author: GOLDBERG, Circuit Judge:

text:
    BLUMCRAFT OF PITTSBURGH, Plaintiff-Appellant, v. KAWNEER COMPANY, INC., et al., Defendants-Appellees.
    No. 72-3428.
    United States Court of Appeals, Fifth Circuit.
    July 20, 1973.

      See also D.C., 341 F.Supp. 1018.
    Edwin G. Russell, Jr., Atlanta, Ga., James C. McConnon, Frank J. Benasutti, Philadelphia, Pa., J. Timothy White, Atlanta, Ga., for plaintiff-appellant.
    Joseph B. Brennan, Bennett L. Eight, Atlanta, Ga., Richard D. Mason, Andrew J. Bootz, Joseph Krieger, Robert L. Rohrbaek, Chicago, 111., William S. White, Niles, Mich., Edward L. Green-blatt, LeRoy C. Hobbs, Robert Carpenter, Atlanta, Ga., for defendants-appel-lees.
    Before GOLDBERG, CLARK and RO-NEY, Circuit Judges.
   GOLDBERG, Circuit Judge:

In the 1971 case of Blonder-Tongue Laboratories v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788, the Supreme Court partially overruled a long line of cases and held that collateral estoppel could be applied in patent infringement cases, regardless of mutuality as long as the plaintiff had a “full and fair opportunity” to litigate the validity of his patent in a prior action and was unsuccessful. In the case sub judice we are asked to decide whether the collateral estoppel made possible by Blonder-Tongue attaches where a prior judicial finding of invalidity which the defendant asserts as an estoppel, was preceded by an earlier finding of validity. The court below somewhat reluctantly decided that collateral estoppel was required and on that basis granted defendant’s motion for summary judgment. We affirm.

I. Factual and Procedural Background

In June of 1969 plaintiff-appellant, Blumcraft of Pittsburgh, brought this suit for patent infringement against the defendants-appellees, Kawneer Company, Inc., Breman Steel Company, Inc., and A. R. Winter Company, Inc., [hereinafter “Kawneer”]. At issue is the validity and infringement of design patent No. D-171,963 [hereinafter “Blum patent”] which was issued to Louis Blum by the Patent Office on April 20, 1954. The patent covered a new ornamental railing design developed by Blum.

A. Prior Suits

This suit is not the first time the validity of the Blum patent has been placed before the federal courts and the present appeal can be understood only after a review of the earlier Blumcraft litigation. Two previous suits filed by Blumcraft for infringement of the Blum patent, one in the Court of Claims and one in the Fourth Circuit, are directly involved in the instant appeal. A third action filed in the Tenth Circuit is indirectly involved. A brief history of the three prior suits in the order of their final judgments is necessary.

1. Court of Claims. [1] On February 12, 1963, Blumcraft filed a claim against the federal government in the Court of Claims for infringement of the Blum patent. After extensive discovery, the ease was tried before a United States Trial Commissioner who decided that the Blum patent was valid and that it had been infringed by certain railings used by the Government. The case was then submitted by the parties to the Court of Claims under a stipulation which limited the amount of recovery and in which the Government agreed not to take exception to any of the Trial Commissioner’s findings. On February 17, 1967, the Court of Claims adopted the findings of the Trial Commissioner and held the patent valid and infringed. Blumcraft of Pittsburgh v. United States, 1967, 372 F.2d 1014, 178 Ct.Cl. 798.

2. Fourth Circuit. On September 27, 1962, several months prior to the filing of the Court of Claims suit, Blum-craft filed its first suit for infringement of the Blum patent in the United States District Court in South Carolina against numerous defendants (none of whom are involved in the instant suit) who were using certain railings manufactured by Architectural Arts, Inc. The case was tried in May of 1967, after the Court of Claims decision had been rendered and upon essentially the same evidence as was proffered in the Court of Claims. After a full trial, in May, 1968, the district court decided that the Blum patent was valid and had been infringed. Blumcraft of Pittsburgh v. Citizens and Southern National Bank of South Carolina, D.S.C.1968, 286 F.Supp. 448.

On appeal, the Fourth Circuit reversed. Blumcraft of Pittsburgh v. Citizens and Southern National Bank of South Carolina, 4 Cir. 1969, 407 F.2d 557. Applying the relevant standards as expounded in Graham v. John Deere Co., 1966, 383 U.S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545, the court found that the Blum design was “obvious” in terms of the prior art and that therefore the patent was invalid. Despite the obvious conflict between the Fourth Circuit and the Court of Claims as to the validity of the Blum patent, the Supreme Court denied Blumcraft’s repeated petitions for cer-tiorari. 395 U.S. 961, 89 S.Ct. 2103, 23 L.Ed.2d 747, 396 U.S. 870, 90 S.Ct. 39, 24 L.Ed.2d 125, 396 U.S. 949, 90 S.Ct 369, 24 L.Ed.2d 254 (1969).

3. Tenth Circuit. In August, 1968, prior to final judgment in the Fourth Circuit case, Blumcraft brought suit in the United States District Court in Kansas claiming that the defendant, Architectural Art Manufacturing Company, had infringed the Blum patent. After the Fourth Circuit rendered its decision declaring the Blum patent invalid, defendants moved the district court for summary judgment on the grounds of res judicata. Before this motion could be ruled on, however, the Supreme Court issued its decision in Blonder-Tongue, swpra, and the defendants amended their summary judgment motion to include a plea of collateral estoppel based on the Fourth Circuit’s ruling. The district court granted judgment against Blumcraft on two grounds:

“Blumcraft is here doomed and the decision must be against it for two very valid reasons, viz., (1) it is bound by its original claims and assertions as to the nature, character and participation of the parties here in the South Carolina litigation, which assertions, for plaintiff’s own good, the Court presumes to be true; (2) and most importantly, it is bound by the holding of Blonder-Tongue and its progeny.”

Blumcraft of Pittsburgh v. Architectural Art Mfg. Co., Inc., D.Kan., 1972, 337 F.Supp. 853, 855. On appeal the Tenth Circuit summarily affirmed “for the reasons stated by the district court.” 459 F.2d 482.

B. The Suit at Bar

This suit was filed by Blumcraft in the United States District Court in Georgia against Kawneer in June, 1969, after both the Court of Claims’ decision of validity and the Fourth Circuit’s decision of invalidity. Defendants’ first motion for summary judgment based on collateral estoppel was denied by the district court in June of 1970, 318 F.Supp. 1399, citing Triplett v. Lowell, 1936, 297 U.S. 638, 56 S.Ct. 645, 80 L.Ed. 949, on the ground that lack of mutuality barred the application of collateral estoppel.

Upon motion of defendants, in February, 1971, the court below stayed its prior order pending the ruling by the Supreme Court in Blonder-Tongue. In May, 1971, the Supreme Court decided Blonder-Tongue, which partially overruled Triplett v. Lowell and permitted collateral estoppel in patent cases regardless of the absence of mutuality. Supplemental briefs were then filed and on November 16, 1971, the district court again denied Kawneer’s motion for summary judgment, 341 F.Supp. 1018. The court concluded its order as follows:

“As was stated in Blonder-Tongue, ‘no one set of facts, no one collection of words or phrases, will provide an automatic formula for proper ruling on estoppel pleas. In the end, decision necessarily rests on the trial courts’ sense of justice and equity.’ At present, there are two conflicting decisions construing the validity of the patent in question. In the interest of justice, this court cannot place more weight on the decision of the Court of Appeals than on the decision of the Court of Claims in ruling on the defendants’ plea for estoppel.”

Upon a repeated motion by Kawneer, on March 27, 1972, the district court again denied summary judgment, stating that the existence of the prior Court of Claims adjudication of validity distinguished Blonder-Tongue and precluded the application of collateral estoppel.

On May 24, 1972, the Tenth Circuit rendered its opinion, discussed supra, affirming the Kansas district court’s application of collateral estoppel against Blumcraft. On September 22, 1972, in response to a renewed motion based on the Tenth Circuit’s action, the court below vacated its earlier orders and granted defendants’ motion for summary judgment. In its order the court stated:

“While the court is not fully convinced that its analysis of Blonder-Tongue, supra, as set out in the November and March orders, was incorrect, it must and does give preceden-tial consideration to the above holding of the Tenth Circuit Court of Appeals as it applies to the issue of collateral estoppel in this case.”

Blumcraft appeals from the entry of summary judgment.

II. The Law

The position asserted by Blumcraft and initially accepted by the court below is that Blonder-Tongue left broad discretion with the district court to determine whether it would be “just and equitable” to apply collateral estoppel in a given case. Factually, Blonder-Tongue involved a situation in which there was only one prior finding of invalidity. Blumcraft argues that here, where there is a finding of validity prior to the finding of invalidity, it would be “inequitable” to estop the third action. Implicit in this argument is the assertion that since one court has found the patent valid and one court has found it invalid, the correctness of the second decision is open to question and it would therefore be unjust to preclude the patentee from further litigation.

While it is true that the “correctness” of the Fourth Circuit ruling of invalidity is brought into question by the existence of the prior inconsistent determination in the Court of Claims, this fact alone is not sufficient to trigger the discretion left to the district court in Blonder-Tongue. Blonder-Tongue predicated the application of collateral estoppel not on whether the prior finding of invalidity was “correct” but rather on whether the plaintiff had “a full and fair opportunity to litigate” in the prior suit asserted as a bar. The escape hatch from estoppel left to a plaintiff by the Supreme Court was as follows:

“Moreover, we do not suggest, without legislative guidance, that a plea of estoppel by an infringement or royalty suit defendant must automatically be accepted once the defendant in support of his plea identifies the issue in suit as the identical question finally decided against the patentee or one of his privies in previous litigation. Rather, the patentee-plaintiff must be permitted to demonstrate, if he can, that he did not have ‘a fair opportunity procedurally, substantively and evi-dentially to pursue his claim the first time.’ Eisel v. Columbia Packing Co. 181 F.Supp. 298, 301 (Mass.1960). This element in the estoppel decision will comprehend, we believe, the inl-portant concerns about the complexity of patent litigation and the posited hazard that the prior proceedings were seriously defective.
“Determining whether a patentee has had a full and fair chance to litigate the validity of his patent in an earlier case is of necessity not a simple matter. In addition to the considerations of choice of forum and incentive to litigate mentioned above, certain other factors immediately emerge. For example, if the issue is nonobviousness, appropriate inquiries would be whether the first validity determination purported to employ the standards announced in Graham v. John Deere Co., supra; whether the opinions filed by the District Court and the reviewing court, if any, indicate that the prior case was one of those relatively rare instances where the courts wholly failed to grasp the technical subject matter and issues in suit; and whether without fault of his own the patentee was deprived of crucial evidence or witnesses in the first litigation.”

402 U.S. at 332-333, 91 S.Ct. at 1445, 28 L.Ed.2d 788.

At the conclusion of the above passage outlining the parameters of “full and fair opportunity,” the Court stated;

"But as so often is the case, no one set of facts, no one collection of words or phrases, will provide an automatic formula for proper rulings on estoppel pleas. In the end, decision will necessarily rest on the trial courts’ sense of justice and equity.”

402 U.S. at 333-334, 91 S.Ct. at 1445. Blumcraft argues that the above mentioned “sense of justice and equity” gave the court below the discretion to deny estoppel in this case. We disagree, the only discretion left to the district court’s “sense of equity and justice” by Blonder-Tongue is in the determination of whether the plaintiff had a full and fair opportunity to litigate in the prior suit finding invalidity. The above passage relied on by Blumcraft must be read in the context of the paragraph within which it appears.

Although many factors enter into the determination of whether the plaintiff had a full and fair opportunity to litigate in the prior suit, it is clear that Blumcraft has not alleged and in fact could not allege that the Fourth Circuit suit was not fully and fairly litigated. The Fourth Circuit judgment met every criteria for estoppel articulated by Blonder-Tongue, see also Monsanto Co. v. Dawson Chemical Co., 5 Cir. 1971, 443 F.2d 1035, cert. denied, 1972, 405 U.S. 974, 92 S.Ct. 1191, 31 L.Ed.2d 248 and, although not necessary to an estoppel, it is instructive to note that the Fourth Circuit suit was the final judgment from the forum first chosen by Blumcraft to litigate its patent. See generally, Smith, The Collateral Estoppel Effect of a Prior Judgment of Patent Invalidity: Blonder-Tongue Revisited (part I), 55 J. of the Patent Off. Soc. 285 (1973).

The fact that a prior inconsistent ruling of validity raises a question as to the correctness of the invalidity determination does not create an exception to Blonder-Tongue and in fact is fully supported by the facts in Blonder-Tongue. In Blonder-Tongue the Eighth Circuit first ruled the patent invalid and thereafter the Seventh Circuit, on the basis of an independent analysis, affirmed the Illinois district court’s ruling that the patent was valid. Faced with these obviously inconsistent determinations, the Supreme Court nevertheless ruled that the earlier judgment of invalidity could bind the later suit, regardless of which was “correct.” Although technically distinguishable from the present case, the fact that the Supreme Court applied estoppel without regard to the “correctness” of the first decision mandates our decision that Blumcraft must allege more than just the possibility of being estopped by an incorrect decision before the district court’s “sense of justice and equity” comes into play. See also Monsanto Co. v. Dawson Chemical Co., supra. As the Seventh Circuit noted in affirming the application of estoppel on remand in Blonder-Tongue, despite the fact that it was counter to its earlier finding of validity:

“Even if those courts [in the prior case finding invalidity] erred in the reasoning challenged by plaintiff, we are confident that such error would not be a defect of the magnitude contemplated by the Supreme Court as a reason why the court in the second action should deny the effect of estoppel to the earlier judgment.”

University of Illinois Foundation v. Blonder-Tongue Laboratories, Inc., 7 Cir. 1972, 465 F.2d 380, 381, aff’g, N.D.Ill.1971, 334 F.Supp. 47, cert. denied, 1972, 409 U.S. 1061, 93 S.Ct. 559, 34 L.Ed.2d 513.

Blumcraft also questions the wisdom of permitting the application of collateral estoppel in infringement cases involving design patents. Apparently the Circuits have taken somewhat conflicting approaches toward design patentability and the Supreme Court has shown a consistent reluctance to resolve these conflicts. Again, our answer is that Blonder-Tongue was not concerned with “correctness.” The presence of conflicting circuit court determinations in Blonder-Tongue persuasively shows that the possibility of one circuit being bound by another circuit’s differing approach is not directly material. We are unable to find or infer any exception in Blonder-Tongue for design patent cases.

We are not blind to the potential “problems” inherent in our decision, but we believe that through the proper application of Blonder-Tongue these problems can be satisfactorily resolved. For instance, under our ruling today it would be technically possible to apply collateral estoppel where a prior finding of invalidity was preceded by several rather than by just one finding of validity. In such instances there would be a red flag warning a court to apply the full and fair criteria very carefully to determine if the court finding the patent invalid had adequately comprehended and applied the appropriate substantive standards. Ultimately, of course, there is appeal to the Supreme Court from the finding of invalidity; and, while we recognize the apparent difficulty in obtaining relief through this channel, we cannot predicate an exception to a rule mandated by the Supreme Court on the basis of our assessment of the Court’s future performance. In any event, the “injustice” to the patentee in such cases is no greater and in fact is arguably less than in a situation such as Blonder-Tongue, where the determination of invalidity came prior to any validity rulings. In Blonder-Tongue, despite the explicit fact that, absent the application of collateral estoppel, further successful suits on the patent would have been possible after the first unsuccessful suit, the Supreme Court sanctioned, and ultimately the Seventh Circuit allowed collateral estoppel to be applied. It follows that the fact of a prior successful suit, as here, should not, in itself, be permitted to undermine the numerous policy reasons expounded in Blonder-Tongue in favor of applying estoppel.

We also recognize the inevitable problems that can arise in determining the effect of the determination of invalidity upon a prior judgment of validity if collateral estoppel is applied to all later suits. These problems are not presently before us, but we do note that the federal courts have had little difficulty in formulating appropriate solutions. E.g., Troxel Mfg. Co. v. Schwinn Bicycle Co., 6 Cir. 1972, 465 F.2d 1253; cf. Lear, Inc. v. Atkins, 1969, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610.

The only other appellate court to pass on the problem before us is the Tenth Circuit in its Blumcraft case which involved the same plaintiff, the same patent, and the same prior inconsistent validity determinations. That court affirmed the district court’s ruling that collateral estoppel was applicable. In following the Tenth Circuit the court below wisely, albeit reluctantly, abandoned its earlier determination that it had the discretion to deny estoppel despite the existence of a full and fair opportunity to litigate in the prior suit. Although Blumcraft attempts to distinguish the Tenth Circuit suit, it is clear that the Kansas district court opinion, adopted by the Tenth Circuit, did rule directly on the point at issue here.

Blonder-Tongue did not throw merely a jab at the multiplicity of patent litigation ; rather, it intended a knockout blow through the doctrine of collateral estoppel so that any time a patent was found invalid in a fair fight with a knowledgeable referee, the courts could count ten and the patent holder could no longer maintain that he was champion. In partially overruling Triplett v. Lowell, the Court decided that the numerous factors favoring estoppel in patent cases far outweighed the unavoidable potential for a patentee to be estopped from future litigation as a result of a possibly “incorrect” decision. This is, however, the nature of our entire judicial process Whenever any judgment achieves the imprimatur of finality, it may potentially be asserted against the unsuccessful litigant either by res judicata or through collateral estoppel as a shield to future litigation involving the same questions and the- correctness of the final judgment cannot, as a rule, be challenged.

If litigation were costless, both to the litigants and to society, it might be desirable never to allow collateral estoppel to preclude a new lawsuit. But as with most mortal endeavors, litigation is not so blessed. Collateral estoppel is a rule of repose and as such it is not always pure or just or even cognitive. Efficiency and economy in judicial administration have their places in our judicial schema. Blonder-Tongue does require as a condition precedent to its invocation at least one round of pristine purity. In our case we cannot say that such an encounter has not taken place. Blumcraft had a full and fair opportunity to litigate the validity of its patent in a forum of its own choosing, and the patent was declared invalid. Under both the letter and spirit of the Supreme Court’s ruling in Blonder-Tongue, the district court was correct in applying collateral estoppel and in granting defendants’ motion for summary judgment.

Affirmed.

      . E. g., Triplett v. Lowell, 1936, 297 U.S. 638, 56 S.Ct. 645, 80 L.Ed. 949.

      . There is some dispute as to whether the railings at issue in the Court of Claims suit were manufactured by Kawneer and whether Kawneer should be estopped from raising collateral estoppel in this suit because it declined an invitation to participate in the Court of Claims litigation. Regardless of who manufactured those particular railings, Kawneer had no obligation to join the litigation; and since Kawneer could not have controlled the defense of the Court of Claims suit, even if it had participated, the employment of equitable sanctions against Kawneer for failing to participate would be most inequitable. Without deciding whether Blumcraftfs equitable counter to collateral estoppel could ever be interposed, it is here rejected on the facts.

      . The Court explicitly noted that “Defendant has filed no opposition or response to plaintiff’s motion for judgment on the issue of liability. . . . ” 372 F.2d at 1015.

      . The district court acknowledged the existence of the Court of Claims decision but explicitly stated that it was reaching “its own independent determination that the plaintiff’s design patent was valid.” 286 F.Supp. at 456.

      . Architectural Art was the manufacturer in control of the defense in the South Carolina and Fourth Circuit cases.

      . The claim of res judicata was based upon Architectural Art’s assertion that it had been the true party in interest against Blumcraft in tlie Fourth Circuit and that therefore both parties were bound by that judgment.

      . This Court denied an interlocutory appeal from that motion, Aug. 19, 1970, Misc. No. 1773.

      . Despite the district court’s certificate under 28 U.S.C. § 1292(b), on May 4, 1972, this Court again denied leave to file an interlocutory appeal. Misc. No. 2407.

      . Appellees’ contention that the Court of Claims’ ruling is not of “equal stature” with the Fourth Circuit ruling because the Government did not oppose the Trial Commissioner’s findings before the Court creates an added dimension to the problem sub judioe which we need not encounter. The estoppel sanctioned by Blonder-Tongue operates only against a plaintiff and does not apply to prior findings of validity. See Boutell v. Volk, 10 Cir. 1971, 449 F.2d 673; Philips Electronic and Pharmaceutical Ind. Corp. v. Thermal Electronics Ind. Inc., 3 Cir. 1971, 450 F.2d 1164. We therefore need not examine whether the Blumcraft patent was fully and fairly litigated before the Court of Claims. Inasmuch as collateral estoppel would apply regardless of the finding of validity in the Court of Claims litigation, under our reading of Blonder-Tongue, the vigor of the Government’s performance before the Court of Claims is not relevant to our disposition.

      . Compare Technograph Printed Circuits, Ltd. v. Martin-Marietta Corp., 4 Cir. 1973, 474 F.2d 798, where the Fourth Circuit arguably treated the “full and fair opportunity” issue as separate from the “justice and equity” determination. See also Bourns, Inc. v. Allen-Bradley Co., N.D.Ill., 1972, 348 F.Supp. 554.

      . In finding that Blumcraft had a full and fair opportunity to litigate the Fourth Circuit suit, the district court in the Tenth Circuit case noted:
      “All the pertinent facts are before this Court relative to the scope and issues of the South Carolina case. There, this plaintiff was the aggressor, the attacker, ‘choosing his own forum and with the incentive to litigate.’ One of the principal issues urged by defendants in that suit was obviousness. Perusal of the opinions of both District Judge Simons and Circuit Judge Butz-ner indicate a familiarity with and application of the standards announced in Graham v. John Deere, 383 U.S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545, to the evidence in the case. The available records nowhere indicate that the patentee Blumcraft was deprived either of crucial evidence or witnesses in the District Court, nor was there a claim by plaintiff that such a detriment occurred. This Court’s whole impression from examining the exhibits and record in the South Carolina case is one of full proof and effort on both sides, and a studied and considered conclusion by three learned circuit judges, without division, of the patents’ invalidity. This is a far cry from the necessary finding by this Court that either court in the South Carolina case ‘wholly failed to grasp the technical subject matter.’ ”
      Blumcraft of Pittsburgh v. Architectural Art Mfg., Inc., D.Kan., 1972, 337 F.Supp. 853, 858, aff’d, 10 Cir. 1972, 459 F.2d 482.

      . See generally, Note, 50 Texas L.Rev. 559, 563-66 (1972); Note 26 S.W.L.J. 451, 461 (1972): Comment, Class Actions in Suits for Suits for Patent Infringement in Light of Blonder-Tongue, 13 B.C.Ind. & Comm.L.R. 1473 (1972).


source: Caselaw Access Project

author: THORNBERRY, Circuit Judge:

license: Public Domain

text:
    The WEALDEN CORPORATION and Edward G. Uhl, Plaintiffs-Appellees, v. Joseph J. SCHWEY, et al., Defendants-Appellants.
    No. 72-3049
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 26, 1973.

      Daniel Neal Heller, Judith S. Wald-man, Miami, Fla., for defendants-appellants.
    Sidney A. Stubbs, Jr., West Palm Beach, Fla., Gunster, Yoakley, Criser, Stewart & Hersey, Palm Beach, Fla., for plaintiffs-appellees.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.

       Rule 18, 5th Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Co. of New York et al., 5th Cir. 1970, 431 F.2d 409, Part I.

   THORNBERRY, Circuit Judge:

This is a diversity action in which plaintiffs-appellees seek damages for alleged negligence and fraud in connection with appellants’ maintenance and development of appellees’ citrus groves. The court below found that appellees suffered losses due to appellants’ fraudulent misrepresentations and ordered that appellants return a portion of the money paid by plaintiffs. We affirm.

During the period 1963-70 appellees purchased citrus groves that appellants undertook to improve, maintain and operate; they also purchased undeveloped land that defendants undertook to develop into citrus groves. Specifically, Wealden Corporation (Wealden) purchased groves denominated 10A and 10B and an undeveloped tract called the “580.” Wealden, Uhl and the Schweys together bought a tract known as the “1150” and later divided it among themselves.

The arrangement seems to have progressed satisfactorily until 1970, when appellees became dissatisfied with the return on their investment and decided to investigate. They found, and the trial court agreed, that their groves were in a poor state of horticultural upkeep. While the Schweys had been submitting invoices for the promised services, those services were not properly performed for at least six months of 1970. The trial court found that appel-lees had paid the Schweys a double fee for the use of certain equipment, a bill for twice the “dragline” services actually performed, and the cost of more than 16,000 trees that were never planted.

Because appellees’ invoices represented these services had been performed properly and fully, the trial court found the invoices to be fraudulent misrepresentations. As a remedy the trial court ordered the Schweys to refund the fraction of appellees’ payments that corresponded to the amount of work left undone. For example, the court found that appellants in effect performed no maintenance on the groves during six months of 1970 and accordingly ordered defendants to refund half the maintenance fees paid in that year.

Appellants advance four points of error. In the first category are two errors of factual determination to which we must apply the “clearly erroneous” standard. Here appellants claim there is no proof of justifiable reliance by Wealden and Uhl, which is a necessary element of fraud in Florida. Likewise he believes that the trial court made gross errors in its computation of the losses suffered by appellees. On both points we cannot say that the trial court was clearly erroneous, and therefore we must uphold its determination.

Appellants allege two errors of law as well. First they contend that the trial court erred in overruling their Rule 41(b) motion to dismiss at the conclusion of appellees’ evidence. They maintain that at that point there was no showing of a standard of care or measure of damages. Even if their assessment of the evidence is correct, they cannot at this point ask for a review of the evidence as it stood when plaintiff closed the presentation of his evidence.

Under Rule 41(b) of the Federal Rules of Civil Procedure the trial judge has the option of weighing the evidence and rendering judgment against the plaintiff or declining to render judgment until the close of all the evidence. See Smith Petroleum Service Inc. v. Monsanto Chemical Co., 5th Cir. 1970, 420 F.2d 1103. In this case the trial judge chose to postpone his decision until the close of all the evidence, thus denying appellants’ Rule 41(b) motion for involuntary dismissal. If defendants wished to challenge this decision, their avenue for so doing was to refuse to offer their evidence, accept a judgment for plaintiffs, and appeal it on the ground that plaintiffs’ evidence was insufficient. Instead they chose to proceed with their case and offer evidence, waiving the right to appeal any error in the trial court’s overruling of their 41(b) motion. 9 Wright & Miller, Federal Practice and Procedure: Civil § 2371 at 221 (1971). Appellees renewed their motion to dismiss under Rule 41(b) at the close of all the evidence, but renewal does' not entitle them to a review of appellants’ evidence as it stood when the first motion was made. On the contrary, the trial court is entitled to take into consideration all the evidence presented before and after the initial motion. See A. & N. Club v. Great American Insurance Company, 6th Cir. 1968, 404 F.2d 100, 103.

The second error of law advanced is that the trial court incorrectly allowed appellees to amend their pleadings at trial while denying that privilege to appellants. This contention is without merit. Appellees were allowed merely to correct Wealden’s corporate name in the pleadings by changing it to “the Wealden Company” from “the Wealden Corporation.” Surely the liberal amendment policy expressed in Rule 15 of the Federal Rules of Civil Procedure allows a party to correct his name.

Appellants complain that the trial court should have granted their motions made at trial to make an amendment that would change the basis of their counterclaim from contract for services for a set fee to either quantum meruit or contract to perform for a “reasonable sum”. The trial court denied the motions on the ground that the new theories would require a new area of proof. Under Rule 15 the trial court is required to allow amendments when “justice so requires”, but he may refuse for reasons of undue delay or prejudice to the opposing party. See Foman v. Davis, 1962, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222. This court has said:

In these times of log-jammed trial dockets, a trial judge must exercise sound discretion in deciding motions for leave to amend. His decision must weigh good cause shown for the delay in moving, vis a vis dilatoriness of counsel resulting in last minute surprise and inability of opposing counsel to meet the tendered issue. Nevels v. Ford Motor Co., 5th Cir. 1971, 439 F.2d 251, 257.

In this case the trial judge did not abuse his discretion in denying appellants the chance to change counterclaim theories.

Affirmed.


author: HILL, Circuit Judge.

text:
    In re John McCandish KING, debtor in proceedings for an arrangement, John M. King, debtor, Appellant, v. Charles A. BAER, Trustee, Appellee. In re KING RESOURCES COMPANY and International Resources Limited, debtors in proceedings for reorganization of corporations, John M. King, Appellant. The COLORADO CORPORATION, Appellant, v. Charles A. BAER, Trustee, Appellee.
    Nos. 72-1474, 72-1515 and 72-1516.
    United States Court of Appeals, Tenth Circuit
    Argued and Submitted March 28, 1973.
    Decided June 19, 1973.
    Rehearing Denied Aug. 13, 1973.
    Certiorari Denied Dec. 3, 1973.
    See 94 S.Ct. 577.

      Jack Balzersen, Dallas, Tex., for John M. King, appellant.
    William G. Sumners, Jr., Denver, Colo., for The Colo. Corp., appellant.
    John S. Pfeiffer, Denver, Colo. (Robert J. Kapelke, Denver, Colo., on the brief), for appellee.
    Before HILL, Circuit Judge, DURFEE, Judge, and HOLLOWAY, Circuit Judge.

       Court of Claims, sitting by designation.

   HILL, Circuit Judge.

These three appeals from the District of Colorado stem from proceedings had under Chapters X and XI of the Bankruptcy Act. They involve common questions, thus the consolidation. No. 72-1474 arises out of the Chapter XI arrangement proceedings instituted by John M. King, debtor, who is appellant in that appeal. Nos. 72-1515 and 72-1516 both arise from proceedings had in the Chapter X matter instituted by King Resources Company and International Resources Limited as debtors in the proceedings for reorganization. John M. King is appellant in the first case, and The Colorado Corporation is appellant in the second case. Charles A. Baer, trustee in both bankruptcy proceedings, is appellee in each of the three appeals.

The controversies originate in sales by King Resources Company of two undivided Vaith interests in Canadian federal oil and gas exploration permits. The contracts under which the interests in the permits were purchased outlined the mode of payment. Each %4th interest was to be sold for $5,218,241. The first payment of $260,912.05 was to be paid by the purchaser within fifteen days from the date of execution of the contract. Subsequent payments of $413,110.75 were to be made on June 1 and October 1 of each year from 1970 through 1975 in payment of the contract purchase price. The two purchase contracts which form the basis of these appeals were executed separately by John M. King and John W. Mecom.

King executed a contract to purchase a %4th interest on December 31, 1969, and made the initial payment of $260,912.05. He made no further payments, and now asserts his failure to make these payments was because King Resources Company had failed to satisfactorily account for exploration work and had generally failed in its duties to the purchasers. King also contends that King Resources Company owed him sufficient amounts of money on other activities to more than offset his payment obligation under the contract. The King Resources Company trustee disagreed and claimed that King Resources, after allowance of all proper payments and credits to King, was entitled under the contract to an additional $1,085,803.38 on December 31,1971.

On May 19, 1971, the United States Internal Revenue Service (IRS) made jeopardy assessments against King personally totaling approximately $5,358,-000, filed its notice of lien, and made levies. On June 1, 1971, King filed his original petition for a Chapter XI arrangement under the Bankruptcy Act (11 U.S.C. § 701 et seq.). On that same day, the arrangement proceeding referee issued, ex parte, an order staying suits and restraining levy, attachment or execution against King or his property (11 U.S.C. § 714).

On August 14, 1971, King Resources filed its petition for Chapter X reorganization under the Bankruptcy Act (11 U.S.C. § 501 et seq.). The petition was approved and the appellee was named as trustee. On March 16, 1972, the trustee filed with the King arrangement referee an application to modify the above referred to order staying suits. Attached to this application was the trustee’s proposed application to the King Resources reorganization judge for an order to show cause why the executory contract between King personally and King Resources for the purchase of the interest in the exploration permit should not be rejected. King resisted the trustee’s application to modify the stay order on the basis that (1) the filing of the application for permission to reject an ex-ecutory contract would constitute the commencement of suit in contravention of the stay order; (2) the %ith interest was a vested property interest and therefore subject to the exclusive jurisdiction of the King arrangement referee and beyond the jurisdiction of the King Resources reorganization judge to authorize rejection as an executory contract; and (3) the device of rejection of an ex-ecutory contract cannot be used to divest a purchaser of his vested title. The referee on April 5, 1972, granted the appel-lee’s application to modify the stay order, found that the application to reject the executory contract did not constitute the commencement of a suit, and left to the court the resolution of whether the contract was an executory contract. Immediately after this order was issued, the trustee filed with the court his application to reject the executory contract. The court ordered King to show cause why the executory contract should not be rejected by the trustee.

King, in the meantime, had filed an appeal to the United States District Court for review of the referee’s order that the application to reject the contract did not constitute the commencement of a suit. On June 2, 1972, the district court affirmed the referee’s decision. That decision of the district court has been appealed to this court and constitutes appeal No. 72-1474. King contends that the application to reject the contract as an executory contract was a “suit” and therefore should have been subject to the stay order.

On April 19, 1972, King filed his motion in the King Resources reorganization proceedings to stay final determination of the trustee’s application to reject the executory contract pending the district court’s review of the arrangement referee’s order that the application to reject did not constitute a suit. King also presented a motion to dismiss the trustee’s application on the basis that he had acquired a vested property right in the permits under the terms of the contract; therefore there was no executory contract over which the reorganization court could exercise jurisdiction to authorize rejection.

Trial on the merits of the trustee’s application to reject the executory contract was held after King had been notified by the district court of its intention to affirm the arrangement referee’s determination that the application of the trustee to reject the executory contract did not constitute the commencement of a suit within the proscriptions of the stay order. King initially asked that the trial be stayed pending his appeal to this court from the district court’s af-firmance of the arrangement referee’s decision. This motion, as were motions to dismiss for lack of jurisdiction, for failure to join the IRS as an indispensable party, and for summary judgment, was denied by the trial court. After trial on the merits, the King Resources reorganization court ruled the contract was an executory contract and authorized the appellee to reject it. That decision is the basis of appeal No. 72-1515. In that appeal King asserts error in the trial court’s refusals to grant his motion to stay, his motion to dismiss for lack of jurisdiction on his allegation that title had vested and therefore there was no executory contract, and his motion to dismiss for failure to join the IRS as an indispensable party. He also attacks the order authorizing rejection of the contract and contends this order, by implication, either erroneously divested him of his vested title or incorrectly found that title had not vested.

The Colorado Corporation, appellant in No. 72-1516, raises basically the same contentions raised by King in appeal No. 72-1515. On December 24, 1969, John W. Mecom executed a contract for the purchase of an undivided %*th interest in Canadian federal oil and gas exploration permits being sold by King Resources. The terms of the contract were the same as that of King. Mecom made the initial payment of $260,912.05 and, like King, made no further payments as required by the contract. On May 24, 1971, The Colorado Corporation acquired the Mecom interest. On April 5, 1972, the trustee filed with the reorganization court his application to reject the contract as an executory contract. That court issued its order to The Colorado Corporation to show cause why the exec-utory contract should not be rejected. The Colorado Corporation responded with its motion to dismiss in which it alleged its acquisition from Mecom was of his vested property interest which he had acquired under the contract. It also challenged the jurisdiction of the reorganization court and contended both the contract and the interest acquired were no longer executory. Trial on the merits was held concurrently as to both contracts. The trial court, following trial on the merits and the pronouncement of its order permitting rejection of the ex-ecutory contract with King, made the same order equally applicable to The Colorado Corporation and authorized the trustee’s rejection of the executory contract. The Colorado Corporation in its appeal raises issues which were also raised by King in No. 72-1515. These contentions will be dealt with coneur-rently, and therefore need not be separately stated at this juncture.

No. 72-U74-

In this appeal, it is the appellant King’s contention that the application to reject the executory contract was a suit which should have been stayed under the provisions of the arrangement referee’s stay order. As the decision to issue an injunction staying the commencement of suits is committed to the discretion of the bankruptcy referee, we do not deem it necessary to determine the status of the trustee’s application to reject the ex-ecutory contract as a suit. So too the decision of the referee to vacate a previously issued restraining order or to allow other proceedings relating to the debtor’s property is discretionary. We find no abuse of the arrangement referee’s discretion in permitting the trustee’s application to reject the executory contract.

We now consider those issues raised only by appellant King in No. 72-1515 regarding asserted errors committed by the King Resources reorganization court. The first error challenges the court’s denial of King’s motion to stay, pending appeal of the district court’s approval, proceedings relating to the trustee’s rejection application. King contends the appeal in that case involved the basic question of the jurisdiction of the arrangement court and should, therefore, have been determined before this proceeding was allowed to continue. Appellant’s reliance on Texaco, Inc. v. Liberty Nat’l Bank & Trust Co., 464 F.2d 389 (10th Cir. 1972), is misplaced. In the instant case each of the two courts was a court of bankruptcy, and each was exercising its own exclusive jurisdiction of the bankruptcy proceeding before it. In this situation the granting or denial of a motion to stay is within the sound discretion of the court. There was no abuse of discretion.

King next contends the court erroneously denied his motion to dismiss for failure to join the IRS as an indispensable party. The contention is that the IRS, by virtue of its jeopardy assessments and levy on the property of King, had an interest in this property also and therefore should have been joined. The law is clear that “before an executory contract should be rejected, a judicial hearing and inquiry, at which interested parties might be heard, should be held, and that an executory contract could be rejected only with the permission of the court. . . . ” Texas Importing Co. v. Banco Popular de Puerto Rico, 360 F.2d 582 (5th Cir. 1966). The notice requirements for the rejection of executory contracts require only notice to the parties to such contracts. Any notice to other parties lies in the discretion of the judge. It is apparent that the IRS was not entitled to any form of notice regarding the rejection of the executory contract. We note, however, that the trial court ordered that notice be given to creditors who had filed statements under §§ 210 and 211 of the Bankruptcy Act, 11 U.S.C. §§ 610, 611. The trial court further found that the IRS did have notice of the hearing. Their failure to attend the hearing may properly be taken as indicative of their intention not to appear. The IRS was not an indispensable party to the rejection hearing.

Nos. 72-1515 and 72-1516

The remaining contentions are raised by appellants in both No. 72-1515 and No. 72-1516 and will be jointly resolved in this opinion. The first of these arguments challenges the determination by the reorganization judge that the contract was executory and therefore rejeetable. The challenge takes various forms; however the basic contention is that a property interest in the exploration permits had vested under the contract, and therefore the contract no longer remained executory. Appellants urge the contract was beyond the jurisdiction of the reorganization court to reject, but rather was within the exclusive jurisdiction of the arrangement court. In Workman v. Harrison, 282 F.2d 693, 699 (10th Cir. 1960), we upheld the rejection of a contract which “was then executory in nature, neither party having completely performed and the obligations of each remaining complex.” Our decision there was based on the highly speculative probability of success and the additional expenditure of large sums of money which made the continued performance of the contract both “burdensome and risky.” We hold the trial court here correctly found the contract to be executory, and properly permitted its rejection.

Appellants next assert error in the reorganization court’s rejection of the executory contracts without also requiring restitution of the purchase price paid by each under the contracts. Rejection of the executory contract constitutes a breach of contract as a matter of law which entitles the other party to the contract to assert a claim for such breach for determination by the court. There is no basis for the requirement of restitution upon the rejection of the ex-ecutory contract.

Appellants last challenge the decision to reject the executory contract as not being warranted by the dictates of equity or sound business judgment. The rejection of an executory contract is committed to the discretion of the judge, and will be reversed only on a showing of abuse of that discretion. We find no such abuse here.

Each of the judgments appealed from is affirmed.

      . 11 U.S.C. § 516(1).

      . In Re Schokbeton Indus., 449 F.2d 321 (5th Cir. 1971); In Re Laufer, 230 F.2d 866 (2d Cir. 1956).

      . See Mundt v. Southland Savings & Loan Ass’n, 354 F.2d 81 (9th Cir. 1965).

      . See Pet Milk Company v. Ritter, 323 F.2d 586 (10th Cir. 1963).

      . 11 U.S.C. § 516 provides: “Upon approval of a petition, the judge may, in addition to the jurisdiction, powers and duties in this chapter conferred and imposed upon him and the court — (1) permit the rejection of executory contracts of the debtor, except contracts in the public authority, upon notice to the parties to such contracts and to such other parties in interest as the judge may designate.” (Emphasis added).

      . Workman v. Harrison, 282 F.2d 693 (10th Cir. 1960).

      . Group of Institutional Investors v. Chicago, M., St. P. & P. R. Co., 318 U.S. 523, 63 S.Ct. 727, 87 L.Ed. 959 (1943).

      . 6 Collier on Bankruptcy, ¶ 3.23 [4] at 571.


author: PER CURIAM.

text:
    UNITED STATES of America, Appellee, v. Bufford James HENDERSON, Appellant.
    No. 72-1715.
    United States Court of Appeals, Eighth Circuit.
    Submitted May 15, 1973.
    Decided June 8, 1973.

      James L. Crabtree, Federal Public Defender, Kansas City, Mo., for appellant.
    Anthony P. Nugent, Asst. U. S. Atty., Kansas City, Mo., for appellee.
    Before GIBSON, HEANEY and ROSS, Circuit Judges.
   PER CURIAM.

Bufford James Henderson appeals from the entry of a judgment of conviction, based upon a jury verdict finding him guilty of violating the provisions of 26 U.S.C. §§ 5861(d) and 5871. Henderson was charged with knowing possession of a firearm, with a barrel of less than 18 inches, which had not been registered to him in the National Firearms Registration and Transfer Record. Henderson raises three arguments: (1) the evidence was insufficient to show that the shotgun involved was not registered to the defendant under the National Firearms Registration and Transfer Record; (2) the trial court failed to instruct the jury that “knowing” possession was an essential element of the crime; and (3) the trial court improperly commented on the evidence. Finding Henderson’s arguments without merit and finding that Henderson received a fair trial, the judgment of conviction is affirmed.

First, Henderson claims that Government’s proof that the gun was not registered was insufficient because the Government had not properly searched the records of the National Firearms Registration and Transfer Record. This contention rests upon the fact that the Government searched the records by submitting the name of Bufford James Henderson to the custodian of the Record: Apparently Henderson had signed his name James Bufford Henderson at various times and from this fact he claims that the Government might have missed an entry under the second name. It is noted that Henderson does not claim that the Record was searched through use of a name which was not his correct legal name. Indeed this case is styled under the name submitted to the custodian of the Record. Furthermore, the jury was told that they need not accept the Government’s proof on this issue as conclusive. At most, a jury question was posed by this argument. When reviewing questions relating to sufficiency of the evidence, this Court must view the evidence in the light most favorable to the Government with all the attendant inferences which may be fairly drawn therefrom. See e. g., Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942).

Second, Henderson argues that the trial judge failed to instruct the jury with regard to an essential element of the offense: knowing possession of the firearm. The trial judge charged:

“The offense charged in the indictment has two essential elements as follows: Of the first, that the defendant at the time and place charged in the indictment possessed a shotgun with a barrel less than 18 inches in length. . . . ”

We agree that the trial court might more properly have told the jury that the defendant must have “knowingly possessed” the firearm in question. Indeed “knowing” possession is an essential element of the crime. See e. g., United States v. Freed, 401 U.S. 601, 607, 91 S.Ct. 1112, 28 L.Ed.2d 356 (1971); United States v. Smith, 477 F.2d 399 (8th Cir., 1973). However, shortly after the trial judge gave the above-mentioned instruction, he defined what he meant by possession, and in our opinion adequately stated the essential element of knowledge:

“The law recognizes two kinds of possession, actual possession and constructive possession. The person who knowingly has direct physical control over things at a given time is then in actual possession of it. A person who although not in actual possession knowingly has both the power and the intention at a given time to exercise dominion or control over a thing, either directly or through another person or persons, is then in constructive possession of it. .
“You may find the element of possession as that term is used in these instructions is present if you find beyond a reasonable doubt that the defendant had actual or constructive possession of the sawed-off shotgun. . ” (Emphasis supplied.)

The general principle which must guide us in this case has been summarized well by Chief Judge Matthes: “It is settled . . . that appellate courts must review trial court instructions in their entirety in order to determine whether juries have been properly charged.” United States v. Mitchell, 463 F.2d 187, 191 (8th Cir. 1972), cert. denied, 410 U.S. 969, 93 S.Ct. 1449, 35 L.Ed.2d 705 (1973). This principle has also been applied to a case quite similar to the instant one. United States v. Milentz, 446 F.2d 111, 113 & n.4 (8th Cir. 1971). While we would have preferred the instructions in this case be more explicit, when taken as a whole, the instructions fairly stated the essential elements of the crime.

Third, Henderson argues that the trial judge improperly commented on the evidence. The trial judge said,:

“There’s some dispute about whether it [the gun] was in the back seat or the front seat, but the evidence is undisputed that officers found the gun in the front seat of the car. So that’s that.”

Henderson objects to this statement because he says it assumes there was never more than one gun. Although the defendant presented no evidence, by cross-examination and by argument Henderson attempted to show that there were two guns involved, the gun found in the car by the policemen, and another gun placed in the car by the defendant. Henderson had been seen running with a gun toward the car, and was observed placing the gun in the car. Henderson apparently sought to prove that the gun put into evidence was a gun which defendant never possessed, but was rather in the car at the time he placed the second gun in the auto. We note that Henderson’s evidentiary basis for this argument was virtually nonexistent. We further note that the car was inventoried and no other gun was found. Furthermore, it seems to us that the trial judge did not assume that there was only one gun, but rather stated that the gun in evidence was found in the front seat and not the back seat. Against this backdrop we are not- prepared to say that the trial judge abused his discretion in commenting on the evidence. See e. g., United States v. Cole, 453 F.2d 902, 907-909 (8th Cir.), cert. denied, 406 U.S. 922, 92 S.Ct. 1788, 32 L.Ed.2d 122 (1972). Cf. United States v. Brandom, 479 F.2d 830 (8th Cir. 1973).

For the foregoing reasons, and because Henderson was accorded a fair trial, the judgment of conviction is affirmed.

      . It apxiears that the trial court may have required the Government to prove specific intent. As noted in the cases of United States v. Freed, supra, 401 U.S. at 607, 91 S.Ct. 1112; United States v. Smith, supra, 477 F.2d at 401, specific intent is not an essential element of the crime. In any event, “To the extent that any consideration of willfulness was inadvertently interjected into the instructions,. the defendant could only have benefited.” United States v. Milentz, supra, 446 F.2d at 113-114.


author: BRIGHT, Circuit Judge.

text:
    Larry William SCHMIDT, Appellant, v. UNITED STATES of America, Appellee.
    No. 73-1057.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 12, 1973.
    Decided Aug. 8, 1973.
    Preston M. Penney, Iowa City, Iowa, for appellant.
    Richard Barry, Asst. U. S. Atty., Des Moines, Iowa, for appellee.
    Before CLARK, Associate Justice, HEANEY and BRIGHT, Circuit Judges.

       The Honorable Tom C. Clark, Retired Associate Justice of the United States Supreme Court, sitting by designation.

   BRIGHT, Circuit Judge.

Larry William Schmidt appeals his conviction on two counts of violating provisions of Selective Service laws and regulations. A jury found appellant guilty of knowingly and wilfully failing to report for and submit to induction into the Armed Forces of the United States in violation of 50 U.S.C. App. § 462 (count I). He was also found guilty of wilfully and knowingly failing to keep his local draft board currently informed of his home address and marital status (as required by Selective Service Regulation 32 C.F.R. 1641.7(a)) during the period from May 1, 1970, to his indictment on February 17, 1971 (count II) also in violation of § 462. Although the presiding judge at trial was the Hon. C. Nils Tavares of Honolulu, Hawaii, Judge Stuart of Iowa undertook to sentence Schmidt.

The district court records show that Schmidt was treated as a young adult, and sentence was imposed pursuant to the Federal Youth Corrections Act (18 U.S.C. § 5005 et seq.). The court placed Schmidt on probation for a period of three years. Since the sentence was general on the two-count conviction, it may be sustained if the defendant was properly convicted under either count. Reed v. United States, 401 F.2d 756 (8th Cir. 1968), cert. denied, 394 U.S. 1021, 89 S.Ct. 1637, 23 L.Ed.2d 48 (1969).

Schmidt raises a plethora of objections to his conviction, most of them directed to his conviction for failing to report for and submit to induction. He argues the invalidity of his conviction on this count because he did not receive actual notice of the order requiring him to report for induction on June 3, 1970, until October of that year, after he had returned from an extensive vacation tour of Europe.

We find it unnecessary to consider the separate claims of error and insufficiency of the evidence to support the convictions under count I, since the record reflects a proper conviction under count II, failure to keep the draft board currently informed of home address and other matters. We, therefore, rest our affirmance upon the conviction under count II.

The record discloses the essential facts. Schmidt registered for the draft on December 7, 1964. He was given a high school deferment until July, 1965. From September 1965, until June, 1969, he was exempted from the draft as a divinity student. Thereafter, since he planned to join the Papal Volunteers, he received an occupational deferment until October 15, 1969, when, for reasons of health, he was unable to pursue the Papal Volunteer program and was reclassified I-A. Schmidt underwent a prein-duction physical examination which he passed. On November 21, 1969, the draft board mailed a notice of Schmidt’s acceptability for service to his designated home address in Brookfield, Wisconsin, which was the address of Schmidt’s parents.

Prior to his passing the physical, Schmidt kept in close touch with his local draft board; however, after November 21, 1969, the local board heard nothing more from Schmidt. On January 15, 1970, the local board sent a current status questionnaire to Schmidt at the Brookfield, Wisconsin, address. This questionnaire was not returned.

Schmidt’s Selective Service file discloses that he notified his local board of a change of home address on May 3, 1966, and that he returned a current information questionnaire (SSS form 127) on September 15, 1966. He returned similar information questionnaires on December 26, 1967, and November 14, 1968, listing Brookfield, Wisconsin, as his home address. On November 5, 1969, Schmidt wrote the board asking that a duplicate copy of the order to report for a physical examination be mailed to his Davenport, Iowa, address. The board complied with this request, but the duplicate order was returned undelivered to the board.

The record discloses that Schmidt did not attend college after June, 1969. He married in March of 1970. At that time he was working as a shipping clerk in Rock Island, Illinois, and apparently-lived in Davenport, Iowa. He and his bride departed for an extended stay in Europe on June 2, 1970. Prior to that date, the board, on May 14, 1970, mailed to Schmidt’s Brookfield, Wisconsin, address an order requiring him to report for induction on June 3, 1970. This order was received and opened by his mother. She testified that she had had no contact with her son after April of 1970 until his return from Europe the following fall. She said that she had called his wife’s mother in Davenport and left a message for the defendant to call her. Schmidt testified he did not actually learn of the induction order until October of 1970 when he visited his parents.

Schmidt, after returning from Europe in late August, looked for a job and found one in Iowa City, Iowa. He established residence there at least by October of 1970. He testified that at that time he was working at a “regular job” and “receiving mail” at an “open address” in Iowa City. Yet he made no effort to contact his draft board at any time prior to the issuance of the indictment. The record shows that Schmidt did not at any time actually live at his parents’ address in Brookfield, Wisconsin, during the period mentioned in the indictment, May 1, 1970, to February 17, 1971 (the indictment date).

Thus, on these undisputed facts, it is quite clear that the jury was entitled to find that Schmidt failed to comply with the regulation which required that he keep the draft board currently informed of his home address. Schmidt testified unequivocally that he did not intend to be drafted even if he had received his notice of induction. Taking into ae-count Schmidt’s failure to communicate his actual whereabouts to his parents from April, 1970, until he left for Europe and for over a month after his return from Europe, his failure to advise his draft board of his new home address after his marriage and on his return from Europe, and his leaving for Europe after he learned that he was physically qualified for military duty, we believe the evidence amply justified a jury finding that he wilfully and knowingly failed to comply with the Selective Service Regulation, 32 C.F.R. 1641.7(a). Thus, we think the conviction justified on count II.

It appears also that Schmidt wilfully and knowingly failed to comply with the induction order after receiving notice of its contents in October of 1970. An induction order requiring a registrant to report at a specific date imposes a continuing duty on the registrant to submit to induction. White v. United States, 403 F.2d 1005 (8th Cir. 1968), cert. denied, 394 U.S. 920, 89 S.Ct. 1196, 22 L.Ed.2d 454 (1969). In White, the indictment charged the registrant with refusing to report for induction continuously from .the date specified in the order to the date of the indictment. Id. at 1006-1007. Here, the indictment only charged a failure to report on or about June 3, 1970. Appellant strenuously argues that the indictment required the government to prove a wilful intent on June 3, 1970, to disregard the order to report for induction and that the evidence fell short of establishing such intent at that time. As we have already observed, we need not resolve this issue to sustain the general sentence which is supported by the count II conviction.

This case was fairly tried and we find no error in the proceedings which taints the conviction on count II. Thus the conviction and sentence are . affirmed.

      . The full text of this regulation reads:
      (a) It shall be the duty of every classified registrant to keep his local board currently informed of his occupational, marital, family, dependency, and military status, of his physical condition, of his home address, and of his receipt of any professional degree in a medical, dental, or allied specialist category. Every classified registrant shall, within 10 days after it occurs, report to his local board in writing every change in such status and in his physical condition and home address and his receipt of any such professional degree.

        Tlie indictment charged Schmidt with failing “to keep his local board currently informed of his occupational, marital, family, and dependency status and of his home address The appellant concedes that the crucial question on this appeal relates to the appellant’s home address.

      . As to the conviction for failure to report for induction, Schmidt claims the induction order was illegal because the local board denied him due process by failing to maintain a complete file as required by law and by misinforming him of his rights under the Selective Service laws. He further alleges that he was denied due process and a fair trial by improper admission of certain evidence, by improper exclusion of other evidence, and by improper instructions to the jury.

      . We add a caveat. We have previously expressed our disapproval of a general sentence upon a multiple count conviction. Peoples v. United States, 412 F.2d 5 (8th Cir. 1969). We do not imply our approval of this procedure in the ordinary case by our affirmance here. However, since the sentencing judge pronounced sentence pursuant to the Federal Youth Corrections Act and placed defendant on probation for three years, the failure to specify a similar separate probationary sentence on each count would seem to be immaterial.


author: MURRAH, Circuit Judge. DURFEE, Senior Judge

text:
    Ann OWENS, Administratrix of the Estate of Maynard S. Owens, Deceased, Plaintiff-Appellee, v. SUN OIL COMPANY, a corporation, Defendant-Appellant.
    No. 72-1650.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted March 30, 1973.
    Decided Aug. 2, 1973.
    John R. Richards, Tulsa, Okl. (R. M. Dubbs, St. Davids, Pa., and John A. Lad-ner, Tulsa, Old., with him on the brief), for defendant-appellant.
    Jay C. Baker, of Baker & Baker, Tulsa, Okl., for plaintiff-appellee.
    Before MURRAH, Circuit Judge, DURFEE,  Judge, Court of Claims, and McWilliams, circuit judge.

         Sitting by designation.

   MURRAH, Circuit Judge.

This case centers around a dispute over the validity of a purported inter vi-vos gift of corporate stock. The appeal is from a judgment on a jury verdict sustaining the validity of the gift. The basic and stipulated facts are that, consistent with her custom of the past several years to make donations of stock to her family, Mrs. Hettie M. Young delivered a stock certificate for 4,237 shares of Sun Oil Company stock to her bank in Fort Smith, Arkansas, to be forwarded to transfer agents for reissuance in specified amounts to designated donees. In due course, and in accordance with her directions, a certificate representing 150 shares was reissued in the name of her nephew, Maynard S. Owens, and returned with the other reissued stock to Mrs. Young’s bank for redelivery to her. The certificate arrived at her bank on August 4, 1970, the same day Maynard Owens was killed in a trucking accident. About ten days later she delivered the Owens certificate to her bank with instructions to cause it to be cancelled and the stock issued in her name. The certificate that had been issued in Maynard Owens’ name was ultimately cancelled, and a new certificate issued to Mrs. Young on October 6, 1970.

As administratrix of her husband’s estate Mrs. Owens pleaded that upon the registration and issuance of the stock certificate to Maynard Owens he became the legal and equitable owner of the stock; that Sun Oil, acting through its authorized agent, transferred the stock certificate from his name to Mrs. Young’s name without his consent, thereby wrongfully converting the stock; and that Sun Oil is therefore liable in damages for the stock’s fair market value.

Sun Oil answered, denying that Mrs. Young ever made any effective or completed gift of the stock to Owens, or that Owens ever received delivery, had possession, or had any equitable or legal title to the stock, and therefore denied that any consent of Owens was needed for the transfer.

As an affirmative defense Sun Oil alleged that at all times it and its transfer agent acted upon the instructions of Hettie M. Young and that custody, possession, and control of the stock were at all times in Mrs. Young; and that the stock was never delivered to Maynard S. Owens.

Both parties moved for summary judgment. In its motion Sun Oil took the position that physical delivery of the stock certificate to Maynard Owens was a prerequisite to consummation of the gift. If this is so there was nothing to submit to the jury, and Sun Oil is entitled to judgment as a matter of law, for it is agreed that Owens never came into physical possession of the certificate.

Generally, there is a division of authority on the question whether physical or manual delivery is essential to the consummation of a gift, and the case law of course turns on the peculiar facts. See, e. g., Annot., 23 A.L.R.2d 1171 (1952). It has been widely recognized, however, that the transfer of stock on the books of the corporation, and the issuance of a certificate in the transferee’s name, constitutes effective delivery. See, e. g., Lawton v. Commissioner of Internal Revenue, 164 F.2d 380, 384 (6th Cir. 1947); Bardach v. Commissioner of Internal Revenue, 90 F.2d 323, 326 (6th Cir. 1937); Frey v. Wubbena, 26 Ill.2d 62, 185 N.E.2d 850 (1962); Moore v. Van Tassell, 58 Wyo. 121, 126 P.2d 9 (1942); and Chicago Title & Trust Co. v. Ward, 332 Ill. 126, 163 N.E. 319 (1928). It is agreed that Arkansas law controls the substantive issues in this case. And Arkansas has recognized and applied the rule that physical delivery of the certificate is not prerequisite to consummation of the gift. See, e. g., Aycock v. Bottoms, 201 Ark. 104, 144 S.W.2d 43 (1940), citing Stewart v. Collins, 36 Wyo. 210, 254 P.137 (1927). See also Johnson v. Johnson, 115 Ark. 416, 171 S.W. 475 (1914). “Indeed, it has been held quite frequently in many jurisdictions that the assignment of certificates of stock to a doneee by a holder is tantamount to delivery of the stock, although manual delivery may be wanting.” Aycock, supra at 47 of 144 S.W.2d. Sun Oil was not entitled to judgment as a matter of law and the trial court properly submitted the case to the jury.

For purposes of trial the parties stipulated that the only issues of fact for the jury were (1) whether at the time of requesting or obtaining transfer of the stock certificate from herself to Maynard Owens on the books of Sun Oil Company, Mrs. Young intended to make a present gift, or a future gift at the time of Owens’ next birthday, in which case it was of course ineffectual and (2) whether there was, in fact, an “actual delivery” of the stock to Mr. Owens. The jury was instructed without objection concerning the essential elements of a valid gift, to the effect that (1) the donor must be of sound mind, (2) must intend to pass the title immediately, (3) must actually deliver the property to the donee and surrender possession and control of the property, and .(4) the donee must accept the gift. The jury was accordingly told, also without objection, that in order to find a valid gift, they must first find from a preponderance of the evidence that Mrs. Young not only intended to make a present gift, but actually delivered the property in question to Maynard Owens; that “actual delivery” does not necessarily mean physical delivery; that “[i]t is enough that the donor has taken all steps necessary to surrender her own dominion and control over the securities and to place them absolutely and irrevocably under the exclusive dominion and control of the donee.”

The jury was further instructed that a stock certificate is prima facie, but not conclusive, evidence of ownership in the person to whom issued; that the facts as to true ownership of the stock may be shown by the evidence; and that since the stock certificate was transferred to the name of Maynard S. Owens and appeared on the books of Sun Oil Company in the name of Maynard S. Owens, the burden was upon Sun Oil to prove its affirmative defense that the certificate was not Maynard Owens’ property. In other words that Sun Oil had to prove, “by a preponderance of the evidence, that the gift to Maynard Owens was not valid.”

Sun Oil specifically objected to that part of the instruction which told the jury that the stock certificate was prima facie evidence of ownership, on the grounds ■ that the plaintiff, having alleged a valid gift, had the burden of establishing all of the elements thereof. But in its requested instructions and briefing Sun Oil readily concedes the correctness of the court’s instructions on prima facie evidence.

Sun Oil also specifically objected to that part of the instruction on the burden of proof, on the ground that the burden was always on Mrs. Owens to prove her allegations of an inter vivos gift of the stock. Although some confusion has arisen over the use, of the phrase “burden of proof” (see, e. g., Kortz v. Guardian Life Ins. Co., 144 F.2d 676 (10th Cir. 1944), and IX Wigmore on Evidence § 2485 (3d ed. 1940)), it is generally understood that while the burden of proof never shifts, the duty of going forward may shift with the ebb and flow of probative evidence. See, e. g., Hill v. Smith, 260 U.S. 592, 43 S.Ct. 219, 67 L.Ed 419 (1923); First Nat. Bank v. Ford, 30 Wyo. 110, 216 P. 691, 31 A.L.R. 1441 (1923); and IX Wigmore on Evidence § 2489 (3d ed. 1940). Also cf. Denning Warehouse Co. v. Widener, 172 F.2d 910 (10th Cir. 1949). The burden of proving the alleged ownership of the stock by a preponderance of the evidence was on Mrs. Owens and never shifted; the burden is always with the proponent of the issue. See, e. g., First Nat. Bank v. Ford, supra; Pacific Portland Cement Co. v. Food Mach. & Chem. Corp., 178 F.2d 541, 547 (9th Cir. 1949); and IX Wigmore, supra §§ 2485 and 2489. But as we have seen the certificate was prima facie evidence of ownership, and such evidence is entirely sufficient to sustain the burden and take the case to the jury. The jury may, but is not required to, return a verdict in the plaintiff’s favor. See, e. g., IX Wigmore, supra §§ 2489 and 2494. Cf., e. g., Beaver v. Fidelity Life Association, 313 F.2d 111 (10th Cir. 1963).

In our case Sun Oil not only denied the allegations of the complaint that upon the issuance of the certificate to Owens he became the legal owner of the stock, it also specifically alleged as an affirmative defense that the gift was never consummated because the stock was never delivered to Owens. In this posture, “. . . the burden of proof in the true sense of the term is upon the defendant as to all affirmative defenses which he sets up in answer to the plaintiff’s claim or cause of action .... This rule does not involve a shifting of the burden of proof, but merely means that each party must establish his own case.” See Baumgartner v. Rogers, 233 Ark. 387, 345 S.W.2d 476, 478 (1961), quoting 20 Am.Jur., Evidence § 137. See also First Nat. Bank v. Ford, supra, and Pacific Portland Cement Co. v. Food Mach. & Chem. Corp., supra. While the affirmative pleadings may have added little or nothing to the issues framed by the general denial, and the court might very well have disregarded the form for the substance of the parties’ claims (see, e. g., 30 Yale L.J. 117-122 (1929)), at the same time the instruction with respect to burden of proof followed the form of the pleadings, and we cannot say it was reversibly erroneous.

Apparently to bolster the prima facie ease, the administratrix was permitted to testify about overhearing her husband’s end of a conversation with Mrs. Young shortly before his death. Objection was made on the grounds that, since Mrs. Young was not a party to the lawsuit and Sun Oil was not a party to the conversation, any purported conversation between Mrs. Young and her nephew would be the rankest of hearsay and prejudicial. The court sustained the objection to admission of the testimony as a statement against interest, and ruled out anything said between Mr. Owens and Mrs. Owens or Mrs. Young. After an in-chambers conference, however, Mrs. Owens was finally permitted to testify that as a result of what she overheard at the Owens’ end of the conversation she formed a “state of mind” that “[Owens] was going to receive some stock from .his aunt.” On appeal Sun Oil complains of the admission of Mrs. Owens’ testimony as to her state of mind as highly prejudicial. But we are not concerned with Mrs. Owens’ state of mind, and it was totally irrelevant and, we think, equally harmless. That is, see Rule 61 Fed.R.Civ.P.

Mrs. Owens was also permitted to testify that Mrs. Young visited her at her home on the evening before the funeral, and that at that time she told Mrs. Owens that the stock “ . . . would have to be called back because it had the wrong social security number on it” ; that after she had received and cashed the dividend check she told Mrs. Young about it while at Mrs. Young’s house, that Mrs. Young indicated that this was “all right” ; and that she did not know that “[Mrs. Young] had taken [it] back” until she was so informed by Sun Oil. Mrs. Young categorically denied any such conversations, but the testimony went to the issue of donative intent, and the credibility of the witnesses was for the jury.

To sustain its burden of rebutting the administratrix’ prima facie case and to prove its affirmative defenses, Sun Oil introduced the testimony of Mrs. Young on the issue of intent. On direct examination, Mrs. Young testified that she intended to make a gift to her nephew, and that she accordingly caused the stock to be transferred to him, to be delivered at “some opportune time” as a birthday present. On cross-examination, however, she was more specific. Counsel asked Mrs. Young the salient question whether or not the gift was made when the certificate was returned to her bank on August 4. The answer was, “yes.”

“Q: You say as far as you are concerned the gift was made at that time except for giving him the little certificate? A: Well, it was in his name then but it was in my books.
“Q. Yes. A: Now the dividend went to him.
“Q. Was it your stock or Maynard’s stock at that time, as far as you were concerned ? A: It was his stock after his name is on it.”

This testimony was subject to the inference that she not only intended to make a present gift, but that she surrendered control and dominion of the stock. But, however you want to look at it, this testimony cannot as a matter of law prevail against the prima facie case of ownership made out by the transfer of the stock certificate on the books of the corporation.

We hold that the issuance of the stock in the name of Maynard S. Owens, along with the evidence of Mrs. Young’s intent, was sufficient to sustain the burden of showing intent to make a present gift and effective delivery.

The judgment is affirmed.

DURFEE, Senior Judge

(dissenting) :

I respectfully dissent from the memorandum opinion in this case. The jury was instructed that “(a) certificate of stock is prima facie evidence of title to the stock represented thereby * * * ” and then that:

“Since the stock certificate was transferred to the name of Maynard S. Owens and appeared on the books of Sun Oil Company in the name of Maynard S. Owens, the burden of proof is upon defendant Sun Oil Company to prove its affirmative defense that the certificate was not Maynard S. Owens’ own property at the time it was transferred back on the books to the name of Hettie M. Young. In other words, the defendant, Sun Oil Company, must prove, by a preponderance of the evidence, that the gift to Maynard S. Owens was not valid and that the stock certificate did not belong to him.” [Emphasis a<|ded].

The instructions shifted the burden of persuasion from plaintiff-appellee to defendant-appellant on the-central issue of the existence or nonexistence of an inter vivos gift of the Sun Oil Co. stock to Maynard Owens.

In my opinion the application of the rule that the stock certificate was prima facie evidence of ownership merely established the sufficiency of plaintiff-ap-pellee’s evidence to go to the jury and at most shifted the burden of producing evidence but not the burden of persuasion to defendant-appellant. See McCormick on Evidence, §§ 336-342 (2d ed. 1972); IX Wigmore on Evidence, § 2494 (3d ed. 1940). As example, the Oklahoma cases which have applied this presumption of ownership rule in purported inter vivos gift situations do not suggest that upon introduction of the stock certificate as evidence of ownership the burden falls upon the opposing party to convince the trier of fact of the nonexistence of a gift of the stock by a preponderance of the evidence. See Frazier v. Oklahoma Gas & Electric Co., 178 Okl. 512, 63 P.2d 11 (1936); Davis v. National Bank of Tulsa, Okl., 353 P.2d 482 (1960). There are no Arkansas cases directly on point.

Plaintiff-appellee alleged ownership of the Sun Oil stock in her deceased husband by virtue of a gift from Mrs. Young. The burden of producing sufficient evidence (to withstand a motion for directed verdict) as proof of the gift and the burden of persuading the jury by a preponderance of the evidence of the existence of a valid gift of the stock rested with plaintiff-appellee. Edwin F. Armstrong & Co. v. Ben Pearson, Inc., 294 F.Supp. 163, 167 (E.D.Ark.), aff’d sub nom., Leisure Group, Inc. v. Edwin F. Armstrong & Co., 404 F.2d 610 (8th Cir. 1968); Spink v. Mourton, 235 Ark. 919, 362 S.W.2d 665, 667 (1962). The above mentioned jury instructions effectively relieved plaintiff-appellee of the latter burden by placing the onus on defendant-appellant to prove by a preponderance of the evidence the nonexistence of a valid gift. I think the instruction was misleading and prejudicial. See 5 Am.Jur.2d, Appeal & Error, § 810.

It would be a curious kind of law which would permit a plaintiff, who must prove every essential element of an inter vivos gift and must carry his burden by a preponderance of the evidence, to establish all four elements of an inter vivos gift with a single presumption and by means of that same presumption cast upon the opposing party the ultimate risk of proving to the trier of fact that the nonexistence of the gift is more probable than its existence.

      . The rule was first announced in Oklahoma State Bank of Ada v. Cole, 170 Okl. 64, 38 P.2d 914 (1934).