author: GARTH, Circuit Judge.

text:
    Fred ACKER and Kenneth C. Dabrow, Individually and on behalf of all other persons similarly situated, Appellants, v. PROVIDENT NATIONAL BANK and Philadelphia National Bank, all national banking corporations, Appellees.
    No. 74-1432.
    United States Court of Appeals, Third Circuit.
    Argued Jan. 7, 1975.
    Decided Feb. 21, 1975.

      Daniel M. Berger, Michael P. Malakoff, Berger & Kapetan, Pittsburgh, Pa., Harold Rosenthal, Rosenthal & Gale, Philadelphia, Pa., for appellants.
    Robert S. Ryan, Melvin C. Breaux, Drinker, Biddle & Reath, Philadelphia, Pa., for appellee Provident National Bank.
    Gregory M. Harvey, Morgan, Lewis & Bockius, Philadelphia, Pa., for appellee Philadelphia National Bank.
   OPINION OF THE COURT

Before ALDISERT, WEIS and GARTH, Circuit Judges.

GARTH, Circuit Judge.

On this appeal, we are called upon to decide: (1) which of two arguably applicable statutes governs the rate of interest which national banks in Pennsylvania may charge on revolving credit card accounts; and (2) whether the applicable Pennsylvania law allows the defendant banks to charge “interest-on-interest” in connection with such accounts. The district court held that the defendant banks could charge the 15% rate authorized by the Pennsylvania Goods and Services Installment Sales Act (hereinafter, “Sales Act”), rather than being limited to the 12% maximum rate established by the Pennsylvania Banking Code (hereinafter, “Banking Code”); and, that compound interest could be charged on the delinquent accounts. We agree with the district court that defendants may charge the higher interest rate (15%) authorized by the Sales Act. We do not agree that the Sales Act authorizes “interest-on-interest”, and to that extent, we reverse.

I. FACTS

Defendants, Provident National Bank (hereinafter, “Provident”) and Philadelphia National Bank (hereinafter “PNB”) are national banks organized under the National Bank Act 12 U.S.C. § 21 et seq., with offices in Philadelphia. For a period of years preceding the filing of this complaint, both banks operated revolving bank credit card plans. The “Master Charge” and “BankAmericard” credit plans are commonly referred to as “revolving credit” plans because of their unique features. A description of the chain of events involved in their issuance and use is helpful to an understanding of the issues presented in this case.

A person desiring to become a credit card holder of Provident Master Charge or PNB BankAmericard generally completes a written application and submits it to the bank for whose plan he is applying. Upon approval of the application, a written agreement is sent to the applicant and he is issued a Master Charge or BankAmericard credit card with his name and account number. The cardholder agreements set forth the terms and conditions governing the use of the card, including the maximum amount of credit which the cardholder may have outstanding at any one time.

Under the cardholder agreement, an account is established at the bank on behalf of each cardholder who is then permitted (a) to borrow money from the bank through cash advances and (b) to purchase merchandise from various member merchants who have agreed with a bank operating a Master Charge or BankAmericard plan to honor the credit card, provided that the sum of borrowings and credit purchases does not exceed the maximum limit established. PNB also imposes a separate maximum limitation on cash advances. Both the Master Charge and the BankAmericard cardholder agreements provide that the Annual Percentage Rate imposed on the outstanding balances arising from the purchase of merchandise shall be fifteen percent (15%).

When a cardholder utilizes his card to purchase merchandise, he presents the card to the merchant at the time the purchase is made. The merchant imprints the sales slip describing the merchandise with the cardholder’s number. The merchandise and a copy of the sales slip are given to the cardholder.

The member merchant presents the sales slip to Provident or PNB. The amount shown on the sales slip, (less a percentage set by agreement between Provident or PNB and the merchant), is paid to the merchant, or credited to the merchant’s account.

Both Master Charge and BankAmericard are operated on the basis of billing cycles. The last day of the billing cycle is referred to as the “billing date”, which is the same date of each month for each individual cardholder. The day immediately following the billing date is the first day of the next billing cycle. There are 12 billing cycles per calendar year. Provident’s Master Charge billing system and PNB’s BankAmericard billing system are processed by computer. Although transactions such as payments, credits and new charges to accounts are processed as the slips are received by Provident or PNB respectively, actual computations in the accounts, including calculation of finance charges, are made only once each billing cycle on the billing date.

On the billing date all transactions posted to an account during that billing cycle [e. g., purchases, payments and credits] are reviewed by the computer. The finance charge, if any, is then calculated and imposed, and a summary of the resulting information is printed by computer on a statement [the “monthly statement”]. The monthly statement is mailed to the cardholder within a day or two after the billing date.

On the first billing date subsequent to the receipt of sales slips by Provident or PNB, the amounts and dates of new purchases are recorded on the monthly statement and the total of the new purchases is included on the statement as a part of the amount shown under the heading “New Balance”. The remainder of the amount shown under the heading “New Balance” consists of previously outstanding balances less applicable payments and credits.

No charges are imposed on purchases when they first appear on the periodic statement as new charges. If the cardholder pays the entire outstanding balanee of his account before his next billing date [a period of about 25 days] he will incur no charges on those new purchases. This feature is known as the “free ride” period. Some Master Charge and BankAmericard cardholders pay their entire outstanding balances each month and never incur any charges.

If the cardholder fails to pay the entire outstanding balance, a charge will be imposed on those purchases, but it will be computed only from the billing date on which the purchases first appeared on the monthly statement, and not from the date of the actual purchase. Whenever a cardholder fails to make a timely monthly payment, both Provident and PNB impose a finance charge on a balance which includes the unpaid finance charge imposed in the previous cycle. Thus, both banks admit that they have charged compound interest on delinquent accounts.

Plaintiffs Dabrow and Acker have been BankAmericard cardholders since November 5, 1966 and March 11, 1970 respectively, and both have used their BankAmericard credit cards only for purchases of merchandise. Dabrow has been a Master Charge cardholder since June 1970 and has used his Master Charge Credit Card only for the purchases of goods and services.

Plaintiffs commenced this action as a class action in November 1972. Thereafter both plaintiffs and defendants moved for summary judgment as to all six counts of the Complaint. On February 27, 1974, the district court held that its jurisdiction was properly invoked, and granted the defendants’ motions. Plaintiffs appeal only from the grant of summary judgment in favor of the defendants as to count one (alleging excessive interest charges) and count four (alleging the charging of “interest-on-interest”).

II. BANK CODE (12%) OR SALES ACT (15%)

The rate of interest which can be charged by a national bank is governed by 12 U.S.C. § 85. In effect, the National Bank Act “defers” to the laws of the state in which a national bank is located to establish the interest rate which the national bank can charge. Pennsylvania, however, has two different “interest rate” statutes, each of which is arguably applicable to bank operated revolving credit card plans. Section 309 of the (Pennsylvania) Banking Code of 1965, 7 P.S. § 309, provides for a rate not to exceed one percent (1%) per month, or twelve percent (12%) per year on the actual outstanding balance.

Installment loans (including revolving credit plans)

(a) Maximum rate — An institution may make a charge for an installment loan which complies with the requirements of this section, at a rate not in excess of six dollars ($6) per one hundred dollars ($100) per annum computed on the original principal amount for the period of the loan. If such loan is one of a series of loans under an agreement (“revolving credit plan”) providing a maximum outstanding balance of all such loans at any time, the institution may make a charge at a rate not in excess of one per cent per month on the actual outstanding balance of the loan. * * * * * *

Section 1904 of the (Pennsylvania) Goods and Services Installment Sales Act provides for an interest rate on retail installment accounts not to exceed one and one-quarter percent (1V4%) per month or fifteen percent (15%) per year.

Rates of service charge on accounts
Subject to the other provisions of this article the seller or holder of a retail installment account may charge, receive and collect the service charge authorized by this act. The service charge shall not exceed the following rates computed on the outstanding balances from month to month:
(a) On the outstanding balance, one and one-quarter percent (lV4%) per month. * * * * * *

Plaintiffs contend that the twelve percent (12%) rate of the Bank Code establishes the maximum interest rate which national banks can charge on their revolving credit card plans. Defendants contend that they are authorized to charge up to fifteen percent (15%) under the Sales Act.

A. The Credit Card Transaction as a “Loan.”

Plaintiffs contend that both the Master Charge and the BankAmericard cardholder agreements constitute “loans” within the meaning of § 309 of the Bank Code.

In support of this argument (that a bank-operated revolving credit card account more closely resembles a “loan” than a “credit sale”), plaintiffs focus, first, on various “loan” characteristics of the transaction:

(1) The parties to the cardholder agreement are the bank and the customer, rather than the merchant and the customer.
(2) Both the sales slip and the cardholder agreement require the customer to make payment directly to the bank.
(3) The deferred payment feature of credit card transactions involves the “forbearance of a debt” (i. e. “loan”) by the issuing bank.
(4) The bank does not “sell” retail goods but “loans” money so that goods may be purchased.

Plaintiffs urge that these characteristics, among others, call for application of the Bank Code (governing “loans”) rather than the Sales Act (governing “credit sales”) to defendants’ revolving charge plans.

Second, plaintiffs refer to an Opinion of the Pennsylvania Attorney General, 1960 Pa. Att’y Gen. Op. No. 231, cited in 23 D & C2d 136 (1961), concerned with the question of whether a bank, which operated a revolving credit card plan, was limited by the maximum interest rates of the General Usury Statute or the Bank Code. The Attorney General wrote

The buyer, as far ' as the bank is concerned, is a borrower. The bank is not a retail merchant selling goods on credit.
You are, therefore, advised that a bank participating in a revolving credit plan . . . cannot charge more than $6.00 per hundred per annum collected in advance on amounts up to $3,500 without violating section 1001A(4) of the Banking Code. . ,

Third, plaintiffs direct our attention to cases in which Master Charge and BankAmericard plans have been held •subject to state usury laws governing the “loaning” of money. See, e. g., Partain v. First National Bank of Montgomery, 467 F.2d 167 (5th Cir. 1972); Master Charge v. Daugherty, 123 Cal.App.2d 700, 267 P.2d 821 (1954); but see Kass v. Central Charge Service, Inc., 304 A.2d 632 (D.C.Court of Appeals 1973); Kass v. Garfinckel, 299 A.2d 542 (D.C.Court of Appeals 1973) (en banc); Uni-Serv Corp. v. Commissioner, 349 Mass. 283, 207 N.E.2d 906 (1965).

We are satisfied that bank-operated revolving credit card plans in Pennsylvania are not “loans” governed by the Bank Code. In the first instance, we recognize that the Attorney General’s Opinion on which plaintiffs rely predated the Sales Act (1966) by more than five (5) years. Second, there is equally persuasive authority for the proposition that bank-operated revolving credit card plans involve “credit sales” — not “loans.” In Kass v. Garfinckel, supra, the District of Columbia Court of Appeals cited with approval the reasoning of the trial court as follows:

“ ‘. . . When we look beyond trappings to substance, we see that a charge account with defendant enables customers to make purchases at defendant’s stores on a deferred payment basis without the need to pay in cash. In return for that consideration the customer agrees to pay a credit service charge under certain circumstances. He has it within his control to avoid all such credit charges, or he may take advantage of the deferral option and pay an amount of up to 18 percent per year. This is not the stuff of a loan or forbearance. . . .’”

299 A.2d at 543. Then in Kass v. Central Charge Service, Inc., supra, it was held that:

“ . . Although the arrangements entered into by Central Charge are slightly different from those employed in retailer-operated revolving charge account agreements, they are sufficiently similar to entitle Central Charge to the same beneficial exemption from the usury laws being accorded retailers who operate their own plans.

304 A.2d at 634 (citing with approval the analysis of the trial court). In the second Kass case, the District of Columbia Court of Appeals relied upon Uni-Serv Corp. v. Commissioner, 349 Mass. 283, 207 N.E.2d 906 (1965). There, the Supreme Judicial Court of Massachusetts held that a credit card plan, similar to those at issue in the present case, was:

. [Essentially a time sales financing arrangement in which credit is extended for the sole purpose of purchasing goods or services from stores participating in the plan. . The fact that the ultimate creditor is Uni-Serv and not the seller of goods or services is likewise of no consequence.

207 N.E.2d at 908. Finally, we do not believe that affixing the label “loans” to Master Charge and BankAmericard plans automatically requires application of the Bank Code (12%) rather than the Sales Act (15%). It is necessary to examine the specific provisions of the Sales Act to determine if bank-operated revolving credit card plans are encompassed within its scope. (See discussion at 10-16 infra).

B. Statutory Analysis of the Sales Act.

Plaintiffs argue that the definitional sections of the Sales Act exclude Master Charge and BankAmericard plans. Section 1201(5) of the Sales Act defines a “retail installment sale” as “. the sale of goods or the furnishing of services by a retail seller to a retail buyer for a time sale price payable in installments.” (emphasis added). Plaintiffs contend that a Master Charge or BankAmericard transaction does not involve an “installment sale.” In plaintiffs’ view, there is no “time sale price” involved in Master Charge and BankAmericard purchases.

The difficulty with plaintiffs’ argument in this regard is twofold. (1) § 1201(9) of the Sales Act defines “time sale price” as “. . . the total of the cash price of the goods or services and the amounts, if any, included for insurance, official fees and service charge.” (emphasis added). Thus, by its very definition, “time sale price” can mean the same as “cash sale price” if no additional charges are imposed at the time of purchase. A “cash sale price” payable in installments (without any additional charges) is precisely what is involved in a Master Charge or a BankAmericard transaction. (2) Plaintiffs’ argument, resting on the definition of “installment sale,” fails to recognize that § 1103 of the Sales Act specifically includes a “revolving account” as one type of “contract within the Act.”

Plaintiffs also argue that bank operated credit card plans (whereby the bank establishes a revolving account directly with the customer) are not encompassed within the Sales Act’s definition of “revolving accounts.” They contend that the Sales Act’s provisions only authorize “revolving accounts” set up by a retail seller, or by a “financing agency” on behalf of a retail seller. We do not read the definitional sections of the Sales Act as requiring or supporting such a limited view of the Act’s scope. Section 1201(7) defines a “revolving account” as follows:

(7) “Retail installment account” or “installment account” or “revolving account” means an account established by an agreement pursuant to which the buyer promises to pay, in installments, to a retail seller or to a financing agency, his outstanding balance incurred in retail installment sales, whether or not a security interest in the goods sold is retained by the seller, and which provides for a service charge which is expressed as a percent of the periodic balances to accrue thereafter providing such charge is not capitalized or stated as a dollar amount in such agreement, (emphasis added).

Thus, by its express terms, the Act authorizes an account in which the buyer is obligated to make direct payments to a “financing agency.” There is no suggestion in the Act that the validity of such an arrangement is limited to situations in which the “financing agency” is acting solely on behalf of the retail seller rather than as an independent operator of a credit card plan.

Lastly (insofar as plaintiffs’ “definitional” arguments are concerned), plaintiffs contend that, even if a bank acting independent of a retail merchant comes within Section 1201(7), defendant banks are not “financing agencies” within the Sales Act’s definition of that term because they do not “purchase” retail installment accounts as required by Section 1201(16). Section 1201(16) defines “financing agency” as:

(16) “Financing agency” means a person engaged in this Commonwealth in whole or in part in the business of purchasing retail installment contracts, or installment accounts from one or more retail sellers. The term includes but is not limited to a bank, bank and trust company, private banker, or investment company, (emphasis added).

Plaintiffs claim that neither Provident nor PNB “purchase” installment contracts in their Master Charge and BankAmericard operations. Their argument can be summarized as follows: (1) the obligation to pay for purchases made with bank credit cards runs exclusively to the defendant banks and not to the merchant who makes the sale; (2) the merchant has no monetary interest in the sales slip executed by the buyer; (3) therefore, defendant banks do not “purchase” commercial paper from member merchants in Master Charge and BankAmericard transactions. When faced with the same argument below, the district court refusing to limit its inquiry to the definitional portion of the statute, examined Article IX of the Act (dealing with Retail Installment Accounts) and specifically focused on the “purchase or acquire” language of § 1901 (see note 14, supra). That section provides, among other things, that the “financing agency” may “purchase or acquire indebtedness.” The court concluded:

“. . . Even if it might successfully be argued that Provident and PNB do not ‘purchase’ the indebtedness, it certainly can be decided that they at least ‘acquire’ the cardholder’s indebtedness from the retail seller.”

373 F.Supp. at 65. We agree with the district court and, therefore, find it unnecessary to address ourselves to the question of whether defendant banks do, in fact, “purchase” installment accounts in the course of their Master Charge and BankAmericard operations. Thus, we conclude that the defendants come within the definition of a “financing agency” [§ 1201(16)], that has established a “revolving account” [§ 1201(7)], through which defendants “acquire indebtedness” [§ 1901] arising from a “retail installment sale” [§ 1201(5)]; thereby, satisfying the definitional requirements of the Sales Act.

C. Legislative History

Plaintiffs next contend that the legislative history of the Sales Act supports their view that the Act was not intended to encompass bank operated revolving credit card plans. They claim that prior to the passage of the Sales Act, Pennsylvania merchants were exempt under the “time-price” doctrine from the State’s general usury laws. They then refer to the debates preceding passage of the Sales Act which evidenced that a major purpose of the legislation was to place a limit on the interest merchants could charge. Plaintiffs claim that it would be incongruous for an Act, designed to limit interest charges by merchants, to increase, at the very same time, the rate of interest which banks could charge on revolving credit card plans (formerly limited to 12% by the Bank Code of 1965). In support of this argument, plaintiffs cite the remarks of Representative J. F. Clark to the effect that Pennsylvania banks were then making a substantial profit under the twelve percent (12%) interest rate authorized under the Banking Code.

Mr. J. F. Clarke. In reply to merely one point, Mr. Speaker, I would like to state briefly my belief again that the one percent per month on the unpaid balance limitation on the credit service charge is adequate. Retailers say that they need 18 percent a year in order to compensate them for handling these accounts. There is a new system proposed by the banks in Pittsburgh — -in fact it is in practice and has been working for some months — in which the banks issue credit cards upon application and finance purchases for the holders of these credit cards. .
Now, Mr. Speaker, if the banks— and there are large banks in the city of Pittsburgh — find this business so profitable at the rate of one percent per month from the unpaid balance to go out and seek it as avidly as they have been doing lately — and in many cases, I have been told, that they even send these credit cards unsolicited to persons — surely these large major retail stores and any other retail merchants can operate on the same basis and cover themselves with a one percent credit service charge.

Pennsylvania Legislative Journal-House (Special Session No. 1 of 1966, June 27, at 72). See also remarks of Representative Schmitt, Id. at 72-73.

After reviewing the legislative history of the Sales Act, we are not persuaded that the references by Representatives Clarke'and Schmitt to the rates of interest charged on bank-operated revolving credit card plans indicate a legislative intent to limit banks to the twelve percent (12%) rate if merchants should ultimately be permitted to charge a higher rate. The remarks of Representatives Clarke and Schmitt must be read in the context of the dispute between the House and the Senate in Pennsylvania as to the maximum rate which should be authorized by the Sales Act. In referring to the twelve percent rate then being charged by Pittsburgh banks, Representatives Clarke and Schmitt were apparently speaking for those legislators advocating a twelve percent (12%) maximum interest rate under the Sales Act. It was in this form (12%) that the Sales Act was passed by the House of Representatives. Subsequently, however, the Pennsylvania Senate refused to approve a twelve percent (12%) rate. The final compromise reached between the House and Senate provided for a fifteen percent (15%) rate. Our reading of the legislative history leads us to conclude that the Pennsylvania legislature intended the fifteen percent (15%) rate of the Sales Act to apply to both retail sellers and financing agencies (including banks) that met the statutory definitions, discussed supra. While the amount of the maximum rate was strongly disputed, we do not believe that the Pennsylvania Legislature ever intended to distinguish, as to maximum permissible interest rates, between bank-operated and non-bank-operated credit card plans.

Our interpretation of the legislative history of the Sales Act is buttressed by the fact that the Pennsylvania Legislature was aware that merchants did not finance their credit plans by themselves but rather sold their commercial paper to banks. Section 1904 of the Sales Act (see p. 7 supra) specifically allows the “seller or holder of a retail installment account” to charge the one and one-quarter per cent (1V4%) per month rate. Section 1201(13) defines the “holder” of a retail installment account to include a “financing agency” which purchases the installment account. If the Sales Act authorizes a bank to charge a fifteen percent (15%) rate when it purchases “indebtedness” from merchants, we see no logical reason to construe the Act as precluding the same interest charge when the bank “acquires” indebtedness from merchants.

After reviewing plaintiffs’ arguments that the twelve percent (12%) rate of the Bank Code, rather than the fifteen percent (15%) rate of the Sales Act, fixes the maximum interest that defendants can charge on their Master Charge and Bank Americard plans, we hold that defendants are authorized to charge up to fifteen percent (15%) per year as provided by the Sales Act.

III. “INTEREST-ON-INTEREST”

Plaintiffs contend that Pennsylvania, as evidenced by a long line of cases, disfavors compound interest and allows its imposition only where there is an express statutory authorization or a specific contract provision so providing. Plaintiffs argue that there is no statutory authorization in the Sales Act nor a contract provision permitting defendants to charge “interest-on-(overdue) interest.” We agree. The Pennsylvania Supreme Court in Powell, supra note 20, stated:

It is fairly well established that the law in this Commonwealth frowns upon compound interest and as such will only permit compound interest on a debt when the parties have provided for it by agreement or a statute expressly authorizes it.

246 A.2d at 115. Being bound by the law of Pennsylvania, we cannot approve the district court’s reasoning that compounding is permitted because the Act does not expressly prohibit it. Pennsylvania requires not an absence of expression but rather the presence of an express, affirmative statement in the Act approving the charging of compound interest before “interest-on-interest” may be allowed. (See cases cited in note 20 supra). No such expression is found in the Sales Act. To the contrary, § 1905 of the Sales Act (which sets forth the required disclosures to be made to a buyer) provides:

“The . . . holder of a retail installment account shall promptly provide the buyer with a [monthly] statement . . . setting forth the following: * * * * * *
(d) The amount of the service charge, and the following statement: The service charge herein contained does not exceed the equivalent of fifteen percent (15%) simple interest per annum on the unpaid balance except that a minimum service charge of seventy cents (70$) per month may be made. * * * * * *

Thus, far from specifically approving the compounding of interest, the Sales Act mandates that no more than fifteen percent (15%) “simple interest’ be charged.

Nor do we read the provisions in the defendants’ “Cardholder Agreements” as specific contractual provisions for the charging of compound interest. The “Provident/Master Charge Agreement” provides no more than: “. . .a Finance Charge will be added to the Master Charge Account ‘purchases’ balance. . ” The Bank Americard “Customer Payment Schedule” is even less explicit: “. . . The amount of the Finance Charge is determined by multiplying such balance by a periodic rate of lVi% per month . . ..” We are satisfied that neither of these “cardholder agreements” is sufficiently explicit to constitute a contract for the payment of compound interest.

Defendants have advanced various arguments in an effort to persuade us that § 1904 of the Sales Act, in permitting interest charges on “outstanding balances,” in fact authorizes the compounding of interest. First, defendants refer to § 1905 which requires various disclosures in the “monthly statement.” One such disclosure is the “total balance.”

Defendants contend that the “total balance” (§ 1905(e)) is the sum of all charges and credits enumerated in the preceding subsections of § 1905 (i. e.— subsections (a) through (d)). One of the preceding subsections (§ 1905(d)) provides for an “interest” charge and defendants, therefore, urge (without objection by plaintiffs) that “total balance” includes an “interest” element. The significance of this argument is that the “total balance” at the end of one billing cycle becomes the beginning balance of the next cycle on which the new interest charge is computed. Thus, argue defendants, the Sales Act impliedly authorizes a billing procedure which includes built-in, compound interest. Defendants then claim that there is no difference between the term “total balance” in § 1905(e) and the term “outstanding balances from month to month,” which term appears in § 1904. They argue that “total balance” (§ 1905(e)) constitutes the base upon which “interest” is to be calculated; and, that § 1904 merely sets the maximum rate of “interest” to be applied to that base. Thus, argue defendants, the term “outstanding balances from month to month” was intended to mean the same as “total balance,” which includes “interest” as well as current and past due principal.

We reject this argument. Defendants’ analysis would require us to hold that the legislature used two different terms (“total balance” in § 1905(e) and “outstanding balances” in § 1904) in two different sections of the statute to convey the same meaning. It does not necessarily follow from the fact that the term “total balance” in § 1905(e) includes by definition an “interest” element that the term “outstanding balances” in § 1904 must similarly include that “interest” element. The purposes of the two sections are different. Section 1905 (“Monthly Statement”) serves the purpose of informing the cardholder of the amount of his outstanding indebtedness each month. By contrast, the purpose of § 1904 is to regulate the maximum amount of interest which can be charged on revolving accounts. Thus, given the difference in purpose and language between §§ 1904 and 1905(e), we do not believe the legislature intended the two terms to be synonymous. Finally, we cannot ignore the expressed intent of the legislature as reflected in § 1905(d) that the interest charge to be disclosed may not exceed “. . . fifteen percent (15%) simple interest per annum on the unpaid balance . . ..” (emphasis added). Had compound interest been contemplated or intended, it would have been illogical for the legislature to require disclosure in terms of “simple interest.”

We are convinced that the defendants’ analysis, predicated upon an interpretation of §§ 1904 and 1905 of the Sales Act, is not sufficiently persuasive to overcome Pennsylvania’s strong policy against the compounding of interest. As we noted previously (see p. 16 supra), there must be evidence of an express, affirmative legislative intent before defendants are authorized to compound interest in connection with their revolving credit card accounts. We find no such intent expressed in the Sales Act.

Second, defendants have argued that the legislative history of the Sales Act indicates that the language of § 1904 (see p. 7 supra), “outstanding balances from month to month,” reveals that the legislature contemplated the charging of interest on balances which include overdue interest from past billing cycles. In support of this argument, defendants refer to the changes made in various drafts of the proposed legislation which ultimately resulted in the present form of § 1904.

Printer’s No. 24 (Pennsylvania’s designation for legislative drafts) contains the text of House Bill No. 7 (see note 16 supra), embodying the version of the Sales Act as passed by the House on June 28, 1966. At that time, the predecessor provision of § 1904 (which now reads: “. . . The service charge shall not exceed ... (a) on the outstanding balance, one and one-quarter percent (1V4%) per month. . . . ”) appeared as follows:

Sj8 # SfC $
(1) The credit service charge shall be calculated at a rate not to exceed ONE PER CENT OF THE UNPAID PRINCIPAL MONTHLY BALANCE ON WHICH IT IS CALCULATED, (emphasis added). * * * * sis *

Printer’s No. 32 is the first Senate Reprint of House Bill No. 7 and reveals, by “strike-outs” at 21 — 22, the total deletion of the House provision quoted above. Printer’s No. 32 substituted a new provision governing maximum permissible interest charges, which, except as to the rates proposed (the Senate version authorized a variable interest rate of one and one-half percent (lVz%), resembles the present version of § 1904 in its use of the term “outstanding balances.”

. The service charge shall not exceed the following rates computed on the outstanding balances from month to month.

The Senate’s language, “outstanding balances from month to month,” survived to appear as the final version of the Sales Act, 69 P.S. § 1904. In light of the revisions in the various drafts of the Sales Act, defendants argue that the House decided to limit the base upon which service charges (interest) could be imposed to the “unpaid principal monthly balance”; but, that such a limitation was specifically rejected by the Senate. Since the final version of the Sales Act embodies the Senate’s language (“outstanding balances”), defendants reason that the House must have acquiesced in the Senate’s decision to expand the base on which interest is charged to permit interest on “outstanding balances” (i. e. principal and interest).

The term “outstanding balances” as it now appears in the Sales Act [and as it appeared in the Senate draft (Printer’s No. 32) and in the report of the Conference Committee (Printer’s No. 34)] is without definition. We cannot tell with certainty whether the term “outstanding balances” includes or excludes “interest”; in this respect, its meaning is obscure and equivocal. There is no clear legislative intent inherent in the use of the term “outstanding balances” to indicate authorization for the charging of interest on “balances” which would include past due interest from previous billing cycles. Pennsylvania’s strong policy against charging compound interest, in our opinion, requires an unequivocal and affirmative statutory authorization before permission to charge compound interest would be justified. Although defendants have referred to various provisions in the House and Senate drafts of the Sales Act, they have failed to show us a pattern of revisions which unequivocally demonstrates an intent to permit the charging of “interest-on-interest.” Indeed, defendants have not and, we believe, cannot reconcile their various arguments (that § 1904 of the Sales Act authorizes the charging of compound interest) with the express requirement in § 1905(d) that disclosure be in terms of “simple interest.” Thus, we hold that the Sales Act, lacking an express, affirmative expression of legislative intent to permit compound interest, does not authorize the charging of compound interest on defendants’ revolving credit card accounts.

Finally, defendants claim that, despite charging compound interest, the effective rate of interest charged on Master Charge and BankAmericard accounts was never in excess of fifteen percent (15%) “simple” interest per year. We cannot agree with defendants that there is no statutory violation in the unauthorized charging of compound interest merely because the actual amounts charged do not exceed fifteen percent (15%) “simple” interest. If, as we hold, compound interest is not permitted under the Sales Act, it does not matter that the effective rate of compound interest results in interest charges within the permitted “simple” interest rate. In Citizens National Bank v. Donnell, 195 U.S. 369, 374, 25 S.Ct. 49, 49 L.Ed. 238 (1904), the Supreme Court dealt with an argument similar to that raised by defendants here.

. The rate of interest which a man receives is greater when he is allowed to compound than when he is not, the other elements in the case being the same. Even if the compounded interest is less than might be charged directly without compounding, a statute may forbid enlarging the rate in that way.

In our view, Pennsylvania law “forbid[s] enlarging the rate” of interest by compounding and the Sales Act makes no specific exception to this general rule in the case of revolving credit card accounts. Accordingly, we hold that the Sales Act is violated by compounding interest regardless of the effective rate charged.

IV.

Although summary judgment was sought by the defendants on all six counts of plaintiffs’ complaint, appeal from the order of the district court was taken only from the grant of summary judgment on Count One (excessive interest charges) and Count Four (compounding of interest). For the reasons we have stated, we will affirm so much of the district court’s Order of February 27, 1974 as granted summary judgment in favor of defendants on Count One. As to the grant of summary judgment in favor of defendants on Count Four, we will reverse and remand to the district court for additional proceedings consistent with this opinion.

Each party will bear its own costs.

      . Master Charge, BankAmerieard.

      . The parties entered into a Stipulation of Facts describing, in large part, the operation of the Master Charge and BankAmericard revolving charge plans. In its opinion below, the district court ably summarized the stipulated facts, 373 F.Supp. 56 (E.D.Pa.1974). Our discussion in this section draws heavily on the district court’s factual statement, with such deletions and amplifications as we believe are required by the more limited nature of this appeal.

      . If the cardholder disputes the sale, quality or delivery of merchandise covered by the sales slip, Provident or PNB may collect from or charge back the sale to the member merchant.

      . As indicated in the text, the “outstanding balance” may include unpaid finance charges from previous billing cycles on which interest is thereafter imposed.

      . The Stipulation of Facts reveals that the total number of Master Charge cardholders during the period November 1970 through November 1972 exceeded 100,000. The total number of BankAmericard cardholders in November 1972 approximated 280,000. The district court took no action with respect to certifying a class because of its summary judgment disposition.

      . Neither party asserts that there is a genuine issue or dispute as to any material fact.

      . The plaintiffs did not object to the grant of summary judgment as to counts 2, 3 and 5. (App. at 282, Tr. at 56; see Stipulation of Fact # 31).

      . We agree with the well-reasoned opinion of the district court (373 F.Supp. at 61-63) that jurisdiction is properly founded on 28 U.S.C. § 1337 (“. . district courts shall have original jurisdiction of any civil action . arising under any Act of Congress regulating commerce . . ..”). We, therefore, need not decide whether jurisdiction would also lie under 28 U.S.C. § 1355 (“. . . original jurisdiction, exclusive of the courts of the States, of any action ... for the recovery ... of any . . penalty incurred under any Act of Congress.”). See First National Bank of Charlotte v. Morgan, 132 U.S. 141, 144, 10 S.Ct. 37, 33 L.Ed. 282 (1889) (“A suit against a national bank to recover back twice the amount of interest illegally taken by it is a suit to recover a penalty incurred under a law of the United States . . .”).

      . Among other things, plaintiffs seek injunctive relief and damages under 12 U.S.C. § 86, which authorizes recovery of “twice the amount” of the excessive interest paid.

      . 12 U.S.C. § 85 provides:
      Rate of interest on loans, discounts and purchases
      Any association may take, receive, reserve, and charge on any loan or discount made, or upon any notes, bills of exchange, or other evidences of debt, interest at the rate allowed by the laws of the State, Territory, or District where the bank is located, or at a rate of 1 per centum in excess of the discount rate on ninety-day commercial paper in effect at the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and no more, except that where by the laws of any State a different rate is limited for banks organized under State laws, the rate so limited shall be allowed for associations organized or existing in any such State under this chapter.

      . See generally, B. Clark & A. Squillante, The Law of Bank Deposits, Collections and Credit Cards 185-208 (1970); Brandel & Leonard, Bank Charge Cards: New Cash or New Credit, 69 Mich.L.Rev. 1033 (1971); Davenport, Bank Credit Cards and the Uniform Commercial Code, 85 Banking L.J. 941 (1968); Hale, Holder in Due Course and Bank Cards, 5 U.S.C. L.J. 164 (1969); Note, Waiver of Defense Clauses in Three Party Consumer Credit Card Transactions, 11 B.C. Ind. & Com.L.Rev. 991 (1970); Note, Bank Credit Cards: The Service Charge Problem, 77 Dick.L.Rev. 991 (1970); Note, Bank Credit Cards and the Usury Laws, 4 U.Cal.L.Rev. (Davis) 335 (1971); Note, Interest Incognito — Usury Statute Applied to Revolving Charge Account Agreement, 34 U.Pitt.L.Rev. 54 (1972) for discussion of various “loan aspects” of revolving credit card transactions.

      . Section 819-1001(A)(4) was expanded by § 309 of the Banking Code of 1965 to permit an interest charge of 1% per month on a “revolving credit plan.”

      . We note that defendant banks charged a maximum of twelve percent (12%) per year on “cash advances” obtained by the use of Master Charge or BankAmericard. Moreover, Stipulated Facts Nos. 7 & 8 reveal that plaintiffs used their credit cards only for the purchase of goods and services. Thus, we are not presented with an issue or a case in which direct loans were made to cardholders on Master Charge and BankAmericard accounts other than in a “retail purchase” context.

      . § 1103. Contracts within Act
      For the purposes of this act a retail installment contract, contract, retail installment account, installment account, or revolving account is made in Pennsylvania and, therefore, subject to the provisions of this act if either the seller offers or agrees in Pennsylvania to sell to a resident buyer of Pennsylvania or if such resident Pennsylvania buyer accepts or makes the offer in Pennsylvania to buy, regardless of the situs of the contract as specified therein, (emphasis added).

      . Plaintiffs point to § 1901 of the Sales Act in support of their argument that a “financing agency” can establish a “retail installment account” only as the agent of a retail seller. Section 1901 provides in relevant part:
      “. . .a retail installment account may be established by a financing agency on behalf of one or more sellers from whom the financing agency may, with the buyer’s consent purchase or acquire indebtedness of the buyer to be paid in accordance with the agreement.” (emphasis added).
      We do not construe the permissive language of § 1901 as precluding banks from initiating their own credit card plans and independently qualifying as “financing agencies” within the meaning of § 1201(16). See discussion at 12 infra.

      . Defendants strenuously argue that they do purchase the indebtedness from the retail merchant. The substance of the banks’ argument is that while “. [T]he buyer is indebted the instant he makes the credit purchase, . . . the bank does not become his creditor until it has received the evidence of his indebtedness and paid the merchant for the indebtedness by crediting his account at the bank. . . . ” (Brief for Appellees at 18, n. 7). The banks view such “crediting” as the equivalent of “purchasing.”
      It is noteworthy that both the Master Charge and the BankAmericard Merchant Agreements use language indicative of a “purchase” of indebtedness. The “Provident/Master Charge Plan Merchant Agreement” requires the merchant to . . Assign all sales slips by delivery to Provident.” The “BankAmericard Merchant Agreement” calls ■ for the “. . . Purchase of Sales Drafts by Bank.” (emphasis added).

      . See Pa. House Bill No. 7, Special Sess. of 1966, Printer’s No. 24, at 30 (authorizing one percent per month); Pa. Senate Reprint of House Bill No. 7, Special Sess. of 1966, Printer’s No. 32, at 50 (a variable one and one half percent per month); Conf. Comm. Rpt. on House Bill No. 7, Special Sess. of 1966, Printer’s No. 34, at 21 (authorizing one and one-quarter percent per month).

      . Section 1201(13) provides:
      “Holder” means the retail seller who acquires a retail installment contract or installment account executed, incurred or entered into by a retail buyer, or if the contract or installment account is purchased by a financing agency or other assignee, the financing agency or other assignee,. The term does not include the pledgee of or the holder of a security interest in an aggregate number of such contracts or installment accounts to secure a bona fide loan thereon.

      . Plaintiffs have not contested the banks’ right to charge fifteen percent (15%) interest when the documents of indebtedness are, in fact, purchased from the retail merchant. Plaintiffs’ argument in the present case is that Master Charge and BankAmericard transactions do not involve such “purchases.”

      . This disposition makes it unnecessary for us to deal with defendants’ argument that, even if state banks (operating their own revolving credit card plans) are excluded from charging 15% interest under the Sales Act, national banks can nevertheless charge the same rate allowed to merchants. See Tiffany v. National Bank of Missouri, 85 U.S. 409, 21 L.Ed. 862 (1873); but cf. 12 C.F.R. § 7.7310.

      . Powell v. Retirement Bd., 431 Pa. 396, 246 A.2d 110 (1968); Murray v. Prudential Insurance Co. of America, 144 Pa.Super. 178, 18 A.2d 820 (1941); Stokely v. Thompson, 34 Pa. 210 (1859); Sparks v. Garrigues, 1 Binn. 151 (Pa. 1805).

      . “Compound interest” is defined as follows: “Interest upon interest, i. e., when the interest of a sum of money is added to the principal, and then bears interest which thus becomes a sort of secondary principal. . ” (citations omitted).
      Black’s Law Dictionary 358 (4th ed. 1957).

      . The district court found it significant that there is no express language in the Goods and Services Installment Sales Act prohibiting the compounding of interest. 373 F.Supp. at 66.

      . But see Novicki v. O’Mara, 280 Pa. 411, 124 A. 672, 673 (1924) (“A change of language in separate provisions of a statute is prima facie evidence of a change of intent.”)

      . Pa. House Bill No. 7, Special Sess. of 1966, Printer’s No. 24, § 503, at 30.

      . Pa. House Bill No. 7, Special Sess. of 1966, Printer’s No. 32, § 904, at 50.

      . As indicated, supra note 16, the maximum permissible rate of interest was eventually compromised at fifteen percent (15%) per annum.

      . Plaintiffs’ counsel stipulated that defendants were not charging interest in excess of fifteen percent (15%) per year. (See App. at 283).

      . Plaintiffs’ brief did not explicitly raise any issue concerning the district court’s disposition of plaintiffs’ motion for class certification. A motion to remand to the district court (predicated upon the district court’s failure to act on plaintiffs’ class certification motion), and correspondence relating thereto, were addressed to this Court. In light of our disposition and our remand, we leave this issue for the district court’s determination if and when raised or renewed. We express no opinion regarding the merits of the class certification issue or any action which the district court may take in respect to any such motion.


source: Caselaw Access Project

author: CHOY, Circuit Judge:

license: Public Domain

text:
    UNION OIL COMPANY OF CALIFORNIA et al., Plaintiffs-Appellants, v. The Honorable Rogers C. B. MORTON, Secretary of the Interior of the United States of America, et al., Defendants-Appellees.
    No. 73-1692.
    United States Court of Appeals, Ninth Circuit.
    Feb. 24, 1975.
    As Amended on Denial of Rehearing April 29, 1975.

      Samuel O. Pruitt, Jr. (argued), Los Angeles, Cal., for plaintiffs-appellants.
    A. Barry Cappello, City Atty. (argued), Marvin Levine, Deputy County Counsel (argued), Santa Barbara, Cal., Jacques B. Gelin (argued), Washington, D. C., for defendants-appellees; George P. Kading, County Counsel, Santa Barbara, on the briefs for County of Santa Barbara; A. L. Wirin and Fred Okrand, Los Angeles, Cal., on the briefs, for non-city intervenb'r's-appellees.
   OPINION

Before BROWNING, CARTER and CHOY, Circuit Judges.

CHOY, Circuit Judge:

Four major oil companies brought this action to set aside an order of the Secretary of the Interior denying them permission to construct a drilling platform in the Santa Barbara Channel which they allege is necessary for full exercise of their rights under a federal oil and gas lease. The companies also seek to enjoin the Secretary from further interference with enjoyment of their lease rights. The district court held that the Secretary’s order was within his statutory authority and was not arbitrary, capricious, or an abuse of discretion, and dismissed the complaint. We vacate the decision of the district court and remand for futher proceedings.

Factual Background

In February 1968, the four companies (hereinafter “Union”) paid over $61 million for oil and gas rights on tract OSC — P 0241. The leased tract lies on the continental shelf in the Santa Barbara Channel, beyond the jurisdiction of the State of California. The Interior Department granted the lease under the authority of the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq.

The lease gives Union the right to erect floating drilling platforms, subject to the provisions of the Act and to “reasonable regulations” not inconsistent with the lease issued by the Secretary. Two platforms, A and B, were installed, each supporting many productive wells. In September 1968, Union sought permission to install a third platform, C. The Secretary approved the application, and the Army Corps of Engineers issued the necessary permit. In January 1969, before platform C was installed, a blowout occurred on one of the wells on platform A. The blowout caused the disastrous Santa Barbara oil spill which killed birds and marine organisms, damaged beaches and seafront properties, and restricted fishing and recreational activities in the area.

On February 7, 1969, the Secretary ordered all activities on this and certain other leases suspended pending further environmental studies. After these studies were completed, the Secretary announced on September 20, 1971, that Union would not be allowed to install platform C, because operation of that platform* would be “incompatible with the concept of the Federal Sanctuary [which the Secretary had proposed to Congress].” He stated that all operations would remain suspended on certain other Channel leases, pending action by Congress cancelling the leases. See Gulf Oil Corp. v. Morton, 493 F.2d 141 (9th Cir. 1973).

The Department formally notified the companies the following month that the Secretary “has determined that the installation of Platform ‘C’ would be inconsistent with protection of the environment of the Santa Barbara Channel and has directed [the Regional Supervisor] to withdraw the approval of September 16, 1968.” This suit resulted. On November 3, 1972, just prior to trial, the Secretary issued a statement further clarifying the environmental concerns contributing to his decision. (see page 752 infra.)

We upheld the Secretary’s suspension of the leases pending congressional action in Gulf Oil, supra. Because Congress had not acted within a reasonable time to cancel the leases in question, however, we declared the suspension invalid after October 18, 1972. 493 F.2d at 149. This appeal is limited to the validity of the order withdrawing permission for Union to install platform C.

The Act

The Outer Continental Shelf Act authorizes the Secretary to issue oil and gas leases on the outer continental shelf to the highest bidder. 43 U.S.C. § 1337(a). A lease issued under this Act, like a mineral lease granted under the Mineral Leasing Act of 1920, 30 U.S.C. § 181 et seq., does not convey title in the land, nor does it convey an unencumbered estate in the oil and gas. See Boesche v. Udall, 373 U.S. 472, 478, 83 S.Ct. 1373, 10 L.Ed.2d 491 (1963); McKenna v. Wallis, 344 F.2d 432, 440-41 (5th Cir. 1965), vacated, 384 U.S. 63, 86 S.Ct. 1301, 16 L.Ed.2d 369 (1966). The lease does convey a property interest enforceable against the Government, of course, but it is an interest lacking many of the attributes of private property. Oil and gas deposits beneath the continental shelf are precious resources belonging to the entire nation. Congress, although encouraging the extraction of these resources by private companies, provided safeguards to insure that their exploitation should inure to the benefit of all. These safeguards are not limited to those provided by covenants in the lease; Congress also authorized the Secretary to maintain extensive, continuing regulation of the oil companies’ day to day drilling operations.

Careful study of the Act confirms that Congress intended to exercise both proprietary powers of a landowner and the police powers of a legislature in regulating leases of publicly owned resources. Cf. Forbes v. United States, 125 F.2d 404, 408 (9th Cir. 1942). The Secretary, to whom Congress has delegated these powers, may prescribe at any time those rules which he finds necessary for the conservation of natural resources. 43 U.S.C. § 1334(a)(1). Exercising its legislative power, Congress has provided criminal penalties for knowing violation of these rules. 43 U.S.C. § 1334(a)(2). In addition, those rules in effect at the time a lease is executed are incorporated statutorily into the terms of the lease. 43 U.S.C. § 1334(a)(2). The Secretary like a private property owner, may obtain cancellation of the lease if the lessee breaches such a rule. 43 U.S.C. § 1334(b)(1). Violation of rules issued after the lease has been executed does not enable the Secretary to cancel the lease, however. The property rights of the lessee are determined only by those rules in effect when the lease is executed. See generally Christopher, The Outer Continental Shelf Lands Act: Key to a New Frontier, 6 Stan.L.Rev. 23, 43-47 (1953).

The Lease

The Secretary’s authority to issue conservation regulations binding previously executed leases is clearly expressed in the Act, 43 U.S.C. § 1334(a)(1):

The Secretary shall administer the provisions of this subehapter relating to the leasing of the outer Continental Shelf, and shall prescribe such rules and regulations as may be necessary to carry out such provisions. The Secretary may at any time prescribe and amend such rules and regulations as he determines to be necessary and proper in order to provide for the prevention of waste and conservation of the natural resources of the outer Continental Shelf, and the protection of correlative rights therein, and, notwithstanding any other provisions herein, such rules and regulations shall apply to all operations conducted under a lease issued or maintained under the provisions of this subchapter. Without limiting the generality of the foregoing provisions of this section, the rules and regulations prescribed by the Secretary thereunder may provide ... in the interest of conservation, for . . . suspension of operations or production. . . .

The lease with Union, however, provided that it was entered into

under, pursuant, and subject to the terms and provisions of the [Act], and to all lawful and reasonable regulations of the [Secretary] when not inconsistent with any express and specific provisions herein, which are made a part hereof .

The Secretary granted Union “the right to construct or erect ... all artificial islands, platforms, fixed or floating structures . . necessary or convenient to the full enjoyment of the rights granted by this lease . . ..” Union urges that any regulation issued after execution of the lease which denies Union the right to erect platform C is inconsistent with this express provision of the lease and therefore is a breach of the lease agreement. We disagree.

Terms of the lease inconsistent with the statute are invalid. The Secretary can alienate interests in land belonging to the United States only within the limits authorized by law. United States v. California, 332 U.S. 19, 40, 67 S.Ct. 1658, 91 L.Ed. 1889 (1947); Mammoth Oil Co. v. United States, 275 U.S. 13, 35, 48 S.Ct. 1, 72 L.Ed. 137 (1927); Utah Power & Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 61 L.Ed. 791 (1917); Beaver v. United States, 350 F.2d 4, 7 — 8 (9th Cir. 1965), cert. denied, 383 U.S. 937, 86 S.Ct. 1067, 15 L.Ed.2d 854 (1966); Reese v. Virgin Islands, 277 F.2d 329, 332-33 (3rd Cir. 1960). Cf. 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, 925, 199 Ct.Cl. 705 (1972). Congress empowered the Secretary to lease gas and oil rights with the qualification that he would retain the power to amend existing rules and regulations whenever he deems it necessary for the conservation of natural resources.

Union proposes an interpretation of the lease which, if accepted, would require us to find certain of its provisions invalid because inconsistent with the Act. If possible, however, we will construe terms of a Government lease so that they conform to the statute. See 3 Corbin, Contracts § 532 at 4 (1960); 1 McBride & Wachtel, Government Contracts § 2-120 (1972). So construed, we find no inconsistency between the terms of Union’s lease and the provisions of the Act.

A lease may be terminated by its own terms in the event that stated conditions subsequent occur. After declaring itself subject to the provisions of the Act, the Union lease incorporates those regulations issued by the Secretary which are not inconsistent with specific terms of the lease. We construe the lease provision that certain regulations are incorporated (“made a part hereof”) into the lease to express the drafters’ intention that those regulations are ones whose violation is a condition subsequent rendering the lease voidable. We also construe it to refer only to regulations in existence at the time the lease was signed. This construction of the lease renders it fully consistent with the Act’s declaration that “continuance in effect of any lease . . . shall be conditioned upon compliance with the regulations ... in force and effect on the date of the issuance of the lease . . ..” 43 U.S.C. § 1334(a)(2).

The provision of the lease on which Union relies does not qualify the Secretary’s power, under section 1334(a)(1), to issue regulations promoting protection of the environment after the lease has been executed. Those rules are not a part of the lease, their violation not a ground for cancellation. Although the lease does not recognize explicitly the Secretary’s continuing power to regulate drilling operations, its acknowledgement that its terms are subordinate to provisions in the Act amply defers to the Secretary’s statutory powers. We therefore find no inconsistency between the terms of the lease and the structure of the Act which authorizes it.

“Natural Resources” Includes the Environment

The Act empowers the Secretary to prescribe rules necessary for “conservation of the natural resources of the outer Continental Shelf . . ..” 43 U.S.C. § 1334(a)(1). Whatever doubts may have existed in the past as to the construction of this phrase were resolved by our decision in Gulf Oil Corp. v. Morton, 493 F.2d 141 (9th Cir. 1973). The phrase encompasses all the natural resources of the shelf, not merely the mineral resources. The Secretary is responsible for conserving marine life, recreational potential, and aesthetic values, as well as the reserves of gas and oil.

Gulf Oil’s construction of “natural resources” is reinforced by the terms of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. § 4321 et seq. NEPA directs that we construe the Outer Continental Shelf Act in light of Congress’ desire to “create and maintain conditions under which man and nature can exist in productive harmony . . ..” 42 U.S.C. §§ 4331(a), 4332. NEPA’s goals supplement the original goals of the Act. 42 U.S.C. § 4335. The Secretary has full authority to reconcile the objectives of the two statutes by regulating drilling under Government leases with an eye to the protection of the environmental quality of the continental shelf. Zabel v. Tabb, 430 F.2d 199 (5th Cir. 1970), cert. denied, 401 U.S. 910, 91 S.Ct. 873, 27 L.Ed.2d 808 (1971). See Calvert Cliffs’ Coordinating Comm. v. AEC, 146 U.S.App.D.C. 33, 449 F.2d 1109, 1112-13 (1971); F. Anderson, NEPA in the Courts 271-74 (1973).

Suspension: Regulation or Taking?

Pursuant to 43 U.S.C. § 1334(a)(1), the Secretary issued a regulation on August 22, 1969, authorizing emergency suspension of any operation which “threatens immediate, serious, or irreparable harm or damage to life, including aquatic life, to property, to the leased deposits, to other valuable mineral deposits or to the environment. Such emergency suspension shall continue until in his judgment the threat or danger has terminated.” 30 C.F.R. § 250.12. Refusal to allow installation of a previously approved platform could be justified only as a suspension of operations under this regulation.

The regulation properly provides for “conservation of the natual resources of the outer Continental Shelf,” as we have construed that phrase. Nevertheless, Union points to the distinction between a suspension and a revocation, asserting that the Secretary did not in fact merely suspend operations, because a suspension by definition possesses a “temporary nature.” United Air Lines, Inc. v. CAB, 198 F.2d 100, 108 (7th Cir. 1952); see Western Air Lines, Inc. v. CAB, 196 F.2d 933, 935-36 (9th Cir.), cert. denied, 344 U.S. 875, 73 S.Ct. 167, 97 L.Ed. 677 (1952). The structure of the Act demonstrates that Congress intended vested rights under the lease to be invulnerable to defeasance by subsequently issued regulations. Although 30 C.F.R. § 250.12 provides expressly that a “suspension” shall be limited in time only by the Secretary’s judgment that the environmental threat has ended, and although 43 U.S.C. § 1334(a)(1) authorizes regulations providing not only for suspensions but for any other action affecting operations which the Secretary determines “necessary and proper” for “conservation of natural resources,” Congress clearly did not intend to grant leases so tenuous in nature that the Secretary could terminate them, in whole or in part, at will.

Congress itself can order the leases forfeited even now, subject to payment of compensation. But without congressional authorization, the Secretary or the executive branch in general has no intrinsic powers of condemnation. Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 585, 588, 72 S.Ct. 863, 96 L.Ed. 1153 (1952); Hooe v. United States, 218 U.S. 322, 335, 336, 31 S.Ct. 85, 54 L.Ed. 1055 (1910). Congress’ clear concern to distinguish police power regulation from invasion of property rights in these leases convinces us that Congress did not confer powers of condemnation upon the Secretary by implication.

The degree to which the Government may interfere with the enjoyment of private property by exercise of its police power without having to pay compensation is not a simple question. The courts, under a variety of tests, have recognized that regulation of private property can become so onerous that it amounts to a taking of that property. See Goldblatt v. Hempstead, 369 U.S. 590, 594, 82 S.Ct. 987, 8 L.Ed.2d 130 (1962); United States v. Central Eureka Mining Co., 357 U.S. 155, 168, 78 S.Ct. 1097, 2 L.Ed.2d 1228 (1958); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 67 L.Ed. 322 (1922). If, as Union contends, platform C is a necessary means for the extraction of oil from a portion of the leased area, refusal to permit installation of that platform now or at any time in the future deprives Union of all benefit from the lease in that particular area. We therefore conclude that an open-ended suspension of the right granted Union to install a drilling platform would be a pro tanto cancellation of its lease.

Such a taking by interference with private property rights is within the constitutional power of Congress, subject to payment of compensation. See Dugan v. Rank, 372 U.S. 609, 83 S.Ct. 999, 10 L.Ed.2d 15 (1963). But Congress no more impliedly authorized the Secretary to take the leasehold by prohibiting its beneficial use than by condemnation proceeding. A suspension for which the fifth amendment would require compensation is therefore unauthorized and beyond the Secretary’s power.

Whether the Secretary has taken Union’s property depends on the conditions of the suspension. If operations are suspended indefinitely, property rights have been taken. To determine whether the suspension is indefinite, or, on the other hand, is a temporary suspension whose termination is conditioned by the occurrence of certain future events, we must examine the justifications which the Secretary has offered for the suspension. The Secretary explained the suspension most recently in his statement of November 3, 1972:

The following were the primary factors that led to my decision denying the platform applications:

(1) construction of the proposed platform and drilling wells would increase the risk of oil pollution in the Santa Barbara Channel by reason of:
(a) the risks inherent in offshore oil drilling;
(b) location of the Channel in an active seismic belt; and
(c) with regard to Platform “C”, the fact that the platform would be located on the damaged Dos Quadros [sic] structure;
(2) oil pollution in the Santa Barbara Channel would have adverse consequences, both short and longer term, because of the characteristics of the Channel environment; the following attributes of the Channel that would be affected by oil pollution were given particular consideration:
(a) animal and plant marine life;
(b) commercial and sport fisheries;
(c) recreational use;
(d) beaches and shore line of the
Channel;
(e) birds;
(3) the lack of systems and equipment which are completely effective in controlling and removing oil pollution under all weather a,nd sea conditions;
(4) the suitability of the Dos Quadros [sic] structure (leases OCS-P 0241 and 0240) for unitization and the suitability of leases OCS-P 0240 and 0166 for unitization;
(5) additional platforms would increase interference with other uses of the Channel for recreational and commercial fishing;
(6) additional platforms would be aesthetically undesirable.

Factors 2, 4, 5, and 6 amount simply to a weighing of conflicting interests which the Secretary should have undertaken before the lease was granted. For the Secretary to offer these factors now to justify suspending Union’s drilling activities asserts in effect that he can cancel the lease because he has changed his mind. These enumerated interests are not temporary concerns which the passage of time may eliminate.

Factors 1 and 3, however, suggest conditions which the development of new technology or further study may lessen as threats to the environment. Further study of seismic risks in the Channel, or of the geology of the Dos Cuadros structure, for example, may produce evidence of environmental risks unanticipated at the time the lease was executed. Knowledge of these newly-discovered risks might induce Congress to cancel the lease. A suspension also might provide time for an improved pollution control technology to be developed. A suspension whose termination was conditioned on the occurrence of events or the discovery of new knowledge which can be anticipated within a reasonable period of time would be a valid exercise of the Secretary’s regulatory power, and not a fifth amendment taking.

The vague assertion of potential risks advanced in the Secretary’s 1972 statement is totally inadequate to enable this court to decide whether such justifications for a suspension do exist, however, and whether they sufficiently restrict the duration of the suspension to avoid the need for compensation. The trial court decided without explanation that the suspension deprived Union of no property rights. We are uncertain as to the basis for this conclusion.

In view of the insufficient nature both of the Secretary’s explanation for the suspension and the district court’s justification of its judgment, we vacate the decision of the district court and remand the case to the district court for a determination whether the Secretary is taking property rights from Union. The court should allow the Secretary to prepare and present an amended statement of the grounds on which he bases the suspension. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971); SEC v. Chenery Corp., 318 U.S. 80, 94-95, 63 S.Ct. 454, 87 L.Ed. 626 (1943). The court may, at its discretion, receive additional evidence and testimony in support of and in opposition to the Secretary’s amended justification. The court should then determine whether each justification advanced by the Secretary is appropriate under 30 C.F.R. § 250.12, whether the Secretary has offered sufficient evidence to demonstrate that his decision was not arbitrary and capricious or an abuse of discretion, and whether the duration of a suspension based on the grounds offered is sufficiently conditioned on the occurrence of future events to avoid fifth amendment requirements of compensation.

If the trial court finds that the suspension, as limited by the Secretary’s amended statement, complies with these requirements, Union’s complaint should be dismissed. Otherwise, the order of suspension should be set aside as beyond the Secretary’s statutory powers. 5 U.S.C. § 706(2)(C).

Because of the Secretary’s continuing supervisory obligations, injunctive relief against further interference with Union’s operations would be inappropriate.

Vacated and remanded.

      . 43 U.S.C. § 1334(a):
      (2) Any person who knowingly and willfully violates any rule or regulation prescribed by the Secretary for the prevention of waste, the conservation of the natural resources, or the protection of correlative rights shall be deemed guilty of a misdemeanor and punishable by a fine of not more than $2,000 or by imprisonment for not more than six months, or by both such fine and imprisonment, and each day of violation shall be deemed to be a separate offense. The issuance and continuance in effect of any lease, or of any extension, renewal, or replacement of any lease under the provisions of this subchapter shall be conditioned upon compliance with the regulations issued under this subchapter and in force and effect on the date of the issuance of the lease if the lease is issued under the provisions of section 1337 of this title, or with the regulations issued under the provisions of section 1335(b)(2) of this title if the lease is maintained under the provisions of section 1335 of this title.
      43 U.S.C. § 1334(b):
      (1) Whenever the owner of a nonproducing lease fails to comply with any of the provisions of this subchapter, or of the lease, or of the regulations issued under this subchapter and in force and effect on the date of the issuance of the lease if the lease is issued under the provisions of section 1337 of this title, or of the regulations issued under the provisions of section 1335(b)(2) of this title, if the lease is maintained under the provisions of section 1335 of this title, such lease may be canceled by the Secretary, subject to the right of judicial review as provided in section 1337(j) of this title, if such default continues for the period of thirty days after mailing of notice by registered letter to the lease owner at his record post office address.
      (2) Whenever the owner of any producing lease fails to comply with any of the provisions of this subchapter, or of the lease, or of the regulations issued under this subchapter and in force and effect on the date of the issuance of the lease if the lease is issued under the provisions of section 1337 of this title, or of the regulations issued under the provisions of section 1335(b)(2) of this title, if the lease is maintained under the provisions of section 1335 of this title, such lease may be forfeited and canceled by an appropriate proceeding in any United States district court having jurisdiction under the provisions of section 1333(b) of this title.

      . The Secretary’s issuance of a lease and Union’s reliance on its terms do not estop the Government from enforcing statutory provisions contrary to the lease. We will apply the doctrine of estoppel to the Government “if the government’s wrongful.conduct threatens to work a serious injustice and if the public’s interest would not be unduly damaged by the imposition of estoppel.” United States v. Lazy FC Ranch, 481 F.2d 985, 989 (9th Cir. 1973). We are very reluctant to apply estoppel against the Government in cases involving rights to public land, however. See Beaver v. United States, 350 F.2d 4, 8 (9th Cir. 1965), cert. denied, 383 U.S. 937, 86 S.Ct. 1067, 15 L.Ed.2d 854 (1966); United States v. Cappaert, 508 F.2d 313, 319-320 (9th Cir. 1974). But cf., United States v. Georgia-Pacific Co., 421 F.2d 92 (9th Cir. 1970) (Government estopped from demanding specific performance of agreement to convey real property). Furthermore, in this case, the costs to the public could be enormous if the Secretary were estopped to maintain continuing, vigorous regulation of Union’s drilling, including suspension of its operations and of its installation of new platforms when appropriate. The costs to Union would be merely the loss of anticipated profits if its leases were cancelled, or postponement of those profits if its operations were suspended. The equitable considerations which underlie application of estoppel dictate that the doctrine should not be applied in the circumstances of this case.

      . See Christopher, The Outer Continental Shelf Lands Act: Key to a New Frontier, 6 Stan.L.Rev. 23, 44 (1953):
      “The potential lessees of outer Shelf land . . . realize that they are subject to police-power regulations which can be modified from time to time. But they are sensitive to provisions that would give the United States power to change the proprietary regulations governing the lease after the issuance of a lease.”

      . 5 U.S.C. § 706(2)(A) provides the proper scope of review, as the district court concluded. The substantial evidence test is reserved for adjudications for which a formal hearing is required by law.


author: GIBSON, Chief Judge.

text:
    Glen E. CROW, Appellant, v. Clarence M. KELLEY, Appellee.
    No. 74-1758.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 10, 1975.
    Decided March 14, 1975.

      Glen E. Crow, pro se.
    Burt C. Hurn, U. S. Atty., and Anthony P. Nugent, Jr., Asst. U. S. Atty., Kansas City, Mo., for appellee.
    Before GIBSON, Chief Judge, HEANEY, and ROSS, Circuit Judges.
   GIBSON, Chief Judge.

In this pro se petition for a writ of. mandamus, Glen E. Crow, an inmate at the Missouri State Penitentiary, requests that Respondent Kelley, the Director of the Federal Bureau of Investigation, be ordered to remove all false, illegal and unconstitutional information regarding him from the files of the F.B.I. His petition alleges:

That Respondent is depriving [Crow] of Due Process of Law in violation of the Fourteenth Amendment to the Constitution of the United States, in that Respondent’s said F.B.I. files contain reports and information concerning an alleged prior criminal record, which are untrue, and which are a continuous prejudicial threat, and a continuous denial of Due Process.

The District Court dismissed the petition without a hearing and Crow appeals. We affirm.

Jurisdiction in the District Court was asserted on the basis of 28 U.S.C. § 1361, which provides:

The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.

The first and foremost question to be answered on this appeal is what duty, if any, is owed to petitioner regarding the challenged F.B.I. record.

At the present time the F.B.I. maintains records under the statutory authority contained in 28 U.S.C. § 534. That section replaced the authorization existing from 1930 and contained in 5 U.S.C. § 340 (1964). It can thus be seen that a part of the F.B.I.’s duty is the acquisition and preservation of criminal identification records. While not deprecating the serious disabilities that may flow from having an arrest or conviction record, it is also evident that these records may be valuable tools for law enforcement officials, a sentiment evidenced by the Congressional direction to the F.B.I. to accumulate this information as well as to exchange the information with authorized users.

The District of Columbia Circuit has found a limited, and as yet not fully explieated, duty on behalf of the F.B.I. to assure the accuracy of the criminal records it disseminates. Tarlton v. Saxbe, 507 F.2d 1116 (D.C.Cir. 1974). See also Menard v. Saxbe, 162 U.S.App.D.C. 284, 498 F.2d 1017 (1974) (Menard II); Menard v. Mitchell, 430 F.2d 486 (1970) (Menard I). Without questioning the appropriateness of the Tarlton holding in the circumstances presented therein, we find no basis for granting Crow the relief he requests in the present proceeding.

(a) The Attorney General shall— (1) acquire, collect, classify, and preserve identification, criminal identification, crime and other records * * *.
There is established under the jurisdiction of the Department of Justice a division of the Federal Bureau of Investigation to be known as the Division of Identification and Information; said bureau shall be vested with the duty of acquiring, collecting, classifying, and preserving criminal identification and other crime records * * *.

The allegations of Crow’s petition demonstrate a failure to request relief from the local or state authorities with jurisdiction over his arrests and convictions. We are in agreement with the statement of the District of Columbia Circuit in Menard II that

[SJound principles of justice and judicial administration dictate that in general actions to vindicate constitutional rights, by expungement of arrest records maintained notwithstanding release of the person and absence of probable cause for arrest, be maintained against the local law enforcement agencies involved. The primary duty of executive inquiry into the facts of distant arrests is a burden assigned more appropriately to the local agency whose officials made the arrest than to the FBI.

Menard II, supra, 498 F.2d at 1025 (footnote omitted).

It is established that the F.B.I. uniformly honors requests from local authorities for the return of “arrest” records, Menard II, supra at 1025, and that complete relief from the adverse effects of a void or invalid arrest and conviction cannot be obtained solely from the F.B.I. as the offending record would remain in the files of the local law enforcement agency. It is more appropriate to require petitioners to seek relief where it will be most effective.

A brief recitation of several of the convictions Crow seeks to have expunged will demonstrate the difficulties that would be presented in allowing the present action in the District Court. One misdemeanor conviction is for attempted jail break; a sentence of one year was apparently imposed in 1964 after a 1943 felony conviction for the same offense was vacated in the Missouri state courts. Another is a 1944 Missouri felony conviction for stealing chickens in the nighttime. Although by virtue of location there would not be the same heavy burden of testing the validity of these convictions in federal district court in Missouri as there would be in a locale far removed from Missouri, we do not think a requirement of initially presenting an asserted claim of constitutional invalidity to state or local officials should be limited only to those cases of inconvenience to the district courts. Such a requirement rests upon principles of federal-state comity and judicial and administrative efficiency.

Crow would apparently impose an affirmative duty of inquiry upon the F.B.I. to assure itself of the constitutional validity of arrests and convictions before entering these in the F.B.I. records. No case has yet gone to such a length. In Tarlton v. Saxbe, 507 F.2d 1116 (D.C.Cir. 1974), the District of Columbia Circuit held that the F.B.I. is under some duty to prevent the dissemination of inaccurate arrest and conviction records, leaving the limits of that duty to be spelled out after remand for consideration of this duty with the countervailing considerations of federalism and administrative efficiency. These countervailing considerations include the potentially huge administrative burden on the F.B.I., the fact that the F.B.I. is not in a position to make judgments as to the constitutional validity of arrests and convictions, and that the duty of inquiry is more appropriately left to the local officials responsible for the arrest and conviction.

Here, Crow’s complaint with the F.B.I. is not that its records inaccurately reflect his past arrest and conviction record, but with the underlying validity of those arrests and convictions. In this circumstance we need not intimate any view as to what duty, if any, the F.B.I. is under to assure the accuracy of its records. For without exhaustion of his state or local remedies, we hold that Crow’s petition states no cause of action. Just as a federal district court may not pass upon the constitutionality of a state conviction upon a petition for habeas corpus without exhaustion of state remedies being shown, 28 U.S.C. § 2254, we do not think the result should be any different by styling the action a petition for mandamus requesting expungement of the record of conviction. Considerations of federal-state comity require that we give an initial opportunity to the state or local authorities to pass upon the validity of the convictions challenged by Crow.

The decision in Menard v. Saxbe, 162 U.S.App.D.C. 284, 498 F.2d 1017 (1974), granting expungement of an F.B.I. criminal record is of no benefit to petitioner in the present case. Menard’s record was ordered expunged upon the basis of that court’s interpretation of 28 U.S.C. § 534 to preclude the F.B.I. from maintaining as a criminal record a record of an “encounter” with the police established not to be an arrest. We do not have anything resembling that situation here. We have no difficulty in determining that the record of an arrest and conviction constitutes a criminal record within the meaning of 28 U.S.C. § 534 and, thus, properly is maintained in the F.B.I. criminal files.

The District Court correctly determined it was without jurisdiction to entertain Crow’s petition. Its judgment is affirmed.

      . The Honorable William R. Collinson, United Districts of Missouri. States District Judge for the Eastern and Western

      . It should be noted that petitioner’s F.B.I. record is not a part of the record in this case and that petitioner’s allegations concerning the record are based at best on his belief in what the F.B.I. record contains. Crow’s prayer for relief requests an order directing Respondent to furnish petitioner a copy of the F.B.I. records.

      . That section provides:

      . Section 340 provided:

      . These disabilities may include increased vulnerability to police scrutiny — first questioned and last eliminated as a suspect — Davidson v. Dill, 503 P.2d 157, 159 (Colo.1972); whether to testify at trial, Menard v. Mitchell, 139 U.S.App.D.C. 113, 430 F.2d 486, 491 (1970); use in sentencing decisions, United States v. Cifarelli, 401 F.2d 512 (2d Cir.), cert. denied, 393 U.S. 987, 89 S.Ct. 465, 21 L.Ed.2d 448 (1968); or release pending appeal, Russell v. United States, 131 U.S.App.D.C. 44, 402 F.2d 185 (1968). In addition there is a “social stigma” attached to an arrest record, see United States v. Dionisio, 410 U.S. 1, 10, 93 S.Ct. 764, 35 L.Ed.2d 67 (1973), and the existence of an arrest record may foreclose employment opportunity. Menard v. Saxbe, 162 U.S.App.D.C. 284, 498 F.2d 1017, 1024 (1974); Menard v. Mitchell, supra, 430 F.2d at 490 n. 17.

      . Cf. Preiser v. Rodriguez, 411 U.S. 475, 489-90, 93 S.Ct. 1827, 1836, 36 L.Ed.2d 439 (1973), wherein the Court stated:
      In amending the habeas corpus laws in 1948, Congress clearly required exhaustion of adequate state remedies as a condition precedent to the invocation of federal judicial relief under those laws. It would wholly frustrate explicit congressional intent to hold that the respondents in the present case could evade this requirement by the simple expedient of putting a different label on their pleadings.


author: PER CURIAM.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Edward ISOME, Jr., Defendant-Appellant.
    No. 74-1508.
    United States Court of Appeals, Sixth Circuit.
    Feb. 28, 1975.
    Certiorari Denied May 27, 1975.
    See 95 S.Ct. 1993.
    H. Fred Hoefle, Cincinnati, Ohio (Court appointed), for defendant-appellant.
    William W. Milligan, U. S. Atty., Byron E. Trapp, Cincinnati, Ohio, for plaintiff-appellee.
    Before PHILLIPS, Chief Judge, MILLER, Circuit Judge, and McALLISTER, Senior Circuit Judge.
   PER CURIAM.

Appellant, Edward Isome, Jr., was convicted by a jury for aiding and abetting the interstate transportation of falsely-made securities in violation of 18 U.S.C., Sections 2 and 2314. The government’s proof that Isome was an aider and abettor in the above offense is that he procured a young woman to present a check which was falsely made, and drawn on a bank in Elmhurst, lilinois, at the Colerain office of the Madison Building Association in Cincinnati. The young woman deposited $150.00 of the $550.00 check, receiving a Madison check for the $400.00 difference. She then attempted to cash, a short time later, the $400.00 check at The Provident Bank, a few blocks away. The Provident officials called the Madison Building Association to inquire about the check. The young woman left the bank without the check or the money. The same day, the manager of The Provident Bank called the police and the FBI and gave them the information which he had. The Madison Building Association held the Colerain Illinois check and allowed it to pass through the normal collection process. After the check was dishonored, they turned it over to the FBI. There is nothing in the record to show that the FBI knew that the Illinois check was bad, nor is there any evidence that could have prevented Madison from trying to collect the Illinois check in their possession.

Appellant claims that where the false check in this case was permitted to clear across state lines, the Government, rather than the accused, caused the transportation and no federal crime has been proved. However, United States v. Sheridan, 329 U.S. 379, 67 S.Ct. 332, 91 L.Ed. 359, holds that the interstate requirements are met by cashing the forged cheek on a bank in another state. The court in Sheridan, supra, pointed out (p. 391, 67 S.Ct. p. 338):

“A word will dispose of the idea that Sheridan did not ‘cause’ the transportation. Certainly he knew the checks would have to be sent to the Missouri bank for collection. Given the proven forgery and uttering, no other conclusion would be possible. Necessarily, too, it would follow he intended the paying bank to send the checks there for that purpose. He knew they must cross state lines to be presented. One who induces another to do exactly what he intends, and does so by defrauding him, hardly can be held not to ‘cause’ what is so done.”

See also Judge Pope’s concurring opinion in Hendrix v. United States, 327 F.2d 971 (5 Cir., 1964), in support of the foregoing.

Appellant’s guilt was amply proved by Isome’s accomplice, Marilyn Smith, whom Isome drove to the bank and who testified that he instructed her to cash the check, which did not belong to him, and which he was not authorized to sign, using a woman’s name as payee. Isome then instructed her to cash the check, waited outside the bank until she rejoined him, took the money from her in the car, and later gave her a share of it.

The above transaction was a violation of the statute in question.

Error is claimed with regard to the admission of evidence regarding the car in which Isome’s accomplice, Miss Smith, was driven to the bank by Isome. Miss Smith testified it was a blue and white Buick convertible. Moreover, another witness who had followed Miss Smith from the bank, took down the license number of the car, which was registered to Martina Walker, who had married Edward Isome, Jr. State records were introduced with reference to the license registration and the marriage of Edward Isome, Jr. to Martina Walker. That the original records were not introduced is, at most, harmless error.

There was no error on the part of the court in not granting a mistrial because of an inadvertent statement of a government witness which the court amply remedied by detailed instructions to the jury on the subject; nor did the court err in refusing to grant appellant’s pre-trial motion for a severance of counts.

The verdict of the jury was sustained by overwhelming evidence and no error appearing in the rulings, directions or trial of the case by the trial court, the judgment of conviction is accordingly affirmed.