and sent it to him at his request. Here is a prescription written on July 24th, Dovers powder, aspirin, caffeine, a few grains of each. He had been in the dust, driving, he said, and his nose and throat were stopped up, had an acute cold. He had just a summer cold and I prescribed that for him. «Q. He wasn’t sick in ted? A. No; he. was ou{¡ }¿s campaign. He had a summer cold. I recollect now I gave him that. I reamember it now since I recollect what I gave p for. And here is one on the same date,.a little solution for rhinitis, to dry up the membrane, a little syrup of emulsion, put that ip lactate, of pepsin, as a vehicle to take along and take a solution of that to dry that up, to relieve the irritation in the nose andi throat. That is just an ordinary prescription to take for a cold. And here is one in 1927, He must have had a little cold. I gave him Some tincture of aconite, atrophine sulphate mixture ’to alleviate a little cold. That was back in 1927, in November.” The doctor testified that the prescriptions, ^rere such as were given to well folks as well as s;e]j folks in that country. The examinations and tests made by Dr. Wharton were, made in the Purifoy-Mayfield Clinie, and he was assisted by Mrs. Aerial Goodwin, teehnicistn, employed at the clinic, and it was she wll0 made the urinalysis, as weU as the X-ray pictures. Both Dr. Wharton and Mrs. Good- ^ testified that they did not disclose to the insured the result of the urinalysis, because they wished first to see whether it amounted to anything, and that when they found on the nexfc day that it had cleared up, and there was n0 return of the condition, they themselves thought nothing further about it. ■ ^ tion ag to whether or nofc insured waa in d health on the 21st A t 1&28 wllen the policies were deliyered testi was intr;dueed) showing the result of another examination made .of insuxed,g urine on the 22d 23d or 24t]l of Au; 1928 and based Qn result of that examinati which showed albumin, a few eells and anular oastg ts testi_ fled for the defendant that, if on that date the showed albumin and granular east ^ condition of the insured WOuld be thfl game Qn fte 21st o£ A t E rts £or ^ laintíff however denied this contentionj testifying that at least, without a fuller showag to the health and condition of the patient, it could not be said what the condition of his health would be on any preceding day, as the disease with which he died frequently developed very rapidly. On the 25th of August, 1928, the insured left for Hot Springs, Ark., where he was treated, 'and' there is no question but that from that timé' on he suffered from acute nephritis, or Bright’s disease, dying therefrom November 18, 1928. As before observed, the issue as to whether the insured was in good health when the policies were delivered is not before us because not covered by the motion, but it is clear that the testimony on the question was such as to make it a jury question. ' Referring to interrogatories 9 and 10 the answers to which it is claimed by the defendant were knowingly false, it is again observed that the motion for directed verdict limited the ground to the answer to mterrogatory 10 However, m considering the ques-turn as to whether the answer to interrogatory No. 10 was knowingly false, it is necessary to refer to the answerto 9c, supra, and hence, liberally construed, the motioni may be said to. cover the answers to both of these mterrogatories. Question 9e was whethj he had consulted a physician or had suffered from any ailment or disease of the stomach, intestines, liver, kidneys or bladder, and his answer was “Yes.” . Under the heading “Nameof disease’’ appears theword “Appendicitis”; under the heaffmg “No. of attacks” appears the number “1”; under the heading Date” appears lOlo’ ; under the heading “Duration” appears the words “1 Mo.”; under the heading “Severity” appears the word “Acute”; under the heading “Result (if within five years name and address of each physician consulted)” appears the words “Appendectomy — without drainage — reeovery.” The disease and operation not having occurred within five years, he was not required to give the name of any physician and did not do so. The directions to the medical examiner, printed at the head of the page, were to the effect that the examiner should see that each answer was full and satisfaertory. The examiner who made out the application, although available, was not called Iby the defendant. .Can it be said that this answer was false The answer was m the affirmative, and that . . , . • was certainly not a false answer, but it is i • 7 ,, , ,, 4. i 'i „ claimed that the answer taken as a whole nee-•i • 7 , 7 , „ essarily meant that the insured had not con-. ,, . , • • . .7 ,. - , sulted a physician at any other time, and had not suffered from any ailment or disease other than appendicitis: The blank being furnished by the insurance company, and the answers being written by its examining physidan and he not being called, and the insured being dead, left this interrogatory and ansyer standing alone for interpretation. The defendant’s examining physician might have aided the court and jury, had he been placed upon the witness stand, and under these eircumstances we are of the view that it cannot be sfid f*at all reasonable men must have, concluded that the answer to this mterrogaknowingly false The jury might haveRelieved from the evidence, and the fa™rabl® inferences that might reasonably have beenA d™ ^ ^ ¡ ments from much the insured had suffered W0 of a tóvial ebaraet sneh ^ cold eon_ sti ti beadacbe> and ^ attack of tbe fllI) anfl mi M bonestly bave been believed by H as well as b Ms esamining pbysieian, to ^ be<m q£ nQ e uenee. It must be bome ^ mind tbat tbe uncontradioted 6vi. dence was to the effect tbat tbe insured was aQ aeti robust, and apparently healthy M(1 tbat be was not advised ^ to the result of ^ urinal is made b Dr. wbar. t(m and Mrg- Goodwin ^ February or March, 1928 and view o£ ae £aet tfiat thereafter be condllcted a strenu0.us campaign and was not eonflned to bed Untu ^ tbe date o£ ^ a lieati tbe jury might reasonably have coneluded t.bat neither he nor his phygieÍ£m realized tbat be was afflieted even in an incipient stage, with the disease which ultimately eaused bis death. % one o£, tellm°^^le sb°uld be bere ffidered Dr. Wharton, after testifying that.he had_not advised the msOTed 98 to fbat the examination revealed, waa interrogated as follows: KQ- He told you he had blood in the urine? A. He thought it was.” This, to a physician, might indicate a serious condition, but apparently even from a medical standpoint the symptom was not neeessarily serious. The insured, however, was a layman. The symptoms disclosed disappeared, and inasmuch as his physician did not seem to consider the symptoms serious, and did not advise the insured that it was serious, but permitted him to continue in a strenuous occupation, whereas, had the doe- , ,, . , . / . ,,, ,. tor thought him afflicted with Bright’s djs- . ° .., ., , , , , ease, he should have prescribed complete rest, ’ ,. . y, . /, . ,. ’ reasonable men might have concluded that ,, ...... neither the insured nor his physician knew . ,. , ... .. , that the symptoms disclosed a diseased con- .... * ■ ^ . dltlon °£ E a T7 S more a trmal disturbance, Misrepresentations will not void a policy unless the insured knew they were false, or he were chargeable with such knowledge. Seeurity Life Insurance v. Brimmer (C. C. A.) 36 F.(2d) 176, 179; Bankers’ Reserve Life Co. v. Matthews (C. C. A.) 39 F.(2d) 528, 537; Moulor v. American Life Ins. Co., 111 U. S. 335, 4 S. Ct. 466, 28 L. Ed. 447; Mutual Life Ins. Co. v. Hilton-Green, 241 U. S. 613; Northwestern Mutual Life v. Wiggins (C. C. A.) 15 F.(2d) 646; New York Life Ins. Co. v. Griffith (C. C. A.) 35 F.(2d) 945; Adler v. New York Life Ins. Co. (C. C. A.) 33 F.(2d) 827; Metropolitan Life Ins. Co. v. Johnson, 105 Ark. 101, 150 S. W. 393. In Bankers’ Reserve Life Co. v. Matthews, supra, this court said with reference to misrepresentations alleged to have been falsely made: “Being representations, they do not void the contract, even though untrue in faet, provided they were honestly madé in the belief by insured that they were true. That is, they must be both untrue and knowingly falsely made by insured.” In Security Life Insurance v. Brimmer, supra, this court said: “Ordinarily false representations will not avoid a policy unless the assured knew they were false, or he were chargeable with sueh knowledge.” The burden of proof was, of course, upon the defendant, and fraud is not to be presumed. An applicant for insurance is not required, nor indeed expected, to disclose the faet of consulting a physician for slight or temporary ailments such as an ordinary cold, inability to sleep, constipation, headache, or the like. Adler v. New York Life Ins. Co. (C. C. A.) 33 F.(2d) 827, 832; Bankers’ Life Co. v. Hollister (C. C. A.) 33 F.(2d) 72, 74; Connecticut Mutual Life Ins. Co. v. Union Trust Co., 112 U. S. 250, 5 S. Ct. 119, 28 L. Ed. 708; Mutual Reserve Life Ins. Co. v. Dobler (C. C. A.) 137 F. 550; New York Life Ins. Co. v. Cumins (C. C. A.) 24 F.(2d) 1; Ward v. Standard Accident Ins. Co. (C. C. A.) 30 F.(2d) 328, 63 A. L. R. 842; New York Life Ins. Co. v. Moats (C. C. A.) 207 F. 481; Miller v. Maryland Casualty Co. (C. C. A.) 193 F. 343. In the case of Adler v. New York Life Ins. Co., supra, greatly relied upon by the defendant, it is said: “It may be that failure to remember diseases or treatments or omissions of sueh as are honestly thought to be trivial or not within the meaning of the questions in an application may disprove the presence of fraud.” Tn Bankers’ Life Co. v. Hollister, supra, the defendant contended that an answer to a similar question was false, and in the course of the opinion it is said: “Furthermore, the application must be liberally construed in favor of the insured, and, under the weight of authority, an applicant for insurance is not required or expected to disclose the faet of employing or consulting physicians or surgeons for slight and temporary ailments which leave no trace of injury to health, such as an ordinary cold or inability to sleep because of occasional excesses, such as existed in this case.” In the instant case the insured categorically answered the interrogatory in the affirmative. He did not say that the only time he had consulted a surgéon or had any ailment was when he had appendicitis, and he was not required to give the name of the physician unless the consultation had occurred within five years. The jury might, under the evidence, have believed that the insured in good faith believed that, except for~ the appendicitis, all other ailments for which he had consulted a physician were of a trivial character) To void this policy on the ground of false representation, the answer must not only have been untrue, but it must have been with reference to a material matter, and must have been knowingly false. When it is doubtful whether the misrepresentation was material or not, the question of materiality must be submitted to the jury. Passing now to the answer to interrogatory No. 10, it is observed that by this interrogatory, the insured was asked whether he had consulted or been examined or treated by any physician or practitioner not named above, within the last five years. The record shows that he had not consulted nor been treated by any physician, except his brother, Dr. J. B. Wharton. In the preceding answer, he had stated that he had consulted a physician. He had in faet consulted but one physician; so when, in interrogatory 10, he was in effect asked what physician not named above he had consulted, having in mind that he had consulted only one physician, he answered “None.” This may have left the an-' swer somewhat ambiguous, but not necessarily knowingly false. What has been said with reference to the materiality of the matter involved in the answer to interrogatory 9 is, of course, equally applicable here. Not only was the printed matter in this application furnished by the defendant, but the written matter was placed therein by defendant’s representative, so that the entire application, printed and written, was prepared by the defendant; If the application then, as .a whole, was ambiguous, this ambiguity was attributable to th© defendant rather than the insured, and as said by this court in Business Men’s Assur. Co. v. Campbell, 32 F.(2d) 995,. 997: “ ‘The rule is settled that in case of ambiguity that construction of the policy will be adopted. which is most favorable to the insured.’ Mutual Life Ins. Co. v. Hurni Packing Co., 263 U. S. 167, 44 S. Ct. 90, 68 L. Ed. 235, 31 A. L. R. 102. In the absence of fraud, the applicant’s failure to disclose facts about which no questions are asked will not avoid a policy.” We are of the opinion that under the testimony in this case, with such favorable inferences as might reasonably have been drawn therefrom, the most that can be said is that the facts and attendant circumstances were such that fair-minded men might reasonably draw different inferences or conclusions therefrom, and hence the ease was one for the jury and not for the court to decide. The judgment of the lower court should be and is reversed, and the cause remanded, with directions to grant the plaintiff a new trial. KENYON, Circuit Judge (dissenting). My firm conviction that the trial court was right in directing a verdiet for the defendant in this case forces me to dissent from the opinion of the majority. The motion to direct a verdiet was on the ground that the applicant made material misrepresentation’s in answering question 10 of the-application. I think the assigned reason of the motion is immaterial if the judgment below was in fact a right one. Stipcich v. Insurance Co., 277 U. S. 311, 48 S. Ct. 512, 72 L. Ed. 895. The insured received from defendant three policies of life insurance, aggregating $25,-000. Applications were signed on July 27, 1928. The policies were dated August 11, 1928, and were delivered to insured on August 21, 1928. The insured died on November 18, 1928. Insured had $7,000 of insurance on his life prior to these policies. The policies provided in article 10 that statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties. In my judgment there was no absence of fraud in this matter. The evidence seems overwhelming that the whole performance was an ingenious fraud practiced upon the insurance company, and hence the statements were not merely representations. However, that is not of controlling importance. The applications for the policies contained as stated in the majority opinion questions and answers, the important ones being 9 and 10. The application contained the following: “I hereby certify that the above answers and statements are made by me, that they are correctly and fully recorded by the Medical Examiner, and that no material circumstance or information has been withheld or omitted concerning my past and present state of health and habits of life. “Dated at, El Dorado Arkansas,, this 27, day of July 1928. “In presence of L. L. Purifoy, M. D. Proposed Insured must sign here ‘John Hawkins Wharton.’ ” I refer to some of the evidence. Mrs. Goodwin, who conducted the Purifoy-Mayfield Clinic, testifies that, in the late winter of 1927 or early spring of 1928, the insured came to the clinic in company with his brother (Dr. Wharton); that she made pictures of his urinary tract and 'examined a specimen of his urine; that Dr. Wharton directed her to make X-ray picture of the urinary tract; that insured came to the clinic alone quite frequently and left specimens of urine on different occasions; that she made these examinations for a week or ten days and made the reports to Dr. Wharton; that the next time Dr. Wharton was there was the 22d or 23d of August, 1928; that he brought a specimen for the urinalysis test; that a report on that was made to Dr. Mayfield, and within a day or two insured went to Hot Springs. These tests showed a very bad condition of the-kidneys and bladder, to which reference is hereinafter made. Dr. Wharton testified as to the general examinations of his brother, the insured, of the making of X-ray pictures of his brother’s urinary tract; that he took him to the clinic the first time he was there; that his brother brought Mrs. Goodwin specimens for analysis of his urine several times, and that Mis. Goodwin was acting for him in making these urinalyses; that his brother told him of having blood in the urine. Dr. Wharton testified there was no doubt that insured had consulted him as a physician during the five-year period. The evidence shows he doetored him for kidney and bladder trouble, and that he was troubled about his brother’s condition right up to the time the policies were issued. The question involved is not alone the knowing false answers to questions 9 and 10. but whether insured fraudulently withheld material information from the insurance company as to his past or present condition of health. As to the alleged false answers, it is of course true that material false statements in an application for insurance as to consulting a physician relieve an insurance company from liability if the insured knew that the statements were false. New York Life Ins. Co. v. McCarthy (C. C. A.) 22 F.(2d) 241; Security Life Ins. Co. of America v. Brimmer (C. C. A.) 36 F. (2d) 176; Bankers’ Reserve Life Co. v. Matthews et al. (C. C. A.) 39 F. (2d) 528. Question 9 is as follows: “Have you consulted a physician or practitioner for or suffered from any ailment or disease of: * * * “e. Stomach, Intestines, Liver, Kidneys, or Bladder? “Yes, Appendicitis, 1 attack, Date? 1913, Duration? 1 month. Severity? Acute. Results? Appendectomy — without drainage— Recovery.” Did the term appendicitis give any information as to his kidney or bladder trouble? Is the answer to question 10 any fairer or more honest? He was asked in 10 if he had been treated by any physician or practitioner not named above. He said, “No.” No physician was named above, and the evidence shows he had consulted his brother frequently, and he consulted other physicians about the time the policy was issued, though perhaps shortly thereafter. He had had many examinations in the five months preceding that time at the Purifoy-Mayfield Clinic. Why did he not say so in answer to interrogatory 10 ? Why did he not tell about the examinations of his blood and urine by Mrs. Goodwin? It cannot be said that his brother was not another physician than referred to in question 9, because there was no particular physician referred to in 9. The answer to 10 is therefore clearly false, though both answers show a considerable cunning in the effort to conceal the truth as to insured’s physical condition. These answers conveyed no information to the company as to his real condition, which he must have known. All he disclosed was that he had been treated for appendicitis. It was a partially true answer, which may be more deceptive than a falsehood. Truth may be concealed, as well as revealed, by language. The purpose of the application was to secure facts as to his physical condition. He carefully.and ingeniously concealed them. How can it be said that no material fact was knowingly withheld from the insurance company by the insured as to the condition of his health? This relationship demanded good faith both from the insured and from the insurance company. The Supreme Court in Mutual Life Insurance Co. v. Hilton-Green, 241 U. S. 613, 624, 36 S. Ct. 676, 680, 60 L. Ed. 1202, said: “Beyond doubt an applicant for insurance should exercise toward the company the same good faith which may be rightly demanded of it. The relationship demands fair dealing by both parties.” The same point is stressed in Stipcich v. Metropolitan Life Insurance Co., 277 U. S. 311, 48 S. Ct. 512, 72 L. Ed. 895; and in Adler v. New York Life Ins. Co., 33 F.(2d) 827, 832, this court says: “Also, the evidence leaves no doubt of the materiality of the matters concealed. In addition, it is difficult to imagine an honest frame of mind in an applicant who thinks it would be immaterial for an insurer to know that he had been under practically continuous treatment for more than two years immediately preceding and at the time of the application.” The language of this court in Mutual Life Ins. Co. of New York v. Hurni Packing Co., 260 F. 641, 645, is interesting: “A chief part of any insurance company’s business is a discrimination in selecting risks lest the natural and average losses may be exceeded. The purpose of the inquiries made as to prior consultations or treatments-by physicians is to furnish to a life insurance company the information, either that the applicant has had continuous prior good health or the names of the practitioners consulted, so that the company may decide what further inquiries should be made in view of such disclosures. That such consultations were for what seemed to the applicant or his physician but trivial ailments is beside the question. It is the materiality to the company’s investigation and decision as to acceptance of the risk that is involved.. Inquiries as to prior attacks necessitating the attendance of physicians may disclose information not to be found by the medical examiner’s own efforts. The history of the patient may be quite essential to supplement a physical examination.” Could anything be conceived more untruthful in an application, in view of all the facts, than a statement that nothing was concealed from the company concerning the insured’s past and present state of health ? Eor seven months prior to the application he had been consulting his brother, a physician, and having prescriptions given him. Albumin and pus in the urine are not small or trivial matters, as are sometimes referred to by the courts. They are more than colds and headaches, they are symptoms of incipient Bright’s disease, and a man associating so closely with a doctor brother as this insured did and in constant communication with him must have known his condition. It is contrary to human nature to think it was not fully discussed between them. On his first visit to Mrs. Goodwin’s laboratory in the early spring of 1928, she found albumin, blood, and pus cells in his urine. Was not the company in any semblance of fair treatment entitled to know this before issuing policies for $25,000 ?. She reported to Dr. May-field on the 23d or 24th of August, almost exactly the date of the policies, that her tests then showed a heavy increase of albumin. Was a man in this condition a well man on August 22d When the policies were given ? If the insurance, company had known of the first examination and the pus and the blood in the urine, would it have issued the $25,000 of policies on the life of the man who had taken only $7,000 of insurance when he was well? After the discovery at the second examination that the albumin had greatly increased over what it was at the first examination, the insured with his $25,000 policies, which he could not have secured except by deceiving the insurance company, went to Hot Springs, Ark.,for treatment, and within three months died from Bright’s disease, the very thing that the evidence -shows -he had when the policies were issued. Was there no deception' practiced upon the company? The testimony of his own brother, naturally somewhat reluctantly given, condemns the transaction. Insured consulted him within three days preceding the applications for the policies. If that fact had been disclosed in the applications, would any policies have been issued? In Stipcich v. Metropolitan Life Ins. Co., 277 U. S. 311, 322, 48 S. Ct. 512, 515, 72 L. Ed. 895, the Supreme Court said: “But the respondent’s answer sets up that certain answers given in the written application as to the insured’s recovery from his earlier illness, its--recurrence, and with respect to consultation of -physicians, were false and known by him to be false when he signed the application. It is now suggested that Stipcich in his application made a positive misrepresentation regarding a visit to a physician the day before he applied for insurance. If that were clearly established we would consider it necessary to affirm the judgment below, although we think the rulings on which it was based erroneous.” My mind is unable to reach any other conclusion than that the insured made false answers to interrogatories 9 and 10 of the applications, and that he knew they were false; that his statement that no material circumstance or information had been withheld or omitted concerning his past and present state of health was absolutely false and known by him to be false. Prom the evidence it is also apparent that he was not in good health on the date of the delivery of the policies and that he. knew he was not in good health. It was his duty to make that fact known to the company. This whole transaction smacks of fraud. "When insured was well he needed only $7,000 of insurance; when marked for death by Bright’s disease he secured $25,000 more by fraudulently concealing from the insurance company his true condition. No one would claim that these policies would have been issued if the company had known his true condition of health. It was his business to tell it the truth. He did not do so. Why then should his beneficiaries profit by this fraud? Appellant is not entitled to recover as a matter of law. It seems to me the trial court on this record could not have permitted a verdict for plaintiff to stand, and hence did right in instructing a verdiefc,

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NICHOLS et al. v. UNITED STATES. No. 6019. Circuit Court of Appeals, Fifth Circuit. March 30, 1931. Jno. W. Gaines, Jr., of Tampa, Fla., for appellants. W. P. Hughes, U. S. Atty., of Jacksonville, Fla. (W. P. Hughes, U. S. Atty., and Louis S. Joel, Asst. U. S. Atty., both of Jacksonville, Fla., on the brief), for the United States. Before FOSTER, Circuit Judge, and HUTCHESON and SIBLEY, District Judges. SIBLEY, District Judge. Under an indictment in five counts for using the mails to defraud, Claude Nichols and J. W. Nichols were convicted on all counts, J. B. Nichols on three of them, and Nell Sellers Smith on one. Upon their appeal the assignments of error relate to the sufficiency of the indictment, the refusal of the court to direct a verdict of not guilty, the rulings on evidence, and the instructions to the jury. The fraudulent plan is set forth fully in the first count. The remaining counts do not repeat it, but each after a formal preamble as to the time and venue alleges: “Said defendants so having devised said scheme and artifice to defraud said Central States Life Insurance Company of St. Louis, Missouri, as hereinbefore set forth and described, in pursuance of said scheme, etc.,” used the mails in a stated way. The objection is that the counts, except -the first, set forth no crime because they do not allege any scheme or artifice to defraud; there being no express adoption of the allegations of the first count. That reference may be made to another count to avoid repetition is well settled. Crain v. United States, 162 U. S. 625, 16 S. Ct. 952, 40 L. Ed. 1097. That a reference in the very form above set forth is sufficient was held in Clark v. United States (C. C. A.) 298 F. 293. The evidence, though circumstantial, was sufficient to carry the case as to each appellant to the jury. It was contended by the prosecution that in 1926, in Lakeland, Fla., Claude Nichols and J. W. Nichols, his brother, planned to take out life and aeeident insurance in favor of .a fictitious person called William Edward Smith, to keep it in force a while, and then have a fictitious accidental death of Smith and collect the policies through a pretended widow. The evidence shows that insurance for $25,000 with double indemnity in ease of accidental death was procured in the Central States Life Insurance Company, payable to the estate of Smith, and the policies were received and the first premium paid by Claude Nichols. Other policies issued by Shenandoah Life Insurance Company were never delivered because Smith was not produced to be re-examined, or to receive the policies in person. All communications by mail about the insurance were to be through a mail box in Lakeland, Fla., rented in the name of William Edward Smith, whom the postmaster did not know, but through one William Elbert Smith, whom he did know. All premiums that were paid were paid by or through the two Nichols, or by cashier’s checks mailed from places where one of them had been. The policies went into default, and, the company not being able to find Smith, a reinstatement was effected through Claude Nichols. Conflicting statements were made by him about the home of Smith. In February, 1929, Claude Nichols made inquiries in Lakeland about the moral character of the stenographer of a friend there, and whether she would like to make a nice piece of money, but the matter was not followed up. The policies again fell into default, and would become-wholly void" on June 16, 1929. On June 9, 1929, Nell Sellers, the stenographer of J. B. Nichols, who was another brother practicing law at Miami, being on vacation at her parents’ home at Jacksonville, went in company with J. W. Nichols and another man through the rain from Jacksonville to Waycross, G.a., where Nell Sellers and the other man under the name of William Edward Smith were married by the judge of the court of ordinary under a license there procured and paid for by Nichols. The ordinary and his son identified this Smith as the William Elbert Smith of Lake-land; he, however, proving a very good alibi. . The bride and groom went hack with Nichols to Jacksonville. The next day the bride returned to her father’s home and the groom and J. W. Nichols went on to Miami, and on June 13th, joined by J, .B: Nichols, went fishing in Biscayne Bay. At dusk, in a rain squall as to whose occurrence there is dispute, the two Nichols claimed that the boat was overturned, and all three men precipitated into the water, where Smith seemed to drown, but without struggle or sinking, the body floating for some half hour with the face downward, and that they were unable to rescue him, though they were expert swimmers. Becoming exhausted, they swam ashore, and the body floated out to sea in their presence and was never recovered. They saved the boat, however, and came back in it and reported the tragedy. The policies 'were found in the office of J. B. Nichols. He and J. W. Nichols made affidavits of the death, and Nell Sellers executed a proof of death and claim as widow for the insurance. Payment was refused. Inquiry in the county in Florida where the application for insurance stated that William Edward Smith was born was without result. Nothing could be ascertained of his existence in Lakeland. No relative, friend, creditor, debtor, or business associate inquired for him at Miami. No trace of any property or papers or business of his could be found. The- apartment of Nell Sellers was searched in her presence, and, though she claimed that Smith had lived there with her whenever he was in Miami for a year before their marriage, no clothing, papers, or effects of his were found there. She could show no photograph, letter, or keepsake from him. A few persons testified to knowing such a man slightly through introduction to him by Nell Sellers or one of the Nichols, and that this acquaintance w.as not William Elbert Smith, who was alive and at the trial. It was testified that the tide was at full ebb or coming in at the time the drowning was claimed to have happened, and that the body, like the boat, would not have gone out to sea, and that except for a narrow ship channel there was no water at the place which could not be waded at low tide. Experts swore that the body of a drowning person sinks after rising two or three times, and remains under water for forty-eight hours or longer, after which it again rises and floats face up; but there was some dispute as to this. The mailing of letters about the insurance premiums by Claude Nichols, of the affidavits concerning the death by J. B. and J. W. Nichols, and of the proof of death and claim for the insurance through the insurance agent, were the uses of the mail relied on for conviction. Neither appellant testified. The evidence thus stated in outline made a question for the jury as to what th,e truth was, and whether there was any reasonable theory of innocence which would explain all the facts. The jury might well conclude that the insurance was fraudulently taken out, and that no drowning occurred; Nell Sellers being taken into the scheme to pretend a marriage and become the sole heir on promise of some sort of division of the money. Although she did not personally mail anything, she executed the insurance claim, intending that it should be mailed to the company by its agent, as it in fact was. She thereby caused the mail to be used to carry out the scheme. She was convicted only on the last count, which relates to the mailing of this paper. There was no error in submitting the case to the jury. The cashier’s cheeks sent to the insurance company in payment of premiums had nothing on them or accompanying them to show who sent them. Each one came through the post office of a place at which one of the Nichols had resided. The objection that it was not proved that either of them had sent the checks was not good. The payment of the premiums to keep the insurance in force was part of the res gestas, what happened about the insurance. That it was only shown that the Nichols might have paid them rendered the evidence of little weight, but did not make it inadmissible. The testimony of persons at Lakeland, such as the postmaster, that they had never known of a William Edward Smith there, that his name was not in the city directory or telephone books, and that on inquiry they could not learn of him, was admissible. Had they been persons with no especial opportunity to' know the residents of Lakeland, and had they made no inquiry for Smith, their not knowing him would have proven nothing. But the burden of showing that no such person had lived in Lakeland could have been borne in no other way than by such proof as was offered. While not a demonstration, it was some evidence of the negative fact to be proved. 23 C. J. “Evidence,” §§ 1762, 1790. Testimony was admitted that J. B. Nichols seemed nervous while investigation was in progress touching the boat used on the fishing trip. This was, of course, as objected, a conclusion or opinion of the witness. But where the impressions giving rise to the conclusion cannot be given to the jury so as to enable them to draw the proper conclusion as well as the witness, the conclusion of the witness in connection with the best details of his observations that he can give is allowable. Mayor v. Wood; 114 Ga. 370, 40 S. E. 239. This rule is constantly applied to interpretations of expression of the face or the demeanor of an observed person. 22 C. J. “Evidence,” § 705. Evidence that Claude Nichols on his way to Miami in February, 1929, inquired at Lakeland as to the moral character of his friend’s female stenographer, and whether she would be interested in making a nice piece of money, was not irrelevant. It was admitted as tending to show that Claude Nichols was seeking a widow for William Edward Smith, later found in Nell Sellers at Miami. The testimony of physicians and others who had had long and varied experience with drowning .and drowned persons as to the behavior of the bodies of such was correctly allowed. This was a proper field for expert testimony, and expertness can come through experience as well as special education. 22 C. J. “Evidence,” § 606. We have examined the instructions to the jury complained of, and find no cause for reversal therein. Affirmed.

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OLYMPIC SALT WATER CO. v. SHIPOWNERS’ & MERCHANTS’ TUGBOAT CO. No. 6208. Circuit Court of Appeals, Ninth Circuit. March 9, 1931. Rehearing Denied April 13, 1931. Morrison, Hohfeld, Foerster, Shuman & Clark and Forrest A. Cobb, all of San Francisco, Cal., for appellant. Thacher & Jones, of San Francisco, Cal. (Thomas A. Thacher, Harrison A. Jones, and W. Kevin Casey, all of San Francisco, Cal., of counsel), for appellee. Before RUDKIN and WILBUR, Circuit Judges, and N0RCR0SS, District Judge. NORCROSS, District Judge. This is an appeal from a deeree of nonliability in favor of appellee as owner of the American tug Sea Ranger, awarded upon its petition for exoneration from and limitation of liability filed in pursuance of the provisions of sections 183-188, 46 USCA. Appellant filed a claim for damages to its wharf and an answer alleging such damage was occasioned by the negligence of said tug and its owner in attempting to tow the disabled steamer Yosemite into San Francisco Bay, on account of which negligence the tow was lost outside the Golden Gate and the wreck came ashore, subsequently colliding with the wharf, causing damages in the alleged sum of $38,000. The question of negligence is presented in connection with the following main facts: About 1 o’clock a. m. February 7, 1926, appellee heard that the wooden steam schooner Yosemite was in distress in the vicinity of Point Reyes. At 3:45 a. m. appellee dispatched the tug Sea Ranger to assist or salvage the Yosemite. Four hours later the tug located the then abandoned vessel, which was in a partially submerged condition. A hawser was placed on board and the tug proceeded towards San Francisco with the Yosemite in tow. About 9 p. m. the San Francisco lightship was reached, at which point approximately two-thirds of the towage, had been performed, the destination being Butehertown flats in San Francisco Bay. The bar preceding the main ship channel entrance towards the Golden Gate was crossed at about 12:30 a. m. February 8th. After crossing the bar and proceeding for about two and one-half miles in the main ship channel entrance, the Yosemite, or her after end, sank and touched bottom. About 3:30 a. m. the tug parted the hawser. The sunken vessel was left in the channel and the Sea Ranger returned to San Francisco. At about 7:40 a. m. of the same day, February 8th, the main portion of the hull of the Yosemite was found by the beach patrol of the Coast Guard ashore about one-quarter of a mile south of appellant’s wharf. The vessel remained stranded at that point on the ocean beach for four days and until February 12th, when by reason of a severe storm the hulk was lifted off the beach and floated north, striking and injuring appellant’s wharf. The court below found: “That the petitioner’s tug ‘Sea Ranger’ was not negligent in determining to tow the steamer ‘Yosemite’ into San Francisco Bay through the Golden Gate; that there was no negligence in selecting the main ship channel for this purpose; that there was no negligence in attempting the passage of this channel under the conditions of weather and tide then prevailing; that there was no negligence in the conduct of the navigation of tug and tow; and that the grounding and breaking away of the ‘Yosemite’ was not due to any negligence on the part of the ‘Sea Ranger.’ ” Counsel for appellant contend that practically all the testimony on the issue of negligence is by deposition, including all of appellant’s testimony, and being an admiralty appeal and hence a trial de novo, this court is in as good a position as the trial court to determine such issue. The testimony of Captain Genereaux, who, at the time of the injury, was in command of the Sea Ranger, was taken upon the part of appellee by deposition. The testimony of Captain Clark, who was also at the time in the employ of appellee and on board the Sea Ranger, was taken by deposition upon the part of appellant. It is the contention -that the testimony of Mate Gallagher of the Sea Ranger and that .of Captain Johnson, who at the time was Warrant Officer in the Coast Guard and in charge of the Point Bonita Coast Guard station, “contribute nothing to the facts”; that “they were used especially as experts”; that “it is on the testimony of Captain Genereaux and Captain Clark alone that the facts bearing on the issue of negligence must be determined.” The contention that the facts bearing on the issue of negligence must be determined alone from the depositions of Captains Genereaux and Clark is not supported by the record. Captain Johnson, who had been in the Coast Guard Service on the Pacific Coast for thirty-six years, fifteen of which had. been spent in and about the Bay of San Francisco, was not only qualified as an expert, but was a witness to most of the occurrences from the time the towage started. He was aboard the tug at the time it crossed the bar and at the time it parted the hawser. He then returned to his power launch, which had been accompanying the tow, stating he would stand by to warn traffic of danger. This case is not within the rule applied by this court in the case of The Santa Rita, 176 F. 890, 893, 30 L. R. A. (N. S.) 1210, where it was observed “that libelant’s principal witnesses, * 'i: * testified by depositions,” but comes within the general rule re>ferred to in the opinion in that case and frequently applied by thi% court in other eases, to the effect that the findings of the trial court upon conflicting testimony should not be disturbed except for manifest error. Sorenson v. Alaska S. S. Co. (C. C. A.) 247 F. 294; The Beaver (C. C. A.) 253 F. 312; The Hardy (C. C. A.) 229 F. 985; The Yucatan (C. C. A.) 226 F. 437. Error is assigned in the failure of the court to find that the petitioner “negligently abandoned the ‘Yosemite’ without attempting to secure her or to anchor her, or to prevent her from breaking up.” The court below found from the evidence “that the grounding and breaking away of the ‘Yosemite’ was not due to any negligence on the part of the ‘Sea Ranger.’ ” There' is, no showing that the Sea Ranger or its owners failed to perform any duty required subsequent to parting the hawser. The Yosemite sank, and further towage was out of the question. The officer in charge of the Coast Guard station was on the scene, and stated he would stand by in his power launch to warn any traffic of danger from the sunken vessel. The next morning the main portion of the hull of the sunken vessel was found by the Coast Guard on shore. The vessel was a wreck. The following day the owners of the Yosemite abandoned her and surrendered the vessel’s documents at the United States Custom House at San Francisco. After abandonment the wreck was subject to removal by, the United States. 33 USCA § 409. In the case of Red Star Towing & Transportation Co. v. Woodburn (C. C. A.) 18 F.(2d) 77, 79, the court said: “A tugowner is no more responsible for the eventual collision, when he himself suffers from his earlier fáult, than when another is the victim. The statute establishes a new duty arising after the sinking, and demanding as its condition nothing but the fact and notice of it to the wreck owner. Though the tug be a guilty party to the original mishap, the duty is not ordinarily upon her to provide against further loss; the statute imposes the duty upon the owner alone, and absolves the tug from subsequent consequences, which conceivably might otherwise be thought to be the proximate result .of her original fault”. See, also, the ease of The Anna M. Fahy (C. C. A.) 153 F. 866. Deeree affirmed.

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NAGLE, Commissioner of Immigration, v. LIM FOON. No. 6200. Circuit Court of Appeals, Ninth Circuit. March 16, 1931. Geo. J. Hatfield, U. S. Atty., and Albert C. Wollenberg, Asst. U. S. Atty., both of San Francisco, Cal., for appellant. Stephen M. White, of San Francisco, Cal., for appellee. Before BUDKIN and WILBUR, Circuit Judges, and NORCROSS, District Judge. NORCROSS, District Judge. This is an appeal from an order and judgment granting a writ of habeas corpus and discharging the petitioner, appellee, from the custody of appellant. The proceeding was heard upon the allegations of the petition. The salient faets therein alleged are as follows: The petitioner is of Chinese descent, bom in China. In June, 1908, he was admitted to the United States by the immigration authorities of the port of San Francisco under the status of a minor son of a lawfully domiciled Chinese merchant. In June, 1915, the petitioner pleaded guilty to the crime of murder in the first degree before the superior court of San Joaquin county, Cal., and was by that court sentenced to life imprisonment at the State Penitentiary at San Quentin, from which institution he was paroled in 1925. From the date of his admission in 1908, petitioner resided and remained in the United States until November, 1927, when he departed through the port of San Francisco for a temporary visit to China. At the time of his departure he was in possession of a so-called laborer’s return certificate, form 432, issued to him by the immigration authorities for the Port of San Francisco on the 18th day of October, 1927. Prior to the issuance of such certificate, the matter of petitioner’s prior conviction, prison service, and parole was investigated and known to the authorities issuing the certificate. In July, 1928, petitioner returned from his visit to China to the port of San Francisco, and, upon presenting his said certificate to the immigration authorities, was permitted to enter the United States. Following his admission last mentioned, petitioner continued to reside and remain in the United States until September 21,1929, when he departed therefrom through the port of San Francisco on a round trip voyage on the steamship Malolo as a member of its crew. At the time of his last-mentioned departure, he was in possession of a so-called laborer’s return certificate, form 432, issued to him by the immigration authorities. The steamship Malolo was a vessel of American registry and ownership. The round trip voyage was completed on the 20th day of December, 1929'. Upon arrival at the port of San Francisco, petitioner was taken into custody by the immigration authorities. Upon a hearing before the Board of Special Inquiry, he was denied admission and ordered deported to China upon the following ground: “That he is an alien and not admissible to the United States for the reason that he is one of a class who has been convicted of and has admitted having committed a felony or other crime or misdemeanor involving moral turpitude, to-wit: murder in the first degree, and that he was convicted of said crime and sentenced to serve for the period of his natural life, in the State Prison, of San Quentin, as contemplated in Section 3 of the Immigration Act of 1917. Upon appeal to the Secretary of Labor, the order of deportation was affirmed. Three questions of law are presented upon the record, and they will be considered as and in the order stated in appellant’s brief, “(1) Does a laborer’s return certificate under the Chinese Exclusion Act, exempt the holder thereof from the provisions of the General Immigration Act?” In the case of Hee Fuk Yuen v. White, 273 F. 10, 13, this court had under consideration the question whether a merchant’s return certificate was conclusive of the question of right to readmission. From the opinion in that case we quote the following excerpt: “The purpose of readmission certificates is to avoid detention and to facilitate the readmission of Chinese aliens who are entitled to return to the United States under the Chinese Exclusion Laws. They have no binding effect as adjudications of the right to return.” In addition to the authorities cited in the Hee Fuk Yuen Case may be cited the case of Hom Yuen v. United States, 214 F. 57, 59, wherein the Circuit Court of Appeals for the Second Circuit in its opinion stated: “The proposition that there is any finality about the 'return certificate’ is wholly unfounded.” It is also well settled that the general immigration laws are coexistent with the Chinese Exclusion Acts, and alien Chinese are subject also to the provisions thereof. United States v. Butt, 254 U. S. 38, 41 S. Ct. 37, 65 L. Ed. 119; United States v. Wong You, 223 U. S. 67, 32 S. Ct. 195, 56 L. Ed. 354. The question considered is answered in the negative. “(2) Is the excluding provision of Section 3 of the Immigration Act of February 5, 1917, relating to aliens convicted of a erime, limited to aliens who were convicted of a crime outside the United States?” Section 3 of the Immigration Act of February 5, 1917 (8 USCA § 136), provides as follows: “That the following classes of aliens shall be excluded from admission into the United States; * * * persons who have been convicted of or admit having committed a felony or other crime or' misdemeanor involving moral turpitude.” Taking thB ja^guage of section 3 by b-sejf; may be conceded that it is sufficiently generaj ^ be inclusive of aliens convicted q£ a erime either within or ^thout the United stateg>. ^ seetiorl) boweverj is to be eonstrued wia referenee to the act as a whole and the purposes occasioning its enactment. Wong Yow v. Weedin (C. C. A.) 33 F.(2d) 377. This and other sections of the Act of February 5, 1917, are re-enactments with slight changes or modifications of prior legislation on the same subject. This statute also may be said to have been enacted in the light of the construction placed on prior acts by the courts. Looe Shee v. North (C. C. A.) 3.70 F. 566. Considering the purpose of such enaetments, this court, in Haw Moy v. North, 183 F. 89, 91, said: “The general objeet of the immigration statutes is not only to prevent the admission of undesirable and forbidden classes of aliens, but to remove from this country all such aliens who may have succeeded in effecting an entry, That Congress has power to legislate as to both classes of aliens has been settled by many decisions of the courts and is not now open to investigation. Each class is equally undesirable, and each is equally inimical to the best interests of the country at large. In the Immigration Act of February 20, 1907 (34 Stat. 898), which is the latest expression of the legislative will upon the subject, Congress has provided, in section 2, that certain classes of aliens therein enumerated shall be excluded from admission to the United States. * * * Sections 19, 20, and 21 provide for 3he deportation of aliens found in the United States in violation of law. * * * “It will be seen from this legislation that Congress intended to exercise its admitted jurisdiction not only in excluding defective and undesirable aliens who might be seeking entry into this country, but also to deport those who, having entered, were found to be unlawfully here.” Section 19 of the Act of 1917 (8 USCA § 155), provides as follows: “ * * * any alien who, after February 5, 1917, is sentenced to imprisonment for a term of one year or more because of conviction in this country of a crime involving moral turpitude, committed within five years after the entry of the alien to the United States “ * * ; any alien who was convicted, or who admits the commission, prior to entry, of a felony or other crime or misdemeanor involving moral turpitude; * * * shall, upon the warrant of the Secretary of Labor, be taken into custody and deported. * * * The provision of this section respecting the deportation of aliens convicted of a crime involving moral turpitude shall not apply to one who has been pardoned * * * ; nor shall any alien convicted as aforesaid be deported until) after the termination of his imprisonment.” It is dear that the purpose of section 3 was to exdude certain classes of aliens therein described. It is also clear from the provisions of section 19 that its purpose was to provide for deportation of certain aliens for certain reasons. No reason appears why an alien who has committed an offense within the United States involving moral turpitude subsequent to five years’ lawful entry and residence is not subject to deportation, and yet may be subject to a denial of entry upon a return permit and deported when that fact appears. If he committed such an offense without the United States, it is immaterial when the same was committed; he is subject to deportation. The right to deport in the ease of an alien denied admission is incident to such denial. In the case of the appellee, however, there is in section 19 an express prohibition of his deportation until after termination of imprisonment. A mere parole is not a termination of imprisonment. It is subject to revocation at any time. In this ease the court below remanded the appellee “to the custody of the prison authorities of the State of California.” The two sections should be construed in the light of each other, and so construed section 3 (8 USCA § 136 (e) is not inclusive of a felony or other crime or misdemeanor involving moral turpitude committed within the United States subsequent to five years after an original lawful entry. See Wilson v. Carr (C. C. A.) 41 F.(2d) 704. “(3) Is an alien seaman subject to the excluding provisions of section 3 of the Immigration Act of February 5, 1917, upon his return from a round trip foreign on an American vessel?” This question is answered in the negative by the decision of this court in Weedin v. Banzo Okada, 2 F.(2d) 321. The case of United States v. Day, 279 U. S. 398, 49 S. Ct. 354, 73 L. Ed. 758, relied on by appellant, is not in conflict with the Weedin Case. The court in that ease expressly stated that it was dealing only with the question of entry. Order and judgment affirmed.

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STOVER v. VALLEY NAT. BANK OF CHAMBERSBURG, PA., et al. No. 4484. Circuit Court of Appeals, Third Circuit. March 10, 1931. John McD. Sharpe and Walter K. Sharpe, both of Chambersburg, Pa., for appellant. Edmund C. Wingerd, Edwin D. Strite, and Minehart & Crider, all of Chambersburg, Pa., for appellees. Before BUFFINGTON, WOOLLEY, and THOMPSON, Circuit Judges. THOMPSON, Circuit Judge. This ease is here on appeal from an order and decree of the District Court dismissing the appellant’s exceptions to an order of a referee in bankruptcy disallowing two claims of the appellant based upon mortgages upon real estate of the bankrupt as preferred claims and allowing them only as unsecured claims under the following circumstances: On August 16, 1927, Emmert Sheely was adjudged a bankrupt and the cause referred to a referee in bankruptcy. The appellant) John P. Stover, filed with the referee a claim for $6,000 based upon a mortgage executed March 31, 1924, and a claim for $4,000 based upon a mortgage dated March 13, 1925. Both mortgages were recorded in the office of the recorder of deeds for the proper county on June 29, 1927, which was within four months of the filing of the petition and adjudication in bankruptcy. The mortgagee claimed a preference in the amount of the mortgages, with interest, out of the proceeds of the sale of the real estate described in the mortgages. Stover’s claims were allowed by the referee then in office. The Valley National Bank of Chambers-burg, appellee; had, on July 11,1927, entered judgment upon a judgment note, payable on demand, dated April 14, 1921. The Citizens’ National Bank of Greeneastle, appellee; and other creditors held claims based upon notes and upon judgments entered after the recording of Stover’s mortgages. There were no other mortgages against the land mortgaged to Stover. The referee who allowed the claims having died, the Valley National Bank of Chambersburg, a creditor, presented a petition to the referee who succeeded him to reconsider and disallow the claims as preferences and to hold that they are entitled to no preference or priority in the distribution of the proceeds of the sale of the real estate. After hearing, the referee entered an order disallowing both claims as preferred and allowing each claim as an unsecured claim with interest. To that order Stover excepted, whereupon the matter was brought before the court upon a certificate for review. The District Judge dismissed the exceptions and sustained the dis-allowance of the claims as preferred claims. It is not disputed that the two mortgages were executed and delivered for present and valuable consideration in the principal amounts thereof; that at the time they were executed and delivered, Sheely, the bankrupt, was solvent; that, at the time they were recorded, there were no other mortgages, judgments, or liens of record against the real estate covered by the mortgages; and that at the time of recording, Sheely was insolvent and Stover had reason to believe that he was insolvent. The District Judge followed the conclusions reached in the cases of In re Dundore (D. C.) 26 A. B. R. 100, and English v. Ross (D. C.) 140 F. 630. In his opinion the learned judge said, in construing section 60, paragraphs a and b, of the Bankruptcy Act (11 USCA § 96 (a, b): “The application of paragraphs a and b above quoted depends upon the meaning to be given to the phrase in paragraph a ‘if by law such recording or registering is required.’ “The Act of Assembly of Pennsylvania of April 27,1927, P. L. 440, § 1 (21 PS § 622), provides for the recording of mortgages, as follows:' ‘ * * * No mortgage, or feasible deed in the nature of a mortgage, shall be a lien, until such mortgage or defeasible deed shall have been recorded, or left for record, as aforesaid.’ ” Under the act of Assembly of Pennsylvania, cited above, we agree with the court below that the recording of the mortgages as transfers was “required” in order for them to become liens upon the real estate of the mortgagor. What their status would have been without recording is not before us. The question is whether the transaction constituted the two mortgages voidable preferences as against any other creditors of Sheely’s estate in bankruptcy represented by the trustee. It is undisputed that, at the time of recording, there were no other creditors, having liens upon the real estate in question, who would, by judgment or otherwise, be regarded in the law as creditors of the same class. In Bailey v. Baker Ice Machine Co., 239 U. S. 268, 36 S. Ct. 50, 60 L. Ed. 275, the Supreme Court construed section 47a, cl. 2, of the Bankruptcy Act, 11 USCA § 75 (a) (2) vesting the trustee with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied as meaning that, when not otherwise provided, the rights, remedies, and powers of the trustee in bankruptcy are determined with reference to the conditions existing when the petition is filed, and that a trustee in bankruptcy cannot, under section 47a, cl. 2, of the Bankruptcy Act, 11 USCA § 75 (a) (2), assail a contract of conditional sale filed prior to, but within four months of, the petition on the ground that he has the status of a creditor fastening a lien under the provisions of a state law on the property prior to the recording of the contract; and this because the trustee acquires that status only from the filing of the petition. See Dudley v. Easton, 104 U. S. 99, 26 L. Ed. 668. And in Carey v. Donohue, 240 U. S. 430, 36 S. Ct. 386, 389, 60 L. Ed. 726, L. R. A. 1917A, 295, the court said: “The limitation of the provision to those transfers which are ‘required’ to be recorded under the applicable law is not to be taken to be an artificial one by which the rights of creditors are made to depend upon the presence or absence of local restrictions adopted, alio intuitu, in the interest of others. Rather, as we have said, we deem the reference to be to requirements of registry or record which have been established for the protection of creditors, — the persons interested in the bankrupt estate, and in whose behalf, or in whose place, -the trustee is entitled to act. And where, as in this case, there is no such requirement, and the transfer was made more than four months before the filing of the petition in bankruptcy, there can be no recovery under § 60 [11 USCA § 96].” In Martin v. Commercial National Bank, 245 U. S. 513, at page 519, 38 S. Ct. 176,178, 62 L. Ed. 441 it is said: “The word ‘required’ in section 60b [11 USCA § 96 (b)] refers directly to statutes in many states relating to recording which through various forms of expression seek to protect creditors by providing that their rights shall be superior to transfers while off the record. Recognizing the beneficial results of these enactments and intending that rights based thereon might be utilized for the advantage of bankrupt estates, Congress inserted (amendment of 1910) the clause ‘or of the recording or registering of the transfer if by law recording or registering thereof is required.’ In Carey v. Donohue we pointed out that purchasers are not of those in whose favor registration is ‘required,’ but that the reference is to persons concerned in the distribution of the estate, i. e., ‘creditors including those whose position the trustee was entitled to take.’ And we think it properly follows that before a trustee may avoid a transfer because of the provision in question he must in fact represent or be entitled to take the place of some creditor whose claim actually stood in a superior position to the challenged transfer while unrecorded and within the specified period. “The Georgia statute imposes the requirement of registration only in favor of a creditor who fixes a lien on the property before recording takes place. Here there is no such person; the trustee occupies the status of one who acquired a lien after that event. No one concerned in the distribution of the estate actually held rights superior' to the mortgage while off the record.” See, also, Bunch, Petitioner, v. Maloney, Trustee, 246 U. S. 658, 38 S, Ct. 425, 62 L. Ed. 925, where, in a per curiam decision, a decree of the Circuit Court of Appeals of the 8th Circuit (233 P. 967) was reversed upon the authority of Martin v. Commercial National Bank, supra. The situation in the present case is on all fours with the facts briefly stated in the foregoing citation. The trustee has no lien except that derived under section 47a (11 USCA § 75 (a) under which he is “deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied.” And his lien is fixed as of the date when the petition in bankruptcy was filed. The recording of the mortgages, therefore, gave the mortgagee liens superior to that of the trustee. The order and decree of the court below is reversed, with direction that the claims of the appellant be allowed as preferred claims, as against the fund derived from the sale of the mortgaged real estate.

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BALTIMORE & PHILADELPHIA STEAMBOAT CO. et al. v. NORTON, Deputy Commissioner, et al. No. 4457. Circuit Court of Appeals, Third Circuit. March 25, 1931. Louis Wagner, Thomas Clary, and R. A. Smith, all of Philadelphia, Pa., for appellants. Paul Ereeman, Asst. U. S. Atty., and Geo. C. Krewson, both of Philadelphia, Pa. (Walter W. Warwick, of Washington, D. C., of counsel), for appellees. Before BUFFINGTON and WOOLLEY, Circuit Judges, and THOMPSON, District Judge. WOOLLEY, Circuit Judge. Emil Bruno Gube, an employee of the Baltimore & Philadelphia Steamboat Company, on descending from a boat of this company, then in navigable waters of the United States, fell and sustained an injury- to- his left arm. He instituted proceedings against his employer for compensation under the Longshoremen’s and Harbor Workers’ Compensation Act, approved March 4, 1927, 44 Stat. 1424 (33 USCA §§ 901-950). The Maryland Casualty Company was joined as insurance carrier for the Steamboat Company. At a hearing before the Deputy Commissioner for the proper Compensation District it appeared that the claimant was totally disabled for a period of 34 weeks and that, thereafter, he was permanently disabled by a partial loss of use of his arm, estimated at 40%. It also appeared that his regular weekly wages were $31.50 and his average weekly wages including wages for overtime were $36.06. On the Deputy Commissioner’s award of compensation for 146 weeks at the weekly rate of $24.04, being two-thirds of the average weekly wages, the Steamboat Company and Casualty Company filed a bill for review in tbe District Court of tbe United States averring that tbe Deputy Commissioner should not have included the claimant’s overtime earnings in tbe wage factor of compensation and that instead of tbe claimant being entitled to 146 weeks’ compensation, be was entitled to compensation for only 125.6 weeks. Tbe District Court sustained tbe findings and award of tbe Deputy Commissioner both in respect to tbe amount of weekly compensation and tbe period of payment. 40 F.(2d) 530. Tbe Steamboat Company and tbe Casualty Company join in this appeal. Three questions are involved: two raised by tbe appellants and one arising out of an inquiry of our own as to whether tbe questions are moot in view of tbe fact that tbe Steamboat Company, tbe employer, has paid its injured employee tbe compensation awarded. Of course if tbe questions in this ease were moot we should not decide them:' If moot as to one party, we think they are not' as to tbe other. True, tbe Baltimore & Philadelphia Steamboat Company paid its employee tbe compensation awarded, as it was bound to do, without awaiting an appeal. Section 21 of the act (33 USCA § 921). If tbe Steamboat Company were tbe only party to tbe action tbe question might, conceivably, be moot. But there are two parties; tbe Steamboat Company, tbe principal, and tbe Maryland Casualty Company, tbe assurer on tbe obligation to tbe employee. The Casualty Company is a real party here. It still desires and has a right to demand that tbe question of proper payment as affecting its liability to its principal be decided. If tbe Steamboat Company unwisely or improvidently paid a compensation claim which in law it was not required to pay, that is not a reason why tbe Surety Company should pay tbe Steamboat Company and, similarly, that is not a reason why tbe Surety Company should not have tbe question tried out and decided so as to fix its legal liability. We bold tbe questions are properly here for review; and they are two, both dealing with compensation, one reckoned in dollars and tbe other in weeks. Tbe first is whether in estimating tbe compensation to be paid weekly to tbe injured employee his weekly wages ($31.50) under a contract as to days and hours should control, or tbe amount of actual wages earned and paid ($36.06) which include not only bis weekly wages but also wages earned outside tbe time of tbe contract. Stated differently, tbe question is whether tbe compensation should be based on regular weekly wages fixed by contract of employment or on actual weekly wages earned for a period long enough to determine an average. As tbe statute accords tbe injured employee compensation for wages lost, we think tbe compensation should conform to actual wages which, but for tbe accident, be would have earned. And so, evidently, thought tbe learned district judge, whose finding in this regard is afT firmed. Tbe next question calls for an interpretation of tbe vital part" of tbe Longshoremen’s and Harbor Workers’ Compensation Act because it is tbe money part of tbe act. The purpose of this act, as its title denotes, is to provide compensation to an injured longshoreman for bis “disability,” or incapacity occasioned by an injury, to earn the wages be bad been receiving. ' Section 2, subd. 10 of tbe act (33 USCA § 902, subd. 10). Tbe provision of tbe act pertinent to this case is section 8 (33 USCA § 908) which provides a method of computing such compensation to employees who have suffered injuries of different kinds resulting in disabilities of different characters and different qualities. First stating these differences in injuries and in their characters and qualities, tbe statute then deals with an employee’s compensation (in dollars) for lost wages reckoned by weeks. As tbe statute speaks in figures rather than in words, we find it difficult to construe its terms in tbe abstract and feel compelled to follow its own structure and devote our interpretation more to figures than to words, believing that out of tbe figures which the Congress used and out of the order in which it used them its intent will stand out clearly and, we think, with certainty. Section 8 provides compensation for different degrees of disability: (a) Permanent total disability; (b) Temporary total disability; (e) Permanent partial disability; and (d) Temporary partial disability. We are not concerned in this case either on tbe facts or in interpreting tbe law with (a) permanent total disability or (d) temporary partial disability. The claimant was totally disabled for a time and partially disabled for all time. Therefore we are concerned only with (b) and (c), temporary total disability and permanent partial 'disability, for it is manifest that these two things can happen, as they did in this case, to one individual as a result of tbe same accident. Subsection (b) of section 8 of the act, 33 USCA § 908, subsec. (b), dealing with temporary total disability alone, provides that: “In case of disability total in character (which means that the man is wholly incapacitated to earn a wage) but temporary in quality (which means that though total for a time, the disability may later become partial or disappear altogether) 66% per centum of the average weekly wages shall be paid to the employee during the continuance thereof.” But a man may suffer a permanent partial disability without suffering a temporary total disability. In that event subsection (c) of section 8, 33 USCA § 908, subsee. (e), pars. 1 and 19, provides: “In case of disability partial in character but permanent in quality the compensation shall be 66% per centum of the average weekly wages, and shall he paid to the employee as follows: “(1) Arm lost, three hundred and twelve weeks’ compensation. * * * “(19) Partial loss or partial loss of use: Compensation for permanent partial loss or loss of use of a member [in this case an arm] may be for proportionate loss or loss of use of the member. [In this ease found to be 40 per centum.]” Yet a man may suffer both a temporary total disability, which is sometimes referred to as the healing period, and a permanent partial disability as in this case. On that combined event paragraph 22, subsection (e) of section 8, 33 USCA § 908, subsec. (e), par. 22, provides that: “In ease of temporary total disability and permanent partial disability, both resulting from the same injury, if the temporary total disability continues for a longer period than the number of weeks set forth in the following schedule, the period of temporary total disability in excess of such number of weeks shall be added to the compensation period provided in subdivision (e) of this section: Arm, thirty-two weeks. * * * ” “The compensation provided by subdivision (e)” for permanent partial disability to an arm is, as we have seen, 312 weeks. The excess of temporary total disability over the 32 weeks provided by paragraph 22 of subsection (c) is in this case 2 weeks, making 34 weeks of temporary total disability. As only the “excess” of 32 weeks is to be “added” to the 312 weeks, it is clear that the 32 weeks healing period is included in the 312 weeks’ compensation period for loss of an arm or of its use. Adding the excess of total disability (2 weeks) to the latter period, the figures in this ease stand as follows: 312 weeks plus 2 weeks equal 314 weeks. This figure of 314 weeks now includes disability of both kinds. Compensation for each measured in weeks must be separated in this total because the law deals with them differently. The 34 weeks for temporary total disability must be picked out and set aside. To determine the period of payment for permanent partial disability the 34 weeks of temporary total disability must be deducted from the total of 314 weeks. This leaves 280 weeks compensation for permanent partial disability. This is for the reason that temporary total disability stands alone; the disability being total, compensation is allowed for it, without deduction or apportionment (section 8, sub-see. (b), to the full % of the man’s weekly wages. But compensation for the remainder of the term (280 weeks), which represents the weeks following temporary total disability and constitutes all the period of permanent partial disability for which compensation is allowed, is subject to apportionment of loss provided by paragraph 19 of subsection (e) of section 8 which has in this case been determined to he 40% of the use of the arm. Now it is just here that, for the first time, apportionment of loss enters into the calculation, and it enters, as it must, at the place in the calculation where subsection (c) (19) puts it, namely; under the heading of “permanent partial disability” (280 weeks). Thus there are two separate and distinct figures in the calculation, each a resultant of different subsections of section 8 in question. One, under subsections (b) and (e), (temporary total disability), is 34 weeks, on which the claimant gets all the law allows without deduction or apportionment, and the other under subsection (e), (permanent partial disability), where he gets only 40% of what the law allows if the disability were total, whether temporary or permanent. If this method of computation were not pursued but that of the appellants followed, namely; adding the two weeks excess healing period (e) (22) to the total 312 weeks (e) (1), and then apportioning the sum of these items, there would be: an apportionment of 40% on the 34 weeks of temporary total disability with respect to which the statute requires no apportionment. This would defeat the intent of the Congress to allow full compensation when the disability is total and for “the continuance thereof.” The practical or money difference in the two theories of calculation is the differenee between 146 weeks and 125.6 weeks and is more clearly disclosed by tbe following, tables: We figure thus: The appellants figure thus: The appellants interpret the statute, and, indeed, some authorities interpret a similar state statute, on the theory that although, a man may suffer two kinds of injury from the same accident, he cannot claim compensation for both temporary total disability and permanent partial disability, but must elect the compensation payable for one or the other as suits him best. As we read the statute we see in it the plain intent of the Congress to provide compensation for five situations, four occurring with single disabilities as in section 8 (a), (b), (e) and (d), and tbe fifth, (e) (22), 33 USCA § 908, subsecs, (a-d), and (c), par. 22, where temporary total disability and permanent partial disability occur jointly when both result from the same injury. Following that intent, it is clear that, two kinds of disabilities having been suffered, the compensation applicable to each should be paid so long as, within the statute’s limitations, disabilities of these two characters continue 'respectively; and it is equally clear that as the statute distinguishes between the character of the disabilities and the time of their duration, the compensation should conform to each respectively; and that where, as in temporary total disability, the statute provides no deduction or apportionment, none should be made, and in the other (permanent partial disability) where it provides an apportionment, one should be made yet only for the period of weeks to which compensation for disability of that “character” relates. Another sentence in paragraph 22 of subsection (e) of section 8 which it is thought has a hearing on the interpretation of the statute is the following: “In any case resulting in loss or partial loss of use of arm * * * where the temporary total disability does not extend beyond the periods above mentioned [32 weeks] for such injury, compensation shall be limited to the schedule contained in subdivision (e).” This provision, it would seem, was inserted to meet a situation, not covered by the previous paragraphs and subsections. However that may be*, the temporary total disability in this ease did extend beyond the period (32 weeks) previously provided and, accordingly, the quoted paragraph has no bearing on the matter in hand. ■ The decree of the District Court dismissing the bill is affirmed.

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ERIE R. CO. v. IRONS. No. 4378. Circuit Court of Appeals, Third Circuit. March 19, 1931. Collins & Corbin, of Jersey City, N. J. (Edward A. Markley and Charles W. Broadhurst, both of Jersey City, N. J., of counsel), for appellant. Charles Hershenstein, of Jersey City, N. J. (Thomas G. Haight, of Jersey City, N. J., of counsel), for appellee. Before BUFFINGTON and WOOLLEY, Circuit Judges, and THOMPSON, District Judge. WOOLLEY, Circuit Judge. On the occasion in question, a Bush Terminal freight ear float was moored to a float bridge of the Erie Railroad Company in the navigable waters of the Hudson River at Jersey City. A switching crew, consisting of a conductor, two brakemen, an engineer and fireman, was engaged in shunting loaded freight cars onto the float. One draft had been placed on its southerly track. The engine with three empty pushers and the remaining draft of five loaded cars then proceeded to move eastwardly over the bridge and onto the northerly track of the float. The movement was being made under the direction of the conductor with the aid of two brakemen, Irons being nominally the forward brakeman and.Smith the rear brakeman, though in the direction of the movement their positions were physically reversed. When the draft came to rest on the float, Smith mounted the most easterly car and, either at once or later, put on its brakes and the brakes of other cars. Irons set the brake of the westerly ear, descended to the deck, and, either at the command or. with the assent of the conductor, uncoupled that car from a pusher, thus cutting out the draft, and signalled the engineer to go ahead. This the engineer did by moving the engine only a few feet yet far enough to carry the last pusher off the float and onto the bridge, leaving a space of twelve or fifteen feet between it and the first car. The float had a hump in the middle from which the deck inclined fore and aft. All at once the draft of ears began slowly to move toward the bridge. Irons picked up a block and in his unsuccessful effort to chock a wheel had one of his feet caught by the block and the other by a frog or a rail, causing him to fall under the car where he sustained an injury resulting in the loss of a leg. He brought suit under the Federal Employers’ Liability Act (45 USCA §§ SI-SA) for this personal injury and, after verdict, had the judgment from which the defendant railroad company now appeals, assigning several errors involving additional facts which we can state more appropriately in the separate discussion of each assignment. The first error the defendant charges to the court was its refusal to direct a verdict in its favor on three grounds: (a) That there was no evidence of negligence On its part; (b) that as matter of law the plaintiff assumed the risks of his injury; and (c) as matter of law the accident was solely due to the contributory negligence of the plaintiff. On the question of negligence of the defendant two issues were raised and submitted and certainly one, and maybe both, were decided. The first was whether or not the brakes on the cars were defective or “inefficient” in violation of the Safety Appliance Act (45 USCA § 1 et seq.); the other whether Smith, the rear brakeman and Irons’ fellow-workman, was negligent in performing his work of promptly and efficiently setting the brakes when the draft came to rest. If a finding on both of these issues could not be sustained by. the evidence, then, clearly, a verdict should have been directed for the defendant. But the two issues were submitted in the alternative and if either could be found for the plaintiff on supporting evidence that would be enough under proper instructions. There was evidence that- had the brakes been efficient, the one brake set by Irons and the two (or more) set by Smith before the ears began to move would have held the draft, raising the permissible inference that the brakes were defective. Though expert, in quality, this, nevertheless, was evidence for the jury to accept or reject. The defendant, however, maintains that there was absolutely no evidence that Smith had set even one brake completely and securely before the ears began to move and, accordingly, that the jury, in finding the brakes defective, was allowed to base their inference not on a proven fact but on another inference. Manning v. John Hancock M. I. Co., 100 U. S. 693, 25 L. Ed. 761. Opposed to the defendant’s position we find positive testimony (R 132) that Smith applied the brakes on the two rear cars when the draft was stationary. There is testimony that he applied the brakes on the other cars but it -is uncertain whether, when he did so, the ears were stationary or moving; and there is also testimony that all the brakes set by him were seeurely set in that by a later test they could be moved only one notch more. We think this is valid evidence on the issue of defective brakes and sustains the jury’s possible finding on this one of the two issues. And as to Smith’s negligence there is evidence that sustains the jury’s possible finding for the plaintiff on that issue, for it is certain from the character of the verdict that on either one or the other of these issues the jury found for the plaintiff. In respect to this second issue the defendant, somewhat contrary to its position on the first, maintains there was no evidence to dispute Smith’s word that he so completely and securely set the brakes that when, after the accident, he went over the cars, as ordered, he was only able to take up each brake one notch more by using his entire strength with a brake stick. But the negligence charged to him as a fellow-workman was not in failing adequately to set the brakes but in failing seasonably to set them. It was Ms duty to jump on the cars as they came upon the float, climb to the top and apply the brakes at the east end and work west as soon as the ears stopped. Irons immediately applied the brake by hand on the westerly end of the first car and then, as was Ms duty, climbed down to make the cut. But Smith was late in getting up on the ears and the evidence shows that if he had promptly and properly performed his duty and had jumped upon the cars when they were going onto the float and had begun tightening the brakes as soon as the cars had stopped, he would have had time to tighten all the brakes while Irons was tightening one, descending to the ground and preparing to make the cut. Everyone agrees that if the brakes had been efficient and all had been set the draft could not have moved. We think tMs evidence was enough on wMeh to submit the issue of Smith’s negligence to the jury. The defendant’s next ground for a directed verdict was that, as matter of law, the plaintiff assumed the risks of Ms injury. There is no question that in an action under the Federal Employers’ Liability Act the defense of assumption of risk (save in specified eases) continues as at common law. Seaboard Air Line v. Horton, 233 U. S. 492, 34 S. Ct. 635, 58 L. Ed. 1062, L. R. A. 1915 C, 1, Ann. Cas. 1915B, 475; Chesapeake, etc., R. Co. v. Proffitt, 241 U. S. 462, 36 S. Ct. 620, 60 L. Ed. 1102; Southern Pacific Co. v. Berkshire, 254 U. S. 415, 41 S. Ct. 162, 65 L. Ed. 335. But the legal responsibility of the employee in assuming risks depends somewhat on whether they are a part of or incident to Ms employment, and are, or should be, known by him. The defendant maintains that the risk of the cars moving on the float prior to the brakes being fully and efficiently set by Smith was an obvious risk of Irons’ employment wMch he assumed as a part of Ms contract of hire. But Smith’s action was charged as negligence and the jury found that either his negligence or that of the defendant in supplying inefficient brakes was the proximate cause of Irons’ injury. An employee does not, under the Federal Employers’ Liability Act, assume as a part of his contract of employment the risk of the negligence of a fellow-employee or of his master in supplying inefficient appliances in violation of the Safety Appliance Act. The final ground on the motion for a directed verdict was that the accident was due solely to the negligence of the plaintiff himself. If that were true, he of course should not recover. Davis v. Kennedy, 266 U. S. 147, 45 S. Ct. 33, 69 L. Ed. 212; Illinois Central R. Co. v. Skaggs, 240 U. S. 66, 36 S. Ct. 249, 60 L. Ed. 528. Having held that there was evidence to submit the alternative issues of negligence on the part of the defendant to the jury, it would be legally inconsistent to say that the learned trial judge should have directed a verdict for the defendant on the ground that the plaintiff was solely negligent. The defendant’s main contention on this issue is that Irons should have satisfied himself before making the cut that Smith had properly performed his duties by fully and efficiently applying the brakes. Smith’s duty was fixed by rule or practice and was known to Irons, hence we think Irons might have assumed that Smith had performed Ms duty. However that may be, the conductor was in charge of the movement, both Smith and Irons were within Ms view and Irons made the cut on the conductor’s direction or with Ms assent. 'We find no error in the court’s denial of the motion for a directed verdict. The defendant next charges error to the trial court in denying its motion for a new trial based on the ground that the damages were excessive. The appellant recognizes the general rule that a trial court on a motion for a new trial may in the exercise of its discretion deny the motion and that its action is not a subject of review by an appellate court. Henderson v. Moore, 5 Cranch, 11, 3 L. Ed. 22; Railway Co. v. Heck, 102 U. S. 120, 26 L. Ed. 58; Ayers v. Watson, 137 U. S. 584, 11 S. Ct. 201, 34 L. Ed. 803; Pickett v. United States, 216 U. S. 456, 30 S. Ct. 265, 54 L. Ed. 566. It maintains however as an exception to this very firm rule that where the denial of the motion is an abuse of discretion or due to the application- of erroneous legal principles, it is a subject for review on appeal. We discern nothing in the matter raised on the motion for a new trial involving legal principles and capable of an erroneous application and therefore reviewable within the sense of Chesapeake & Ohio Railway Company v. Gainey, 241 U. S. 494, 36 S. Ct. 633, 60 L. Ed. 1124, and of our own ease of Stetson v. Stindt (C. C. A.) 279 F. 209. Here the learned judge was dealing only with the amount of the jury’s verdict in an action of tort and was called upon to exercise his discretion in determining whether or not on the record before him the ver-diet was excessive. In performing that duty we find he did not abuse his discretion. The real trouble in this ease arises from the next question which is whether under the facts as set forth in the complaint and proved at the trial the court had jurisdiction of this suit under the Federal Employers’ Liability Act, or was the plaintiff’s sole remedy under the Longshoremen’s and Harbor Workers’ Compensation Act (44 Stat. 1424 [33 USCA §§ 901-950), to be pursued in the method there prescribed which initially is not by suit in a district court. This question was brought to the attention of the court (after the case had been tried, verdict rendered, rule for a new trial dismissed and judgment entered) on a petition to set aside the judgment and, being a jurisdictional question, is urged on this appeal under authority of C., B. & Q. R. R. Co., v. Willard, 220 U. S. 413, 31 S. Ct. 460, 55 L. Ed. 521, and Continental National Bank v. Buford, 191 U. S. 119; 24 S. Ct. 54, 48 L. Ed. 119. In this case the plaintiff not only pleaded the Federal Employers’ Liability Act‘but counted on that act and specifically averred a violation of the Safety Appliance Act. At the trial the defendant admitted that, at the time of the injury, the cars in question were engaged and the- plaintiff was employed in interstate commerce and the case was, with the concurrence of everyone, tried to judgment under the Federal Employers’ Liability Aet. As to the evidence the defendant neither at the trial nor later on motion for a new trial made a claim that the plaintiff’s injury was maritime in character because sustained when he was engaged in a marine employment, yet, on the motion to set aside the judgment it said, and here urges, that the evidence established that fact and necessarily divested the court of the jurisdiction of the case which it had assumed under the Federal Employers’ Liability Aet. The matter was earnestly argued before the trial court, and in this court, on opposite theories by opposing counsel. The defendant maintained that, whatever his previous employment and whoever was his employer, Irons was at the moment of his injury loading a vessel in navigable waters and therefore was performing a maritime service, Atlantic Transport Co. v. Imbrovek, 234 U. S. 52, 34 S. Ct. 733, 58 L. Ed. 1208, 51 L. R. A. (N. S.) 1157; Southern Pacific Co. v. Jensen, 244 U. S. 205, 37 S. Ct. 524, 61 L. Ed. 1086, L. R. A. 1918C, 451, Ann. Cas. 1917E, 900; Nogueira v. N. Y., N. H. & H. R. R. Co., 281 U. S. 128, 50 S. Ct. 303, 74 L. Ed. 754, which establishes that Irons’ remedy for the resulting - injury was' exclusively under the Longshoremen’s and Harbor Workers’ Compensation Act. The position of the plaintiff was, and is, that he was not a longshoreman employed at the time of his injury in loading a vessel but was á railroad employee and as such was, wholly without regard to place, engaged purely in a railroad service, and-that the Congress did not put one so employed within the terms of the act. Like ourselves, the trial judge did not feel called upon to decide this question. He disposed of the motion .adversely to the defendant on a finding that, as a right of action is preserved to an injured employee unless his employer has qualified to invoke the statute, the defendant had not shown the things required of it to bring the injury within the aet. The antecedents of the Aet and the steps by which it was developed may be found in Atlantic Transport Co. v. Imbrovek, 234 U. S. 52, 34 S. Ct. 733, 58 L. Ed. 1208, 51 L. R. A. (N. S.) 1157; Southern Pacific Co. v. Jensen, 244 U. S. 205, 37 S. Ct. 524, 61 L. Ed. 1086, L. R. A. 1918C, 451; Ann. Cas. 1917E, 900; Knickerbocker Ice Co. v. Stewart, 253 U. S. 149; 40 S. Ct. 438, 64 L. Ed. 834, 11 A. L. R. 1145; State Industrial Commission of State of New York v. Nordenholt Corporation, 259 U. S. 263, 42 S. Ct. 473, 66 L. Ed. 933, 25 A. L. R. 1013; Washington v. Dawson & Co., 264 U. S. 219, 44 S. Ct. 302, 68 L. Ed. 646; Panama Railroad Co. v. Johnson, 264 U. S. 375, 44 S. Ct. 391, 68 L. Ed. 748; Engel v. Davenport, 271 U. S. 33, 46 S. Ct. 410, 70 L. Ed. 813; International Stevedoring Co. v. Haverty, 272 U. S. 50, 47 S. Ct. 19, 71 L. Ed. 157; Northern Coal Co. v. Strand, 278 U. S. 142, 49 S. Ct. 88, 73 L. Ed. 232, and Nogueira v. N. Y., N. H. & H. R. R. Co., 281 U. S. 128, 50 S. Ct. 303, 74 L. Ed. 754. Seeing there its purpose and scope, we shall assume without deciding that shifting loaded freight cars onto the float was in essence loading cargo and was therefore maritime in character. With this assumption before us we turn to the defendant’s claimed qualifications to invoke the act and claimed place of the accident on which the learned trial judge, holding them not proved, dismisse'd the motion to set aside the judgment. As to these qualifying essentials, the plaintiff says that the act (section 2, subsec. 3 [33 USCA § 902, subsec. 3]) excludes employees on vessels under eighteen tons net, and that there was no testimony as to the weight of the float and therefore none as to whether he was within the act. Proof that the float was 250 feet over all with a beam of 50 feet, having on its deck three railroad tracks and carrying ten loaded freight cars of a weight of 100,000 pounds each was rather conclusive evidence that the float was more than eighteen tons. Next the plaintiff maintains there was no testimony as to the ownership of the float. However important that may be, we find none. More important, perhaps, is the plaintiff’s third contention, that where the employer fails to insure its compensation liability or to file a statement with the United States Commissioner that it is financially responsible as a self-insurer, the provisions of section 5 (33 USCA § 905) are applicable, namely, that upon the failure of the employer to secure such payment, the injured employee may elect to maintain an . action at law or in admiralty. We find no evidence that the defendant had complied with this requirement. The. defendant however urges that all such things may be proved when Irons proceeds against it under the act and therefore need not be proved by the defendant in this ease. Manifestly that position is unsound. Eor this case has been ended by judgment and what the defendant is now trying to do is to oust the court of its jurisdiction over its judgment. This can only be done on an affirmative showing that the employee and the remedy for his injury come under some other act than the one under which his case was brought, tried and decided. And, finally, to prevail on its motion to set aside the judgment the defendant must show from the testimony in the record that as a matter of fact (distinguished from the question of law on which we have predicated an assumption) that the injury was maritime because the accident did in fact happen on navigable waters during the performance of a maritime service. Therefore the locus in quo of the accident, being determinative of whether or not the plaintiff’s employment was maritime and his injury maritime, has a vital bearing on the question whether the Longshoremen’s- and Harbor Workers’ Compensation Act applied and whether, accordingly, the court was without jurisdiction of the ease. On this matter there was testimony to this effect: After the draft of five cars had been placed on the northerly track of the float and been cut from the engine with its three pushers, two things happened: One, the draft remained stationary for a short time and the engine and pushers pulled away and stopped on the bridge. Thus the cars were on the float in navigable waters and the engine and pushers were on the bridge, which, being neither a boat nor a float, was for present purposes land. The easterly end of the easterly pusher on the land was about twelve feet from the westerly end of the westerly ear on the-float. The accident happened somewhere within this short span. Where? This is a jurisdictional question which, manifestly, must be answered. In looking for the answer' we find testimony which further contracts the space within which it did happen and lessens the probability of its occurrence on the float. It is this: When the draft was brought to a stop on the float, the westerly end of the westerly ear was about six feet from the westerly end of the float.' Thus the probability of a marine accident is restricted to these six feet. After Irons had cut the draft and the engineer had on his signal moved the last pusher to its new position six feet on the bridge and stopped, the draft on the float started to move toward the bridge. Irons was crossing the track within two feet of the westerly end of the westerly ear when the conductor called and warned him. He was then within four feet of the end of the float. Either then or before the draft started to move (a mooted question) he grabbed a block with which to chock a car wheel but the block, not holding, slid in front of the wheel. To make it hold, Irons stooped down and held it against the wheel, walking backwards in doing so. In this position and in this movement he walked about four feet. Thus the remaining space on the float was consumed. He was then either bn the float at its edge or on the bridge at its edge. Then the block caught one of his feet and the frog or a rail caught his other foot and he fell .under the moving car. He grabbed the axle of the second pair of wheels and an instant later a wheel ran over his leg. Still holding on to the axle he stopped when the draft hit the first pusher on the bridge and extricated himself from between the wheels of the westerly car and the easterly pusher. Op this evidence, even conceding a latitude in the figures favorable to the defendant, or on other evidence that made the span between the pusher and car a few feet longer, it is certain that the evidence did not disclose to the learned trial judge the place of the accident, whether it was on the bridge or the float, whether on land or water, and, accordingly, did not prove that the accident was maritime and that the case came under the Longshoremen’s and Harbor Workers’ Compensation Act. The most that the evidence showed him was that the occurrence began on the float and ended on the bridge, and that the accident happened somewhere during the occurrence. On this evidence the defendant, on its motion to open the judgment for want of jurisdiction, did not prove as an essential fact that the disability Of the plaintiff resulted from an injury occurring upon navigable waters of the United States even if before the injury he was engaged in a maritime operation of loading the float with cargo in ears. The judgment is affirmed.

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HALL v. UNITED STATES. No. 6342. Circuit Court of Appeals, Ninth Circuit. March 23, 1931. John W. Ray, of Phoenix, Ariz., for appellant. John C. Gung’l, U. S. Atty., of Tucson, Ariz., and J. S. Wheeler, of Phoenix, Ariz., and B. G. Thompson and Norman S. Hull, Asst. U. S. Attys., both of Tucson, Ariz. Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges. SAWTELLE, Circuit Judge. This is the second appeal in this .case. See 41 P. (2d) 54. Appellant was convicted upon three separate counts of an information charging: First, the unlawful possession of approximately 200 gallons of intoxicating liquor; second, the unlawful possession of certain property designed for the manufacture of intoxicating liquor; third, the maintenance of, a common nuisance. The government introduced evidence tending to prove that on or about July-15, 1928, George C. Ruffner, sheriff of Yavapai county, Arizona, had a conversation with appellant, Joe Hall, in which conversation Ruffner, among other things, said, “Well, now Joe, as far as this pool-hall business is concerned that is legitimate business, we issue licenses for that, but as for this other stuff, this making whiskey, I am going to make you quit,” to which Hall replied, “Well, now, George, I want to tell you something, * ” ’* I have got 350 gallons o£ damned good whiskey and I am going to sell it”; that a short time after this conversation Ruffner secured a search warrant from the superior court of said county to search Hall’s residence and pool hall; that as a result of such search Ruffner found and seized the liquor referred to, as well as a gas burner, pressure tanks, condensers, a copper boiler, a cooling tank, and other property used and useful in the manufacture of intoxicating liquor; that all the above-described property is set forth in the return on the search warrant; that, at the time Ruffner secured the search warrant and proceeded to appellant’s premises to make the search, Ruffner expected to find appellant either making or selling whisky, violations of the state prohibition law, and that he did not conceive the idea of turning the property over to the federal officers until after he had made the search and seizure and realized that appellant could only be prosecuted for the unlawful possession of the seized property, which is not-a violation of the state prohibition law. This court held on the former appeal that “the affidavit for the search warrant was on information and belief, and was clearly insufficient under the federal statutes. '* * * The provision of the fourth amendment to the Constitution, forbidding unreasonable searches and seizures, refers to governmental action, and is not invaded by unlawful acts of individuals or of municipal or state officers, in which the government has no part. Burdeau v. McDowell, 256 U. S. 465, 41 S. Ct. 574, 65 L. Ed. 1048, 13 A. L. R. 1159. But evidence obtained through wrongful searches and seizures by state officers who are co-operating with federal officers must be excluded. Byars v. United States [273 U. S. 28, 47 S. Ct. 248, 71 L. Ed. 520], supra; Gambino v. United States, 275 U. S. 310, 314, 48 S. Ct. 137, 52 A. L. R. 1381, 72 L. Ed. 293. The latter case went one step further and held that where the search and seizure was made by state officers for the sole purpose of aiding in the prosecution of a federal offense, the testimony must be excluded, whether there was co-operation between state and federal officers at the time of the search and seizure or not.” Hall v. United States, supra. The trial court, after hearing all the evidence, concluded that at the time the state officer made the search and seizure he had no intention of securing evidence for the government and was not acting in co-operation 'with government officers; hence overruled appellant’s motion to suppress the evidence. The evidence was sufficient to support the finding of the court in that regard. This disposes of the first assignment of error. In this connection it might be well to consider assignment 8. It assigns as error the ruling of the court on appellant’s objection to the admission in evidence of the affidavit for the search warrant, the search warrant itself, and the return thereon containing an inventory of the property seized. The record discloses that same were offered mid admitted for the purpose of corroborating the testimony of the witness Ruffner, to show that the warrant was executed, and to identify the specific property that was seized under the warrant. In our opinion there was no error in admitting these documents. They were admissible not only as tending to corroborate the witness Ruffner’s testimony as to the kind and character of the property which he found and seized, but also as tending to prove that in making the search he acted upon his own initiative as a state officer in attempting to enforce a state statute, and that he was not acting in co-operation with any federal officer. In his brief, counsel for appellant states that “argument is not offered on assignments 2, 3, 4, 7, and 11,” but he admits that said assignments were considered and disposed of by this court on the former appeal. This leaves for consideration assignments 5, 9,10, 12,13,14, and 15. Assignment 5 is argued in connection with assignments 13, 14, and 15. Assignments 9 and 10 allege that the “court erred in denying defendant’s motion for a directed verdict in favor of the defendant,” and that “the verdict of the jury is contrary to the law and to the evidence.” In support of these assignments, counsel for appellant contends that “without the evidence obtained under the void search warrant there was no evidence upon which a jury could legally arrive at a verdict of guilty and a directed verdict in favor of defendant should have been granted.” The bill of exceptions fails to state that it contains all the evidence produced on the trial; therefore the question whether there was any substantial evidence to justify a conviction is not before us for review. In the ease of Rasmussen v. United States (C. C. A.) 8 F.(2d) 948, 949, Judge Hunt, speaking for this court, said: “Defendants urge that the court erred in denying their motion for a directed verdict upon the ground that the evidence was insufficient to sustain conviction. But as the bill of exceptions signed by the judge fails to show affirmatively or by inference that it contains all the testimony produced upon the trial, the question whether there was any substantial evidence to warrant a conviction is not before us for review. Oregon-American Lumber Co. v. Simpson [C. C. A.] 8 F.(2d) 946 (decided November 16, 1925). Obviously, the appellate court cannot say that the presumption in favor of the verdict has been overcome in that there is lack of evidence, unless all the testimony that was produced before the lower court is brought up for review. Meyer v. Everett Pulp & Paper Co., 193 F. 857, 113 C. C. A. 643; Goldfarb v. Keener (C. C. A.) 263 F. 357; Buessel v. United States, 258 F. 811, 170 C. C. A. 105; Taylor-Craig Corporation v. Hage, 69 F. 581, 16 C. C. A. 339; Greenspahn v. United States (C. C. A.) 298 F. 736.” Assignment 12 is “that the court erred in various rulings in the trial of Court and cause, and in the admission and rejection of evidence.” Such a general assignment of error does not comply with the requirements of Rule 11 of this court, whieh reads in part as follows: “ * * * When the error alleged is to the admission or to the rejection of evidence, the assignment of errors shall quote the full substance of the evidence admitted or rejected. * * * When this is not done, counsel will not be heard, except at the request of the court; and errors not assigned according to this rule will be disregarded, but the court, at its option, may notice a plain error not assigned.” This assignment is too general and does not set forth the evidence admitted or rejected. This court should not be expected or required to search the record to find the" evidence to whieh the assignment relates. Assignments 5, 13, 14, and 15, relate to the refusal of the court to give the jury requested instructions Nos. 3,5, and 6. The bill of exceptions does not set out the trial judge’s general charge to the jury nor the requested instructions referred to, although the latter by a mistake appear in the engrossed bill of exceptions; therefore the errors assigned are not subject to review by this court. A somewhat similar situation arose in the ease of Johnston v. United States, 154 F. 445, 449 (C. C. A. 9th). In that case, Judge Gilbert said: “Error is assigned to the refusal of the court to give to the jury certain instructions which were requested on behalf of the plaintiff in error. We cannot consider this assignment, for the reason that the whole of the charge given by the court to the jury is not in the record. Where the record does not contain the whole charge, it will be presumed that the court properly charged upon every branch of the ease, and it will be presumed that further instructions were given to correctly modify erroneous instructions shown by the record, if it is very clear that these could have been so corrected and the record is incomplete. Bennett v. Harkrader, 158 U. S. 441, 15 S. Ct. 863, 39 L. Ed. 1046; Northern Pac. Ry. Co. v. Tynan, 119 F. 288, 56 C. C. A. 192, and cases there cited.” “In fhe absence of the charge as given it will be presumed that the court properly instructed the jury in respect of these matters. The court is not required to grant specific prayers, if the subject-matter therein contained is properly covered in the general’ charge. With the presumption in favor of the correctness of the charge, the assignments in the present ease are without merit.” Williams v. United States, 57 App. D. C. 253, 20 F.(2d) 269, 270. “The bill of exceptions does not contain all the instructions given. We are therefore unable to say whether defendant was prejudiced by the last instruction given, a portion of whieh was invited by his own counsel. Whether an accused is prejudiced by any particular language in a charge can only be ascertained by an examination of the entire charge. Colt v. United States, 190 F. 305, 111 C. C. A. 205. Not infrequently does it occur that language whieh, standing alone, might be subject to criticism, is entirely harmless when read in connection with other portions of the instructions.” Michael v. United States, 7 F.(2d) 865, 866 (C. C. A. 7th.) Notwithstanding the fact that the bill of exceptions does not contain all of the evidence and the general charge of the trial judge, and that counsel has failed to comply with the rule of this court above referred to, we have in the exercise of our discretion considered the assignments of error, and do not find that any reversible error was committed by the trial court. Judgment affirmed.

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CORNERO v. UNITED STATES. No. 6295. Circuit Court of Appeals, Ninth Circuit. March 23, 1931. Otto Christensen and Simpson & Simpson, all of Los Angeles, Cal., for appellant. Samuel W. McNabb, U. S. Atty., and Harry Graham Balter and Milo E. Rowell, Asst. U. S. Attys., all of Los Angeles, Cal. Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges. WILBUR, Circuit Judge. The appellant, with seven others, was charged with conspiracy to violate the National Prohibition Act. The indictment, returned on June 16, 1927, alleges that the conspiracy was entered into on the 1st of June, 1925, to “possess and transport” intoxicating liquors. The appellant pleaded not guilty on July 12, 1927. Pour of the defendants, Jones, Howell, Richards, and Allen, pleaded guilty. On May 3, 1928, a jury was impaneled to try the appellant and L. V. Murphy. The jury was discharged on May 8, 1928. The appellant claims that, by reason of the selection of the jury on May 3 and its subsequent discharge on May 8; he was placed in jeopardy. He opposed the continuance of the case and. the discharge of the jury, and, before a jury was again selected, on May 6, 1930, to try appellant and two of his codefendants, appellant interposed a plea of former jeopardy, which was overruled. Thereupon the case proceeded to trial upon the plea of not guilty, and a verdict of guilty was returned against appellant and Jack Wilson, a codefendant. The jury disagreed as to defendant L. V. Murphy. Appellant was sentenced to imprisonment for two years at McNeil Island and to pay a fine of $7,500. Wilson was placed on probation. The general rule is that, where the jury has been impaneled for the trial of a criminal case, jeopardy has attached, and in such case the plea of former jeopardy should be sustained. There are exceptions, however, to this general rule as to what constitutes former jeopardy, and the government contends that the ease at bar comes under one of these exceptions. It appears from the record that, when the ease was called for trial, the district attorney proceeded to impanel the jury without having ascertained whether or not his witnesses were present. He was relying upon the testimony of two of the eodefendants, Howell and Jones, who had previously pleaded guilty and who were released under bond to appear for sentence on the day of trial. They were not subpoenaed as witnesses, but it was assumed by the district attorney that they would be present at the trial in view of their obligation and bond so to do. Immediately after-the first jury was impaneled, the district attorney ascertained that his witnesses were absent, whereupon the court continued the ease from, time to time to May 8. On that date the district attorney announced: “Mr. Gallagher [the district attorney] : If your Honor please, in that matter we wish to move for a continuance on behalf of the Government. This is a matter that involves the intimidation of witnesses whom we have not been able to locate, and we are not ready for trial. We are endeavoring to locate the witnesses, and I believe, your Honor, that the continuance of this matter would not be outside the court’s sound judicial discretion. “The Court: Are the witnesses not here? “Mr. Gallagher: No. We have not been able to determine their whereabouts. “The Court: What efforts have you made to get them? “Mr. Gallagher: The witness Jones has closed his home and stored his furniture and bought two new tires for his automobile and started for a place unknown. Boarders in a house near his are watching the despatch of communications to stop them from reaching us and are intercepting messages to Jones. We have interviewed Howell’s wife and she doesn’t know his whereabouts. Those two witnesses are absolutely indispensable, to the proof of the Government’s case. ' “Mr. Simpson: If your Honor please, we renew our objections to the continuance of this ease and wish to call the court’s attention to the fact that the district attorney had an opportunity prior to the time the jury was empaneled and sworn to ask for a continuance. There have been— “Mr. Gallagher (interrupting): The record will show I did not have the opportunity. “Mr. Simpson: There have been no subpoenas issued in this ease for the attendance of those two witnesses, although the subpoenas were issued for other witnesses. There is no showing in this ease that if those two witnesses were present that they would be competent to testify or that their •testimony would be material. There is no showing of any due, or in fact any, diligence in this case to procure the attendance of those witnesses. Por those reasons and on those grounds, and the fact that the defendant is in jeopardy and here in court, we move the court to instruct the Government to proceed at this time or that the jury be instructed to return a verdict of not guilty. “The Court: The gentlemen of the jury are discharged. “Mr. MacDonald: We object, your Honor, to the discharging of the jury in this case at this time. “The Court: The ease will go off calendar. “Mr. MacDonald: May an objection and an exception to the order of the court discharging the jury be nqted? “The Court: Surely. The case is off calendar. It automatically goes over to the term unless the district attorney makes some other disposition of it in the meantime. “Mr. Gallagher: If your Honor please, in the Comero ease the defendant Richards has appeared. May I suggest that the time of his sentence be deferred until some time during this term? “The Court: June 25th. “The Clerk: Your Honor, were Prank Comero and Murphy present in court this morning? “The Court: Yes, they were present.” The district attorney contends that the jury was not impaneled on May 3, 1938, with the understanding that both sides were ready to proceed on the merjts. When the case was called for trial, the 'district attorney stated that there were three witnesses for the government, t,wo of whom had failed to make an appearance. He • suggested to the court that perhaps they could impanel the jury and have one of the investigating officers make a search and “see why they are not here.” ' Three defendants, Murphy, Richards, and Cornero, were present in court and responded to the call of their names, whereupon the district attorney stated: “May I suggest we impanel the jury and that I have a short time to ascertain as to the witnesses?” Thereupon thq jury' was impaneled and sworn to try the case. The court then asked if the district attorney was ready to proceed, and he stated that he was; not, and would like a short continuance to ascertain where his witnesses' were. Both lived out of the county in which the trial was held, one in San Bernardino and one in Orange county. The district attorney stated both witnesses were absolutely indispensable. The jury were temporarily excused, and, upon the motion of the district attorney, the bonds of the defendant-witnesses who had failed to appear were forfeited and a bench warrant issued. The case was continued to 10 o’clock the next morning over the objection-of the appellant. The next morning, May 4, the district attorney announced his inability to go to trial, and indicated his belief that the defendants had fled. The district attorney requested a continuance until the July calendar. The eourt denied this request, but continued the case until Tuesday, May 8, at which time the jury was discharged, as hereinbefore stated. The district attorney, upon his own suggestion, proceeded with the impanelment of the jury on May 3 without having ascertained whether or not his witnesses were present. Nothing was done by the defendant at that time which would prevent his raising the question of former jeopardy. The fact is that, when the district attorney impaneled the jury without first ascertaining whether or not his witnesses were present, he took a chance. While their absence might have justified a continuance of the case in view of the fact that they were under bond to appear at that time and place, the question presented here is entirely different from that involved in the exercise of the sound discretion of the trial court in granting a continuance in furtherance of justice. The situation presented is simply one where the district attorney entered upon the trial of the case without sufficient evidence to convict. This does not take the case out of the rule with reference to former jeopardy. There is no difference in principle between a discovery by the district attorney immediately after the jury was impaneled that his evidence was insufficient and a discovery after he had called some or all of his witnesses. It is uniformly held that, in the absence of sufficient evidence to convict; the district attorney cannot by any act of his deprive the defendant of the benefit of the constitutional proyision prohibiting a person from being twice put in jeopardy for the same offense.Ex parte Lange, 18 Wall. (85 U. S.) 163, 21 L. Ed. 872; Const. Amend. 5; Jarl v. U. S. (C. C. A.) 19 F.(2d) 891. In U. S. v. Shoemaker, 27 Fed. Cas. 1067, No. 16279, 2 McLean, 114, this question was fully discussed, and it was held that, where the district attorney entered a nolle prosequi after the jury had been impaneled and witnesses sworn, jeopardy had attached. In U. S. v. Watson, Fed. Cas. No. 16651, where the case was continued after the impaneling of the jury, a juror was withdrawn from the box and the jury discharged on account of the illness of the district attorney and the absence of witnesses for the prosecution. It was held that jeopardy attached and the defendant could not be retried. It is also held in Hipple v. Texas, 80 Tex. 531, 191 S. W. 1150, L. R. A. 1917D, 1141; Pizano v. State, 20 Tex. App. 139, 54 Am. Rep. 511; People v. Barrett, 2 Caines (N. Y.) 304, 2 Am. Dec. 239; State v. Richardson, 47 S. C. 166, 25 S. E. 220, 35 L. R. A. 238, and in Allen v. State, 52 Fla. 1, 41 So. 593, 120 Am. St. Rep. 188, 10 Ann. Cas. 1085, that the mere absence of a witness is insufficient to justify the court in discharging the jury under the rule of manifest necessity and that jeopardy attached. The government, to avoid the claim of former jeopardy, relies upon the rule variously stated by textbooks and in judicial decision, to the general effect that, in ease of a most urgent necessity, the trial judge has authority, in the exercise of sound discretion, to discharge the jury, and that in a ease of such urgent necessity such action under such circumstances will not constitute former jeopardy. This is stated to be a more modern modification of the doctrine of jeopardy. 16 C. J. 250, §§ 394, 395; 12 Cyc. 269, subd. (g); 8 R. C. L. 153, § 142; U. S. v. Shoemaker, supra; Thompson v. U. S., 155 U. S. 271, 273, 15 S. Ct. 73, 74, 39 L. Ed. 146; U. S. v. Perez, 9 Wheat. 579, 580, 6 L. Ed. 165; Lovato v. New Mexico, 242 U. S. 199, 37 S. Ct. 107, 61 L. Ed. 244; Simmons v. U. S., 142 U. S. 148, 12 S. Ct. 171, 35 L. Ed. 968; Ex parte Lange, 18 Wall. 163, 21 L. Ed. 878; Blair v. White (C. C. A.) 24 F.(2d) 323. These eases are cited by the government as authority for the proposition that, whenever it is necessary for the purposes ofl justice, or in order that the ends of public justice may not be defeated, the court can discharge a jury without the consent of the defendant, in the exercise of its sound discretion, and such proceedings would not constitute former jeopardy. It is true that there is language used by the courts in the foregoing cases which, divorced from its context and applied as authority for the general proposition, would sustain the rule advocated by the government in the case at bar. We are here dealing, however, with a fundamental right of a person accused of crime, guaranteed to him by the Constitution, and such right cannot be frittered away or abridged by general rules concerning the importance of advancing public justice. An examination of the cases cited will disclose the fact that no court has gone to the extent of holding that, after the impanelment of the jury for the trial of a criminal ease, the failure of the district attorney to have present sufficient witnesses, or evidence to prove the offense charged, is an exception to the rule that the discharge of a jury after its impanelment for the trial of a criminal ease operates as a protection against a retrial of the same ease. Without undertaking to analyze or discuss all the eases cited, a statement of the situation involved in some of the decisions by the Supreme Court which axe relied upon by the government will indicate that the general expressions used by the court in such decision has reference to an entirely different, situation than that presented by the ease at bar. In Thompson v. U. S., it was discovered, after the jury had been sworn and the witnesses examined, that one of the jurors was disqualified by reason of having been a member of the grand jury that found the indictment. It will be observed that, as only eleven competent jurors had been sworn to try the case, it might be readily held that no proper jury was ever impaneled. It was in connection with this claim that the court made the statement whieh is relied upon by the government: “As to the question raised by the plea of former jeopardy, it is sufficiently answered by citing United States v. Perez, 9 Wheat. 579 [6 L. Ed. 165]; Simmons v. United States, 142 U. S. 148, 12 S. Ct. 171 [35 L. Ed. 968] ; and Logan v. United States, 144 U. S. 263, 12 S. Ct. 617 [36 L. Ed. 420]. Those eases clearly establish the law of this court that courts of justice are invested with the authority to discharge a jury from giving any verdict whenever, in their opinion, taking all the circumstances into consideration, there is a manifest necessity for the act, or the ends of public justice would otherwise be defeated, and to order a trial by another jury; and that the defendant is not thereby twice put in jeopardy, within the meaning of the fifth amendment to the constitution of the United States.” The first case cited in support of the foregoing rule, U. S. v. Perez, 9 Wheat. 579, 6 L. Ed. 165, is one much relied upon by the government in this case. The statement made by the court in U. S. v. Perez has been so often quoted in subsequent eases that we do not set the same out in full. It does not appear from the opinion under just what conditions the; former jury was discharged, but it was stated in Dreyer v. Ill., 187 U. S. 71, 85, 23 S. Ct. 28, 33, 47 L. Ed. 79, where, referring to U. S. v. Perez, supra, it was said: “That was a capital ease, in whieh, without the consent of the prisoner or of the attorney of the United States, the jury, being unable to agree, were discharged by the court from giving any verdict. * * * ” The general statement of the rule in U. S. v. Perez, supra, and Dreyer v. Ill., supra, must be construed with reference to the question there involved; namely, as to whether a defendant could be tried by another jury after the first jury had been discharged because of failure to agree upon a verdict. The sound discretion referred to in those opinions is that discretion of the trial court involved in the determination of when and after how long a deliberation the jury should be discharged, for the reason that the accused is entitled to have the jury given a reasonable time to arrive at a verdict before a mistrial should be declared and the jury discharged. In Simmons v. U. S., 142 U. S. 148, 12 S. Ct. 171, 35 L. Ed. 968, supra, citing U. S. v. Perez, supra, it was said: “The general rule of law upon the power of the court to discharge the jury in a criminal ease before verdict was laid down by this court more than 60 years ago, .in a case presenting the question whether a man charged with a capital erime was entitled to be discharged because the jury, being unable to agree, had been discharged, without his consent, from giving any verdict upon the indictment.” The court applied the rule announced in U. S. v. Perez, supra, to the situation where it appeared that one of the jurors had sworn falsely on his voir dire that he had no acquaintance with the defendant, whereas it later appeared that he was acquainted with the defendant, and other circumstances in connection with the discovery made it improbable that the jury could act fairly or impartially. In Logan v. U. S., 144 U. S. 263, 12 S. Ct. 617, 628, 36 L. Ed. 429, supra, the rule announced in U. S. v. Perez, supra, was applied to a ease where a jury had been discharged after forty hours’ deliberation and had announced in open court that they were unable to agree upon a verdict. It is said in that case: “Upon those facts, whether the discharge of the jury was manifestly necessary in order to prevent a defeat of the ends of public justice, was a question to be finally decided by the presiding judge in the sound exercise of his discretion.” In Keerl v. Montana, 213 U. S. 135, 29 S. Ct. 469, 53 L. Ed. 734, a defendant had been tried and convicted of murder; the judgment was reversed by the Supreme Court of'Montana; upon a second trial the jury disagreed; on the third trial the defendant interposed the plea of once in jeopardy on the ground that the jury was improperly discharged at the end of the second trial. Upon the authority of the previous decision of the Supreme Court hereinabove quoted, it was held that the plea was not well taken. In Lovato v. New Mexico, 242 U. S. 199, 37 S. Ct. 107, 61 L. Ed. 244, supra, after the jury had been impaneled and sworn, it developed that the accused had not been arraigned and had not pleaded to the indictment. The jury was dismissed temporarily, the accused was arraigned and pleaded and the same jury was again sworn and the trial resumed.. It was held under these circumstances that the procedure involved was at most an irregularity, and the accused had not twice been placed in jeopardy. None of these cases is authority for the claim of the government in the case at bar under the circumstances presented by the record at the time the first jury was discharged. As has been stated, the position of the district attorney was no different from what it would have been if he had produced all the evidence he had the ability to produce and had discovered that such evidence was insufficient to justify a conviction. His announcement in advance of the presentation of evidence that indispensable witnesses were absent was merely an admission that he could not convict the defendant with the evidence that he was able to produce. There is nothing in the cases cited by the government that militates against the authority of the eases we have cited, which are to the effect that mere absence of witnesses discovered after the jury is impaneled is insufficient to deprive the accused of his right to claim former jeopardy upon a subsequent trial where the jury is discharged without his consent and notwithstanding his objection. The court should have granted the motion of the defendant that the court “instruct the Government to proceed at this time, or that the jury be instructed to return a verdict of not guilty” (Bishop on Crim. Proc. vol. 1, § 1016; U. S. v. Shoemaker, 27 Fed. Cas. 167, No. 16279, 2 McLean, 114 supra; Bishop, New Crim. Proc. vol. 2, § 820; Id. § 818, or should have discharged the defendant Bishop, New Crim. Proc. vol. 2, §§ 818, 820, 830). In either event the order would be equivalent to an acquittal so far as another trial upon the same charge is concerned. Bishop Crim. Proc., vol. 2, § 818. Judgment reversed, with instructions to the trial court to dismiss the ease and discharge the. defendant.

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Caselaw Access Project

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2024-08-24T03:29:51.129683

GAIRING TOOL CO. v. ECLIPSE INTERCHANGEABLE COUNTERBORE CO. Nos. 5530, 5531. Circuit Court of Appeals, Sixth Circuit. Nov. 5, 1930. On Petition for Rehearing April 7, 1931. F. D. Hardesty, of Detroit, Mich., for appellant Gairing Tool Co. S. C. Barnes, of Detroit, Mich., for appellee Eclipse Co. Before DENISON and HICKENLOOPER, Circuit Judges, and WEST, District Judge. HICKENLOOPER, Circuit Judge. The appellee complained in the court below of the infringement of its patent re-issue No. 16,817, issued December 13, 1927, upon application of John Hugo Smith, for a reaming and counterboring tool. All nine claims of the pate.nt were in issue. Claims 1 and 4 may be 'taken as typical of the two classes covered, and are printed in the margin. It will be noted that they differ only in that claim 4 (with which claim 6 is to be aligned) requires that the ribs of smaller radii shall number at least three, to pilot the cutting ribs of larger radii. The other claims read equally upon a tool which has but two ribs of the smallest radii. The District Court held claims 4 and 6 valid and infringed, and the remaining claims invalid by reason of anticipation in the prior art. Both parties appeal. The tool covered by the patent is designed for performing, simultaneously, counterboring, reaming, and chamfering operations upon a easting already provided with a circular aperture, whereby a depressed shoulder (or shoulders) surrounding the existing hole is produced, to exact dimensions as to depth, and the walls of such hole and of the newly produced shoulders are dressed in the same ■operation. In the prior art, before Smith, various means were used for thus counterboring and machining. Counterboring tools with a pilot and reaming or dressing tools were common, but these were used upon the turret lathe, successively, each tool performing the single operation for which it was designed. Such tools frequently had three or more ribs to provide the cutting edges. The stepped eounterbore was also old in the art and was constructed with three or more ribs to provide cutting edges of different radii, but the cutting edges of greater radii were mounted above and upon the same ribs as the edges of smaller radii. It is thus obvious that in the stepped eounterbore of the prior art, the life of the tool was limited to that period within which the grinding for ■ sharpening cutting edges would consume the shortest longitudinal distance between the different radii, for such grinding operations upon the cutting edges of greater radii would almost inevitably cut into the rib of less radius, thus deforming and destroying the dimensions of the cutting edge of lesser radius when that point was reached. Drills or tools designed primarily for boring, but also susceptible to use for counter-boring, in which separate ribs were provided for cutting edges of different radii, such as the tool covered in the patent to Thomas, No. 805,170 (1905), the patent to Bennett, No. 1,000,067 (1911), the boring bar of Heinkel, patent No. 1,337,015 (1920), with its insertable cutters, and the tool of the Ohio Brass Company, referred to in the record as the Mansfield use, were also known and used. But in each of these tools the independent or separate ribs for each radius, never exceeded two. We concur in the opinion of the District Judge that the evidence establishes the prior invention and public use by the Ohio Brass Company, of a tool with separate, but only two, cutting ribs for each radius, with that degree of certainty and conviction which is required to defeat the patent (Barbed Wire Patent, 143 U. S. 284, 12 S. Ct. 443, 450, 36 L. Ed. 154), and that this use was not of the abandoned experiment type, nor within the lost arts. But even apart from the Mansfield use, it would be extremely difficult to sustain the claims which read upon a tool having only two ribs for each radius, in view of the patents to Bennett and to Thomas, which 'latter patent also departed from the principle of the stepped eounterbore and was an advance in the direction of independent ribs for each radius, although this step was taken merely "by providing a clearance and oiling groove, along a major rib, which divided the rib into portions of different radii. Bennett clearly shows two separate ribs for each radius. It follows that the decree finding claims 1, 2, 3, 5, 7, 8, and 9 invalid, and dismissing the bill as to such claims, must be affirmed. A more difficult question arises as to claims 4 and 6, as to which the defendant below contends invention is not disclosed by the mere increase in the number of separate or independent ribs with their respective cutting edges. As above stated, however, pilots were in common use with the counterboring tools of the prior art when' operated upon the turret lathe, and were considered necessary to produce work of accurate dimensions. The tool of the patent in suit provides such piloting means while at the same time the wall of the initial opening is dressed or reamed. The tool of the patent also provides additional means of radiation for the heat developed, and possesses, or retains, the much lengthened life which is due to the fact that the cutting edge of ribs of greater radii may be ground without injury to the ribs of less radii. So far as the present record discloses, the tool of claims 4 and 6 was both new and highly useful. It was immediately and enthusiastically accepted by the trade and has had great commercial success. Smith v. Goodyear Dental Vulcanite Co., 93 U. S. 486, 495, 23 L. Ed. 952. The defendant below has paid it the tribute of extremely close, if not absolute, imitation. The need existed for many years, but was not theretofore met, machinists preferring to do the separate operations by turret lathe. This is indicative of the fact that more than mere mechanical ability was required to conceive the invention, and reduce it to practice. Compare Southern Textile Machinery Co. v. United Hosiery Mills, 33 F.(2d) 862 (C. C. A. 6). As to claims 4 and 6, the references contained in the present record were all before the Patent Office, with the possible exception of the Mansfield use, and were rejected as anticipations, and this at least greatly strengthened the presumption of novelty and invention which arises from the grant of the patent. Hildreth v. Mastoras, 257 U. S. 27, 32, 42 S. Ct. 20, 66 L. Ed. 112; Smokador Mfg. Co. v. Tubular Products Co., 31 F.(2d) 255 (C. C. A. 2); Gordon Form Lathe Co. v. Walcott Machine Co., 32 F.(2d) 55 (C. C. A. 6). We therefore conclude that invention is disclosed, that more was involved than a mere multiplication of elements, that the claims cover a true combination (compare Diamond Rubber Co. v. Consolidated Tire Co., 220 U. S. 428, 443, 31 S. Ct. 444, 55 L. Ed. 527), and not a mere aggregation of elements theretofore separately known and used in the art to perform identical functions, as in Concrete Appliances Co. v. Gomery, 269 U. S. 177, 46 S. Ct. 42, 70 L. Ed. 222, and Adams v. Galion Iron Works & Mfg. Co., 42 F.(2d) 395 (C. C. A. 6), and that the decree, finding said claims 4 and 6 valid and infringed, and the remaining claims in suit invalid, must be affirmed. No costs will be awarded either party in this court. On Petition for Rehearing. Appellant, defendant below, files a petition for rehearing upon the ground of newly discovered evidence of prior public use by the Dayton Engineering Laboratories Company of Dayton, Ohio. Although this petition is supported by affidavits and drawings, such evidence is not of the type which we may consider upon an appeal, it not having been presented to the court below, and it is therefore incompetent to support a petition for rehearing as such. However, we are at liberty to consider such petition for a rehearing as an application for leave to file a petition in the District Court to reopen the case, and to remand the cause to the District Court for that purpose. This action will be taken only if the newly discovered evidence is of that substantial character which seems, prima facie, to seriously threaten the validity of the patent, and if it does not appear upon the showing made that the petitioner was guilty of laches in the discovery and presentation of such evidence to the court. • In the present instance it is also urged that the tool shown by the drawings produced could not have the piloting effect of the tool of the patent in suit, because the' cylindrical shape had not been retained upon the outside edges of the cutting ribs of smaller radii, such edges being cut away from the cylindrical on straight lines, thus destroying that snugness of fit essential to a'piloting action. We think it apparent that the tool of the alleged prior use would not have as efficient piloting action ás the patented tool, but we think it equally clear that it would have some piloting effect, and perhaps sufficient to permit it to operate as a prior use. To this extent the drawings and affidavits constitute substantial evidence seriously threatening the validity of the patent; but whether or not such evidence is in truth .sufficient to defeat the patent is primarily a question for the District Court upon a more Complete presentation of the facts. The defense of laches is based upon the contention that counsel for appellant was for some time employed in the patent department of the General Motors Research Corporation, a subsidiary of General Motors Corporation, that the Dayton Engineering Laboratories Company was also a subsidiary of General Motors, that under these circumstances counsel should have known of the practice of the General Motors Corporation patent department of keeping complete records of all new designs of tools or machinery, and that such counsel should therefore have applied to the General Motors Corporation for possible information of prior uses. But we are not impressed that due care required that counsel broadcast inquiries to all corporations by which prior uses might possibly have been made, nor is there assurance that if inquiry had been made of the General Motors Corporation such a search for uses by subsidiary companies would have resulted as to have disclosed this particular prior use. Upon the showing made we do not think the evidence of laches sufficient to defeat the present petition, but we do not intend'to hold that a consideration of this issue is thereby foreclosed when the petition to reopen is heard by the District Court. A reopening would be distinctly in furtherance of justice, especially since publicity has been given to the alleged prior use. If sueh evidence be sufficient to avoid a decree of injunction and accounting against other manufacturers or users, the appellant should not be the only manufacturer so enjoined. However, the application comes exceedingly late in the litigation, after trial in the District Court, and after hearing and decision in the Court of Appeals, and it is therefore discretionary with the court to impose terms. See Roemer v. Bernheim, 132 U. S. 103, 10 S. Ct. 12, 33 L. Ed. 277; Trane Co. v. Nash Engineering Co., 25 F.(2d) 267 (C. C. A. 1); Thomson-Houston Electric Co. v. Nassau Electric R. Co., 110 F. 646 (C. C., N. Y.) Barber v. Otis Motor Sales Co., 245 F. 945 (D. C., N. D. N. Y.). It is accordingly ordered herein that the mandate be stayed, the decree of affirmance heretofore entered herein be suspended, that leave be, granted to file a petition in the District Court to reopen this cause, and that the eause be remanded to the District Court for the purpose of entertaining sueh petition; but should such petition to reopen be granted, it is further ordered that appellant pay to appellee the sum of $2,500, expenses and counsel fees, as a condition to securing sueh relief. 1. A tool of the character described, comprising a head, and a plurality of integral radial ribs, the outer ends of which form cutting teeth, said ribs being alternately spaced and different in length and diameter and the ribs of less diameter constituting pilot teeth and projecting beyond the ends of the ribs of greater diameter and extending substantially the entire length of the head, whereby the proper relation between the cutting ends of the ribs may be maintained at all times. 4. A tool for cutting in an already existent hole, comprising a shank terminating in a head, integral cutting ribs projecting from the sides of the head and running along the sides of the head in separate distinctly spaced ribs in sets of different radii but in overlapping relation, the sets of smaller radii running substantially to the outer end of the head and running beyond those of larger radii at the working end of the tool and numbering at least three to pilot the cutting ribs of larger radii.

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2024-08-24T03:29:51.129683

Ex parte ZWILLMAN. No. 4553. Circuit Court of Appeals, Third Circuit. Feb. 3, 1931. Minturn & Weinberger and Harry H. Weinberger, all of Newark, N. J., and William T. Connor and John R. K. Scott, both of Philadelphia, Pa., for petitioner. Joseph L. Smith, of Newark, N. J., for respondent. Before WOOLLEY and DAYIS, Circuit Judges, and THOMPSON, District Judge. THOMPSON, District Judge. This is a petition to this court for the issuance of a writ of habeas corpus. The relator avers that he is deprived of his liberty without due process of law, in violation of the provisions of the Fourteenth Amendment to the Constitution of the United States, under the following circumstances: He is detained and imprisoned in the Essex County Penitentiary under a commitment issued by a judge of the court of common pleas of Essex county, N. J. • Under indictments chargipg him with atrocious assault and battery and assault with intent to kill, he waived trial by jury, and was convicted on February 11, 1929. Sentence having been suspended by the trial court, he applied for a new trial, and a hearing was had upon his rule to show cause on March 12, 1929. The court held the matter under advisement until December 5, 1930, on which date the rule to show cause was discharged. On December 12, 1930, a motion in arrest of judgment was made on behalf of the relator. The motion was denied, and on the same day he was sentenced to imprisonment in the penitentiary for six months at hard labor, and to pay a fine of $1,000, the defendant to stand committed until the fine should be paid. On December 17, 1930, application was again made for a rule to show cause why a new trial should not be granted, which rule was disallowed. During the period between the relator’s conviction and the imposition of sentence on December 12,1930, he was at large upon his own recognizance. It is alleged by the relator that the judge of the Essex county court had no authority or power to impose sentence or pronounce judgment on December 12, 1930, because that power was expressly denied him by the provisions of chapters 231 and 232 of the New Jersey Laws of 1928. The pertinent part of chapter 231 is as follows: “55. After conviction and sentence the court before which such conviction was had upon the application of the defendant for a new trial shall have power at any time within the period of six months from the date of the entry of such eonvietidn, to open and vacate the same and grant a new trial and discharge the defendant from custody upon bail, pending such new trial, and may also at any time within the period of thirty days from the date judgment is entered, but not thereafter, upon application of the defendant, or on its own motion, open and vacate the judgment entered on any conviction and resentence the defendant, as right and justice may seem to require and discharge the' defendant from custody upon bail, pending such resentenee; provided, no writ of error is pending to review such judgment.” The pertinent part of chapter 232 is as follows: “1. In all criminal cases where sentence is by law to be imposed, it shall be the duty of the trial court to impose sentence upon the defendant within the following periods: “Where there has been a trial and a verdict of a jury or determination of a court sitting without a jury, it shall be the duty of the court to impose sentence within thirty days after the rendition of such verdict or determination. Where there has been a plea of guilty or other plea upon which sentence may be imposed, it shall be the duty of the court to impose such sentence within forty days after acceptance of such plea. Where a sentence has been opened and vacated, it shall be the duty of the court, except where a new trial is granted, to resentenee the defendant within ten days after the said sentence was so opened and vacated.” Although the defendant moved for a new trial within thirty days after verdict, it is contended that the court was without power to impose sentence after the expiration of the thirty days because of the provisions of chapter 232, and that it was mandatory and obligatory upon the court to give judgment upon the relator’s application for a new trial within six months from the date of conviction because of the provisions of chapter 231. In reliance upon the construction of those statutes, the relator on December 31, 1930, applied to the Chief Justice of the Supreme Court of New Jersey for his discharge upon a writ of habeas corpus. The writ was allowed, and, after hearing on January 3, 1931, the Chief Justice denied the petition, dismissed the writ, and remanded the relator to the Essex County Penitentiary. The relator on January 7, 1931, made application to the Supreme Court of New Jersey for a writ of certiorari, which application was denied on January 9. The application for certiorari into the Supreme Court is alleged to be under pro7 visions of an act entitled “An Act for preventing the injury of illegal confinement, and better assuring the liberty of the people,” 2 Compiled Statutes 1910, p. 2639; and in particular section 53 thereof, which provides as follows: “53. In criminal cases, prisoner may appeal; in civil eases, either party. — That all proceedings commenced under this act before a justice of the supreme court, may be removed, after final decision by such justice, by certiorari into the supreme court, that is to say, if the imprisonment is for an alleged crime, and the decision is against the right of the prisoner to a discharge, the prisoner may remove such proceeding; if on civil process either party may do so; in like manner the final decision of the supreme court thereon may be removed, by writ of error, into the court of errors and appeals; provided, however, that if a discharge has been awarded, such appeal shall not stay such discharge. ..(Rev. 1877, p. 475.)” Notwithstanding that the latter act provides a right to appeal on writ of error, the relator, claiming that he is deprived of his rights under the Fourteenth' Amendment, asks this court to hold that the action of the court ' of common pleas and the Supreme Court of New Jersey has deprived him of his liberty without due process of law. There are two well-established rules governing the court in this casé. The first is. that, except in extraordinary circumstances, the writ of habeas corpus cannot be utilized for the purpose of proceedings in error. Harlan v. McGourin, 218 U. S. 442, 31 S. Ct. 44, 54 L. Ed. 1101, 21 Ann. Cas. 849; Matter of Gregory, 219 U. S. 210, 31 S. Ct. 143, 55 L. Ed. 184; Glasgow v. Moyer, 225 U. S. 420, 32 S. Ct. 753, 56 L. Ed. 1147; Craig v. Hecht, 263 U. S. 255, 44 S. Ct. 103, 68 L. Ed. 293. There are no exceptional circumstances in this case to take it out of that rule. The second rule is that, in the construction of state statutes, the federal courts will adopt the construction put upon them by the state courts. Upon the application to the New Jersey Supreme Court for a writ of certiorari, that court filed a per curiam opinion (152 A. 775, 776, 9 N. J. Misc. R. 66) set out in the brief for the state of New Jersey citing an opinion by Vice Chancellor Garrison in State v. Osborne, 79 N. J. Eq. 430, 82 A. 424, where a similar statute was construed adversely to the contention of the relator, and, citing the statutes in controversy here, the court said: “It is argued that the effect of these legislative enactments is to require the court to impose sentence within thirty days after the rendition of a verdict, and that although the defendant in this ease was -seeking to have his conviction'set aside the court must impose the sentence within the time fixed by \aw, although it was considering the matters urged on the defendant’s rule, and thereby lost its power to impose sentence. Thus, the defendant by trick could defeat the state of its remedy. “It is inconceivable to suppose that the Legislature intended any such result. As Vice Chancellor Garrison pointed out in State v. Osborne, supra, the power to suspend sentence where the defendant does not object resides .in the courts of this state. It certainly resides in these courts where defendant, by his own motions, has delayed the imposition of sentence. Otherwise, the legislative enactment, which was obviously intended to be merely directory, would result in fugitives from justice and those who sought a new trial by rule to show cause on motions in arrest of judgment securing a release from the penalties of the law and would, by the mere passage of days, secure immunity from punishment. “We see nothing in Sections 53, 54, or 56 of the Habeas Corpus Act, 2 Compiled Statutes, p. 2651, that makes it mandatory upon us to issue a writ of certiorari in a ease such as this. Certainly, the practice was not so understood by Vice Chancellor Garrison in State v. Osborne, and no reason has been suggested to us to the contrary. “The writ will be denied.” In the case of Erie R. R. Co. v. Hilt, 247 U. S. 97, 38 S. Ct. 435, 436, 62 L. Ed. 1003, where a construction was placed by this court upon a statute of New Jersey in the absence of its construction by the Court of Errors and Appeals, the highest court of the state, Mr. Justice Holmes, in an opinion reversing the judgment of this court (246 F. 800), said: “The words of the statute seem to us to require a different construction from that adopted and they have been given their full literal meaning by the Supreme Court of the State in the ease of an infant younger than the plaintiff. Barcolini v. Atlantic City & Shore R. R. Co., 82 N. J. Law, 107, 81 A. 494. In view of the importance of that tribunal in New Jersey, although not the highest Court in the State, we see no reason why it should not be followed by the Courts of the United States, even if we thought its decision'more doubtful than we do.” While the statutes invoked here have apparently not been construed by the Court of Errors and Appeals of New Jersey, although the relator might have appealed to that court from the decision of the New Jersey Supreme Court, we, following Erie R. R. Co. v. Hilt, adopt the ruling of the latter in its construction of the statutes in question. The petition is dismissed, and the writ of habeas corpus denied.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

MITCHELL v. LAY et al. No. 6340. Circuit Court of Appeals, Ninth Circuit. Feb. 24, 1930. Rehearing Denied April 6, 1931. E. Forrest Mitchell, State Insurance Com’r., and Frank L. Guerena, both of San Francisco, Cal., for appellant. Reisner & Deming, of San Francisco, Cal., for appellee Helen Lay. Bronson, Bronson & Slaven, of San Francisco, Cal., for appellee Lumbermen’s Reciprocal Ass’n. Marshall B. Woodworth, of San Francisco, Cal., for appellee Samuel M. Shortridge, Jr. Before RUDKIN and WILBUR, Circuit Judges, and SAWTELLE, District Judge. Certiorari denied 61 S. Ct. 656, 75 L. Ed. —. WILBUR, Circuit Judge. This action is brought on the equity side of the United States District Court for the Northern District of California by the appellee Helen Lay against the appellee Lumbermen’s Reciprocal Association, a Texas corporation, and resulted in the appointment of appellee as receiver for the Lumbermen’s Reciprocal Association. After appointment of a receiver the appellant was cited by him to appear in court to show cause why he should not be enjoined from further, proceeding with an- action in the superior court and from interference with the property of the Lumbermen’s. Reciprocal Association, and after a hearing upon the receiver’s petition and appellant’s counter motion to vacate the receivership was denied, and an injunction was issued. From these orders appellant takes this appeal. The appellees moved to dismiss .the appeal, and, reserving the jurisdictional question, have also argued and submitted the appeal on the merits. In order to understand the situation presented by the appeal it will be necessary to state the facts in some detail. The bill in equity, hereinafter referred to as the complaint, filed by appellee Helen Lay, who will hereinafter be referred to as the plaintiff, alleged as follows: That the appellee Lumbermen’s Reciprocal Association, the defendant therein named, is a corporation organized under the laws of the state of Texas, conducting an insurance business within the state of California; that the defendant was insolvent, that its license to do insurance business in the state of Texas was suspended by the insurance commissioner in that state on July 23, 1930, and that its license to do business in California was suspended by the order of the insurance commissioner for the state of California, the appellant herein, on the next day, July 24, 1930. As a basis for the allegation of insolvency plaintiff alleges- that the liabilities of the defendant exceeds the value of its' assets by approximately $325,0t)0, and that there are a great many outstanding claims against the defendant arising out of its policies of insurance which are unpaid and cannot be paid, for the reason that the defendant had not sufficient cash to satisfy the same. It is also alleged that the liability of the defendant consists largely of claims arising out of policies issued by the defendant in Texas, in California, and in other states; that the amount of “known valid unpaid claims now outstanding against the defendant in the State of California aggregate approximately $75,000, and that defendant is indebted to other California residents in the sum of approximately $3,000.” Plaintiff alleged that the defendant has the following assets located in the state of California: Cash on hand, $7,000; accounts receivable, $60,000; securities on deposit with the insurance commissioner of the state of California, in lieu of a bond required of workmen’s compensation insurance carriers by the laws of the state of California, of the approximate value of $81,000. That all said assets are located in the city and county of San Francisco, state of California, within the jurisdiction of this court; that policyholders to whom policies have been issued by the defendant are entitled to cancel their policies, and that the insolvency of the defendant will no doubt result in the cancellation” of the policies and a claim for refund of unearned premiums; that it may be “reasonably anticipated that as soon as tbe insolvency of the defendant becomes generally known a great many suits will be instituted against defendant by claimants within the State of California and elsewhere and that a great many attachments will be levied upon the property and assets of defendant within the State of California; that the expense of a proper defense of said suits will be very great, thereby further impairing the defendant’s present insolvent financial condition, and that by reason of said multiplicity of actions the assets of the defendant will be largely consumed and dissipated.” It is alleged that, by reason of the facts therein stated, “it is necessary, in order to protect the said claim of plaintiff and the said claims of other creditors of the defendant residing in the State of California and within the jurisdiction of this court, that a receiver be appointed by this court to take possession of the business and assets of defendant within the jurisdiction of this court and that said assets and the business of defendant within this State and within the jurisdiction of this court be administered by such receiver under the order and direction of this court and that all creditors be enjoined from bringing any action against or levying any attachment against the property of defendant to the end that the rights of all claimants against and creditors of defendant within the jurisdiction of this court may be properly and adequately protected; that unless such receiver be appointed and such injunction issue, the assets of defendant now located in the State of California and within the jurisdiction of this court will be largely dissipated and consumed by reason of said multiplicity of actions and by reason’ of a withdrawal and transfer from the State of California to the State of Texas, for the purpose of payment of claims of residents of Texas and of other states, of property and funds of defendant now located within the jurisdiction of this court; that if such receiver is appointed and such injunction issue plaintiff and the other claimants against defendant residing within the jurisdiction of this court may and probably will receive substantially the full amount of their said claims, but not otherwise. *. * * That plaintiff has no adequate remedy at law and can have relief only in equity and therefore files this bill of complaint in behalf of herself and of all the creditors of defendant who may hereafter join herein.” Plaintiff prays that the court will administer all the assets of the defendant within the state of California and fix the rights of the creditors of the defendant in the state of California and within the jurisdiction of the court, and that a receiver be appointed to take possession of all the assets of the defendant within the jurisdiction of the court, to collect money due defendants, to bring suits at law, reinsure all risks now insured against by defendant, to employ attorneys, and counsel and other officers, agents, and employees, to administer the assets and business of the defendant within the jurisdiction of the court; to do all acts necessary to properly administer the business and property of the defendant and the payment of claims against defendant; that the officers of the defendant be required to transfer all of its property and assets located within the state of California and within the jurisdiction of the court to the receiver, that all persons be enjoined from instituting suits or actions at law or in equity against the defendant, attaching or taking other legal processes against the property of the defendant within the jurisdiction of the court and from interfering with the possession of the receiver. The plaintiff prays for other relief which 'need not be specified in further detail, except to say that the court was asked to adjudicate the claims of all creditors within the jurisdiction of the court and after doing so to direct the payment of the same by the receiver out of the assets of the defendant located within the jurisdiction of the court. The complaint was verified the 29th day of July, 1930, and on that day the appellee was appointed receiver. On July 31, 1930, Wright Morrow, of Houston, Tex., was appointed receiver of the Lumbermen’s Reciprocal Association in and for the state of Texas. On August 1, 1930, the appellant, in pursuance of his duties as insurance commissioner and in conformity with the law of the state of California (Stats. 1919, p. 265), began an áction in the superior court of the city and ’ county of San Francisco, state of California, to liquidate the affairs of said association and praying the court to appoint him receiver of the association, as provided by said statute of California. Thereupon, an order of the superior court was issued restraining the local agent of the association, E. J. Brockman, from disposing of the property of the association, and to show cause why the appellant should not be appointed receiver. This order was served on E. J. Brockman on August 2, 1930. On August 6, 1930, the defendant association filed an answer herein admitting the allegations of the complaint and joining in the prayer of the plaintiff praying that such decree be made in the premises as may be just and proper for the full protection of the plaintiff, the defendant, and all creditors of defendant. Plaintiff alleges in her complaint that her husband was killed July 18, 1930, in an industrial accident while working for the "Bos Construction Company, that this company was insured against the consequences of industrial accident by a policy of insurance issued by the defendant; .that she filed an application for compensation on July 24;-that the Industrial Accident Commission of California, in pursuance of the Workmen’s Compensation Law of that state, had made an award in her favor and against the defendant insurance company for the sum of $5,000 on July 28, 1930. The plaintiff alleges that the "next day, July 29, 1930, she made a demand upon the managing agent of the defendant for the state of California, E. J. Brockman, for the sum of $5,000, in conformity with the terms of the award, but alleges “that said sum has not been paid nor has any part thereof”; that at the time of making the demand she was informed by said agent that defendant was insolvent. The Workmen’s Compensation Law of California provides for the docketing of an award in the office of the clerk of the superior court, that thereupon and thereafter it has the effect of a judgment and an execution can be issued to collect the same in conformity with the usual practice in case of executions issued upon other judgments. Cal. Stats. 1917, c. 586, § 21, pp. 831, 851. No reason is alleged why the plaintiff could not have immediately docketed her judgment and caused an execution to be issued thereon. The award, however, was still subject to the control of the Industrial Accident Commission during the twenty-day period, within which the law permits an application for rehearing. Id., §§ 65, 66, pp. 874, 875. In addition to the above remedy the plaintiff had recourse to the special fund of $80,000 deposited for the benefit of those securing awards under the Workmen’s Compensation Laws of California to be paid upon the order of the appellant insurance commissioner. To that extent she is a preferred creditor, as will presently appear. An act of the Legislature of- the state of California for the protection of the beneficiaries of Workmen's Compensation insurance policies against the default or insolvency of insurance carriers issuing policies provides for the filing of a bond by the insurance ■ company to secure payment to employees of the insured who secure awards for injuries, or in lieu thereof a deposit as in the case at bar. Section 11 of the act (Stat. of Cal. 1917, p. 295) provides that such deposit shall be subject to the same conditions as the bond (Stat. of Cal. 1917, e. 200, p. 292, as amended, Stat. of Cal. 1919, c. 334, p. 611). This deposit is made with the state treasurer through the insurance commissioner “as security for the payment of its obligations on said business done in this state, and said deposit shall not be withdrawn except upon the written order of the insurance commissioner in payment of compensation claims, but shall be forthwith payable by the state treasurer to the insurance commissioner upon such order; provided, that any such deposit, or any remainder thereof, may be repaid to such carrier upon satisfactory showing to the insurance commissioner that every liability to pay compensation shall have been reinsured with a solvent carrier or fully paid and discharged. Said deposit shall be used only for the payment of compensation claims so long as there shall remain unpaid any such' claim or any part thereof.” Section 11. The condition of the bond which is referred to in the above provision in regard to the deposit provides, in substance, that, if the insurance carrier fails to pay an award of the Industrial Accidént Commission on account of workmen’s compensation within thirty days after the same becomes final, the surety will forthwith pay said award or awards to said insurance commissioner as trustee for said beneficiary. The bond further provides that, if the insurance carrier shall suspend payment or become insolvent, or a receiver shall be appointed therefor, the surety will pay said awards to the extent of its liability under the bond upon the expiration of thirty days after the same becomes final, without regard to any proceedings for the liquidation or reinstatement of said insurance carrier. It provides that the Industrial Accident Commission may make an award directly against the surety in event the award is not paid within thirty days after the same becomes final, said award to be in favor of the insurance commissioner as trustee for the beneficiary of such award, provided a copy of the judgment against the surety may be entered by the clerk of the superior court of any city or city and county of San Francisco. The bond also provides for the “payment of legal costs, including reasonable attorneys’ fees, incurred in all actions or proceedings taken to enforce páyment-of said bonds or payment of said awards or said judgments against said surety.” It is not necessary in this action to determine (Stat. of Cal. 1917, e. 200 supra, p. 292, § 2) whether the deposit in the office of the treasurer of the state of California is to be paid out'upon the order of the insurance commissioner in the amount of, and in the order of, the awards made by the Industrial Accident Commission against said insurance company, or whether in case of liquidation the fund is to be divided pro rata between those who have suffered losses covered by such policies. It would seem clear that, before the plaintiff was justified in coming into a court of equity for the appointment of a receiver and the liquidation of the affairs of the insurance company, she should have exhausted her remedy against this special fund deposited for her benefit. Whether, upon the ground of diversity of citizenship and in default of any judicial proceeding in the state courts, a federal court of equity might enforce the rights of a nonresident to such fund or take jurisdiction thereof, is a question not involved in this case, for there is no claim that there has been any default or misconduct on the part of any one with reference to the deposit in question. The plaintiff has not attempted to secure any part of said fund by any of the methods provided by law, and therefore is not in a position to invoke the jurisdiction of a court of equity to enforce rights which she herself has not undertaken to secure according to the proeedure outlined by the state law. It appears further from the complaint that the period for a rehearing of the said award made to plaintiff had not yet expired, and that therefore the award was not final at the time the complaint was filed in the district court. Subsequently, as appears by affidavits filed on the hearing of appellee’s motion for an injunction, the Industrial Accident Commission set aside the said award. Thus plaintiff is now the holder of an unliquidated claim which she is prosecuting in the proper state tribunal which has exclusive jurisdiction thereof. She cannot, under these circumstances, invoke the jurisdiction of the federal court by bringing a new action on the ground of a diversity of citizenship in support of her unliquidated. claim which is pending for liquidation upon her application therefor before the state tribunal. Appellees claim however, that the defects of the complaint are cured by the answer of the defendant corporation, admitting the award, admitting its failure to pay the same and its insolvency. It is uniformly held that consent of the defendant cures some of the deficiencies of such a complaint, such as the failure to pursue legal remedies. In re Metropolitan Railway Receivership, 208 U. S. 90, 110, 28 S. Ct. 219, 52 L. Ed. 403, citing Brown, Bonnell & Co. v. Lake Superior Iron Co., 134 U. S. 530, 10 S. Ct. 604, 33 L. Ed. 1021; Town of Mentz v. Cook, 108 N. Y. 504, 508, 15 2 N. E. 541; Horn v. Pere Marquette R. Co. (C. C.) 151 P. 626, 633. The answer of the defendant corporation, however, cannot change the fact that the plaintiff is prosecuting her claim for an award in the state tribunal, that the matter was pending before that tribunal at the time she commenced this action, as the award was not yet final, and that she is entitled to payment from a special fund pledged for the payment thereof and amply sufficient therefor, in the hands of the officers of the state of California, that plaintiff is not entitled to ask a court of equity to assist her to resort to the general assets of the insolvent association until she has exhausted the fund pledged for the payment of her claim, and that her appeal for the assistance of a court of equity to liquidate the affairs of the insolvent corporation in the interest of herself and other creditors is without merit because of the special security for her claim which she does not allege is insufficient to fully pay the same. This brings us to a consideration of the nature of the order appealed from and the right to appeal therefrom. A petition was filed in this action by the receiver alleging the pendency of the above-mentioned proceeding-in the state court, and praying that the appellant insurance commissioner be enjoined from further, proceedings in that action and from interfering with the possession of the receiver with reference to the property of the defendant in his possession. An order to show cause was served upon the appellant. He appeared, filed an answer, and evidence was introduced on his behalf. In the meantime the proceedings in the state court were continued by the superior court pending the action of the District Court, and after the above-mentioned hearing the District Court entered the order from which this appeal was taken. The order is general in its terms in that it prohibits the insurance commissioner from prosecuting the suit he had instituted in the state court and from interfering in any way with the possession of the receiver or with any of the property of the corporation within the jurisdiction of the court. Under this order the appellees claim the right to the possession of the fund of $80,000 now in the custody of the state treasurer as security for the claim of workmen under the Workmen’s Compensation Law of California as well as all the other property “within the jurisdiction of the court.” Whether or not the order can properly be given the broad construction contended for by the appellees without reference to the writ of injunction issued in pursuance thereof is a point that we need not consider. A writ of injunction was issued by the clerk of the District Court on the 3d of October, apparently in pursuance of the order of court theretofore made reciting the proceedings had in the court as aforesaid. This writ issued in the name of the court is in' the form of a judgment ordering and decreeing certain things which need not be stated in detail. 'It is sufficient to say that the insurance commissioner is enjoined from interfering in any way with the duties of the receiver by bringing or prosecuting or maintaining any suit or suits or proceedings in any court of concurrent jurisdiction, “whose purpose or object is or will be to direct and dispossess this court of its jurisdiction over the subject matter and parties plaintiff and defendant in the above-entitled suit, or whose purpose and object it is, or will be, to dispossess or in any manner interfere with the possession of the receiver of said defendant, Lumbermen’s Reciprocal Association. * * * The Insurance Commissioner * * * is enjoined from instructing, advising or informing any banks within the jurisdiction of this court, in which moneys or securities or other property of said defendant are on deposit or in possession of said banks, to refuse to'pay the same over or deliver the same to the said receiver, or from interfering with any money or securities of the defendant on deposit or in the possession of any bank within the jurisdiction of this court.” The appellant insurance commissioner is also thereby directed to pay or deliver to the receiver all moneys, securities, bonds, or collateral in the possession or under the control of the insurance commissioner or other person acting under his direction belonging to the defendant. This general language, it is claimed, applies to the deposit in the custody of the state treasurer to the order of the insurance commissioner of $80,000, and it is claimed requires the state treasurer to surrender that deposit to the receiver. It will be observed that this injunction prohibits the insurance commissioner from performing the duties imposed upon him by a state statute (Cal. Stat. 1919, c. 178, p. 265, as amended, Cal. Stat. 1921, c. 599, p. 1017), which provides for the liquidation of insolvent insurance companies which have been engaged in business in the state of California. The constitutionality of this state statute is not disputed. The order appealed from directs that the appellant insurance commissioner violate his official duty under such statute by turning over to the receiver of the federal court a fund that was in the custody of the state through its officers for the protection of creditors of the insolvent insurance company before this action was begun. And these orders are made notwithstanding that there is no claim that the insurance commissioner has neglected his duty, but solely on the ground that he is endeavoring to perform his duty as defined in the state statute. The mere statement of this situation is sufficient to show the impropriety of the order of the court. Dodds v. Palmer Mountain Tunnel Co. (C. C.) 188 F. 447; Rev. St. § 720 (28 USCA § 379). So far as the appellant’s application for a receivership was concerned it had been begun before the insurance commissioner was cited to appear and the federal court had no right to enjoin the further prosecution of that action, Hamilton v. Walsh (C. C.) 23 F. 420, 429; Lanning v. Osborne (C. C.) 79 E. 657; City of Lee’s Summit v. Jewel Tea Co. (C. C. A.) 217 E. 965; Kansas City Gas Co. v. Kansas City (D. C.) 198 E. 500; Chapman v. Brewer, 114 U. S. 158, 5 S. Ct. 799, 29 L. Ed. 83; Sargent v. Helton, 115 U. S. 348, 6 S. Ct. 78, 29 L. Ed. 412, although the trial court had a right to protect its receiver in the possession of the property of which he had already taken possession on the ground that the federal court had just acquired jurisdiction thereof. Upon the return of the order to show cause the appellant moved for an order vacating the receivership. This application was denied, and from this order also the appeal was taken. At this juncture we pause to consider appellee’s motion to dismiss so far as the motion is based upon the claim that the appellant is not entitled to appeal from the order granting the injunction or from the ■order refusing to vacate the receivership on the ground that the appellant is not a party to the action, and that the appellant did not ask permission to intervene in the action, thalt therefore he is a stranger to the action and not entitled to the appeal from the orders made. It is true that the appéllant is not a party to the original action, but when he was brought into court by the process of the court at the instigation of the parties to the> action or of the receiver he became a party to the ancillary proceedings and entitled to appeal from the judgment rendered against him. The judgment therein rendered was as to him final and appealable as such. Gas & Electric Securities Co. v. Manhattan, etc., Corp. (C. C. A.) 266 F. 625; see, also, O’Neil v. Welch (C. C. A.) 245 P. 261; Ward v. Foulkrod (C. C. A.) 264 F. 627. We conclude that the order is appealable in its aspect as an injunction, and also as to the order refusing to vacate the receivership which was an essential part of the final judgment on the hearing. Of the latter aspect of the judgment or order appealed from it should be observed that the question is not the abstract one of whether or not specific provision is made in section 129 .of the Judicial Code (28 USCA § 227) for an appeal from an order refusing to vacate a receivership. Ordinarily the right to appeal from the order appointing receiver which is authorized by section 129 is amply sufficient to protect the parties, and an appeal from an .order refusing to vacate the receivership would be entirely unnecessary and it would tend to excuse the defendant from appealing from the order appointing a receiver which it is his duty to do if he is dissatisfied therewith, but when the question is raised by a person who is brought into the court after the receiver is appointed and who has had no opportunity and no right to appeal from the order appointing a receiver, the situation is entirely different. His first opportunity to be heard with reference to the appointment of a receiver is upon his application to have the receivership vacated. In the case at bar the order made denying his motion to vacate the receivership was a part of the judgment, - final as to him, which was rendered by the trial court, and was appealable as such. As we have already pointed out, the allegations of the complaint are insufficient to justify the appointment of a receiver or the issuance of an injunction. So far as the complaint is helped out by the admissions and the consent of the defendant corporation, as we have already pointed out, such consent is insufficient to justify the district court in impounding the assets of the corporation to the exclusion of the insurance commissioner charged under the laws of the state with the duty of administering the assets of the corporation after securing his appointment as a receiver, and to the exclusion of ancillary receivers appointed by the state or district after domiciliary receivers had been appointed. We have thus far dealt with the motion to dismiss solely on appellees’ claim that the orders appealed from are not appealable. In addition thereto, appellees interpose certain procedural objections which will now be considered. After the filing of the petition for appeal and the allowance thereof, a citation was issued returnable within thirty days, as provided by the rules of this court. The citation was not served upon the appellees until after the return day. The marshal had declined to serve the citation on the ground that the return day thereof had passed, and the trial court refused to issue a new citation or extend the time for perfecting the appeal, whereupon an application was made here in open court, appellees appearing to object thereto, and the time for perfecting the appeal was extended. Thereafter citation was served upon appellees by a citizen of the United States and not by the marshal. Unless the service of citation before the return day thereof is jurisdictional, the action of this court already taken excuses the appellant from a strict compliance with the rules governing an appeal. The object of the citation is to give notice to the appellees that the appellant, whose appeal has been allowed, intends to prosecute his appeal, and, where the appellees have actual notice as they had in this case, the object of the citation has been fulfilled. Unless the appeal is taken in open court and the appellees are thereby given actual or constructive notice thereof, the service of the citation is necessary to perfect the appeal. The order allowing the appeal in this case was made in chambers, and therefore the service of the citation was necessary. The service of the citation is not jurisdictional, however, and may be dispensed with by this court if the appellees have or are given notice of the prosecution of the appeal. Berliner Gramaphone Co. v. Seaman (C. C. A.) 108 F. 714; Hunn v. Lewis (C. C. A.) 25 F.(2d) 271; Osage Oil & Ref. Co. v. Mulber Oil Co. (C. C. A.) 38 F.(2d) 396. The motion to dismiss is denied. The orders appealed from are reversed. The court is directed to settle the accounts of the receiver and to order the receiver to turn over to the appellant all property seized under its order by the receiver as soon as the appellant has secured an appointment as receiver thereof in the action now pending in the state court.

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Caselaw Access Project

2024-08-24T03:29:51.129235

2024-08-24T03:29:51.129683

F. S. ROYSTER GUANO CO. v. W. E. HEDGER CO., Inc. No. 296. Circuit Court of Appeals, Second Circuit. April 6, 1931. L. HAND, Circuit Judge, dissenting. Appeal from the District Court of the United States for the Southern District of New York. Libel by the F. S. Royster Guano Company against the W. E. Hedger Company, Inc. Decree for libelant, and respondent appeals. Single & Single, of New York City (Forrest E. Single and Loring R. Lecraw, both of New York City, of counsel), for appellant. Charles P. Hickox and Robert S. Erskine, both of New York City, for appellee. Before MANTON, L. HAND, and CHASE, Circuit Judges. CHASE, Circuit Judge (after stating the facts as above). The facts as stated above were not disputed. It is claimed by the libelee, however, that the gist of the action is the breach of a contract to procure insurance of goods to be carried by water, and that such a contract is not cognizable in admiralty. We would have no quarrel with the appellant’s version of the law applicable if we could agree that it has comprehended correctly the cause of action in suit. Virginia-Carolina Chemical Co. v. Chesapeake Lighterage & Towing Co. (C. C. A.) 279 P. 684; The City of Clarksville (D. C.) 94 F. 201; Marquardt v. French (D. C.) 53 F. 603. There was no breach of any contract to procure insurance. On the contrary, insurance quite satisfactory to all concerned was procured and went into effect. That part of the contract was fully performed at New York. When the barges left New York in tow for Toledo, the only portion of the contract still executory on the part of the libelee was the carriage of the rock by water. That this was a maritime contract no one doubts. We are now concerned only with the manner in which the libelee attempted to perform it. Having obtained insurance as agreed, the conditions of that insurance relating to carriage became a part of its contract with the libelant, and it was bound to carry the rock in whatever manner would comply with the terms of the insurance policy it had chosen. When the rock left New York, the libelant had the express promise of the libelee to tow it to Toledo, and the implied promise to tow it on from Buffalo only after inspection had been made as provided in the insurance policy. The requirement to carry with such inspection was not a separate undertaking. Inspection at Buffalo was but an agreed incident of the one and only carriage contract itself, as much so as if the original agreement between the parties had had nothing to do with insurance, but had expressly provided for such an inspection before the rock was exposed to the perils of a lake'voyage. Because the continued validity of the insurance in force was dependent upon such inspection, which had become an implied condition of, not a condition precedent to, the carriage, the consequences of a breach of such contractual duty extend to and -affect a nonmaritime subject embraced in the original contract which included both a maritime agreement to carry goods and- a non-maritime agreement to place insurance upon them. When the nonmaritime agreement to procure insurance was performed at New York, there remained to be performed only a purely maritime contract, which had for one of its requirements inspection at Buffalo. The subject-matter of the contract itself, rather than the effect of its breach, is the test by which the nature of the agreement is to be determined, and the only obligation the libelee is charged with having failed to perform is that of carrying the rock by water from New York to Toledo in the manner agreed upon. This manner of carriage was open to whatever agreement the parties saw fit to make so long as no law was violated, and an inspection of boats and cargo before venturing upon the lake at Buffalo is so plainly an aid to the safe carriage of the goods that it cannot be divorced from the transportation of which it was but an incident and held to be the basis of a separate and distinct undertaking which created any new or nonmaritime obligations. This rock and these boats were not to be taken to Buffalo for inspection as the object to be attained, but were to be inspected at Buffalo the better to enable the maritime contract to carry the rock to Toledo by way of Buffalo to be safely performed. Compare Loma Fruit Co. v. International Nav. Co. (C. C. A.) 11 F.(2d) 124, 126, 127; Nash v. Bohlen (D. C.) 167 F. 427. The District Court held the measure of damages -to be “the net loss from destruction of or injury to the cargo,” and that is said to be erroneous. There can be no doubt that the libelant lost whatever insurance it could have collected but for the libelee’s failure to carry with inspection as agreed. This makes the damages recoverable the same as in cases where there has been a breach of a contract to insure. In such cases liability as the insurer is enforced. Morris v. Summerl, Fed. Cas. No. 9,837; Marquardt v. French (D. C.) 53 F. 603. If the insurance company would have been liable for “the net loss,” there was no error in the computation of damages. None of the rock reached its destination. One cargo was an actual total loss. The three other cargoes were necessarily sold at an intermediate port and became a salvage loss. Under these circumstances the correct method of adjustment is to deduct the net amount realized from the sale from the value stated in the policy, and the remainder reflects the compensable loss under the policy. There is no occasion for proeeeding -with reference to the rules- obtaining in the adjustment of a particular average loss. London Assurance v. Companhia De Moagens Do Barreiro, 167 U. S. 149, 168, 17 S. Ct. 785, 42 L. Ed. 113; La Fonciere Compagnie D’Assurances v. Koons (C. C. A.) 75 F. 110. See Id. [D. C.] 71 F. 978. It fairly appeared that the libelee represented to the libelant before the trial of the action against the insurance company in the state court, and the president of the libelee testified in that suit, to the effect that the clause in the open policy providing for inspection at Buffalo had been understood and agreed by the libelee and the insurance company to mean inspection of equipment at the beginning of the season rather than inspection on each particular voyage. In reliance upon such representation, the libelant sued the insurance company, and incurred expense in prosecuting that fruitless suit. This expense was apparently incurred in good faith in an attempt to recover insurance which this libelee then insisted Was recoverable, and was made necessary by the libelee’s breach of its carriage contract. Its reasonable amount is therefore recoverable in an action on the contract. Straus v. Victor Talking Mach. Co. (C. C. A.) 297 F. 791, 811; Chambers v. Upton (C. C.) 34 F. 473; New York State Marine Ins. Co. v. Protection Ins. Co., Fed. Cas. No. 10,216; Town of Duxbury v. Vermont Central Ry. Co., 26 Vt. 751. The evidence tending to show the amount reasonably, necessarily, and actually expended for this purpose was not contradicted. It was sufficient prima facie- proof of this element of damage. Decree affirmed. L. HAND, Circuit Judge (dissenting). My brothers agree that if the contract had involved only a promis'e to procure insurance, and no insurance had been procured, this libel would not lie in the admiralty. There are difficulties in applying this, when such a promise is contained in a general contract of carriage; it imposes upon the shipper the choice of foregoing access to an admiralty court upon the contract of carriage, or of abandoning his right of action on the promise to procure insurance. He can hardly bring two suits on the same contract, and in his suit in the admiralty he cannot by hypothesis include the promise to .procure insurance. If I were free, I think I might hold that the promise was merely an incident to the general contract of carriage, and came within the admiralty’jurisdiction along with the rest. However, the authorities cited by my brothers are quite in point, and with them I accept the doctrine that one cannot sue in the admiralty .upon such a promise, even when so incorporated. The amended libel here set up no cause of suit upon the breach of the promise to carry, because though it does allege that the goods were not delivered, it does not allege any actionable wrong in that failure. The only breach was in not securing the inspection upon which the continued validity of the coverage depended .while on the Great Lakes. That inspection was not part of the - performance of the promise to carry; the respondent would not' have been liable as carrier, had it failed to get it. Indeed it was no part-of any express undertaking at all, but merely an implied part of procuring-the coverage. Had the respondent agreed only to take out a policy for the Great Lakes, it appears to me impossible to say that it would have performed merely by getting a certificate from the underwriters, upon whose validity there was an unperformed condition precedent. The. promise was not to get a certificate, but insurance; the breach would have been only of that promise. Certainly, .it can make no difference that the promise here included insurance on the Barge Canal as well; the breach remained the same, the absence of the stipulated insurance. Hence I cannot see how this case can be turned into the breach of a contract of carriage, and unless we were prepared to overrule the decisions which hold that a promise to procure insurance contained in such a contract may not be sued on in the admiralty, I cannot concur. None of us is prepared to overrule them.

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THE LAWRENCE J. TOMLINSON. SEABOARD TERMINALS CORPORATION v. PETTERSON. No. 313. Circuit Court of Appeals, Second Circuit. April 6, 1931. L. HAND, Circuit Judge, dissenting. See, also, 29 F.(2d) 797. Arthur Lovell, of New York City (Leo J. Curren, of New York City, of counsel), for appellant. Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Robert S. Erskine and Henry P. Elliott, both of New York City, of counsel), for appellee. Before MANTON, L. HAND, and CHASE, Circuit Judges. CHASE, Circuit Judge (after stating the facts as above). The disposition of these appeals narrows down to what should be put upon implied warranties. There was no misrepresentation or fraudulent concealment of any known material fact. Ordinarily, a boat chartered for a specified use is impliedly warranted, the charter being silent as to that, to be suitable for the known purpose for which it is to be used. It must be that to be seaworthy for the service intended. The Addison E. Bullard (C. C.A.) 287 F. 674, 677. But, where the charterer takes a dirty boat and agrees to clean it, the implied warranty of seaworthiness is only to the effect that it will be suitable for the contemplated use when properly cleaned. This barge was suitable for the carriage of molasses. When cleaned, it would be fit to carry gasoline. While it had previously carried creosote and fuel oil, it does not appear that the condition of the tank was other than would be expected after having carried such cargoes and then carried molasses. Thus far there is no room fór a difference of opinion. The parties cannot reach common ground as to what cleaning was to be required. The appellant insists it was only such cleaning as would rid the tank of molasses. Its position may be stated briefly that the owner warranted the barge to be seaworthy for the carriage of gasoline when the molasses was cleaned out. The appellee holds firmly to the claim that all the appellant was entitled to get was a tank barge which had carried molasses for its last cargo and which would be seaworthy for the transportation of gasoline when put into whatever condition of cleanliness was necessary for that purpose, whether this required the removal of molasses or the residue of anything else of a nature which did not interfere with carrying molasses. We cannot read clause 6 of the charter party without reaching the conclusion that the language there used casts upon the appellant the burden and the risk of cleaning for gasoline carriage a barge described quite generally merely as having been last used as a molasses carrier. Whatever residue may have been, left from previous cargoes, about which no questions were asked and concerning which the owner had no reason to believe any information was desired, cannot be looked upon other than as adding to the task of cleaning. The charterer undertook without qualification to perform that task, and did it in whatever way and with whatever thoroughness, or lack of it, that it saw fit. The result was unexpected delay and expense for additional cleaning and loss from discoloration of cargoes. But how much, if any, of this was due to the inexperience or incompetence of the man in charge of the cleaning cannot be determined. Nor would it be of benefit now to do that or to have explained why the appellant put the first cargo into a dirty tank or why it continued to use the tank still dirty after the first cargo had been discolored. It is enough for present purposes to point out that the owner was in no way responsible for the inadequate cleaning or the use of the tank before it was properly cleaned. At most, he would be liable for the added cost and loss of time required for cleaning, provided he were liable at all under his contract. He allowed three days “free time in which to do the work,” but this was no warranty that it could be done in three days. It was rather the owner’s contribution toward the work and the measure of his contractual duty in respect to it. Since the withholding of charter hire was unjustified in the absence of any liability on the part of the owner for the unclean condition of the tank, Both decrees are affirmed. L. HAND, Circuit Judge, dissents without opinion.

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UNITED STATES ex rel. POVLIN v. HECHT, United States Marshal. No. 327. Circuit Court of Appeals, Second Circuit. April 6, 1931. Samuel Falk and Ilo Orleans, both of New York City, for relator-appellant. George Z. Medalie, U. S, Atty., of New York City (Thomas J. Todarelli, Asst. U. S. Atty., of New York City, of counsel), for respondent-appellee. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. SWAN, Circuit Judge. The indictment, which was filed at the April, 1928, term of the District Court of the United States for the Western Division of the Eastern District of Arkansas, charges “Shepherd S. Polvin” with violation of the Mann Act (36 Stat. 825 [18 USCA §§ 397-404]), in that on June 15, 1927, he transported a woman named Lucille from Arkansas to Illinois for an immoral purpose forbidden by the statute. Upon this indictment removal proceedings under the statute (18 USCA § 591) were instituted in December, 1929, in the Southern district of New York, where appellant resided. At the hearing before the United States commissioner, the government offered in evidence the indictment, over the objection of appellant, and then proved the identity .of appellant with the defendant in the indictment hy the testimony of Mrs. Hess, a sister of the woman named therein, who had appeared before the grand jury. Since identity was clearly established, appellant’s contention that it was error to receive the indictment in evidence is without merit. United States ex rel. Mouquin v. Hecht, 22 F.(2d) 264 (C. C. A. 2). A. removal proceeding upon the same indictment had previously been had before a commissioner for the Eastern district of New York; the appellant then residing in that district. In that proceeding the appellant was discharged on the ground that the government had failed to prove probable cause. A transcript of the record of that proceeding was introduced in evidence hy appellant, and it is now urged that the former decision should have been followed on the present hearing; the evidence in both being substantially the same. The utmost that can be said, however, is that a decision favorable to the accused on a former hearing is persuasive but not conclusive on a second application for removal. United States v. Levy, 268 U. S. 390, 394, 45 S. Ct. 516, 69 L. Ed. 1010. So the merits of the present decision must be considered. In removal proceedings the court is not to determine the guilt or innocence of the accused, but only to inquire whether there is probable cause to believe him guilty of the offense charged and justify his removal for trial. Morse v. United States, 267 U. S. 80, 83, 45 S. Ct. 209, 69 L. Ed. 522; United States ex rel. Hughes v. Gault, 271 U. S. 142, 150, 46 S. Ct. 459, 460, 70 L. Ed. 875; United States v. Hecht, 11 F.(2d) 128,132 (C. C. A. 2). The government rested after putting in the indictment and the testimony of Mrs. Hess identifying appellant as the person against whom the indictment was brought. This undoubtedly made a prima facie case for removal. Beavers v. Henkel, 194 U. S. 73, 24 S. Ct. 605, 48 L. Ed. 882; Price v. Henkel, 216 U. S. 488, 491, 30 S. Ct. 257, 54 L. Ed. 581. But the indictment is not conclusive (Tinsley v. Treat, 205 U. S. 20, 27 S. Ct. 430, 51 L. Ed. 689), and appellant contends that the prima facie ease was overthrown by his own denials and the cross-examination of Mrs. Hess. It appears that the woman Lucille had been living with Povlin at Little Bock, Ark., where he was a medical student, so that they were generally thought to be husband and wife, though he testified they were not such. When his medical course was completed, they took a train together to Chicago, where Lucille had previously been employed, and there occupied the same room for two days. She then went to work in Chicago, and he proceeded on to his home in New York to begin work there. Five months later she joined him in New York, where she afterwards died. Mrs. Hess testified: “My sister told me and Dr. Povlin told me that she was going to go to Chicago to take a job and stay there until Dr. Povlin established himself in New York.” On this testimony it is argued that the purpose of the journey was to seek employment for the woman in Chicago and consequently, even if Povlin’s denial that he had anything to do with her transportation be disregarded, the purpose of illicit intercourse as an actuating motive for the journey, is shown to have been lacking. Numerous eases have held that such a motive is an essential element of the crime, Alpert v. United States, 12 F.(2d) 352 (C. C. A. 2); Drossos v. United States, 16 F.(2d) 833 (C. C. A. 8)Sloan v. United States, 287 F. 91 (C. C. A. 8); Van Pelt v. United States, 240 F. 346 (C. C. A. 4); Fisher v. United States, 266 F. 667 (C. C. A. 4); though it need not be the sole motive, Ghadiali v. United States, 17 F. (2d) 236 (C. C. A. 9), certiorari denied, 274 U. S. 747, 47 S. Ct. 660, 71 L. Ed. 1328. Hence the conclusion is urged that there was no probable cause to justify commitment for removal. It would be difficult, if not impossible, to formulate a rule of general application as to what evidence will overcome the prima facie case for removal made by the indictment. Clearly, denial of guilt by the accused, even though corroborating testimony is offered, is not necessarily enough. Magnus v. Keville, 6 F.(2d) 157 (C. C. A. 1); United States v. Mathues, 19 F.(2d) 22 (C. C. A. 3); Burton v. Smithers, 31 F.(2d) 966 (C. C. A. 4). On the other hand, evidence of innocence may be such as to rebut the ease made by the indictment. United States v. Hecht, 11 F. (2d) 128 (C. C. A. 2); United States v. Glass, 25 F.(2d) 941, 944 (C. C. A. 3); Johnson v. Hotchkiss, 35 F.(2d) 914 (C. C. A. 9). In discussing the subject in Meehan v. United States (C. C. A.) 11 F.(2d) 847, 849, Judge Denison said: “ * * *■ The eases usually speak of it [the indictment] as prima facie evidence, not of guilt, but of the existence of probable cause. This is perhaps another way of saying that it raises an initial presumption, which might as well be arbitrary as evidential, which continues until it is in some vital' particular overcome by entirely convincing testimony. Wherever there is affirmative-proof, unchallenged except by the indictment, demonstrating lack of guilt, removal should be denied; if the conclusion of no probable cause is put in any substantial doubt by proofs in addition to the indictment, the removal should be made.” We are willing to accept this exposition as a correct statement of the law, and so, apparently, is appellant, as he quotes it without criticism. But the application of the rule so stated does not, in our opinion, lead to a reversal of the judgment below. The crucial question is the purpose of appellant in taking Lucille to Chicago. On this issue many circumstances, prior as well as subsequent to the journey, will be relevant, including the prior relations of this man and woman, their conduct on the way and after their arrival, the fact that appellant was leaving Little Rock permanently — in short, everything which may throw light upon his motives for the journey. His testimony as to his purpose would, of course, not be conclusive; and the testimony of Mrs. Hess as to what Lucille and Povlin told her as to their purpose is but one of the circumstances bearing on his actual purpose. Nor does the fact that part of the defense -evidence came from a government witness seem of special significance, inasmuch as the testimony related only to evidentiary facts. The ultimate fact of appellant’s purpose is not so clearly demonstrated to have been innocent that we can say in the words of Judge Denison that the initial presumption raised by the indictment is “overcome by entirely convincing testimony.” In this respect the present record differs from United States v. Hecht, supra, where this court pointed out that the case was not in the class' in which conflicting inferences could be drawn from the evidence. Here the situation is analogous to that involved in Rodman v. Pothier, 264 U. S. 399, 44 S. Ct. 360, 68 L. Ed. 759, where the ultimate issue involves the consideration of many facts, and the inferences to be drawn from them wei’e held to be for the court where the indictment was found. It may well be that on the trial the government will be unable to-prove its ease, particularly since the woman, is dead, but, as Mr. Justice Holmes declared in United States ex rel. Hughes v. Gault, supra, on a removal proceeding, the magistrate-“is not intended to hold a preliminary trial- and if probable cause is shown on the gov-eminent side, he is not to set it aside because on the other evidence he believes the defendant innocent.” Finding no error, we must affirm the order.

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UNITED STATES ex rel. GROSSBERG v. MULLIGAN, Acting U. S. Marshal. No. 311. Circuit Court of Appeals, Second Circuit. April 6, 1931. David P. Siegel, of New York City (Leo H. Klugherz and Milton B. Seasonwein, both of New York City, of counsel), for petitioner-appellant. George Z. Medalie, U. S. Atty., of New York City (Ellamarye Pailor, Asst. U. S. Atty., of New York City, of counsel), for respondent-appellee. Before L. HAND, CHASE, and MACK, Circuit Judges. MACK, Circuit Judge. Relator pleaded guilty to a mail fraud indictment after a jury had acquitted his co-defendant and disagreed as to his guilt; thereupon he was ordered placed on probation for two years. By the express terms of the order, he was directed to report once in each month to the probation officer; what he was to report and how he was to act under probation were not specified in the order. The judge, however, gave him verbal instructions as to his conduct, and the probation officer, pursuant to the Probation Act § 4 (title 18, U. S. Code, § 727 [18 USCA § 727]), furnished him with a written statement of the conditions of probation and gave him further written instructions as to his conduct. Some months later, on the receipt of complaints that relator was committing acts similar to those for which he had been tried, the probation officer filed an application for revocation of the probation and imposition of sentence. Relator was duly notified of the fact and the substance of the application. A full hearing was had before the judge who had tried the ease. Relator testified in his own behalf. The judge, after stating that he. had given some terms of probation verbally and that these had been broken, imposed a sentence of imprisonment for a year and a day. Appeal therefrom was dismissed for failure to file the record in proper time. Thereupon a writ of habeas corpus was sued out. This writ was dismissed on the ground that the question of jurisdiction to revoke the probation had been raised and decided adversely to relator in the revocation proceedings. The cause is before us on an appeal from the order dismissing the writ. Relator asserts lack of jurisdiction to sentence him, on his contention that under the Probation Act § 1 (18 USCA § 724), jurisdiction to revoke probation and impose sentence is dependent upon allegation and proof that some term or condition expressed in the' probation order has been broken, and that there was neither allegation nor proof of a breach of the only express condition, to report monthly to the probation officer. Ex parte United States, 242 U. S. 27, 37 S. Ct. 72, 61 L. Ed. 129, L. R. A. 1917E, 1178, Ann. Cas. 1917B, 355, held that, at common law, sentence must be imposed and could not be permanently suspended after conviction or plea of guilty, and that, on application of the government, the District Judge could be mandamused to impose sentence. By the Probation Act § 1 (18 USCA § 724), however, the courts are given the power “to suspend the imposition or execution of sentence and to place the defendant upon probation for such period and upon such terms and conditions as they may deem best.” They may “revoke or modify any condition of probation”; 'the term of probation, however, may not exceed five years. By Probation Act § 2 (18 USCA § 725), the defendant may be brought before the court for sentence not only within the probation period, but even thereafter; the only limitation is that it be within the maximum period for which sentence could have been imposed. The court may thereupon “revoke the probation or the suspension of sentence, and may impose any sentence which might originally have been imposed.” We express no opinion on a defendant’s right, in order to forestall the risk of the imposition of sentence in the distant future, to waive suspension and probation and to demand an immediate sentence. If relator had such a right, he waived it by expressly consenting to probation and suspension. It is unnecessary, too, to determine whether under the act the court may suspend sentence without any order of probation in view of its power by the express provisions of section 725 to revoke suspension and impose sen-, tenee after the probation period has ended; in this case, there was a probation order. The court therefore clearly had jurisdiction of relator and of the subject-matter of the revocation of his probation and the imposition of sentence. The act itself has no express restrictions on the power to revoke the probation or to modify the terms, conditions, or time thereof. These are matters for the exercise of a sound judicial discretion. The remedy for an abuse of such discretion or for other irregularities or errors in the exercise of the jurisdiction is solely by appeal, not by writ of habeas corpus. Craig v. Hecht, 263 U. S. 255, 44 S. Ct. 103, 68 L. Ed. 293. However desirable it may be that .at least the general terms of the probation be expressed in the order, nevertheless, in the absence of a statutory requirement and in view of the fact that the suspension of sentence may continue even after the probation period is ended, we cannot deem the insertion of the terms and conditions of probation in the order as requisite to its validity or as a jurisdictional prerequisite to the revocation of probation. We concur in the conclusion reached in this respect in Hollandsworth v. U. S. (C. C. A.) 34 F.(2d) 423. See, too, Campbell v. Aderhold (D. C.) 36 F.(2d) 366. Such, too, has been the construction of analogous provisions in state acts. See Commonwealth v. McGovern, 183 Mass. 238, 66 N. E. 805; Finer v. Commonwealth, 250 Mass. 493,146 N. E. 23; People ex rel. Valiant v. Patton, 221 N. Y. 409, 117 N. E. 614. Viewed in another aspect, jurisdiction in the present ease was clear. At least one condition .was expressly stated in the order; relator was to report monthly to the probation officer. While the application for revocation was not based upon a mere failure to report, but upon the charge that relator was continuing in his former course of conduct contrary to the verbal terms of probation imposed by the court, nevertheless in substance and effect the jurisdiction of the court was invoked to interpret the probation order. Although not in terms so stated, what the court actually did was to construe the word “report” in the light of all of the surrounding circumstances including the verbal instructions. On writ of habeas corpus its conclusions aato the proper interpretation of the order are not reviewable. The order dismissing the writ of habeas corpus must therefore be affirmed

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In re EUREKA UPHOLSTERING CO., Inc. In re SHULMAN et al. No. 356. Circuit Court of Appeals, Second Circuit. April 6, 1931. Mark H. Shulman, of New York City, and Henry Rubin, of Brooklyn, N. Y., for appellants. David Haar, of New York City, for appellee. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. L. HAND, Circuit Judge. The petitioning creditors filed a petition for adjudication of the bankrupt on May 20, 1930, and got a receiver appointed on the same day, who was later appointed trustee, but who never applied to the court for the appointment of an attorney. It may, however, be assumed arguendo that, while acting as receiver he consulted with the attorneys for the petitioning creditors, availed himself of their services, and, as far as he was free to act, actually retained them as his attorneys. They examined the bankrupt and witnesses before the referee, attended meetings of creditors at one of which a composition was discussed, procured an order for the sale of the estate, discovered and secured certain concealed property, attended the sale of the assets, conferred with the receiver, and with creditors and debtors of the bankrupt, and prepared the receiver’s accounts and his fina) report. The referee and judge thought these services only “routine” and allowed one hundred dollars. The attorneys appealed. The petition was irregular in form, since it should have been made by the petitioning creditors themselves. In re Medina Quarry Co., 191 F. 815 (C. C. A. 2). Passing this, it is apparent that the position of an attorney for petitioning creditors has been misconceived. Apparently the appellants suppose that by acting upon the retainer of the receiver as his attorneys, they acquired that status and may recover on that basis. This is not true. The forty-fourth General Order in Bankruptcy (11 USCA § 53) provides that no attorney shall be appointed for a receiver, except by order of court and upon petition of the receiver, supported by the proposed attorney’s affidavit. Local Rule 4 of the Eastern District of New York is to the same general effect, though a little more stringent in form. A similar rule was before the Supreme Court in Weil v. Neary, 278 U. S. 160, 49 S. Ct. 144, 73 L. Ed. 243, where it was held that its disregard not only prevented the attorney from recovering any compensation, but even invalidated an agreement to share the fees of the attorney actually appointed by the court. The order and the rule were passed to control serious abuses and are to be strictly observed; without an order of court upon full presentation of the relation of the proposed attorney with all other interests involved, not only may he not be retained, but he can recover nothing, no matter how beneficial, or how arduous, his services. He is confined to such an allowance as may reward him for acting for the petitioning creditors, which in the absence of a contest on the petition involves only simple duties. The appellants argue that they may at least recover under section 64b (2), 11 USCA § 104 (b) (2), since their services have been the means of recovering a substantial amount for the estate. In this too they are mistaken. While that section does indeed justify such an award after motion to compel the receiver or trustee to undertake a litigation (In re Stearns Salt & Lumber Co., 225 F. 1 [C. C. A. 6]), this is a condition upon the right, at least after a receiver has been appointed (In re Medina Quarry Co., supra). The receiver is responsible for the collection of the assets (In re Felson [D. C.] 139 F. 275, 280), and he alone can authorize any charges against them. If any creditor, petitioning or other, learns facts which lead him to suppose that property has been concealed, he may, and indeed he should, advise the receiver, and if the receiver prove slack, he may apply to the referee to stir him to action. The referee or the judge may then authorize the creditor to proceed, and he will be entitled to his reward under section 64b (2), but not otherwise. Only in this way can claims be avoided for volunteered services, which may or may not have been such as the receiver would, or should, have authorized. The appellants are thus in the dilemma, either of having acted upon an unauthorized retainer of the receiver, which the general order and rule forbid, or of having acted under section 64b (2), while there was a receiver, on whom the primary duty devolved to take action, and whose primacy had not been displaced by an order of the court. On no theory could they therefore run up charges which may be recognized. In conclusion, we cannot ignore the curious notion which this application discloses, that an attorney may recover for what are not legal services at all. For example, in the petition at bar are items for arranging for the sale of the assets, hiring truckmen to carry back concealed property to the bankrupt’s place of business, safeguarding the property, going along with the truck, checking up. what was found, stirring up a criminal prosecution, getting hold of an accountant, collecting accounts due, inquiring of a pledgee of accounts as to any equity, examining the bankrupt’s papers, and more of the sort. The implication behind these claims is that the receiver’s attorney may recover, as for legal services, for discharging the duties of the receiver himself. This is an error, due to the confusion that has come to pervade the whole relation of attorneys to a bankrupt estate, except for which it would seem scarcely necessary to say that the receiver or trustee, and he alone, can recover for services in collecting the estate, and that his statutory fees are the limit of his compensation for these. Any truly legal services he may require are indeed in another class, but his attorney, when he has one, cannot take on his duties, and then recover for them under the guise of legal services, which they are not. It is true that the line is not always easy to draw, but it is there, and referees should draw it straitly, else the estate will be burdened with a duplication of charges. Receivers may perhaps be too poorly paid to discharge their duties; if so, the system will not work. But no such considerations can disguise or justify an allowance to their attorneys for putting themselves in their place. Order affirmed.

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In re KANE. No. 244. Circuit Court of Appeals, Second Circuit. March 16, 1931. Sydney H. Palmer, of Jamaica, N. Y., for creditor-appellant. Harold L. Turk; of Brooklyn, N. Y., for bankrupt-appellant. Garfield & Seligson, of New York City (M. V. Seligson and G. B. Garfield, both of New York City, of counsel), for creditor-respondent. Before L. HAND, CHASE, and MACK, Circuit Judges. MACK, Circuit Judge. On petition of one Sondak, filed in the Supreme Court of the state of New York, appellant Kane yvas required to show cause why he should not be required to pay $3,060, with interest, alleged by the petition to have been delivered to him as petitioner’s attorney, and to have been converted by him to his own use. On July 25, 1930, the order entered thereon granting the motion and directing the payment over of the money with interest recited that Kane had appeared in person but had failed to oppose .the application. Kane was adjudicated a bankrupt on the same day. On further motion of Sondak and on order to show cause personally served on Kane, who did not appear in opposition thereto, the court found that he haá willfully refused to comply with the earlier order, thereby impairing the petitioner’s right to the amount specified. For Kane’s misconduct and disobedience and neglect and refusal to comply with the judgment, he was ordered fined the sum of $3,060 and committed to jail, charged with contempt, until he should have paid such sum to the petitioner. Appellant Mercogliano, alleging himself to be a creditor of Kane, filed a petition in the bankruptcy court reciting that Sondak’s claim was dischargeable in bankruptcy, and that if, pursuant to the order, bankrupt paid the $3,060, a preference in Sondak’s favor would be created, and that, should Sondak be able to enforce the payment, he would receive a preference over all other creditors, contrary to the Bankruptcy Act (section 60 [11 USCA § 96]). Reciting further that, if the sheriff should execute the state court order, the bankrupt, to avoid incarceration might pay such sum to the sheriff, and such payment, if so made, would deplete the bankrupt’s estate and create a preference in Sondak’s favor, and that no trustee in bankruptcy had been elected, petitioner prayed for an order directing the bankrupt and Sondak to show cause why they should not be restrained from paying the $3,060 out of the bankrupt’s funds, and why the sheriff and Sondak should not be restrained from taking any further steps in connection with any orders of the state court in the matter. - ° Affidavits of bankrupt and of other of his alleged creditors were subsequently filed in support of the motion. The opinion filed by the District Judge states that the petition in the state court shows that the money was received by the bankrupt while acting in a fiduciary capacity, and that it would appear therefore that the claim is not dischargeable in bankruptcy; that the bankruptcy court would not go back of the proceeding had in the state court; that the bankrupt has been restrained from disposing of his assets; that in the affidavit filed by him no claim is made that he has any money in his possession. An order was thereupon entered denying the motion. From that order Mercogliano, as an alleged creditor, appealed, and Kane, the bankrupt, joined therein. 1. The order was entered upon a petition and motion made only by the alleged creditor, Mercogliano. Bankrupt was not a party thereto, unless it be as a respondent. As such he was successful, inasmuch as the motion was denied; apart therefrom, he has no standing, merely because he filed an affidavit in support of the motion. Mercogliano, whose motion was denied, is the only party in interest who could appeal from the order. Kane’s appeal must therefore be dismissed. 2. It appears from Kane’s affidavit in support of the motion that a receiver had been appointed in the bankruptcy proceedings. If there were any danger that the bankrupt would take assets that should properly have been in the hands of the receiver and pay them under the state judgment or fine in order to avoid incarceration, the proper party to apply for an order restraining sueh a proceeding would be the receiver after his appointment, and not a creditor, unless indeed some grave emergency were shown, sueh as the inability or refusal of the receiver to act and the consequent danger to the assets of the estate. No such showing was made in the bankruptcy court, and for this reason, apart from all else, the motion should properly have been, denied. Furthermore, it nowhere appears that the receiver had or was entitled to get any money or property or that there was any danger of depleting the bankruptcy estate. 3. Nowhere does it appear that either the receiver or' the bankrupt had in his possession any money that might have come to the bankrupt after the filing of the petition in bankruptcy. Property and moneys so acquired do not belong to his estate in bankruptcy, and are therefore not subject to the control of the bankruptcy court. The possibility that family or friends might be ready to raise money for a composition with or a payment to. creditors, and that, to avert his arrest, they might instead be induced to give it to Sondak, affords no basis for the order prayed for. No legal wrong would be committed against his creditors in bankruptcy or his estate in bankruptcy, if, in this way, Sondak should obtain satisfaction of his judgment. . 4. It is clear on this record that no suggestion was made in the District Court to treat the motion as coming under section 9a(2) of the Bankruptcy Act, 11 USCA § 27(a) (2), and thus as one to prevent the arrest of the bankrupt on civil process on the ground that this might interfere with his proper attendance upon the bankruptcy court or the proper, performance of the duties imposed upon him by the act. Whether or not a creditor has such an interest as would enable him, instead of the bankrupt, to move in this respect, we need not now consider. For, in any event, there is no absolute immunity from arrest. Inasmuch as the court may impose terms sueh as the giving of a bond before granting sueh protection (In re Lewensohn [D. C.] 99 F. 73; affirmed [C. C. A.] 104 F. 1006),- it would seem that the granting or withholding of sueh immunity and the terms, if any, to be imposed, are within the sound discretion of the bankruptcy court. Furthermore, under General Order XXX, 11 USCA § 53 (see In re Francisco [D. C.] 245 F. 216), the habeas corpus writ may well suffice to secure the presence of the bankrupt in so far as he may be needed in the course of the proceedings. Appeal of Kane dismissed. Order affirmed. A memorandum.

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NELSON BROS. COAL CO. v. PERRYMANBURNS COAL CO., Inc. No. 287. Circuit Court of Appeals, Second Circuit. March 16, 1931. Pickett & Pickett, of Brooklyn, N. Y. (Walter H. Pickett, of Brooklyn, N. Y., of counsel), for appellant. William P. Purdy, of New York City (John E. Purdy, of New York City, of counsel), for appellee. Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges. AUGUSTUS N. HAND, Circuit Judge. The appellant, Perryman-Burns Coal Company, Inc., through its salesman Thompson, made an oral contract with the appellee, Nelson Bros. Coal Company, to sell to the appellee approximately 400 tons of coal. The oral contract was made over the telephone on October 31,1924, by Thompson with P. W. H. Nelson, Sr., who was the president of the buyer and died prior to the trial. The agreement was confirmed by a written memorandum of sale made the same date, and sent by Thompson on behalf of Perryman-Burns Coal Company, Inc., to the buyer. The memorandum provided that the coal should be loaded into the buyer’s barge Harlem, and that it should be sold at $12.49 per gross ton, f. o. b. the Undereliff Coal Piers of the Erie Railroad. Thompson’s testimony established that the barge was to be towed by the seller’s tug to the buyer’s coal yards at the Gowanus Canal in Brooklyn, and that the buyer was to pay the railroad freight on the coal to Undereliff Piers, the charges at the piers, including trimming, and the. towage. He also testified that the seller was to take out a marine insurance policy on the barge and coal but for the account of the buyer. The coal was loaded into the barge Harlem at Undereliff Piers and towed to a point at Brooklyn not far from the buyer’s dock. After lying at this place for a few days, the barge was moved up to or near the coal yards, and some time during the night of November 25,1924, she sank with the coal on board. The barge was subsequently raised and the coal salvaged by Merritt, Chapman & Scott Wrecking Company. It was thereafter sold for the account of whom it might concern, and the proceeds of sale were paid to Perryman-Burns Coal Company by consent of the Nelson Bros. Coal Company. Thereafter Perryman-Burns Coal Company, Inc., commenced an action in the New York Supreme Court against the Northwestern Fire & Marine Insurance Company (130 Misc. Rep. 396, 223 N. Y. S. 559), which had insured the eoal, to recover on the marine policy, and alleged in its complaint that it owned the eoal, that the policy issued by the insurance company was against perils of the sea, that the barge while seaworthy sank.owing to unusual tidal conditions in the Gowanus Canal, and that Perryman-Burns Coal Company, Inc., had, by reason of this casualty, incurred salvage expenses amounting to $1,-067.11, which were losses payable under the policy. The court held that Perryman-Burns Coal Company, Inc., the plaintiff in that action, did not have any interest in the coal at the time of the sinking of the barge because the title had passed to Nelson Bros. Coal Company. It also held that the harge was unseaworthy and that her sinMng was due to unseaworthiness, and it directed judgment for the insurance company accordingly. Nelson Bros. Coal Company thereupon filed this libel, alleging that it had gone to expense in raising the Harlem and her cargo of coal, that Perryman-Burns Coal Company, Inc., was the owner of the eoal, and that there was due libelant for such services as its proportionate contribution in general average the sum of $1,067.11. Perryman-Burns Coal Company’s defense to the libel was that the title passed to the eoal when it was loaded on the libelant’s barge at Undercliff Piers, and that, even if that was not so, the sinking was due to the unseaworthiness of the barge. In either event there would be no obligation to make good a contribution in general average. As our decision on the first issue determines the case, we shall not discuss the second. On final hearing of the present cause in admiralty the trial judge held that the title to the eoal was in the respondent, and granted a decree that respondent pay its contribution in general average amounting to $1,067.11 accordingly. The libelant principally relied on the admissions of Perryman-Burns Coal Company, Inc., in the complaint in the Supreme Court action to establish that the latter, and not itself, was the owner .of the eoal. The proof of loss signed by the Perryman-Burns Coal Company in accordance with the requirements of the marine insurance company contained a statement that “the interest of the insured in the property was that of owner.” Of course these admissions were not conclusive, even though they had some probative force. In view of all the testimony, they amounted to little more than an opinion expressed by Perryman-Burns Coal Company as to its legal rights — an opinion with which it may be noted the New York Supreme Court did not agree. The libelant called Thompson as a witness and proved by him that he had testified before the New York Court that “delivery and acceptance are assumed to take place at the same time when the cargo is broken and unloaded. Acceptance does not take place until the cargo is broken and unloaded.” Thompson, as we have said, had represented Perryman-Burns Coal Company, Inc., in making the sale. He somewhat qualified his former testimony at the trial of the present ease when asked whether he had agreed with Nelson Bros. Coal Company that they should have the privilege of approving the eoal and inspecting it as it was unloaded before they accepted it, by saying: “I think that was understood, not expressly implied. * * * That is more or less customary.” We do not regard these answers as showing in whom the title to the eoal was vested. On both occasions Thompson was attempting to state his views as to when the title passed, and was relying upon a supposed custom, which was neither shown to be general or to be known to the purchaser, if indeed it was proved in any sense. The most that the custom amounted to, if it existed, was that a purchaser had a right to. inspect coal when it was unloaded and to reject it if it did not meet contract requirements. In general, where a sale is made f. o. b. the point of shipment, title passes to the seller upon delivery to the carrier, and the goods sold are at the buyer’s risk. United States v. R. P. Andrews & Co., 207 U. S. 229, 28 S. Ct. 100, 52 L. Ed. 185; Standard Casing Co. v. California Casing Co., 233 N. Y. 413, 135 N. E. 834; Rosenberg Bros. Co. v. Buffum Co., 234 N. Y. 338, 137 N. E. 609. This rule would seem to apply- with special strength where the eoal was loaded into a barge belonging to the purchaser. In the present case the buyer was to pay.both freight and insurance as well as trimming and other expenses at Undereliff. A right to- inspect and reject the coal if it did not meet contract requirements would not prevent the passage of title. In Louisville & Nashville R. R. v. United States, 267 U. S. 395, 45 S. Ct. 233, 236, 69 L. Ed. 678, where the United States reserved the right to test eoal after transportation and reject it if it did not come up to specification, it was held that such a right “was not inconsistent with transfer of title * * • at the time of delivery of the coal on cars at the mine.” Delaware, Lackawanna & Western R. R. v. United States, 231 U. S. 363, 34 S. Ct. 65, 58 L. Ed. 269; Illinois Cent. R. Co. v. United States, 265 U. S. 209, 44 S. Ct. 485, 68 L. Ed. 983. The libelant makes the further point that, because the barge was sunk near the coal yards of the buyer and had not been towed to its final destination at the buyer’s dock, there was a failure on the part of_ the seller to com- ■ píete its towing contract, and the title had not passed. But, if the seller, by neglecting to bring the barge up to the dock, failed in a slight degree to complete the carriage of the coal, that circumstance had nothing to do with the passage of title in a ease of this kind. In Louisville & Nashville R. R. v. United States, 267 U. S. at page 400, 45 S. Ct. 233, 69 L. Ed. 678, though the seller had contracted to transfer the coal from the railroad cars to barges, it was held that the title passed when the coal was placed on the cars. We think that the statements by Perry-man-Burns Coal Company, Inc., which were made in connection with the former litigation, were no more than matters of opinion, and that it was clearly under a misapprehension as to when as a matter of law the title to the coal passed. While the statements may have had some prima facie significance in favor of the libelant, they are far outweighed by the other circumstances, which show that-the title to the coal passed to libelant when it was, loaded on. its barge at Undereliif Piers. It surely can have no claim to a contribution in general average based on expenditures in respect to its own coal and barge. The decree is reversed, with direction to dismiss the libel.

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THE HOG ISLAND. SGOBEL & DAY v. EXPORT S. S. CORPORATION. CUNEO et al. v. SAME. Nos. 237, 238. Circuit Court of Appeals, Second Circuit. March 16, 1931. Finkler & McEntire, of New York City, for appellants. Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (L. DeGrove Potter and Michael F. Whalen, both of New York City, of counsel), for appellee. Before L. HAND, CHASE, and MACK, Circuit Judges. CHASE, Circuit Judge (after stating the facts as above). As the damage to these ehestnuts was due to heat, decay, putrefaction, and sweat, it falls within the exceptions,to the bills of lading, and the vessel is not liable unless it is proved that the heat, decay, putrefaction, and sweat was caused by its negligence. The Toyohashi Maru (D. C.) 13 F.(2d) 871; The Florinda (C. C. A.) 31 F.(2d) 262; The Bencleugh (C. C. A.) 10 F.(2d) 49. Whether the stowage was negligent or. not and whether the holds in which the chestnuts were stowed were suitable for such cargo and equipped with adequate means of ventilation were questions of fact. Expert witnesses, well qualified to know, testified that the ventilation supplied was ample for such goods and' that the stowage was not negligent. The ■ evidence to the contrary, notwithstanding that these chestnuts were damaged, falls short of carrying the burden as to negligent stowage and leaves the proof of seaworthiness for the purpose of carrying these goods abundantly established. The lower court so found, and the record supports it. There has been some suggestion that the sweating was caused by disease in the chestnuts and by wetting of the bags before they were laden on the ship. We do not undertake to determine the actual cause of the damage, but confine ourselves to the issue which goes only to the point of deciding whether, under the contract of carriage, the proof in these cases is sufficient to charge the appellee with liability for it. Both decrees are affirmed.

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BROWN’S “SHAMROCK” LINENS, Limited, v. BOWERS. No. 300. Circuit Court of Appeals, Second Circuit. March 16, 1931. MANTON, Circuit Judge, dissenting. Robert H. Montgomery, of New York City (Thomas G. Haight, of Jersey City, N. J., and Roswell Magill, of New York City, of counsel), for appellant. George Z. Medalie, U. S. Atty., of New York City (Harry G. Herman, Asst. U. S. Atty., of New York City, of counsel), for appellee. Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges. Certiorari denied 51 S. Ct. 657, 75 I* Ed. —. SWAN, Circuit Judge. The plaintiff is a corporation organized under the laws of Great Britain, and during the year 1918 it was engaged in the business of importing and selling in the United States linens and other textiles. Being a foreign corporation, the assessment of its war profits and excess profits tax was required, by section 327(b) of the Revenue Act .of 1918, to be computed by the Commissioner in accordance with section 328 (40 Stat. 1093). That section reads in part as follows: “Sec. 328. (a) In the cases specified in section 327 the tax shall be the amount which bears the same ratio to the net income of the taxpayer * * * for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income * * * £or gugk year. * * * “In computing the tax under this section the Commissioner shall compare the taxpayer only with representative corporations whose invested capital can be satisfactorily determined under section 326 and which are, as nearly as may be, similarly circumstanced with respect to gross income, net income, profits per unit of business transacted and capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances.” The complaint alleges upon information and belief that for the year 1918 the ratio of the average tax to the average net income of representative corporations engaged in like business and similarly circumstanced to plaintiff in the respects specified in the statute, did not exceed the sum of 25 per cent., and it charges that the Commissioner failed to use this ratio, but illegally assessed against plaintiff a tax which was 44.8 pereent. of its net income for said year, resulting in an illegal exaction of some $19,600., for the recovery of which this suit w„as brought after a claim for refund had been rejected. Thus it is apparent that the complaint attacks the correctness of the ratio used by the Commissioner and asks the court to review all the comparative data which under the statute must enter into his determination of such ratio. The District Court held that section 328 vested in the Commissioner administrative discretion in the computation of the tax which was not subject to judicial control on the mere allegation of error or illegality. Its opinion may be found in 41 F.(2d) 862. The correctness of this view is the sole question presented by this appeal. A majority of the court are of opinion, as was the judge below, that the law is set-tied adversely to appellant’s contention by Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 48 S. Ct. 587, 72 L. Ed. 985. There it was held that the Court of Claims was without jurisdiction to review the Commissioner’s refusal to grant a domestic corporation a' special assessment, because the Commissioner’s determination involved administrative discretion which could only properly be exercised by an official or a body having wide experience with the class of problems concerned. It is true that there the precise question was whether conditions existed which entitled the domestic taxpayer to a special assessment, the Commissioner having computed its' tax by the normal method; while here the foreign taxpayer is required to have a special assessment, and the question is whether it has been rightly computed. But the considerations which controlled the answer to the former question are equally .applicable to solution of the latter, and were, we think, present to the mind of the court, as indicated by the following quotations from the opinion of Mr. Justice Brandeis (pages 558, 559 of 277 U. S., 48 S. Ct. 587, 589) “* _* * The task imposed on the Commissioner by sections 327 and 328 was one that could only be performed by an official or a body having wide knowledge and experience with the class of problems concerned. For the requirement of a- special assessment under paragraph (d) of section 327, and its computation in all cases, are dependent on ‘the average tax of representative corporations engaged in a like or similar trade or business.’- [Italics ours.] “ * * * What are ‘representative corporations engaged in a like or similar trade or business;’ which corporations are ‘as nearly as may be, similarly circumstanced with respect to gross income, net income, profits per unit of business transacted and capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances’ — these are all questions of administrative discretion.” In Blair v. Oesterlein Mach. Co., 275 U. S. 220, 226, 48 S. Ct. 87, 89, 72 L. Ed. 249, it was said that “there is no inherent impossibility, or, indeed, serious difficulty in reviewing judicially any determination authorized by sections 327 and 328,” but this language was used with reference to a review b’y the Board of Tax Appeals, and must, in the light of the later Williamsport decision, be so limited. Whether, upon appeal from the Board, a Circuit Court of Appeals has power to review a decision of the Board in respect to special assessment under these sections, we need not now say. See Ryan Car Co. v. Commissioner, 44 F.(2d) 26 (C. C. A. 7); cf. Cramer & King Co. v. Commissioner, 41 F.(2d) 24 (C. C. A. 3). The interpretation of the Williamsport opinion which we adopt was also adopted by the Court of Claims in Chicago Frog & Switch Co. v. United States, 67 Ct. Cl. 662, cert. denied 280 U. S. 579, 50 S. Ct. 32, 74 L. Ed. 629. That was a ease identical with the suit at bar, except that the complaining taxpayer was a domestic corporation. See, also, Clinton Iron & Steel Co. v. Heiner, 30 F.(2d) 542, 544 (D. C. W. D. Pa.). The fact that special assessment is mandatory for a foreign corporation and permissive for a domestic one furnishes no basis for distinction-when each is attacking the Commissioner’s computation on the ground that he selected improper comparatives in determining the assessment which he made. The judgment is affirmed MANTON, Circuit Judge (dissenting). Section 327(b) of the 1918 Act (40 Stat. 1057, 1093) requires that the taxpayer, if a foreign corporation, be assessed as to its war profits and excess profits taxes under section 328(a). The Commissioner had no occasion, nor was it his duty, to determine as an administrative act whether the taxpayer was entitled to this special assessment under section 328(a), as was the requirement in Williamsport Wire Rope Co. v. United States, 277 U. S. 551, 48 S. Ct. 587, 72 L. Ed. 985, for there the Commissioner was dealing with a domestic corporation. The error below rested in the court’s determination that the discretionary power conferred on the Commissioner went beyond the determination of whether or not a domestic corporation was entitled to a special assessment under section 328, and in holding that the Commissioner had the additional administrative discretion, which was not reviewable in the courts, of determining the questions suggested in section 328(a). No discretion was reposed in the Commissioner as to computation of the special assessment. Section 328 explicitly directs how the assessment is to he made. Section 328 provides that “the tax shall be the amount which bears the same ratio to the net income of the taxpayer (in excess of the specific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income (in excess of the specific exemption of $3,000) for such year. In the ease of a foreign corporation the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representative corporations.” The mandatory effect of section 328 was to compel the Commissioner, in computing the tax, to use as comparatives, only representative corporations whose invested capital can be satisfactorily determined and that the ratio shall be determined upon regulations prescribed by the Commissioner, with the approval of the Secretary. And section 327 provides “where the Commissioner is unable to determine”; and where “the Commissioner is unable satisfactorily to determine;” and where “the Commissioner finds * * * that the tax * * * would * * * work upon the corporation an exceptional hardship.” This phrase of section 327 indicates an intent, as the Williamsport Case held, to confer a discretionary nonreviewable power on the Commissioner. But the phrase of section 328 is mandatory and requires the Commissioner to ascertain the average fax of the “representative corporations engaged in a like or similar trade or business.” The rest is a mathematical calculation. The task thus imposed upon the Commissioner is no different from many similar ones required in ascertaining gross income, net income, invested capital, depreciation, and allowance, which are necessary to compute the ordinary income and excess profits tax of the taxpayer. It is so well settled as to require no citation of authority to say that such determinations by the Commissioner are reviewable by the courts. The” Commissioner has made the computation, which is complained of, and the courts may reach a different conclusion if the evidence produced shows error in his determination of the representative corporations he has used for comparison or errors in the computations made as the bill of complaint charges. The question for the court on the trial would be whether the Commissioner has followed the mandatory directions of the statute in a manner free from error. The right to sue the collector for an unjustified collection has long been recognized as a common-law remedy. United States v. Emery, etc., Co., 237 U. S. 28, 35 S. Ct. 499, 59 L. Ed. 825. The District Court has jurisdiction in a suit such as this under section 41, title 28, U. S. Code (28 USCA § 41). Unless the Revenue Act of 1918 withdrew this jurisdiction, it must still exist. No provision of the act takes away this jurisdiction or otherwise limits it. It would be no serious difficulty to review the issue presented of whether a Commissioner followed out the direction of section 328 in making the assessment. Nothing in the Williamsport Case (see page 558 of 277 U. S., 48 S. Ct. 587, 72 L. Ed. 985) indicates that the court found Congress intended to abrogate the common-law right of taxpayers to sue the internal revenue collector, and that ease held merely that the courts will not review the discretionary determination of the Commissioner as to whether special relief should be given to any domestic corporation in any given ease. The Court of Claims in Frederick Warne & Co. v. United States, 62 Ct. Cl. 363, 369 said, referring to section 328: “The statute is in positive terms, and expressly points out its applicability to foreign corporations. Why a discrimination between foreign and domestic corporations was deemed advisable is not for judicial determination. The act used mandatory terms and mentions foreign corporations as not entitled to the exemption provided in section 302.” And, as pointed out in Blair v. Oesterlein Mach. Co., 275 U. S. 220, 226, 48 S. Ct. 87, 89, 72 L. Ed. 249, “there is no inherent impossibility, or, indeed, serious difficulty in reviewing judicially any determination authorized by sections 327 and 328.” For these reasons it was error to dismiss the bill, and the judgment should be reversed.

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BERWIND WHITE COAL MINING CO. v. CITY OF NEW YORK et al. No. 206. Circuit Court of Appeals, Second Circuit. March 9, 1931. Macklin, Brown, Lenahan & Speer, of New York City (Horace L. Cheyney, of New York City, of counsel), for appellant. Arthur J. W. Hilly, Corp. Counsel, of New York City (William J. Leonard and Matthew J. Troy, both of New York City, of counsel), for appellee City of New York. Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Robert S. Erskine and Henry P. Elliott, both of New York City, of counsel), for appellee Transatlantica Italiana. Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges. AUGUSTUS N. HAND, Circuit Judge. The libelant, owner of the coal barge Eureka No. 5, was requested by respondent Transatlántica Italiana to deliver a barge-load of bunker coal to its steamship Guiseppe Verdi, which was lying on the north side of Pier 75, North River, Borough of Manhattan. . Libellant accordingly ordered its tug Admiral Dewey to tow the barge to the place. This was done on April 30, 1926, and the barge was moored astern of the Guiseppe Verdi to wait until some of the libellant’s other coal barges were unloaded, before discharging her cargo on the steamer. Libellant had no particular knowledge of the condition of the pier, though it had previously at times had its barges towed there to steamers of the French Line. The Eureka No. 5 was moored in the 'slip astern of the Guiseppe Verdi and bow-in. She was in good condition when the bargee left her for the night. The next morning she was found settled on the bottom of the slip. The bottom of the barge was penetrated by an oak pile which was sticking through her planking on the starboard side. The portion of the pile which was fast in the barge had apparently broken from the end of one of the fender piles of the pier. It was about two feet in length and from 12 to 14-inches in diameter. The remainder of the pile was something like 24 feet long and was still sticking in the mud of the slip when discovered. The end of the pile had evidently been under water and the barge had settled upon it with the ebb of the tide. The fespondent Transatlántica Italiana had a permit from the City of New York (the owner of the premises) to use the pier for April 30, and had leased it for a term beginning May 1. There was some testimony that the break in the piece of the pile found embedded in the barge was new, but this evidence was of slight weight, as bearing upon the length of time during which the pile had been a hidden danger to navigation. The witness admitted that the pile was covered with mud and even an old pile might show new timber in its cross section when broken off. A wharfinger, though not an insurer, is bound to exercise reasonable diligence to ascertain the condition of berths at which it invites vessels to moor. Smith v. Burnett, 173 U. S. 430, 19 S. Ct. 442, 43 L. Ed. 756; M. & J. Tracy y. Marks Lissberger & Son (C. C. A.) 283 F. 100; The Eastchester (C. C. A.) 20 F.(2d) 357. While it is true that the libelant can only recover damages by proving that the owner of the pier was negligent, and that the latter can only be found negligent if it knew, or ought to have known, the condition of the pier at the time it permitted its use, yet the pile had been part of the fender used to protect the pier from vessels in the slip. The owner had control of the premises and was presumptively in a position to say when the waters adjacent to the pier became dangerous from hidden obstructions. It had no excuse for not knowing when a fender pile broke off so that its end lay under water, a danger to vessels coming into the-slip. If the broken pile had not been there long enough to import notice, the wharfinger ought to have offered proof to show when it had last inspected the waters of the slip and what condition it then found. The existence of the broken pile at the time the barge was injured is evidence of an earlier defective condition. Best, J., in Regina v. Burdett, 4 B. & Ald. 124, said: “I am to presume a thing always in the state in which it is found, unless I have evidence that in some previous time it was in a different state.” Such is the general inference, the strength of which is dependent upon the particular circumstances of the case and the likelihood of the duration in the past of a state of facts found to be existing at present. Wigmore on Evidence, § 437; Wilmot Engineering Co. v. Charles Blanchard, 208 App. Div. at page 221, 203 N. Y. S. 700; Crowell Bros. v. Panhandle Grain & Elevator Co. (C. C. A.) 271 F. 129; Gaulden v. Lawrence, 33 Ga. 159; Phipps v. Consolidated Flour Mills Co., 113 Kan. 118, 213 P. 637. In the absence of evidence to the contrary, it is a reasonable” inference that the broken pile on which the barge settled had' remained in situ for a considerable time prior to the accident. If such was the case, the city of New York ought to have discovered an obstruction so dangerous to vessels coming to its pier. The steamship company, however, was in a different situation from the city of New York. It had just begun to occupy the premises and had no opportunity-to become familiar with hidden obstructions to navigation existing prior to its occupancy, nor had it reason to suppose they existed where the slip was one in common use. Berwind-White Coal Mining Co. v. Bush Terminal Co. (C. C. A.) 296 F. 475; M. & J. Tracy v. Marks Lissberger & Son (C. C. A.) 283 F. 100. Nothing but actual notice could give rise to liability on its part, and of such notice there is no proof. The city of New York* on the other hand was in a position to become aware of the breaking down of the piling and of the consequent dangerous condition of the slip. Its failure to discover such a hidden obstruction to navigation existing in its own slip and to repair the premises or to give warning to the vessels coming there was negligence, for which it alone is liable. The decree is modified so as to hold the city of New York liable for the damage to libelant’s barge, and is otherwise affirmed.

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UNITED STATES v. TWO SOAKING UNITS AND VARIOUS OTHER ARTICLES (EXCELSIOR BREWING, Inc., et al. Claimants). No. 271. Circuit Court of Appeals, Second Circuit. March 9, 1931. Howard W. Ameli, U. S. Atty., of Brooklyn, N. Y. (Herbert H. Kellogg, J. Bertram Wegman, and Emanuel Bubliek, Asst. U. S. Attys., all of Brooklyn, N. Y., of counsel), for the United States. Louis J. Castellano, of Brooklyn, N. Y., for appellees. Before L. HAND, CHASE, and MACK, Circuit Judges. CHASE, Circuit Judge (after stating the facts as above). It has been agreed by the parties that the libel is sufficient as a pleading, and no question is raised as to the seizure having been made by the Prohibition Administrator instead of by a collector or deputy collector. We are, therefore, faced with the issue of whether or not any federal officers had the lawful right to seize the property. It is plain that there could be no seizure of real estate. Apparently there was none, but we need not now inquire further into that, for the attachment under the libel will not be vacated as to any property lawfully seized simply because other property may have been seized unlawfully at the same time. McGuire v. United States, 273 U. S. 95, 47 S. Ct. 259, 71 L. Ed. 556; Quandt Brewery Co., Inc., et al. v. United States, 47 F.(2d) 199. When the beer and other personal property was seized on August 9th, it was known that the garage on De Kalb avenue contained beer barrels and all the necessary apparatus for filling those barrels with beer. It was known that that garage was so constructed as to permit whatever was done inside it to be done secretly. It was known that the rather elaborate precautions to hide the interior from view from the outside were not ordinarily resorted to in the construction of garages. It was known that beer had been in the pipe found in the drain in the floor and that beer had been in the racking machine. It was known that the pipe in the drain led to the drain in the Pulaski street garage. It was known that two quarts of illegal beer had been drawn from a faucet in the Pulaski street garage and that the pipe ran under the pavement in the street across to, or at least just outside, the brewery premises, and appeared to run into those premises. It was known that with simple hose connections all these pipes could be made one.' It was known that beer was being manufactured in the brewery and that there was a supply of beer in the vats there. All this was certainly enough to lead a reasonable man of ordinary judgment to the conclusion that beer of an unlawful alcoholic content was kept in those vats in the possession of the Excelsior Brewery, Inc., “for the purpose of being sold or removed by him [Excelsior Brewery Inc.] in fraud of the internal-revénue laws, or with design to avoid payment of said taxes,” in violation of section 3453 of the Revised Statutes. These facts and circumstances were so clearly sufficient to warrant a seizure of the property of the kind enumerated in the statute that it seems idle to urge the contrary, and we have no hesitation in holding that there was then reasonable cause to believe that this property was. possessed in violation of the statute and so could lawfully be seized. Nor was it necessary to obtain a search warrant. The premises in which the property was kept were the brewery buildings of a permittee empowered to manufacture cereal beverages according to the terms of its permit. The officers were entitled to inspect such premises. They had entered lawfully with the knowledge and consent of the owner, and, having so entered, seized the property found in possession of such -owner in violation of law and subject to seizure under the above-quoted statute. It is a mistake to assume that, when premises have lawfully been entered, a search and seizure that is reasonable must always be under a search warrant. Hilsinger et al. v. United States (C. C. A.) 2 F.(2d) 241. When the officers had the permission of the owner to enter and inspect the premises, no entry invito domino by virtue of a search warrant was necessary to accomplish, or would have added to the legality of, whatever seizure they made. United States v. Old Dominion Warehouse, Inc., 10 F.(2d) 736 (0. C. A. 2). The search of the premises, made after lawful entry and seizure of personal property but without a search warrant, to disclose just how the beer the officers were then morally certain was being withdrawn unlawfully was piped from the vats to the garages is said to have been contrary to law. It is undisputed that the pipe with which beer was so withdrawn was so 'cleverly hidden that it took days to trace it to the vats. It is also undisputed that no unnecessary damage was done while the search to do that was made. Such a withdrawal of beer was in violation-of the terms of the"permit under which the brewery was operated. An adequate inspection of the premises of this permittee required whatever investigation by way of such a search as would disclose the actual facts to show how the permittee was conducting its business to enable the inspector to determine whether or not the terms.of the permit were being violated. A preliminary inspection having proceeded to the point where seizure was justified under section 3453, Rev. St., and a seizure having been made, the inspection was completed. As the right to inspect must include the right to make such reasonable investigation in the premises of a permittee of the manner in which the permitted business is conducted as will uncover the truth about it, it is unnecessary to inquire whether or not the search that did this without needless damage was lawful upon any other ground. Decree reversed.

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THE R. LENAHAN, JR. THE JOHN J. RYAN. THE CARLOTTA. No. 254. Circuit Court of Appeals, Second Circuit. March 9, 1931. Macklin, Brown, Lenahan & Speer, of New York City (Horace L. Chevney, of New York City, of counsel), for appellants Bethlehem Steel Co. and Mary Ryan. Barry, Wainwright, Thacher & Symmers, of New York City (John C. Crawley and Paul L. Clugston, both of New York City, of counsel), for appellant Continental Grain Co. Single & Single, of New York City (William J. Mahar of New York City, of counsel), for appellant Thomas Reddy. Stanley & Gidley, of Buffalo, N. Y. (Arthur E. Otten, of Buffalo, N. Y., of counsel), for appellee. Before L. HAND, CHASE, and MACK, Circuit Judges. L. HAND, Circuit Judge. The Iroquois Transit Corporation, the carrier, was in the business of hauling merchandise through the Mohawk River Canal. Having no equipment of its own, or only an insufficient amount, it chartered empty barges and tugs for its purposes. Among the chartered barges were the two in question, whose hire was on a per diem basis; they were bare boats with a bargee in charge, employed and paid by the owners. The tug was small, driven by a Diesel engine, manned by a crew, apparently of only two, also employed and paid by the owner. The earner made up such tows as it needed, and put the tug in charge, using it at its pleasure without consulting the owner. Her hire was also on a per diem basis, and the charter was oral. Late in the season of 1926, in November, the carrier secured a cargo of grain for one barge, and of pig iron for the other, for transport from Buffalo to the Hudson, and put the tug in charge. On the way, due to high water which then prevailed, she lost control of the barges, so that they took the ground, and they and their cargoes were damaged. The four libels were filed severally by the owners of the barges and the cargoes; and the circumstances of the grounding were such that the judge charged the tug with fault in her navigation. As the claimant does not in its brief or argument raise any question as to the propriety of this finding, we shall not discuss her negligence. As to the barges, the tug was exonerated because both she and they were upon demise, “owned pro hae vice” by the carrier. For this reason no lien for negligent towage could arise against her, the notion apparently being that her fault was to be imputed to the tow. As to the cargoes, section 3 of the Harter Act (46 USCA § 192) applied, all the flotilla being treated as a single vessel under the rule in Sacramento, etc., Co. v. Salz, 273 U. S. 326, 47 S. Ct. 368, 71 L. Ed. 663, and In re O’Donnell, 26 F.(2d) 334 (C. C. A. 2). The three vessels being seaworthy, and properly manned and equipped, the faults of the tug’s navigation were excused. We shall assume for argument that all the vessels were demised. There can indeed be no doubt as to the barges. Dailey v. Carroll, 248 F. 466 (C. C. A. 2); Bushey v. Hedger, 40 F.(2d) 417 (C. C. A. 2). As to the tug there is more question. Normally a charter is only a contract of affreightment, when the owner gives the charterer no more than the use of his vessel, on board of which a crew, hired and paid by him, remains, and whose movements they direct. That is however not conclusive, and in The Charlotte, 299 F. 595, we held a charter very like that at bar to be a demise. To be sure, the language of the transfer in that case included the word, “leased,” but our decision did not depend upon that, and we think its omission here in an oral per diem agreement is not to be pressed so far. Plainly, there is much practical difference between a small boat, sent hither and yon in restricted waters, under the immediate direction of the charterer, and a ship sailing the seven seas, which the charterer is merely permitted to lade. At any rate, as we think the point not involved in the case at bar, we are content to assume that the tug, like the barges, was under the “control” of the carrier (U. S. v. Shea, 152 U. S. 186,14 S. Ct. 519, 38 L. Ed. 403), and had therefore been demised. The premises existed for the conclusion of the District Judge. His theory was that because of the common bailment of all three, there remained for legal purposes but a single personality, and that therefore no rights or liabilities could arise. This is expressly supported by two decisions in The Dutchess (D. C.) 15 F.(2d) 198; Id. (D. C.) 16 F.(2d) 1003, and might perhaps be implied from our own decision in Monk v. Cornell Steamboat Co., 198 F. 472. In that case the injured scow had been domised, and the demisee pressed the tug, not on charter, to undertake dangerous towage. The owner of the scow sued the tug and was defeated because the demisee was “owner pro hae vice.” In the circumstances this only-meant that the tug was free to accept the demisee’s consent to the danger; the ease raised no more than a question of the bailee’s apparent authority. Third persons were not obliged to question the propriety of his directions, the scow being uneonditionálly delivered into his possession. When, however, both the injured and the guilty vessels are demised to one bailee, this is not true. The Willie, 231 F. 865 (C. C. A. 2). The fault in that case was of the common demisee’s foreman, and it was not imputed to the injured scow. There was no reason why it should be, since the tort-feasor had not relied upon the consent of the bailee. We'can see no distinction between this decision and the case at bar. In principle we can see no reason for merging the personality of the owner into that of the demisee by virtue of a fiction, such as. ownership pro hae vic.e. The transaction is a bailment .and the bailee is liable, at least in contract, if he neglects to protect the property. If he owned the tug there could be no question, except as to the form of suit, a matter indifferent in the admiralty. That he personally shbuld be excused if he gets possession of it on demise, is of course impossible, and while it may indeed be a hard rule which imposes liability on a tug for the demisee’s fault, as to that we are concluded. A demise makes no difference in collision (The Barnstable, 181 U. S. 464, 21 S. Ct. 684, 45 L. Ed. 954), and negligent towage is equally a tort (The John G. Stevens, 170 U. S. 113, 18 S. Ct. 544, 42 L. Ed. 969). The notion that a thing may be guilty is archaic enough, no doubt an animistic survival from remote times; but once it be granted, it does not comport with convenience or precedent to interject exceptions, based on added irrational fictions. Moreover, while the doctrine has been pressed very far (The China, 7 Wall. 53, 19 L. Ed. 67), it has never, with the exceptions we have mentioned, been extended to the vicarious transfer of fault to an innocent vessel; and indeed, that would contradict even the atavistic conceptions on which the whole theory depends. The Del Norte (D. C.) 111 F. 542, affirmed 119 F. 118 (C. C. A. 9), was not such a case; it decided no more than that a charterer got no lien on the demised vessel through faults of his own servants. The contrary would surely have .been shocking. We have assumed in the foregoing that the carrier was at fault, which could be true only in case the tug’s crew were his servants. In fact, this was probably not the case, but as it makes no difference in the result, we avoid that debatable question by assuming it for the claimant. If they remained the servants of the tug owner, there is even less reason for imputing their fault to the barges. They were not misled by any consent of the carrier which the owner had authorized him to give; they charged their principal and his property as in any other ease. We cannot approve the rule laid down in The Dutchess, supra. As to the cargoes, upon the assumptions we have already made, the decision depends upon a question of fact; that is, whether all the flotilla was seaworthy and well-manned, an issue on which the claimant has the burden. In re O’Donnell, 26 F.(2d) 334 (C. C. A. 2). The proof as to the barges was enough, but we think it failed as to the tug. The currents which she encountered were apparently not usual in spring and autumn, and while the lock-tender opened all the gates at once, and let loose a flood of water, it is at least open to question whether even this presented to her an emergency with which she should not have been able to deal. We are not therefore entirely satisfied that she was fit for the service on which she was engaged, as much a condition of her seaworthiness as that she should be well-found and staunch. Be that as it may, certainly the claimant did not prove, though it alleged, that she was well manned. Her master had not served as such for more than three months, before which he had been an engineer; he held no license save one granted without examination of his fifc ness; and the record is bare of any other evidence of his competency. In the only instance in which this was put to the test, it failed. Nor can we find any evidence as to the competency of her mate, except that he had been for many years employed in the canal. Section 3 of the Harter Act gives a privilege, excusing the carrying vessel from admitted faults, and all the prescribed conditions must be shown to exist. The District Judge appears to have supposed that the libellant must establish the negative. Decrees reversed; causes remanded with instructions to enter interlocutory decrees for the libellants.

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COMMERCIAL TRUST CO. v. UNITED STATES SHIPPING BOARD EMERGENCY FLEET CORPORATION. No. 266. Circuit Court of Appeals, Second Circuit. March 9, 1931. Lampke & Stein, of New York City (William H. D arrow, of New York City, of counsel), for appellant. George Z. Medalie, of New York City (John C. Donovan, and William E. Collins, Sp. Assts. to U. S. Atty., both of New York City, of counsel), for appellee. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. L. HAND, Circuit Judge. The plaintiff took out a summons, which it served upon the defendant, and which disclosed nothing further as to its place of incorporation than that the plaintiff’s name was the Commercial Trust Company of New Jersey. The defendant, the Fleet Corporation, appeared, and by stipulation obtained several extensions of its time to answer. When, by the filing of the complaint, it appeared that the plaintiff was a New Jersey corporation, it moved to dismiss the complaint because the action was not brought in the .proper district. The District Judge so held, and the plaintiff appealed. There are two possibilities, between which we need not choose. The Fleet Corporation is organized under the laws of the District of Columbia, from which it may follow that, as it is not a citizen of any state, it may he sued without its consent in no federal court except that of the District. Yaselli v. U. S. Shipping Board Emergency Fleet Corporation (D. C.) 298 F. 198; Caceres v. U. S. Shipping Board Emergency Fleet Corporation (D. C.) 299 F. 968. This would not apply to actions brought under the Jones Act (46 USCA § 688), which specifically provides otherwise. Leon v. U. S. Shipping Board Emergency Fleet Corporation (D. C.) 286 F. 681. The other possibility is that the question of venue coalesces in this instance with that of the corporation’s “presence” ih the district. Puget Sound, etc., v. U. S. Shipping Board Emergency Fleet Corporation (D. C.) 293 F. 768. So far as we know, however, it has never been held that actions against the Fleet Corporation are between citizens of diverse states, and we can perceive no ground for so holding. It follows that the dismissal was wrong in any ease. If the Fleet Corporation may be sued without its consent only in the District of Columbia, then the defect appeared when the summons was served, and the general appearance excused it. Ex parte Chicago, R. I. & P. R. Co., 255 U. S, 273, 279, 41 S. Ct. 288, 65 L. Ed. 631. If it can be sued wherever it is “present,” then the action was well brought, if it was in fact “present” in the Southern District of New York. If it was not, the error was at once apparent, and if the defendant meant to raise the question, it was bound to do so before general appearance. Upon appeal, however, the question was raised of the substantive jurisdiction of the District Court; and as this is a point which' can be taken at any stage of the proceedings, and of which indeed we must take notice ourselves, we are bound to consider it. It involves a consideration of the complaint. This alleged that the plaintiff was the assignee of certain freights due to a corporation, known as the United States Transport Company, upon two ships, operated by that company under a tripartite operating agreement between the defendant, a third company, and itself. The assignment was security for loans made by the plaintiff to the assign- or, the Transport Company, which transferred to it the bills of lading. With knowledge of the assignment the defendant repossessed itself of the vessels, and collected the freights from the consignees by refusing delivery until they had paid. In form, the action is in the common count for money had and received; in substance, it is a legal substitute for the equitable right to follow the proceeds of the plaintiff’s property into the hands of a constructive trustee. The question is whether a suit might have been brought under the Suits in Admiralty Act for the same relief; for, if so, that remedy is exclusive. Johnson v. Fleet Corporation, 280 U. S. 320, 50 S. Ct. 118, 74 L. Ed. 451. When the loan is itself maritime, the admiralty will entertain a suit to trace the security into the hands of one with whom the pledgor has wrongfully mixed the proceeds with his own; so we held in Bank of British America v. Freights of the Hutton (C. C. A.) 137 F. 534. The initial maritime character of the transaction persists, into whatever form the proceeds may go. . In general, if the loan be maritime, the admiralty has jurisdiction over the collection of such property. Freights of The Kate (D. C.) 63 F. 707; The Advance (C. C. A.) 72 F. 793. However, it is not enough that the security be itself maritime in nature; for instance, a mortgage, even upon a ship, could not, before Congress otherwise provided, be foreclosed in a court of admiralty. Bogart v. The John Jay, 17 How. 399, 15 L. Ed. 95. Rather it depends upon the character of the loan, whether that be to disburse the ship, or for some other recognized maritime purpose. In re Atlantic, etc., Co. (D. C.) 3 F.(2d) 309; affirmed Standard Oil Co. v. Miller (C. C. A.) 3 F.(2d) 438 (C. C. A. 4). We think that the form of the action cannot prevail over its substance, and that if the loans were maritime, it is indifferent that the plaintiff chose to sue in a common count, based upon the unlawful detention of the security. The reasoning of Johnson v. U. S. Shipping Board Emergency Fleet Corporation, applies, and the remedy under the Suits in Admiralty Act (46 USCA §§ 741-752) is exclusive. The complaint does not allege what was the nature of the loans, which, for aught that appears, may have been for ordinary financial purposes; and while this is -not probable, we cannot at this stage of the action dismiss it. We .must assume that it states a good cause of action at law, and remand it to the District Court with instructions to entertain it, unless it appear that the loans were maritime, in which case it must be dismissed for lack of jurisdiction. The plaintiff cites United T. & L. Co. v. N. Y. & B. T. Line, 185 F. 386 (C. C. A. 2), and Home Insurance Co., New York, v. M. T. Co., 16 F.(2d) 372 (C. C. A. 9), as holding that a cause of action like this is not cognizable in the admiralty. In the first, the question was of a cause of action arising because of the overpayment of lighterage hire; the hire was excessive, and the libelant and respondent had had common directors. The second was to recover payments under a. marine policy fraudulently procured from the underwriter. In each case it is true that the obligee might have sued in the admiralty upon the obligation discharged, a charter or a marine policy; but he did not so sue; he had collected under such circumstances as made him a constructive trustee, and it was the obligor who sued to unravel the transaction. As the "reasons which made it unlawful for him to retain the proceeds were not maritime, the obligor failed. In the case at bar the situation is reversed, since there is no effort to unravel a closed transaction. It is the obligee who is the complaining party, and who seeks to collect the loan out of the security in the hands of one who has taken it away from the obligor. It is still the loan which is being collected; whose enforcement is the gravamen of the suit. If that be maritime, the admiralty assumes all incidents in its collection, including the pursuit of the security into the hands of one who holds as trustee. Perhaps the plaintiff might have-sued the consignees; that would certainly have been upon a maritime contract. It prefers to accept the payment as a discharge, and to follow the proceeds into the defendant’s hands; it is still collecting its loan, and the jurisdiction of the District Court depends upon whether that loan was itself maritime. Judgment reversed and cause remanded.

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E. GERLI & CO., Inc., v. CUNARD S. S. CO. Limited. No. 263. Circuit Court of Appeals, Second Circuit. March 3, 1931. Bigham, Englar, Jones & Houston, of New York City (Oscar R. Houston and Ezra G. Benedict Fox, both of New York City, of counsel), for appellant. Lord, Day & Lord, of New York City (George De Forest Lord, of New York City, of counsel), for appellee. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. L. HAND, Circuit Judge. An Italian exporter delivered to the respondent ninety-two bales of silk at Milan for shipment to New York, and took a bill of lading which contained the following clause: “The carrier is not to be liable * * * for any claim for short delivery of, or damage to, the property hereby receipted for, unless notice of such claim is given in writing before the removal of the Goods or such part of the Goods as are discharged from the vessel at the port of discharge.” The goods went by land to Havre, thence by water to Southampton, where the respondent laded them on the “Berengaria,” bound for New York. The exporter endorsed and posted the bill to the libellant, who called for the goods which had been discharged on the wharf. Thirty-eight bales were delivered to him on December sixteenth; fifty-one on December seventeenth; one on December twenty-second; ninety in all. Nothing certain appears in the record as to his knowledge on or before December twenty-second that the other two bales had been lost; but on December twenty-fourth he made written claim for them, which the respondent later recognized as valid to the extent of the value agreed in the bill of lading. In January and February it was still searching for missing goods, and suggested that they might-have been reshipped on the Berengaria in the confusion, or sent by mistake to the Government Stores. The libellant sued for the loss, and the respondent pleaded the clause as a defense; also a clause in limitation of liability which it is unnecessary to set forth at length. The District Judge thought that the libellant had failed to give seasonable notice, and dismissed the libel. The language applicable to the loss of part of a consignment is this: “Before the removal of * * * such part of the Goods as are discharged from the vessel at the port of discharge.” Taken literally, this would mean, in case all the goods were discharged from the vessel, and some were later lost on the pier, that the notice need never be given, because all those discharged were never removed; and the clause would then cover only the ease of goods lost on board. Since it is ordinarily impossible to prove in the ease of lost goods, whether they were lost on board or after discharge, the clause would in practice usually be brutum fulmen. It is indeed true that the language of a bill of lading must be taken against the carrier, but it appears to us that the interpretation suggested would too plainly contradict its purpose. Therefore, we read the phrase, “discharged from the vessel,” as meaning, not that the goods have merely gone over the ship’s side to the wharf, but that they have beemdelivered to the shipper. Anything else, for the reasons just given, would upon most occasions delete it from the contract, and cannot be thought to be its meaning. However, while the clause is valid [Anchor Line, Ltd., v. Jackson, 9 F.(2d) 543 (C. C. A. 2); The Texas Maru, 13 F.(2d) 538 (C. C. A. 2) ], it must give the shipper a reasonable opportunity' to make his claim. In the ease of damage he has such an opportunity before removal, at least if the damage be apparent on inspection; but when there is a shortage he cannot reasonably be asked to act until he knows that he is not to get his whole parcel. If the goods are delivered in installments, he may be told of the shortage when he receives the first; we need not say whether in that ease he must make claim before he removes that. But it would seem to be the only fair meaning of the clause that if he knows of the shortage, he must give notice at least before taking that which he understands to be the last installment. Then at any rate he has ample opportunity, and the purpose is certainly to give the carrier notice as soon as that can conveniently be done. Upon the issue as to whether timely notice has been given, the shipper has the burden of proof. Whatever may be thought of this as res integra, we at least are now too definitely committed to change. The General Geo. W. Goethals (C. C. A.) 298 F. 935; Cudahy v. Munson Line (C. C. A.) 22 F.(2d) 898. In the case at bar the question comes to this: Did the libellant definitively know that the two bales were lost before December twenty-second? He must show that he did not, and the proof is somewhat equivocal. He first made his claim on the twenty-fourth' by letter dated the day before; it merely stated that he meant to hold the respondent responsible and would give the details of his claim when they were determined. On the twenty-eighth he wrote again, repeating the claim and speaking of the goods as “missing” and “not yet received.” The claim, qua claim, would normally presuppose an existing loss, but that is not inevitable. Although, if the goods had not been abandoned, the time had not yet come to claim, it was at least prudent to put it in, as soon as possible, for carriers' are sensitive in such matters. The reference in the second letter certainly implied that the disappearance might not be final, and presupposed that something more would be done to find them. The respondent’s letters in January and February prove the correctness of this surmise. They show that the carrier was still in hopes, was still searching, and proposed to continue. Just when it did give up and declared further efforts fruitless, does not appear, but it was certainly long after the claim was made. When one says that there is a “shortage” in delivery, one means that some of the goods are lost, not merely mislaid. True, one may speak of something as lost which is merely missing at the moment, but actual loss is only when the search is given up, and the thing is accepted as gone. This seems to us the proper interpretation to put upon the clause in question. It would indeed be an unreasonable requirement that a shipper may not take the last of those things found, because he is told that so far, the remainder is not at hand. The time to make claim is only when the shortage has been ascertained; when the carrier admits that he cannot deliver. Not only does it not appear that this was not true on December twenty-second, but it affirmatively appears that the carrier had said nothing of the kind before December twenty-fourth, when the claim was made. Though, strictly, the claim was premature, that does not mar its effect. It seems to us that the libellant has borne the burden. The bill of lading limited the recovery to £20 on each package, unless some greater value was declared and the extra freight paid; it also contained a clause that the contract should be “governed by English law.” The British Carriage of Goods Act, § 6, art. Ill, provides that no clause in a bill of lading shall “lessen” the “liability” of the carrier except as the act allows, and section 5 of article IV may, arguendo, be assumed to forbid any limitation below £100 a package. As matter of interpretation of the document as a whole, we are to take the specific as prevailing over the general, and the £20 clause as paramount to these sections of the act. Had the bill been drawn in England this would not be enough; the validity of the clause would depend upon British law. In fact, it was drawn and delivered in Italy, and it is the law of that kingdom by which alone the question is to be decided ; that is, how far the agreement raised an obligation. Cuba R. R. Co. v. Crosby, 222 U. S. 473, 32 S. Ct. 132, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40. People cannot by agreement substitute the law of another place; they may of course incorporate any provisions they wish into their agreements — a statute like anything else — and when they do, courts will try to make sense out of the whole, so far as they can. But an agreement is not a contract, except as the law says it shall be, and to try to make it one is to pull on one’s bootstraps. Some law must impose the obligation, and the parties have nothing whatever to do with that; no more than with whether their acts are torts or crimes. The difficulty here is that nobody has proved what was the law of Italy. Strictly, that might cut the whole ground from under the libellant’s feet; he must maintain that such a document raises some obligations; if not, he is forced back upon what can be implied from loading the goods on the “Berengaria” at Southampton. However, even though Italy is a country where we know the civil law to obtain, we are not bound to complete agnosticism. Compagnie, etc., v. Rivers, 211 F. 294 (C. C. A. 2); The Hanna Nielsen (D. C.) 25 F.(2d) 984. The extent of our right to make any assumptions about the law of another country depends upon the country and the question involved; in common-law countries we may go further than in eivil law; in civilized, than in backward or barbarous. We can say more in the ease of France or Italy, than of Abyssinia, or Afghanistan (Aslanian v. Dostumian, 174 Mass. 328, 54 N. E. 845, 47 L. R. A. 495, 75 Am. St. Hep. 348); less, than in the ease of England or Australia. No doubt, when there is no evidence, we are always much limited in cases where the common-law does not prevail; but we are not quite without power in commercial matters arising in one of the great commercial countries of Western Europe. Kales, 19 Harv. L. R. 401, 409. We can assume that in Italy an agreement of carriage creates obligations, generally measured by the language used. Mittenthal v. Mascagni, 183 Mass. 19, 66 N. E. 425, 60 L. R. A. 812, 97 Am. St. Rep. 404; Parrot v. Mexican Central Ry., 207 Mass. 184, 93 N. E. 590, 34 L. R. A. (N. S.) 261; Sliosberg v. N. Y. Life Ins., 125 Misc. Rep. 417, 211 N. Y. S. 270, affirmed 217 App. Div. 685, 217 N. Y. S. 226. We may not, however, assume anything as to how far a carrier by contract is allowed to set a value upon the goods he carries; as to that we know nothing. Prima facie, the agreement is a contract; he who maintains that in a given situation it is not, must prove the law of Italy. Sokel v. People, 212 Ill. 238, 72 N. E. 382. The libellant has not proved it, and he must lose. We might indeed have to refuse to give effect to the clause, whatever the Italian law,, if we disapproved the result too much, but that question does not arise. The limitation, if made here, would have been valid. Lawrence Leather Co. v. Compagnie Generale Transatlantique, 18 F.(2d) 930 (C. C. A. 2). Decree reversed and decree directed for the libellant for the equivalent of ¿40.

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CALLAN v. ANDREWS. No. 242. Circuit Court of Appeals, Second Circuit. March 9, 1931. David L. Podell, of New York City (Herman Shulman, Mortimer Hays, and Joseph Lotterman, all of New York City, of counsel), for appellant. Weill, Wolff & Satterlee, of New York City (Lloyd P. Stryker, Henry P. Wolff, and William Gilligan, all of New York City, of counsel), for appellee. Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges. L. HAND, Circuit Judge. The plaintiff, Callan, was a tax expert, who had been continuously employed for some two years before the events in question by the defendant, Andrews, a promoter. Andrews was interested in securing the “listing” on the Chicago Stock Exchange of an issue of bonds of the General Vending Corporation, which the Exchange refused to admit while Andrews remained trustee of a voting trust of the company’s stock. Unless the bonds were “listed” by January twentieth, he stood to take $1,500,000 of them from Lisman, a banker; if they were, he was relieved. In December at New York at an interview at the office of his attorneys, Andrews asked Callan to go to Chicago that day and try to get the bonds “listed.” Callan agreed to do so, except that he could not leave that day. They had another interview on the next day, when, according to Andrews, he told Callan that if he went, he, Andrews, would try to get Lisman, who was present, to give him a thousand shares of General Vending stock. Callan’s story was that Andrews promised to give him the shares himself. It was then also agreed that if the exchange would not accept Andrews as voting trustee, Callan might be substituted. Callan went to Chicago, failed to get the bonds “listed” so long as Andrews was a trustee, but succeeded, when he, Callan, was put in his place. On his return he wrote, asking for the shares, and Andrews replied that he would try to get them from certain shares reserved for émployees, or from Lisman’s shares. Andrews had himself a large number of shares, all held in eserow, under a contract not necessary to describe. Lisman had other shares; there were still others in the hands of third persons, and, as above mentioned, there were some reserved by the company for employees, over which Andrews had some control. How far Callan knew, when he went to Chicago, that Andrews’ own shares were all deposited in eserow, was in dispute. At the second interview Andrews had made him a director of the company and had given him an option to buy certain of the shares. These were in the form of voting trust certificates, but Callan denied that he knew that they were in eserow. In May Callan demanded the shares, Andrews refused to recognize any liability, and Callan brought suit. On the main issue the judge left to the jury only the question whether Andrews had promised to give Callan the shares himself, or had said no more than that he would try to get them from Lisman. He refused to charge that they might find Andrews’ promise to have been no more than a gift. As to damages he also refused to charge that the jury might find that Callan knew that Andrews’ shares were in escrow, and that the time of delivery might therefore be that of their release. He left it to them to find the value of the shares within a reasonable time after Andrews’ refusal in May. As the release of Andrews’ shares from the eserow took place some time later, and aftér they had fallen in value, this made a substantial difference. The jury found a verdict, based upon the value at the time of the repudiation, on which judgment was entered. The appeal raises two main questions; first, whether the evidence was such as required a dismissal, because the promise was gratuitous, or at least a submission of that question to the jury; second, whether the measure of damages was wrong. The appellant also raises the question whether the jury might have found that Callan’s promise was in consideration of his election as director, and the concomitant option. We can, however, find no exception which raises this, and in any ease, in the view we take, it becomes immaterial upon this record. Andrews’ theory is that, Callan having at the first interview already agreed to go to Chicago, his own promise on the next day to give him one thousand shares of stock eould not have been the inducement for the services rendered, and was therefore without consideration. This, because the consideration for a promise must be a quid pro quo, something given in exchange; else it is merely for a gift and nudum pactum. We are not disposed to enter into a discussion of the question so sought to be raised, or to consider how far the general rule has now been modified. Restatement of Contracts, § 90 Amer. L. I. In the case at bar the evidence did not justify a dismissal, and the requests to charge did not raise the question. It was eertainly permissible from the earlier relations of the parties, for a jury to infer that there was an implied promise to pay a reasonable price for the services to be rendered. If so, nothing was left but to settle the amount, and this might be later agreed upon. On the following day, when Andrews said, as we must assume he did, that he would give Callan one thousand shares of the stock, and when Callan assented, the price became fixed which had before been uncertain. Put into paradigm, Callan agreed to release his unliquidated claim and to substitute the shares; Andrews agreed to give the shares in consideration of the release of the unliquidated claim. The evidence admitted of only this interpretation, provided that Callan’s first promise had not been an office of friendship. It would certainly have been improper to direct a verdict for the defendant. The requests to charge did not raise any question as to the character of Callan’s original promise. We may take the third as the least imperative, and that to which the defendant was best entitled. This in substance was that if Callan agreed to go, and went, to Chicago as the result of the first interview, and if the promise to give him the shares was not an inducement, but was treated as a gratuity, the jury might find it a gift. Thus, the request was consistent with the assumption, which the evidence justified, that there had originally been an implied promise of payment. If so, the only possible interpretation was that Andrews’ promise intended to fix the consideration, and it could not have been a gratuity. Callan was concluded by his acquiescence from asking more; Andrews, by his offer from giving less. Had he wished to raise the question whether Callan’s original promise was gratuitous, this was not the way to do it. We do not say that he might not have been entitled to go to the jury on that question. On another trial the record may be different, and we defer any conclusion; the trial judge may then prefer to take a verdict on that issue as well, but we cannot anticipate' his decision on another state of facts. We should affirm the judgment had it not been for the rule of damages adopted. The learned judge apparently supposed either that, in cases of anticipatory breach damages were to be reckoned as though the time of delivery was accelerated, or that there was no evidence from which the jury might conclude that the promised shares were those in escrow. Neither conclusion was in our judgment correct. While a jury might well have found that Andrews meant to get the shares at large, since twenty per cent, of the stock was neither in escrow, in Lisman’s control, nor allocated to the employees, that was by no means an inevitable conclusion. It is true that if Callan knew nothing as to how Andrews stood in the stock, Andrews’ actual position would be irrelevant. Callan was entitled to suppose that a promise to give him the shares, meant a promise to get them on his demand. In that event the time chosen to fix their value was the right one. If, on the other hand, he knew that Andrews had no free shares available, and a large number in escrow, even though it was possible to get them .elsewhere, a jury might conclude that the shares in mind were those in escrow. The evidence as to Callan’s knowledge is in much uncertainty. Andrews swore expressly that he had told him in the preceding August that his shares would all be “tied up” until the company “made good,” and that Lisman’s would he the only “free stock.” Callan at least knew that there had been some sort of contract affecting the stock; and in the following May he spoke of Andrews’ having much earlier “turned the stock over to other people, or agreed to do so.” On the other hand, in January Andrews in a telegram asked a subordinate to give Callan the shares due himself on the employees’ contract, so as to make up the thousand shares. As to the shares in which Callan got the option when he became a director, the testimony was also at variance. These were in fact in escrow, but it is impossible to say with certainty whether Callan had been so informed. We need not decide how much he did know, but it seems to us apparent that we cannot say that the ease was too clear for submission to the jury. They should have determined what shares the parties contemplated. If the contract was for shares in escrow, the time for delivery was when they became free, and the anticipatory breach did not change it. It is the promise which fixes performance; nothing can alter it except a new agreement. This, so far as we can find, is the uniform rule in the United States with an exception to be noted in a moment. Skeele Coal Co. v. Arnold, 200 F. 393 (C. C. A. 2); Second National Bank v. Columbia Trust Co., 288 F. 17, 26, 30 A. L. R. 1299 (C. C. A. 3); Missouri Furnace Co. v. Cochran (C. C.) 8 F. 463; Edelstone v. Schimmel, 233 Mass. 45, 123 N. E. 333; York-Draper Co. v. Lusk, 6 Kan. App. 629, 49 P. 788; Williston, Contracts § 1397; Sedgwick on Damages, § 636-d. As to the -sale of goods, the Uniform Sales Act, §§ 64(3), 67 (3), has now codified the same rule. Segall v. Finlay, 245 N. Y. 61, 156 N. E. 97; Dimon Corp. v. Federal Sugar Ref. Co., 215 App. Div. 140, 213 N. Y. S. 106. In England apparently the rule is the same (Roper v. Johnson, L. R. 8 C. P. 167; Melachrino v. Nickoll, [1920] 1 K. B. 693), unless the market be obviously changing (Nickoll v. Ashton, [1900] 2 Q. B. 298; Roth v. Taysen, 8 Asp. Mar. C. 120), or unless the promisee covers (Melachrino v. Nickoll, supra [semble]). That there may be circumstances which will impose upon the promisee a duty to cover, We need not deny, though they must be indeed rare. Ordinarily we cannot agree that it is reasonable to require him to divine the course of an “obviously” changing market, about which no one’s judgment is of any value. At least there is no such situation here; Callan was under no such duty. His loss was the same as though he had waited till the time of performance arrived. Some of our language in Skeele Coal Co. v. Arnold, supra, which was not necessary to the result, appears to have been inadvertent. The exception we spoke of is not relevant here, and we need only allude to it. It concerns those cases in which a contract for future delivery is treated as a commodity, like “futures” in grain, cotton or the like, dealt in on exchanges. When the parties understand that the contract is itself property, the promisee may be entitled to replace it, since it has a present sale value in his hands. Samuels v. E. F. Drew & Co. (D. C.) 286 F. 278, affirmed 292 F. 734 (C. C. A. 2); Cox v. Crane Iron Works, 5 F.(2d) 314 (C. C. A 3); Williston, § 1397. Judgment reversed; new trial ordered.

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In re DOOLEY et al. No. 195. Circuit Court of Appeals, Second Circuit. March 9, 1931. J. Edward Lumbard, Jr., of New York City (Seymour B. Quel, of New York City, of counsel), for appellants. Robert E. Manley, Acting U. S. Atty., of New York City (Arthur H. Schwartz, Asst. U. S. Atty., of New York City, of counsel), for the United States. Before MANTON, AUGUSTUS N. HAND, and CHASE, Circuit Judges. AUGUSTUS N. HAND, Circuit Judge. This appeal involves the proper scope of the order of the District Court to be entered ■on a motion for the return of articles seized by prohibition agents at the premises of J. M. Dooley Fireproof Warehouse Corporation in the course of an illegal seareh. The illegality of the seareh and seizure is not questioned. The order directed the return of the articles seized and enjoined their use in any prosecution of J. M. Dooley Fireproof Warehouse Corporation, Joseph M. Dooley, its president, and Joseph M. Dooley, Jr., Frederick Dooley, and William M. Dooley, the three sons of the president of the corporation, who, with him, were at the premises at the time of the unlawful raid. The petitioners by this appeal seek to have the order of the District Court so modified as to provide that the property seized be suppressed as evidence not merely as against themselves but as against all persons. ^ Their contention is that the policy of the Fourth and Fifth Amendments to the Constitution precludes the use of illegally seized property as evidence against anyone whatever. But ii has been held by an impressive weight of authority that the objection to an unlawful search and seizure is personal and cannot be successfully raised bv third parties. Rouda v. United States (C.C. A.) 10 F.(2d) 916; Lusco v. United States (C. C. A.) 287 F. 69; Ganci v. United States (C. C. A.) 287 F. 60; Morris v. United States (C. C. A.) 26 F.(2d) 444; Graham v. United States (C. C. A.) 15 F.(2d) 740; Cantrell v. United States (C. C. A.) 15 F.(2d) 953; Lewis v. United States (C. C. A.) 6 F. (2d) 222; Remus v. United States (C. C. A.) 291 F. 501; Chicco v. United States (C. C. A.) 284 F. 434; Tsuie Shee v. Backus (C. C. A.) 243 F. 551; May Wing Sun v. Prentis (C. C. A.) 234 F. 24. It is argued that the reasoning of the Supreme Court in Silverthorne Lumber Company v. United States, 251 U. S. 385, 40 S. Ct. 182, 64 L. Ed. 319, 24 A. L. R. 1426, goes so far as to preclude evidence obtained through an unlawful seareh even as against persons whose rights have not been invaded. We cannot concur in such an interpretation of that decision. There the premises of the Silverthorne Lumber Company were unlawfully searched and property of the corporation and its officers was seized. The papers were returned pursuant to a court order, and thereafter the corporation and two of the Silverthornes were indicted with others for conspiring to defraud the United States. The two Silverthornes, who were officers of the company, had their offices on the premises of the Silverthorne Lumber Company and one of them, Frederick Silverthome, was served with a subpoena duces tecum directed to him individually and as president of the corporation requiring the production upon the trial of corporate papers found during the illegal search. Because the corporation and its officers could not claim immunity under the Fifth Amendment from the production of corporate papers, it was contended in the Silverthorne Case that the Fourth Amendment likewise did not protect them from an unlawful search for corporate papers and so would not prevent the United States from requiring the production of the corporate papers at the trial. The Supreme Court held that a corporation enjoys the immunities granted by the Fourth Amendment to the same extent as an individual, and that the subpoena did not lie because the papers unlawfully seized could not be used as evidence against the corporation or its officers. Such a decision was necessary in order to afford adequate protection to the corporation against an unlawful search and seizure. If corporate property illegally seized could be used in evidence against the officers, there would be little inducement offered to government agents to abstain from raids, seeing that the only real detriment the prosecution would suffer in such circumstances for its unlawful conduct would be the inability to have fines imposed upon a corporate defendant. The court did no more than hold that, where the search had invaded the rights of all the defendants, the papers seized could not be used against any of them, even though the papers .called for by the subpoena were only corporate papers. Here the District Court has granted the identical relief which the Supreme Court granted in the Silverthome Case and has refused relief only in respect to persons who were hot before the court and whose rights, so far as the record shows, were not invaded at all. In Remus v. United States, 291 F. 501, 511, the Court of Appeals of the Sixth Circuit said that an unlawful seizure of the property of one defendant did not prevent its use on the trial as against other defendants who were neither “interested * * * in the premises searched .or the property seized.” The rule of the common law that an illegal search does not affect the rules of evidence ivas modified for the courts of the United States by the decision of the Supreme Court in Weeks v. United States, 232 U. S. 383, 34 S. Ct. 341, 58 L. Ed. 652, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177. This was apparently because the protection of individuals from unlawful searches and seizures was regarded as more important than conviction of the guilty. Gouled v. United States, 255 U. S. 298, 41 S. Ct. 261, 65 L. Ed. 547; Byars v. United States, 273 U. S. 28, 47 S. Ct. 248, 71 L. Ed. 520; Go-Bart Importing Co. v. United States, 51 S. Ct. 153, 75 L. Ed. decided by Supreme Court January 5, 1931. But taking the step involved in the Weeks Case was a far different matter from going so far as to protect by injunctive order individuals who are not before the court and whose rights, so far as appears, have not been invqded at all. If property of persons other than the Dooleys and their corpóration was seized on the unlawful search of the Dooley premises, the rights,- if any, which such persons may have, can be tested by a motion to quash any subpoena duces tecum hereafter issued for the production of the property. We can see no propriety in anticipating future contingencies by enlarging the injunction granted by the court below. At best the only object of the appellants is to protect other persons from troubles with which they have no concern. Order affirmed.

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THE P. R. R. NO. 35. THE EUGENIA MORAN. No. 280. Circuit Court of Appeals, Second Circuit. March 9, 1931. Burlingham Veeder, Fearey, Clark & Hupper, of New York City (Chauncey I. Clark and Stanley R. Wright, both of New York City, of counsel), for appellant. Alexander, Ash & Jones, of New York City (Edward Ash and Lawson R. Jones, both of New York City, of counsel), for appellee. Before L. HAND, CHASE, and MACK, Circuit Judges. L. HAND, Circuit Judge. On August 28,1930, the libellant, the owner of a scow, filed its libel in rem against the tug “Number 35,” which had the scow in- tow, and against the tug, “Moran,” of another company, to recover for injuries resulting from a collision in the Kill van Kull. The “Number 35” answered on September twenty-ninth, the “Moran” on October seventh, and the cause stood upon the docket awaiting trial. Thereupon on December second, over the protest of the claimants, the court directed that the cause be referred to a commissioner “to hear the testimony offered by the parties hereto and to report his conclusions on the issues of law and fact to this court on or before the second day of January, 1931.” This order merely recited that the cause had appeared on a “special” docket, called to determine whether the cases there listed should be referred. The libellant brought on the issues before the commissioner on December twenty-third, when the claimants again protested and refused to take part in the proceedings, which thereupon went along to a conclusion. The commissioner exonerated the “Moran,” found the “Number 35” at fault, liquidated the damages, and recommended a decree for the libellant. The “Number 35” excepted to the report on the ground that the court was without jurisdiction to refer the issues without consent, and that the proceedings before him were for this reason non eoram judiee. The court overruled the exceptions and entered a final decree from which the “Number 35” has now appealed. The case is pressed to test the power of the district court to refer the issues generally in an admiralty cause to a commissioner to hear the proofs and to file an advisory report with his conclusions, for final disposition by the court. The occasion does not appear in the record, but we may take notice of some of the facts. The admiralty docket in the Southern District of New York has been much in arrears for many years, and the judges have been unable with the time available to bring to trial causes upon it without great delay. This has been to the advantage of respondents and claimants, who thus obtain a moratorium of over a year if the claims against them prove to be valid. Judge Woolsey, conceiving that some advance might be made in the disposition of the court's business, called a list of five hundred cases from the foot of the docket, and passed orders of general reference in a certain number, how many does not appear. His power to do so depends upon the meaning to be given the Admiralty Rides 43 and 46 (28 USCA § 723). The first provides that, “where the court shall deem it expedient or necessary for the purposes of justice, it may refer any matters arising in the progress of the suit to one or two commissioners or assessors, to be appointed by the court, to hear the parties and make a report therein.” The second, that “in all trials in admiralty the testimony of witnesses shall be taken orally in open court, except as otherwise provided by statute, or agreement of parties.” If read literally the exception in Rule 46 would forbid any reference whatever under Rule 43, except when the parties agree; so understood, it would differ from Equity Rule 46 (28 USCA § 723), which is the same, ipsissimis verbis, save that it concludes, “except as otherwise provided by statute or these rules.” It is quite true that hitherto the practice has been not to refer the “merits” of an admiralty cause without consent, though that was apparently not the case in all other districts before 1921. The Guy C. Goss (D. C.) 53 F. 826. On the other hand the liquidation of damages before a commissioner has long been as Of course here as elsewhere, and the consent of the parties has been as little required since 1921 as before. Unless we have been wrong in this, Rule 46 is to be read with Rule 43 as an implied exception. We understand the law to be that while for a reference there must be some special circumstances which make it “expedient or necessary for the purposes of justice,” if the parties do not consent, the exception in Rule 46 is not literally absolute. We have to decide whether the size of the dockets, and the occupation of the judges otherwise, make an excuse within the extremely general words of Rule 43. It must be owned that there are expressions in our opinions which countenance the claimants’ position, though we have never decided the point. Thus in The Bronx, 246 F. 809, 810, we said that the court may not send “the merits of a cause for trial before a commissioner,” citing in support Kimberly v. Arms, 129 U. S. 512, 9 S. Ct. 355, 32 L. Ed. 764, a suit in equity. But in Kimberly v. Arms, the Supreme Court was discussing a reference to hear the evidence and determine the cause, quite another proceeding from the advisory report here at bar. Again in The Spiea, 289 F. 436, a cause in which the procedure in the District Court was so amorphous that nobody has ever been able to learn just what did happen, we said-the same thing, once more basing our decision on Kimberly v. Arms. However, both these eases were decided before the Supreme Court passed upon Equity Rules 46 and 59, in Los Angeles Brush Corp. v. James, 272 U. S. 701, 47 S. Ct. 286, 71 L. Ed. 481; and the Ninth Circuit, in Neale, Inc., v. McCormick, 19 F. (2d) 320. Though in each of these the situation confronting the District Court was spread in the recitals of the order of reference, the absence of such an explanation at bar is no reason for inferring that no ground existed, at least if the matter lies in discretion, which we must assume to have been properly exercised until the contrary appears. While the Supreme Court unequivocally announced its determination to enforce the observance of Equity Rule 46, it said that the press' of judicial business might result in a miscarriage of justice, if the judges’ time were absorbed in hearing testimony in patent causes. It refused therefore to intervene, contenting itself with the eaution that the discretion granted by Equity Rule 59 (28 USCA § 723), must not be abused, but leaving the District Judges free, until they should betray some disposition to evade the rule. Equity Rule 46 is, as we have said, to be read like Admiralty Rule 46, but Equity Rule 59, under which alone any reference can be allowed, is somewhat more circumscribed than Admiralty Rule 43. Instead of leaving the matter broadly to the court, “save in matters of account,” it expressly forbids refer-, enees except under “exceptional conditions.” The subject-matter of the Admiralty Rule— maritime litigation — can scarcely contract its scope, in the face of such language. The procedure in the admiralty was taken from the civil law, and, as in equity, in early days evidence was by deposition. The original Judiciary Act (section 30 of the Act of September 24, 1789 [1 Stat. 88]), changed this as to both, and while the ancient practice became optional in equity after 1802 (section . 25, Act of April 29, 1802 [2 Sta(. 166]), the statute remained unchanged as to admiralty until the whole procedure was put into the hands of the Supreme Court in 1842. The rules of 1844 — in which Rule 43 appears as Rule 44 — do not seem to have expressly provided for trials, probably assuming that the original practice prescribed by the act of 1789 was to continue. Although therefore the procedure of equity and the admiralty differed between 1802 and 1913 (when the new equity rules went into effect), since 1913 they have again become the same. There is no reason any longer to impute a higher sanction to trials in open court on one side of the court than on the other, and the same discretion would seem to exist in each. The appellant indeed concedes that there may be issues such that because of their intricacy the court may refer them for report. Its position is that it is the nature of the inquiry alone which justifies that course, and that in an ordinary cause, involving questions with which the judges are-familiar, delay in coming to trial will not serve. Yet, except when he calls assessors to help him— a practice substantially unknown — the judge must in the end decide the dispute on the evidence taken, as much when it is hard as when it is easy. His power to refer troublesome issues depends, not upon his escape from the difficulties they raise, but because their trial will take a long time. If so, we cannot see why crowded dockets do not come within the same excuse. Suits must somehow be decided, and delay may be nearly as bad as no decision at all. A court, finding itself' permanently in arrears and unable to gain upon its work, staffed as it is, is forced to-select the most available means at hand. Whether it is more “expedient or necessary for the purposes of justice” to deny seasonable access to suitors, or to impose upon-them the expense of a reference, appears to-us a matter exclusively for their determination. We agree of course that if it appeared' that they used the practice merely as a fetch to evade the rule, we should be called upon to-intervene. Against that possibility we need do no more than recur to the caution of the-Supreme Court. That is beside the point here. We cannot close our eyes to the situation as it exists, or deny that it may be an occasion for action out of the common. Obviously we cannot now say what circumstances might induce us to interpose. The matter is primarily one for the District Judges; and we must assume that they feel themselves as mueh bound by the law' as we. All we need now decide is that on the showing before us it does not appear that the order was improper. As the appellant does not dispute the propriety of the decision upon the merits, but merely wishes to raise the point of jurisdiction, we affirm the decree without more. Decree affirmed.

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2024-08-24T03:29:51.129683

In re EASTMAN KODAK CO. No. 4551. Circuit Court of Appeals, Third Circuit. Feb. 16, 1931. Pennie, Davis, Marvin & Edmonds, of New York City, and Ballard, Spahr, Andrews & Ingersoll, of Philadelphia, Pa. (Charles W. Riley, of New York City, Boyd Lee Spahr, of Philadelphia, Pa., and George E. Middleton, of New York City, of counsel), for petitioners. Thomas Raeburn White, of Philadelphia, Pa., for respondent. Before BUFFINGTON and WOOLLEY, Circuit Judges, and THOMPSON, District Judge. WOOLLEY, Circuit Judge. This is a motion for leave to file a petition for a writ of prohibition or mandamus to restrain the District Court from exercising jurisdiction over the petitioner whieh it assumed on service of a writ of summons and continues to hold after dismissing a rule to set aside the service. The petitioner finds authority for its motion in section 377 of title 28 of the United States Code Annotated, whieh provides that, “ the circuit courts of appeals * ‘4 5 ” shall have power to issue all writs not specifically provided for by statute, which may be necessary for the” exercise of their respective jurisdictions, and agreeable to the usages and principles of law.” Although the jurisdiction of the circuit courts of appeals is exclusively appellate, the petitioner resorts to this statute and prays for what in law is an original writ whieh all the cases hold those courts can issue when necessary for the protection and strictly in aid of their appellate jurisdiction when it is involved. United States v. Mayer, 235 U. S. 55, 35 S. Ct. 16, 59 L. Ed. 129; In re Massachusetts, 197 U. S. 482, 25 S. Ct. 512, 49 L. Ed. 845; Hammond Lumber Co. v. United States District Court (C. C. A.) 240 F. 924. , But courts differ as to what constitutes involvement of appellate jurisdiction, In re Babcock (C. C. A.) 26 F.(2d) 153; Grable v. Killits (C. C. A.) 282 E. 185, and as to whether the power to issue such writs exists not only when the appellate jurisdiction would otherwise be defeated but in other cases where necessary to render the appellate jurisdiction more efficient and effectual. As we are not inclined to enter'this field of conflicting views voluntarily, we shall assume without deciding that this court has jurisdiction to issue the writ within the first principle stated and shall dispose of the motion on its legal merits. The whole case as it comes here is contained in the petition which accompanied the motion. The petitioner avers that Charles B. Gray commenced an action at law in the District Court against it, the Eastman Kodak Company, a New Jersey corporation, Eastman Kodak Company of New York, a New York corporation, and Eastman Kodak Stores, Inc., a New Jersey corporation, to recover damages for alleged infringement of a patent. What purports to be service upon the petitioning New Jersey corporation was made by serving “a writ of summons together with a copy of the plaintiff’s statement of claim and notice to file an affidavit of defense upon one Mary E. Kirkpatrick, as agent of the petitioner in said district.” Asserting that it did not at the time of service have a regular and established place of business in the district, it entered a special appearance and moved to set aside the service. After a rule to show cause, the matter came before the District Court on motion, answer and proofs. The evidence is not produced in this court. The petitioner, however, stating its own conclusions from the evidence, which are diametrically opposed to the conclusions of the learned trial judge, avers, because not contradicted by other evidence, that the petitioner (the New Jersey Company) is merely a holding corporation, owner, except for qualifying shares, of all the capital stock of the New York Company, and is not engaged in business anywhere; that the New York Company, owner, except for qualifying shares, of all the capital stock of the Kodak Stores Company, is engaged exclusively in the manufacture and sale of photographic equipment and materials in the State of New York; that its business transactions in the Eastern District of Pennsylvania are those of interstate trade only, among which is the delivery of materials to the Kodak Stores Company, which it admits maintains a regular place qf business in Philadelphia, Pennsylvania. The learned district judge discharged the rule on an ultimate finding of fact that the petitioner did at the time of service maintain a regular and established place of business in the district, accompanied with an opinion finding preliminary facts. These are as follows: The judge frontally met the question essential to a valid service, whether the petitioner had “a regular and established place of business in the district” first by recognizing the originally distinct corporate entities of the three defendants. He then stated that the form or plan of these several corporations is a common one (Cannon Mfg. Co. v. Cudahy Packing Co., 267 U. S. 334, 45 S. Ct. 250, 69 L. Ed. 634) and that it was legally possible for them to do what was intended by their organizers, namely; for one to act solely as a holding company, another as a manufacturing company, and the third as a sales company, and that there should be no relation between the first and second except that of stock ownership and none between the second and third except that of stock ownership and vendor and vendee, and none whatever between the third and first. The court, however, found, as against what the three companies were intended to do and what they might have done, the things they actually did, which were to ignore these legal forms and distinctions and treat the activities of each company as a part or branch of one business, having with few or no exceptions the same general officers and together producing and marketing the products, and that there was in this situation a local business of the petitioner holding company with an agent at its place of business on whom service could validly be made. In other words, the court’s final finding of fact was that the petitioner maintained a regular and established place of business in the district and that one of the reasons for the finding was that the petitioner itself had declared it to be such a place of business. So, confronted with a finding of fact by the trial judge which is essential to the jurisdiction of his court over this defendant, the petitioner avers the judge erred m continuing to exercise the jurisdiction so assumed and, without showing the. evidence on which the trial judge made the findings, prays for a rule upon him to show cause why he should not set aside the service, vacate his order and relinquish jurisdiction. We can act only on the petitioner’s own showing and in so acting we shall apply and very briefly refer to the law of the case as made by the petitioner. The plaintiff, seemingly in doubt as to which of the three related corporations he had sued was the actual tortfeasor and being willing to be relieved of possible embarrassment at the trial by a decision on- the petition, interposed no objection and left his case with the court. There is no doubt that a circuit court of appeals can and will issue a writ of prohibition in aid of its appellate jurisdiction when there is a showing of law or fact that jurisdiction has been assumed by a district court within the circuit which is beyond its legal cognizance, Smith v. Whitney, 116 U. S. 167, 6 S. Ct. 570, 29 L. Ed. 601; Petition of United States, 263 U. S. 389, 44 S. Ct. 130, 68 L. Ed. 351, as, for exaggerated examples, in a suit on a contract when the pleadings show it is between citizens of the same state and in a suit on a contract or in tort for damages less than $3000; and for better examples, to require a district court to set aside an ultra vires order suspending a criminal sentence, Ex parte United States, 242 U. S. 27, 37 S. Ct. 72, 61 L. Ed. 129, L. R. A. 1917E, 1178, Ann. Cas. 1917B, 355; in an admiralty suit in rem against a vessel owned by the United States and employed in the public service, The Western Maid, 257 U. S. 419, 42 S. Ct. 159, 66 L. Ed. 299; and in suits for marine torts against a sovereign state which had not consented to be sued, Ex parte State of New York, 256 U. S. 490, 41 S. Ct. 588, 65 L. Ed. 1057, and Id., 256 U. S. 503, 41 S. Ct. 592, 65 L. Ed. 1063. These eases, indeed all the many cases cited by the petitioner which we have examined, turn on matters pf law involving no disputed facts and no findings of fact with respeet to which men and, accordingly, courts might differ. In such instances the appellate court, having before it all that was before the offending trial court, is in position to decide the question of jurisdiction and to decide it fully and finally. But evidently the question when a circuit court of appeals should and should not issue a writ of prohibition turns in some eases, as in the instant case, on facts open to different inferences and in others on a doubt as to the law or the facts. So, in this confusion of eases, the Supreme Court has repeatedly made pronouncements, as to the issuance of a writ of prohibition, so similar in form as to suggest a rule for itself or for the guidance of other courts. It last appears in Ex parte Chicago, R. I., etc., 255 U. S. 273, 275, 276, 41 S. Ct. 288, 289, 65 L. Ed. 631, in these words: “If the lower court is clearly without jurisdiction, the writ will ordinarily be granted to one who at the outset objected to the jurisdiction, has preserved his rights by appropriate procedure and has no other remedy. In re Rice, 155 U. S. 396, 15 S. a. 149, 39 L. Ed. 198. If, however, the jurisdiction of the lower court is doubtful (Ex parte Muir, 254 U. S. 522, 41 S. Ct. 185, 65 L. Ed. 383); or if the jurisdiction depends upon a finding of faet made upon evidence which is not in the record (In re Cooper, 143 U. S. 472, 506, 509, 12 S. Ct. 453, 36 L. Ed. 232), or if the complaining party has an adequate remedy by appeal or otherwise (Ex parte Tiffany, 252 U. S. 32, 37, 40 S. Ct. 239, 64 L. Ed. 443; Ex parte Harding, 219 U. S. 363, 31 S. Ct. 324, 55 L. Ed. 252, 37 L. R. A. [N. S.] 392), the writ will ordinarily be denied.” Reading this rule on the averments of the petition without accepting its conclusions from the evidence, it can hardly be said that the lower court is “clearly” without jurisdiction or that the petitioner has no other remedy. The most one can say is that its jurisdiction is “doubtful” in view of the opposite conclusions which the petitioner and the judge reached from the same evidence. As shown by the-petition itself, it is certain that the jurisdiction of the trial court “depends upon a finding of fact” and on a finding of ■ fact made on evidence which is not before us. It will not do to say in reply that the evidence might be brought up on a rule against the district judge prayed for in the petition, for it is not disclosed whether the evidence has been preserved by stenographic Or typewritten notes. But whether preserved or not, it might later be brought up equally well by appeal after trial. And, finally, it is clear that the complaining party “has an adequate remedy by appeal” to be based on the court’s ruling on some appropriate motion to be made at the trial when, it is conceivable, on the facts as they may develop at the trial, the judge might reverse his present. position and set aside the service or dismiss the statement of claim against the. petitioning defendant. The motion for writ of prohibition is denied.