source: Caselaw Access Project

author: LEWIS R. MORGAN, Circuit Judge:

license: Public Domain

text:
    Franklin NIX, Plaintiff-Appellant, v. The GRAND LODGE OF the INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS, Defendant-Appellee.
    No. 72-3582.
    United States Court of Appeals, Fifth Circuit.
    June 5, 1973.

      William G. McRae, Atlanta, Ga., for plaintiff-appellant.
    J. R. Goldthwaite, Jr., Atlanta, Ga., for defendant-appellant.
    Before TUTTLE, GODBOLD and MORGAN, Circuit Judges.
   LEWIS R. MORGAN, Circuit Judge:

Once again the dispute between Franklin Nix and the International Association of Machinists and Aerospace Workers has found its way to this court. This is the third appeal in this civil action. See Fulton Lodge No. 2 v. Nix, 5 Cir. 1969, 415 F.2d 212; Nix v. Fulton Lodge No. 2, 5 Cir. 1972, 452 F.2d 794. Furthermore, this court also considered one other action involving conflict between Nix and the IAM in Nix v. National Labor Relations Board, 5 Cir. 1969, 418 F.2d 1001. Hopefully our opinion today will lay to rest this spate of litigation.

The basic dispute underlying all of these lawsuits originates with Nix’s unhappy period as an employee of the union. The case before the Labor Board related to a charge that Nix had been fired by the union solely because he was seeking to unionize the union’s employees. This court upheld the Board’s determination that the discharge was based on the theft by Nix of records and papers of IAM vice president Watkins, officer in charge of the southern territory for the union, and thus for good cause.

This present action was filed under the Labor-Management Reporting and Disclosure Act of 1959, seeking to enjoin his expulsion from union membership. The district court held that Nix had been improperly disciplined for making statements protected by section 101(a)(2) of the LMRDA, which guarantees freedom of speech to union members. The court granted injunctive relief against the Local and International, but reserved the question of damages. On appeal, 415 F.2d 212, we affirmed the trial court in all respects save the issuance of an injunction against the Grand Lodge (the International), holding that the district court had never acquired jurisdiction over that defendant. We specifically held that Nix would be afforded an opportunity on remand to amend and seek relief against the Grand Lodge.

Back in district court, Nix amended as suggested, but also added a separate claim relating to his dismissal from his job. Plaintiff then filed notice of dismissal of this amendment to the complaint. Approximately two months later plaintiff filed a second suit which alleged wrongful, malicious and wanton conduct in administering discipline which resulted in discharge from employment and expulsion from membership. In a second count of this new suit he sought declaratory and injunctive relief on behalf of all union members against the Grand Lodge, alleging that Article L, § 3 of the IAM Constitution which allowed discipline of union members for false or malicious statements against other union members or officers conflicted with the freedom of speech provisions of the LMRDA.

In straightening out this tangled web, the district court found Nix foreclosed on count one of his new suit because of the earlier Board and court determination that the discharge had been proper. As to count two of the new suit, the court dismissed it with permission to add it in lieu of the dismissed amended complaint in the original action. The court also narrowed the class to only those members against whom the union’s constitutional prohibition was being applied.

All of these maneuvers were considered and affirmed by this court, 452 F. 2d 794. We stated:

The cause of action asserted can be included by amendment to [the original suit]. Plaintiff will not be harmed by such a course and the district court was well within its case management discretion in the action taken. This leaves the matter in the posture where the district court can determine, in the event of amendment, as its order contemplates, whether the matter should proceed as a class action at all, depending on whether the requisites of Rule 23, F.R.Civ.P., are met.

Id. at 797.

Amendment was made below, and we are now faced with an appeal from the final disposition of this case.

At this point it becomes necessary to attempt to clearly delineate precisely what issues plaintiff is presenting to this court. The difficulty here is that the facts must be gleaned from a morass of pleadings and pre-trial conferences. The district court considered that the only claims by Nix were the questions of constitutionality of the provision to be determined as a class action and the awarding of any attorney’s fees. All damage claims for Nix himself were clearly dropped at pre-trial conference. The court then proceeded to hold the disciplinary section of the IAM Constitution void because of conflict with the LMRDA. The court also ruled that reasonable attorney’s fees would be allowed.

For purposes of this appeal, plaintiff appears to challenge only the court’s conclusion that class damages had not been sought and that the attorney’s fees which counsel for plaintiff were ultimately awarded were inadequate.

Damages for the Class

It is extremely difficult to understand exactly what plaintiff is seeking as damages for the class. In brief and in motions before the trial court he alleges that the term “all appropriate relief” encompassed a claim for class damages. Furthermore, he maintains that the district court was obligated to publish notice to all possible class members and permit other class members to come into the suit and prove their own individual special damages. This would, of course, have, if there were as many possible claims as plaintiff alleges, resulted in a multiplicity of damage trials as each individual alleging injury would have to prove his right to be a member of the class by showing that the provision had been used against him and then prove the damages which followed from that application. As the union points out, actual discipline was imposed following hearing at the local level.

It is not clear from the documents in this case whether plaintiff ever adequately alleged a damage claim on behalf of all members of the class against the International. One thing, however, is clear, and that is determinative of this issue. The trial court in its pre-trial order and in its opinion clearly stated that the class claim was “fully one of law” and indicated that it would be considered on the declaratory and injunctive grounds only.

Under Rule 23 of the Federal Rules of Civil Procedure, the prerequisites for a class action are spelled out in detail. Class actions are of three basic types with the requirements for each varying to some degree. It appears to this court that the district court was proper in limiting the class aspects to the single issue of law.

A reading of the district court’s earlier order of November 16, 1970, wherein it considered a union motion to dismiss the class nature of the actions shows that the court envisioned permitting this suit under Rule 23(b)(2). The court stated that the class count of the complaint was “simply a claim that those same rights (and the rights of persons similarly situated) are violated by the existence and threatened application of that provision of the Union constitution.” This is thus properly a class action within Rule 23(b)(2) which allows such actions when:

(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunc-tive relief or corresponding declaratory relief with respect to the class as a whole .

Since the district court made none of the findings required for maintenance under Rule 23(b)(3), it is obvious that the suit was being allowed to proceed as a class matter under Rule 23(b) (2).

Originally, it was thought suits for money damages would not qualify under (b)(2). See Advisory Committee Note, 39 F.R.D. 98, 102. However, several courts have allowed class damage actions in appropriate cases. Robinson v. Lorillard Corp., 4 Cir. 1971, 444 F.2d 791; Almenares v. Wyman, D.C.N.Y.1971, 334 F.Supp. 512, and other cases cited in Wright & Miller, Federal Practice and Procedure: Civil § 1775, note 31. However, we are not faced with a case where the district court treated damage claims as part of the class action and wholly different considerations apply.

A district court is given broad discretion in controlling class actions because of the managerial difficulties which may develop. Section (c)(4) of Rule 23 specifically states: “When appropriate (A) an action may be brought or maintained as a class action with respect to particular issues . . .”. This clearly means that the district court may take only those parts of a lawsuit which lend themselves to convenient use of the class action motif. Problems which may develop “after an initial finding of liability can be adequately handled since the rule gives a court the power to divide the class into appropriate subclasses or to require the members to bring individual suits for damages.” Eisen v. Carlisle & Jacquelin, 2 Cir. 1968, 391 F.2d 555.

Very instructive on this issue are the views of those scholars generally regarded as currently the leading commentators on the Federal Rules:

Disputes over whether the action is primarily for injunctive or declaratory relief rather than a monetary award neither promote the disposition of the case on the merits nor represent a useful expenditure of energy. Therefore, they should be avoided. If the Rule 23(a) prerequisites have been met and injunctive or declaratory relief has been requested, the action usually should be allowed to proceed under subdivision (b)(2). Those aspects of the case not falling within Rule 23(b) (2) should be treated as incidental. Indeed, quite commonly they will fall within Rule 23(b)(1) or Rule 23(b) (3) and may be heard on a class basis. Even when this is not the case, the action should not be dismissed. The court has the power under subdivision (c)(4)(A), which permits an action to be brought under Rule 23 “with respect to particular issues” to confine the class action aspects of a case to those issues pertaining to the injunction and to allow damages issues to be tried separately, (footnote omitted).

Wright & Miller, Federal Practice and Procedure: Civil § 1775.

Here there seems no doubt that the primary relief sought was injunctive and declaratory and that the concept of class damages (without any individual injury being shown) would be highly speculative.

Nix had waived all questions of damages on his individual claim. Nix knew of no other parties who might have been injured, although he alleged several unnamed parties. It seems eminently clear that because of the differing nature of each individual possible claim, the problem involved in proving separate damages, and the fact that the only common question involved here was the legal question of the validity of the constitutional provision, the district court wisely used its discretion to limit the class aspects to the declaratory action.

Therefore, we hold that it was within the trial judge’s discretion to limit the class aspects of this case to the question of the validity of the constitutional provision.

Attorney’s Fees

The only controversy presented in this appeal over the amount of attorney’s fees awarded counsel for plaintiff Nix is his claim that they were grossly inadequate. The union has not challenged their awardance nor the amount. The district court awarded fees in the amount of $3,000.00. We affirm this determination.

The application by plaintiff’s counsel for attorney’s fees is somewhat unique. The amount claimed is $2,500,000.00. The supporting brief on this figure shows that it was computed by multiplying $2.50, the amount collected monthly by the Grand Lodge from each member, times the approximate total membership of the union, one million. The rest of the request reads very similar to a petition for punitive damages. Plaintiff’s attorney appears to be of the opinion that he should be personally enriched because the union has used sanctions against its membership which conflict with an act of Congress and because he feels it would be socially desirable to punish this union. This has never been the rule in this circuit and we are confident that it never will be. Were punitive damages to be allowed or available in an action such as this they certainly should go to injured parties, not directly to the attorney.

As a legal matter, the arguments made by counsel supporting this figure are thoroughly unconvincing. Primary reliance is placed upon Ratner v. Bakery and Confectionery International Union, 1965, 122 U.S.App.D.C. 372, 354 F.2d 504. In Ratner the court clearly indicated that the award of attorney’s fees was based on quantum meruit. On an earlier appeal of the Ratner case, 335 F. 2d 691, the circuit court had indicated that the district court should not be restricted to figuring attorney’s fees on the basis of a fee schedule which had been originally entered with the plaintiffs and to which the International was not a party. At that time the court indicated that the award should be based on a quantum meruit theory and suggested that the district court take into account the value of the benefit to the International and its membership from the services. The ' amount actually awarded by the trial judge on remand in Batner was extremely close to the amount requested by the attorney based on the fee schedule. The Court of Appeals upheld this as within the court’s discretion. Any reasonable reading of the Batner opinions show that they are not applicable to the claims of this attorney.

Here, despite repeated requests, plaintiff’s attorney failed to supply any information on time spent in the preparation and handling of the class aspects of this case. The trial court in this case therefore based its award on its own knowledge of the proceedings:

In this case, the issue upon which counsel obtained relief arose long after the original trial of the private plaintiff’s case. There has been no trial time and, so far as1 the court knows, no time spent in discovery procedures on this issue. The question was presented by amendment to the pleadings and on brief plus the celebrated short conference with the court. Attorneys’ fees in such eases are deemed by the court to be compensatory and not punitive in nature.

Our consideration of the record in this case leads us to the conclusion that the district court was well within its discretion in setting attorney’s fees at $3,000.-00. We note that counsel for the plaintiff has not presented this court or the district court at any time with a statement of work done on this ease. He has apparently been satisfied to rest his claim for attorney’s fees on his allegations of social desirability which we clearly reject above.

Therefore, the opinion of the district court in this case is, in all respects

Affirmed.

      . Since the class was limited to those against whom this provision was being enforced, determination of the members of the class would be difficult although the plaintiff alleges notice could be given in the union’s periodical.


author: WIDENER, Circuit Judge:

text:
    ROYSTER COMPANY, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 72-2067.
    United States Court of Appeals, Fourth Circuit.
    Argued Feb. 8, 1973.
    Decided June 4, 1973.

      Steven Shapiro, Atty., Tax Division, U. S. Dept, of Justice (Scott P. Cramp-ton, Asst. Atty. Gen., Meyer Rothwacks, William L. Goldman, Attys., Tax Division, U. S. Dept, of Justice, Brian P. Gettings, U. S. Atty., and J. Brian Don-nelly, Asst. U. S. Atty., on brief) for defendant-appellant.
    Richard B. Spindle, III, Norfolk, Va. (Allan G. Donn and Willcox, Savage, Lawrence, Dickson & Spindle, Norfolk, Va., on brief) for plaintiff-appellee.
    Before CRAVEN, FIELD, and WIDENER, Circuit Judges.
   WIDENER, Circuit Judge:

This appeal involves a claim for the refund of federal employment taxes (withholding of income, Federal Insurance Contributions, and Federal Unemployment taxes), plus interest, for a total amount of $11,327.11. Plaintiff Royster is a manufacturer of commercial fertilizers which it distributes throughout 17 states, primarily through independent dealers. During 1965, plaintiff employed about 125 salesmen who were paid both salaries and commissions. Upon the salaries and commissions, Royster withheld Federal Insurance Contributions (FICA) and income withholding taxes, filed timely quarterly FICA returns and timely annual Federal Unemployment Tax (FUTA) returns, and remitted the taxes due. During 1965 and 1966, plaintiff also reimbursed its salesmen for the cost of meals purchased by them during the day on the road. Royster did not withhold FICA or income withholding taxes on the reimbursements for meals, nor did Royster include such amounts on the FICA or FUTA returns filed for 1965 and 1966 or remit any taxes with respect to such reimbursements.

Upon audit of Royster’s 1965 and 1966 returns, the commissioner assessed additional FICA and income withholding, and FUTA taxes and interest. Royster paid the additional assessments and filed timely refund claims. S'ix months having lapsed without the refund claim being acted upon, Royster filed its complaint in the district court.

Both Royster and the Government waived trial by jury or other evidentiary hearing and submitted the case for decision by the court based upon a stipulation, briefs, and oral argument. The stipulation entered into by the parties recited the following as the sole issue in the case:

“. . . whether the amounts paid by plaintiff to its salesmen to reimburse them for the cost of certain meals eaten in the sales territory constitute wages subject to FICA, FUTA and income withholding taxes.”

The district court resolved the issue in favor of Royster and the Government appeals. The government has expressly stated in its brief that it makes no contention that any of the district court’s findings of fact are clearly erroneous. Rather, it contends that the district court erred, as a matter of law, in its holding that the meal reimbursements were not wages within the meaning of the statutes involved.

The district court noted that the government there, as here, abandoned its position that in all instances the code provisions relating to income tax liability of employees are in pari materia with FUTA and FICA and income tax provisions relating to the employer’s duty to withhold. That confession by the government was inescapable in light of the recent case law which has rejected such a theory. Acacia Mutual Life Insurance Co. v. United States, 272 F.Supp. 188 (D.Md.1967); Humble Oil & Refining Co. v. United States, 194 Ct.Cl. 920, 442 F.2d 1362 (1971); Humble Pipe Line Co. v. United States, 194 Ct.Cl. 944, 442 F.2d 1353 (1971); Peoples Life Ins. Co. v. United States, 179 Ct.Cl. 318, 373 F.2d 924 (1967); Stubbs, Overbeck & Assoc., Inc. v. United States, 445 F.2d 1142 (5th Cir. 1971). The government continues to contend, however, that the non-deductibility of such reimbursed expenses by the employee is at least support of its premise that the reimbursements are wages with respect to FUTA and FICA and income tax withholding.

The nature of the payments to the Royster salesmen is described in the stipulation as follows:

“During 1965 and 1966, plaintiff also customarily reimbursed its salesmen for the cost of meals purchased by them during the day on the road.
“Each of plaintiff’s salesmen regularly maintains a daily expense account which is submitted to plaintiff on a weekly basis. These accounts are itemized in detail. The salesmen are allowed the cost of meals purchased by them while on the road even though the territory being covered on a day in question may not have required overnight lodging.
* * # -* * *
“The salesmen to whom the reimbursements in dispute were made for meals purchased on the road were not required to stay away from home overnight. Although the reimbursement to the salesmen . . . was based on actual expenditures by the salesmen, the amount of reimbursement for purposes of the tax assessments involved here was computed by extrapolating from an agreed upon eight week period. The sample selected excluded expenses reimbursed to salesmen away from home overnight. Thus, no part of the amount in dispute here is attributable to reimbursement of salesmen who were away from home overnight.”

The amounts paid by Royster were further described by the district court (and the Government takes no exception to such description) as follows:

“The reimbursements here paid to plaintiff’s, salesmen were the actual cost of meals, just that and nothing more. The reimbursement was not a regular payment in the sense that it would be made without a supporting individual claim for each meal; it was not made unless it was in fact an actual reimbursement, after the fact; it was not made if the meal was not purchased ; it was not dependent for reimbursement as to title or status of the salesman; it was not in any wise measured for reimbursement on any salary or commission level of the salesman; it did save the company the additional mileage expense if the salesman chose to remain in the sales territory and not return to his home' area for a meal.”

It is against this factual background that we view the pertinent statutes.

Concerning FICA. 26 U.S.C. §§ 3101 and 3102 impose a tax for old age, survivors, disability and hospital benefits and require the employer to collect such taxes from the wages of the employee. § 3121(a) defines “wages” within the meaning of §§ 3101 and 3102 as “all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.” Concerning FUTA. 26 U.S.'C. § 3306(b) likewise defines “wages” as “all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash.” For the purposes of withholding income tax by the employer, 26 U.S.C. § 3401(a) defines wages: “For purposes of this chapter, the term ‘wages’ means all remuneration for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash.” The district court was properly of opinion that the slight variations in the wording of the above statutes were inconsequential and that wages has the same essential meaning under all the statutes here in question. The government in its brief agrees with this determination. Thus, the case turns not upon any factual dispute but upon a reading of the pertinent statutes and the meaning to be given the term “wages.”

The government contends that in determining whether the amounts at issue in this litigation are wages, the question is whether the amounts paid are “attributable to the employment relationship.” Such a sweeping theory is too broad. Carried to its logical conclusion, the government’s argument might require that every payment or other economic gain flowing from an employer to an employee constituted wages upon which withholding of income and FICA tax is required and FUTA tax payable. See Humble Oil & Refining Co. v. United States, 194 Ct.Cl. 920, 442 F.2d 1362 (1971). This, of course, is not the law. There are numerous instances in which the government has been of opinion that benefits flowing from the employer to the employee do not constitute wages within the purview of the statutes at issue herein. For example, in Revenue Ruling 59-227, 1959-2 C.B. 13, it was held that a lump sum payment to an employee for his relinquishment of a seniority right and the vacation of a particular position, while ordinary income to the employee, did not constitute compensation for services performed and hence withholding was not required. And, in Revenue Ruling 55-520, 1955-2 C.B. 393, payment to an employee in settlement of litigation over his employment contract, while held to be income to the employee, was held not to constitute a payment for services on which withholding was required. See also Humble Oil & Refining Co. v. United States, 194 Ct.Cl. 920, 442 F.2d 1362 (1971). We cannot agree that any payment made to the employee which is “attributable to the employment relationship” constitutes wages subject to FICA, withholding and FUTA. Such a position might have more validity if the question here concerned the income tax treatment of the reimbursements; however, that is not the issue before us. See Stubbs, Overbeck & Associates v. United States, 445 F.2d 1142 (5th Cir. 1971). We agree with those cases cited earlier in this opinion which reject the proposition that wages under the FUTA, FICA and income tax withholding provisions is synonomous with income under the income tax provisions of the Code. We are of opinion that the term wages is narrower than the term income as used in the income tax provisions relating to how an individual must treat payments to him. Wages are merely one form of income. The government’s position might well render nugatory any distinction between the two.

We believe that the question here is whether the payments at issue were made to the employees of Royster as remuneration for services performed. Such is the literal wording of the statutes involved, and the government advances no reason to support the expanded construction contended for. All a salesman in this case had to do to get reimbursed was to eat on the road. If he did so, he was reimbursed regardless of his performance. Where he ate and what he did while he ate were of no concern to the employer. He performed no services while eating, directly or indirectly. Having the salesmen eat on the road did result in lower mileage traveled by the salesmen than if they returned home to eat, certainly a legitimate business choice of the employer. Stubbs, supra; Acacia, supra; Peoples Life Insurance Co., supra.

The government relies on S. S. Kresge Co. v. United States, 218 F.Supp. 240 (E.D.Mich.1963) and S. S. Kresge Co. v. United States, 379 F.2d 309 (6th Cir. 1967). (The facts were the same in both cases. The 6th Circuit opinion essentially approved the previous opinion of the district court.) The Kresge eases are not inconsistent with this opinion, but actually support the plaintiff. Kresge involved a company which operated a large number of chain stores. The stores involved had lunch counters or snack bars and the company provided a free lunch for any person employed in the food department who would spend his one-half hour lunch break on the job. This enabled the store to keep lunch counter employees at work for the rush hour business in case they were needed. No employee was required to participate in this plan and any employee could take his one-half hour lunch break where he pleased. In both cases, the value of the free lunch was held to be subject to FICA and FUTA taxes. In both cases, however, the employees performed services for the employer during lunch hour when called upon, which they were from time to time. Also, the employees were forbidden to leave the counter and were required to be available for work during lunch time. Being present, available for work, and working if necessary, was held to furnish the consideration for the lunch, and the lunch was the consideration for the employee’s giving up his time and working if necessary. The holdings in the Kresge cases, thus, are in accord with the language of the statutes defining wages: “remuneration for employment” and “remuneration for services performed.”

Each of the other cases, save one, which are relied upon by the government is consistent with this opinion. Most of them are concerned with the income tax treatment of the payment in question. Except Campbell, n. 3, those which relate to FUTA and FICA and income withholding tax statutes have found a service performed by the employee in return for the payment involved if the payment is held subject to the tax sought to be imposed.

Here, unlike Kresge, the remuneration is not attributable to any service on the part of the employee. The Royster salesmen were not on call during their lunch break, and they got the free lunch whether they made any sales that day or not. They performed no services during lunch hour. We conclude, therefore, that the payments in question here were not wages as that term is used in the FUTA and FICA and income tax withholding statutes.

The decision of the district court is

Affirmed.

      . “It is possible, based upon the facts of a specific case, for an employer to make payments to its employees that are not paid as remuneration for employment.” Government brief, p. 10. Of course, we must “ . . . adjudge the rights of parties upon existing facts. . . . ” Bissell v. Spring Valley Township, 124 U.S. 225, 232, 8 S.Ct. 495, 499, 31 L.Ed. 411 (1888). Our duty is “ . . . limited to determining rights . . . which are actually controverted in the particular case. . . . ” United States v. Hamburg American Co., 239 U.S. 466, 475, 36 S.Ct. 212, 216, 60 L.Ed. 387 (1916).

      . On oral argument, the government contends the stipulated phrase “on the road” suggests home area rather than away from home area. We do not take seriously this departure from ordinary English usage.

      . United States v. Correll, 389 U.S. 299, 88 S.Ct. 445, 19 L.Ed.2d 537 (1967): Held cost of meals away from home but not overnight not deductible for income tax purposes. Amoroso v. Commissioner of Internal Revenue, 193 F.2d 583 (1st Cir. 1952): Deductions from income tax for meals not away from home and not overnight held not deductible for income tax purposes. Campbell Sash Works, Inc. v. United States, 217 F.Supp. 74 (N.D. Ohio, E.D.1963): Expense paid vacation for employees held subject to FICA, FUTA, and income tax withholding where employees performed no services during paid vacation. Commissioner of Internal Revenue v. Duberstein, et ux, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1959): Gift of a Cadillac automobile to a business associate held to be income to the recipient. Old Colony Tr. Co. v. Comm’r. Int. Rev., 279 U.S. 716, 49 S. Ct. 499, 73 L.Ed. 918 (1929): Payment by corporation of corporate executive’s income tax pursuant to agreement held to be income. Fred Marion Osteen, et al. v. Commissioner of Int. Rev., 14 T.C. 1261 (1950): Meals away from home but not overnight held not deductible for income tax purposes. United States v. Morelan, 356 F.2d 199 (8th Cir. 1966) : Reimbursement for meals by state policemen away from home but not overnight held to be on the business premises of the employer and not includable in taxable income and deductible if included. Contra, Wilson v. United States, 412 F.2d 694 (1st Cir. 1969). Winn v. Com. of Int. Rev., 32 T.C. 220 (1959) : Meals away from home but not overnight held not deductible for income tax purposes.


author: BREITENSTEIN, Circuit Judge. DURFEE, Senior Judge

text:
    Wilhelm J. BRUSS, Sr., Petitioner-Appellant, v. C. E. HARRIS, Warden, United States Penitentiary, Leavenworth, Kansas, Respondent-Appellee.
    No. 72-1589.
    United States Court of Appeals, Tenth Circuit.
    May 29, 1973.
    Durfee, Senior Judge, dissented and filed opinion.
    Carl Feldhamer, Denver, Colo., for petitioner-appellant.
    Bruce E. Miller, Asst. U. S. Atty. (Robert J. Roth, U. S. Atty., on the brief), for respondent-appellee.
    Before BREITENSTEIN and DOYLE, Circuit Judges, and DUR-FEE, Judge, Court, of Claims.

       Sitting by designation.

   BREITENSTEIN, Circuit Judge.

In this habeas corpus proceeding a federal prisoner seeks a recomputation of the time which he must serve. The district court dismissed the petition, and the petitioner has appealed.

Petitioner was arrested on federal charges on January 9, 1971, and, after an examination to determine his mental competency, was released on a personal recognizance bond on March 9, 1971. While free, petitioner was arrested and jailed on an unrelated state charge in Nebraska. He appeared in federal court under a writ of habeas corpus ad prose-quendum, pleaded guilty to a violation of 18 U.S.C. § 659, was sentenced on July 2, 1971, to three years imprisonment, and was immediately returned to state custody. He entered a guilty plea to the state charge and on October 28, 1971, was sentenced to two years imprisonment to run concurrently with the federal sentence and was released to federal authorities.

The issue is whether the petitioner is entitled to credit on his federal sentence for the period from July 2 to October 28, 1971, when he was in state custody awaiting disposition of the state charges. Petitioner says that he is entitled to the credit because a federal de-tainer prevented him from making bond on the state charge. Credit for the time in state custody was given in the state sentence.

Petitioner was arraigned on the state charge on June 9, 1971, and upon his plea of not guilty, bond was fixed at $3,500. After the federal sentence and the return of petitioner to state custody, a federal detainer against petitioner was filed with the state authorities. The date when the detainer was filed does not appear in the record. The petition for relief alleges:

“Petitioner attempted to raise the bond set by the State of Nebraska and succeeded. Upon raising said bond Petitioner talked with two bondsmen in Lincoln and was informed by both bondsmen that since a federal detainer had been placed against him they would not consider accepting the amount of money needed for the State bond.”

The district court held no evidentiary hearing and, on the basis of the petition and the response thereto, concluded that the petitioner was not entitled to have the time in question credited on the federal sentence.

Petitioner relies on a line of Fifth Circuit decisions. See Davis v. Attorney General, 5 Cir., 425 F.2d 238, 240; Ballard v. Blackwell, 5 Cir., 449 F.2d 868, 870; Spence v. United States, 5 Cir., 452 F.2d 1198, 1199, and O’Connor v. Attorney General, 5 Cir., 470 F.2d 732, 734. The last, O’Connor, dealt with whether jail time on a New Jersey state charge should be credited against a federal sentence imposed in Georgia. The court pointed out the procedural difficulties and remanded the case with directions that the district court should require appellant to utilize an available administrative remedy before proceeding to the fact questions in issue. The record before us does not show any applicable administrative remedies. The Davis, Ballard, and Spence decisions remanded for further evidentiary hearing to determine whether the state detention was solely due to, the federal detainer. Only one of these eases, Spence, dealt with the question of double credit. It held that if the state sentence runs concurrently with a longer federal sentence and the prisoner was unable to post state bond solely because of the federal detainer, he is entitled, to credit on the federal sentence. We are unable to reconcile the Spence decision with Jackson v. Attorney General, 5 Cir., 447 F.2d 747, 748-749, which denies double credit and holds that where the prisoner declines state bail or cannot make it, federal credit does not begin until he is surrendered to federal authorities.

Section 3568, 18 U.S.C., provides that a federal sentence begins to run on the date when the person is received at the institution for the service of the sentence and that the Attorney General shall credit toward service of the sentence “any days spent in custody in connection with the offense or acts for which the sentence was imposed.” The question is whether the July 2-October 28 state custody was jail time served in connection with the federal sentence. We believe that it was not. The controlling facts appear in the record and are not controverted. No evidentiary hearing was required. State bond was fixed prior to the federal sentence. At that time, and for several weeks thereafter, no federal action impinged on his right to release. Petitioner does not claim that he was unable to make the state bond because of indigency. Rather, he says that he “succeeded” in raising the bond and that two bondsmen would not act because of the federal detainer. Additionally, he received a credit for the time in question against the state sentence.

We attach no significance to the fact that the state sentence ran concurrently with the previously imposed federal sentence. Petitioner owed a debt to two sovereigns, and each had a right to exact its debt independently of the other. The petitioner’s claim is that after having received credit from one sovereign he is entitled to credit from both. We do not agree. He is not entitled to double credit. Shields v. Daggett, 8 Cir., 460 F.2d 1060, 1061. In our opinion the jail time in question was not spent in connection with the offense or acts for which the federal sentence was imposed, and, consequently, he is not entitled to credit against the federal sentence.

Affirmed.

DURFEE, Senior Judge

(dissenting).

I respectfully dissent. The question, as stated by the majority is “whether the July 2-October 28 state custody was jail time served in connection with the Federal sentence.”

The majority has concluded that the jail time was not spent in connection with the offense or acts for which the Federal sentence was imposed. I agree only insofar as to the period of jail time prior to July 2.

On July 2, 1971, appellant was sentenced in the U. S. District Court for the District of Nebraska to three years imprisonment for violation of 18 U.S.C. § 659. Appellant alleged that on that day he was returned to state custody, placed in the Lincoln City-County Jail and placed under a Federal detainer. Petitioner-appellant argues that his failure to secure release from his state imprisonment was due to the Federal de-tainer. Appellant alleges that he was informed by two bondsmen “that since a Federal detainer had been placed against him, they would not consider accepting the amount of money needed for the State bond.” This allegation presents a situation identical to the situation testified to by the petitioner-appellant in Ballard v. Blackwell, 449 F.2d 868, 870 (5th Cir. 1971).

If petitioner had been able to furnish the bail required by the state court, we may fairly assume that when he was released from the state jail on bail, he would immediately have been taken into Federal custody to serve his Federal sentence beginning on July 2, 1971, rather than on October 28, 1971, when he was sentenced on the state charge and released to the U. S. Marshal to begin serving his three-year Federal sentence.

The District Court concluded that petitioner’s custody from July 2 to October 28, 1971, was attributable to the state rather than the Federal charge. It held no evidentiary hearing and made no determination either as to why petitioner was unable to furnish bond on the state charge, or whether there was a nexus, as claimed by petitioner, between this inability to furnish bond and the existence of the Federal detainer. Whether there is a nexus between the Federal detainer and continued state confinement is a fact question for the trial court as pointed out in O’Connor v. Attorney General, 470 F.2d 732, 734 (5th Cir. 1972).

In Davis v. Attorney General, 425 F. 2d 238 (5th Cir. 1970) state bail was set on state charges; Davis represented that the Federal detainer was responsible for his confinement because the state officials relied on the detainer warrant to refuse to release him on bail. Upon these allegations by Davis, the 5th Circuit Court held:

“If he was denied release on bail because the federal detainer was lodged against him, then that was time ‘spent in custody in connection with the (federal) offense’, since the detainer was issued upon authority of the appellant’s federal conviction and sentence. Thus, the judgment of the district court is reversed and the cause remanded for an evidentiary hearing on this issue.” 425 F.2d at 240.

In both Davis and the instant case, the state court set the amount of bail to be required for release from state detention, and both Davis and petitioner Bruss alleged that they failed to secure bail because of the Federal detainer.

In Jackson v. Attorney General, 447 F.2d 747, 748-749 (5th Cir. 1971), the Court of Appeals said:

“Though it [bail] was offered to him and though he wanted it, he simply could not make it. The parole violation on warrant (Federal) had nothing to do with petitioner’s failure to be released from state custody.”

This conclusion was reached because an evidentiary hearing by the District Court had established a fact. In the present case, no evidentiary hearing was held by the District Court to determine whether, as alleged by petitioner, he had been unable to be released on bail because his bondsmen had refused to post bond because of the Federal detainer, and whether, as a fact, there was a nexus between the Federal detainer and continued state confinement.

The majority notes that: “State bond was fixed prior to the federal sentence. At that time, and for several weeks thereafter, no federal action impinged on his right to release.” All this is true but beside the point. Petitioner does not seek credit for this time from June 9, 1971, when bond was fixed, and before July 2, 1971, when petitioner alleges the detainer was placed upon him. See e. g., United States v. Eidum, 474 F.2d 579 (9th Cir. 1973).

I agree that no significance attaches to the fact that the state sentence ran concurrently with the previously imposed Federal sentence. I also agree that petitioner owed a debt to two sovereigns and each had a right to exact its debt independently. But the fact of the matter is that if petitioner’s allegations are taken to be true, as of July 2, 1971, each sovereign did not seek to exact its debt independently of the other.

In my opinion, the case should be remanded to determine, as stated in O’Connor, (1) whether bail was possible, and (2) whether the Federal detainer alone caused the continued state confinement, the burden to establish these two factors being upon appellant.

In O’Connor, the 5th Circuit Court held that the District Court on remand before proceeding to the fact questions at issue, should require appellant to utilize the administrative remedy and procedure provided by the Office of Legal Counsel, Bureau of Prisons, Attorney General’s Office, Washington, D. C. The reason stated by the Court for this requirement was that “these cases arising under 18 U.S.C.A. § 3568, and Davis v. Attorney General, supra, present procedural difficulties in that witnesses having knowledge of the facts surrounding state detention, and the failure to make bail are usually far removed from the federal courts where claims of the type here are asserted.” I do not know whether these “procedural difficulties” also exist within the Tenth Circuit. If they do, then the District Court, had this case been remanded, should have been instructed to require appellant to utilize the administrative remedy provided before proceeding to the fact questions which in my opinion, are in issue.

      . In Boyd v. United States, 448 F.2d 477-478 (5th Cir. 1971) the Court of Appeals adopted the reasoning of the District Court which said: “The thrust of Davis is to the effect that denial of state bail must be caused by the federal detainer. If state bail is granted, petitioner is then free to seek federal bail and no credit for state custody is allowed. As a corollary, it seems useless for a prisoner to make state bail if immediate federal custody — not subject to bail — is to follow. Consequently, in those two instances the courts will grant credit towards a subsequent federal sentence for the ‘jail time’ in state custody.”


author: PER CURIAM: ALBERT V. BRYAN, Senior Circuit Judge

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. CAST-A-STONE PRODUCTS COMPANY, Respondent.
    No. 72-2228.
    United States Court of Appeals, Fourth, Circuit.
    Argued March 8, 1973.
    Decided May 30, 1973.
    Albert V. Bryan, Senior Circuit Judge, dissented and filed an opinion.
    John F. Depenbrock, Atty., N. L. R. B. (Peter G. Nash, Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel and Elliott Moore, Deputy Asst. Gen. Counsel, N. L. R. B., on brief) for petitioner.
    J. W. Alexander, Jr., Charlotte, N. C. (Alexander Copeland, III, Blakeney, Alexander & Machen, Charlotte, N. C., on brief), for respondent.
    Before BRYAN, WINTER and BUTZ-NER, Circuit Judges.
   PER CURIAM:

The Board seeks enforcement of its order based upon its finding that the employer committed an unfair labor practice when it discharged Raymond Leasure. Before the trial examiner, the issues had been whether the employee was a supervisor and hence beyond the Act’s protection in the matter of discharge, and whether the discharge was illegal because it resulted from Leasure’s protected union activity. The trial examiner found that the employee was a supervisor, but that he had been discharged for protected union activity; accordingly, he recommended dismissal of the complaint. The government excepted to the finding that the employee was a supervisor. The employer, however, filed no exception to the finding that the employee was discharged for a proscribed reason. The Board, with one member dissenting, reversed the finding that the employee was a supervisor. Since the employer had not excepted to the trial examiner’s finding that the employee had been discharged for unacceptable reasons, it adopted this finding without independent scrutiny and ordered the employee’s reinstatement. 19 N.L.R.B. No. 66.

We find no merit in the employer’s contention that the record as a whole is devoid of substantial evidence to support the Board’s finding that Lea-sure was an employee, rather than a supervisor. It follows that the employer violated § 8(a)(3) and (1) of the Act by discharging him because of his union activity, unless the Board’s finding with regard to the reason for his discharge is vulnerable. We conclude, however, that that issue is not before us.

We turn to the specifics of what transpired. The trial examiner found that Leasure was a supervisor and recommended dismissal of the complaint charging an unfair labor practice in his discharge. But the trial examiner also found that the employer “discharged Leasure solely on the basis that he had been in contact with a labor organization and because of its concern that this might lead to an attempt to organize its employees.” When general counsel filed exceptions to the finding that Leasure was a supervisor, the employer had the right, which it failed to exercise, to file “cross-exceptions to any portion of the trial examiner’s decision, together with a supporting brief . . . ” 29 C.F.R. § 102.46(e). The right was exercisable “within 10 days, or such further period as the Board may allow, from the last date on which exceptions and any supporting brief” may have been filed by general counsel. Id. By the Board’s rules, a matter not excepted to was not before the Board and the employer’s omission constituted a waiver of the contention it elected not to assert. 29 C.F.R. §§ 102.46(b) and 102.48(a). When the Board reversed the trial examiner’s decision with respect to Leasure’s status, it did not consider the rest of the trial examiner’s decision, and the finding that Leasure was discharged for union activity became the law of the case.

In United States v. Tucker Truck Lines, Inc., 344 U.S. 33, 37, 73 S.Ct. 67, 69, 97 L.Ed. 54 (1952), the general principle that administrative decisions should not be overturned “unless the administrative body not only erred but has erred against objection made at the time appropriate under its practice,” was stated. Section 10(e) of the Act, 29 U.S.C.A. § 160(e), specifically codifies that “[n]o objection that has not been urged before the Board . . . shall be considered by the court, unless the failure or neglect to urge such objection shall be excused because of extraordinary circumstances.” We find no extraordinary circumstances here, and we therefore conclude that the employer cannot obtain review of the portions of the trial examiner’s report unfavorable to it which was adopted by the Board and to which it failed to file cross-exceptions within the time permitted by the regulations. American Fire Apparatus Co. v. N. L. R. B. 380 F.2d 1005, 1006 (8 Cir. 1967) supports our view. See also N. L. R. B. v. Midwestern Manufacturing Co., 388 F.2d 251, 253 (10 Cir. 1968); N. L. R. B. v. Gold Spot Dairy, Inc., 417 F.2d 761, 762 (10 Cir. 1969); N. L. R. B. v. Douglas & Lomason Co., 443 F.2d 291, 293 (8 Cir. 1971). The cases relied on by the employer, except one, all arose before the Board’s regulations permitted the filing of cross-exceptions by a prevailing party and were decided on the basis of that lack. We deem them inapposite. N. L. R. B. v. Local 282, International Bro. of Teamsters, etc., 412 F.2d 334 (2 Cir. 1969), seemingly to the contrary, relies on authorities superseded by a change in the Board’s regulation without adverting to either the basis for the earlier decisions or the change in the Board’s rules. We cannot read it as a controlling authority.

Enforcement granted.

ALBERT V. BRYAN, Senior Circuit Judge

(dissenting):

With the dissenting member of the National Labor Relations Board and with the Trial Examiner, I think the dischargee, Raymond Leasure, was a supervisor within the meaning of Section 2(11) of the Act, and thus not within the employee protection of the Act’s Sections 8(a)(1) and (3).

At all events, when the Examiner reached this conclusion — at the same time recommending that the complaint be dismissed — the employer had won the case. Nevertheless, the Board and the majority of the Court penalize the employer for not taking an exception to the Examiner’s report. For me this is wholly without justification.

The penalty imposed is the refusal of the Board, and now the Court, to allow the employer even to be heard on the soundness of a hypothetical finding of the Examiner which the Board adopted as its finding. The finding second-guessed that if the Examiner was wrong about Leasure’s supervisor status, and if Leasure was only an employee, then as an employee, Leasure had been discharged for union activities. But the Examiner declined to decide that Lea-sure was an employee and explicitly concluded that “Respondent’s discharge of Raymond V. Leasure did not violate the Act”. Having prevailed in the case, the employer was not compelled to except.

Truth is no exception could logically have been interposed by the employer to the Examiner’s report. Until the Board overruled the Examiner’s finding of Leasure’s supervisor capacity, there was no decision adverse to the employer. Obviously, too, the employer had no opportunity to except to the adjudication that Leasure had been unwarrantably discharged. Until the Board’s ruling, the employer had no reason or ground for exception. Until then the employer had won and could not at that time have disagreed with the Examiner’s report.

I cannot conceive how any obligation to file an exception was put upon the employer by the General Counsel’s exception to the Examiner’s failure to make the Examiner’s speculative finding the Examiner’s decision. For this requirement, the Court cites a Board rule to the effect that, when General Counsel files exceptions to “any portion of the trial examiner’s decision”, the employer ■may (not must) file cross-exceptions. (Accent added). The employer’s omission to do so constitutes, it is said, a waiver of its right to contest the Board’s finding of the reasons for Lea-sure’s discharge.

It is unbelievable that this rule embraces a hypothetical decision. Surely an exception runs only to a decision, not to the pondering or reflection of the judicial officer upon what should be his final decision. It is particularly noteworthy that the Examiner made no “decision” on the asserted employee-violation. That he made no such decision is conclusively demonstrated by his basing his recommendation of dismissal solely upon the supervisor issue. That was his decision; his meditation upon what it might have been was not a decision.

Finally, at least, the circumstances were extraordinary, and, for that reason, the Board and the Court should not enforce any such rule as the Board now asserts, for the statute, 29 U.S.C.A. § 160(e) cited by the Court, excuses the failure of the employer in such circumstances to urge an objection “before the Board, its member, agent or agency”.

With deference, I conclude that the Board’s order should not be enforced because of the Board’s refusal to hear the employer on the reason for Leasure’s discharge.

       Notwithstanding our dissenting brother’s strong characterizations to the contrary, we view the case no differently from many which come before us on appeal from a district court where the district court has decided all issues — a desirable practice to avoid unnecessary retrial — even though decision of the first may be dispositive of the litigation. A patent case, in which the district court has decided both that a patent is invalid, but if valid was infringed, is a good example. If plaintiff appeals the issue of validity of the patent but defendant fails to appeal the finding of infringement, and if we conclude that the patent is valid, ordinarily we would not consider the issue of infringement so that the district court’s decision on that issue would be final. So here, we think it good practice for the trial examiner to decide all issues, but we think it unnecessary for the Board to pass on any issue to which the parties do not except.


author: BUTZNER, Circuit Judge:

text:
    Robert E. MATTHEWS, Appellee, v. FORD MOTOR COMPANY, a Delaware corporation, Appellant. Robert E. MATTHEWS, Appellee, v. KIMNACH FORD, INC., a Virginia corporation, Appellant.
    Nos. 72-2306, 72-2307.
    United States Court of Appeals, Fourth Circuit.
    Argued March 7, 1973.
    Decided May 21, 1973.

      Allan S. Reynolds, Norfolk, Va. (White, Reynolds, Smith & Winters, Norfolk, Va., on brief), for Ford Motor Co.
    William E. Baggs, Norfolk, Va. (James A. Howard and Breeden, Howard & McMillan, Norfolk, Va., on brief), for Kimnach Ford, Inc.
    Thomas J. Harlan, Jr., Norfolk, Va. (William L. Dudley, Jr., and Doumar, Pincus, Knight & Harlan, Norfolk, Va., on brief), for Robert E. Matthews.
    Before CRAVEN, BUTZNER and RUSSELL, Circuit Judges.
   BUTZNER, Circuit Judge:

Alleging numerous errors, Ford Motor Company and Kimnach Ford, Inc. appeal from a judgment, entered on a jury verdict, for personal injuries suffered by Robert Matthews when his car went out of control as a result of a mechanical defect. Finding that no reversible error was committed during the trial and that Virginia law, which governs this diversity action, supports the liability of Ford and Kimnach, we affirm.

The evidence, viewed in the light most favorable to Matthews, disclosed the following facts: Matthews purchased the car, a 1968 Ford XL Galaxie 500, from Kimnach, an authorized Ford dealer, in April 1968. In November 1968, the vehicle shifted into reverse gear while traveling forward on a rough road. Matthews returned the car to Kimnach for repairs. The defect was in the gear shift selector mechanism, which Kim-nach attempted to correct under the terms of the vehicle warranty. Less than two months later the car again inadvertently shifted into reverse, this time causing a collision that severely injured Matthews.

Eyewitnesses described the car’s erratic movement. The testimony of experts supported Matthews’ claim that Ford’s defective design and assembly and Kimnach’s improper repairs allowed the transmission to reverse unexpectedly. The trial judge submitted the case to the jury on theories of negligence and breach of warranty, and the jury returned a general verdict in favor of Matthews against both Ford and Kim-nach.

Many of the assignments of error pertain to familiar principles of law and to questions which were solely the province of the jury. On these issues, we find extended discussion unnecessary. Examination of the record and consideration of the briefs and oral argument disclose no reversible error in the empaneling and instruction of the jury, the admission and exclusion of evidence, or the denial of motions for judgment. Further, the evidence of negligence amply supports the jury’s verdict against both defendants in tort. Cf. Pierce v. Ford Motor Co., 190 F.2d 910 (4th Cir. 1951).

However, because the jury returned a general verdict, Ford and Kim-nach argue that error in submitting Matthews’ claim of breach of warranty to the jury requires reversal. They rely on clauses in the contract of sale, which they assert are sufficient to disclaim liability. Since no Virginia case applying the sections of the Uniform Commercial Code that pertain to the contractual liability of a manufacturer and a dealer has been called to our attention, we will briefly state the reasons for our affirmance on this issue.

The purchase order for Matthews’ new car contained an express warranty. In lieu of implied warranties, Ford warranted the car to be free from defects in material and workmanship for a period of twenty-four months or until it had been driven 24,000 miles, but the only remedy mentioned was replacement of defective parts free of charge. Matthews urges us to hold that Ford’s exclusion of the implied warranties of merchantability and fitness is either ineffective or unconscionable under §§ 2-316 or 2-302 of the Uniform Commercial Code. However, we need not consider this approach to the problem because it is clear that Ford is liable under its express warranty.

The evidence was sufficient for the jury to find that Ford breached its express warranty by selling a car which inadvertently went into reverse gear when a wheel struck the type of slight obstruction that a manufacturer could reasonably expect a buyer to encounter in ordinary travel. Cf. Spruill v. Boyle-Midway, Inc., 308 F.2d 79, 83 (4th Cir. 1952). Therefore, the only remaining question is the effectiveness of Ford’s attempt to limit damages by restricting Matthew’s remedy to replacement of defective parts. This limitation fails for two reasons. First, Virginia’s version of the Uniform Commercial. Code strips Ford of the defense of lack of privity. Secondly, § 2-719(3) of the Code denounces as prima facie unconscionable the limitation of damages for personal injuries that are caused by consumer goods. Since Ford did not rebut this presumption, Matthews was entitled to recover damages for his injuries.

Kimnach Ford’s contractual liability rests on a different theory. The district court ruled that Kimnach impliedly warranted the fitness of the car, as provided in § 2-315 of the Code. Evidence of the car’s defects was sufficient to establish breach of this warranty and, therefore, the jury’s verdict on this issue is unassailable. Kimnach, however, urges us to hold that although it gave no express warranties, it effectively disclaimed all implied warranties. We find no merit in this contention.

Clause 10 of the terms and conditions of the purchase order was not an effective disclaimer. The Code requires that a writing excluding the implied warranty of fitness be “conspicuous.” Clause 10, buried in small type among 18 other numbered paragraphs on the back of the purchase order, fails to satisfy the Code’s definition of this essential adjective. Accordingly, the implied warranty of fitness was not excluded by Clause 10.

The district court, over Kimnaeh’s objection, held that Kimnach could not rely on the disclaimer of implied warranties in Ford’s express warranty because this warranty by its terms ran directly from Ford to the customer. In the absence of an effective disclaimer, the court ruled, the implied warranty of fitness provided in § 2-315 applied. We find no error in this ruling. Generally, express warranties and disclaimers do not run with personal property. Therefore, the exclusions contained in a manufacturer’s express warranty do not absolve an independent dealer from liability imposed by an implied warranty. Jolly v. C. E. Blackwell & Co., 122 Wash. 620, 211 P. 748 (1922); cf. Fisher v. City Sales & Serv., 128 So.2d 790, 793 (La.App.1961) (civil law).

Kimnach, however, argues that the general rule of non-assignability of disclaimers does not apply because Ford’s disclaimer expressly embraces the dealer. Even if the district court had accepted this argument, Kimnach would be liable. If the disclaimer in Ford’s warranty is deemed to exclude Kimnach’s implied warranty, the undertaking assumed by Kimnach to fulfill Ford’s warranty must also be considered. Its liability, therefore, is coextensive with Ford’s, and the attempt to limit its responsibility for damages to the repair or replacement of defective parts is also prima facie unconscionable under § 2-719(3) of the Code. Since Kimnach, too, failed to rebut the presumption, it, no less than Ford, would be liable to Matthews for his personal injuries under this alternative theory.

Although the Virginia Supreme Court held in Marshall v. Murray Oldsmobile Co., 207 Va. 972, 154 S.E.2d 140 (1967), that a disclaimer of implied warranties was not contrary to public policy, Ford’s and Kimnach’s reliance on the case is unfounded. Murray was a suit for rescission of a contract, not for personal injuries. Moreover, since the transaction occurred before Virginia adopted the Uniform Commercial Code, the statutes which govern the case before us played no role in- that decision.

The judgment is Affirmed. •

      . The uncertainty caused by the general verdict is illustrated by the disparate effect of contributory negligence, which in Virginia is a defense to tort liability but not to breach of warranty. Consideration of Matthews’ alternative claims probably would be unnecessary had the jury returned separate verdicts on the issues of negligence and breach of warranty, as allowed by Fed.R.Civ.P. 49(a).

      . The Supreme Court of Virginia has indicated that an action for personal injuries caused by breach of warranty should be based on the contract of sale and not on the doctrine of strict-liability in tort. Brockett v. Harrell Bros., Inc., 206 Va. 457, 143 S.E.2d 897, 902 (1965); see Speidel, The Virginia “Anti-Privity” Statute: Strict Products Liability under the Uniform Commercial Code, 51 Va.L. Rev. 804, 817 (1965). While the theories of tort and contractual liabilities differ, the result of this case would likely have been the same had the principles of Restatement (Second) of Torts § 402A (1965) been applied. See Chestnut v. Ford Motor Co., 445 F.2d 967, 968 (4th Cir. 1971); cf. Vandermark v. Ford Motor Co., 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168 (1964).

      . The following warranty appeared on the back of the purchase order :
      “There is no warranty, express or implied, made by either the Ford Motor Company or the selling Dealer on new Ford vehicles except the following direct Company vehicle warranty:
      DIRECT COMPANY VEHICLE WARRANTY
      “Ford Motor Company warrants to the owner each part of this Ford vehicle to be free under normal use and service from defects in material and workmanship for a period of 24 months from the date of delivery to the original retail purchaser or until it has been driven for 24,000 miles, whichever comes first. This warranty shall be fulfilled by the dealer (or if the owner of the vehicle is traveling or has become a resident of a different locality, by any authorized Ford dealer) replacing or repairing at his place of business, free of charge including related labor, any such defective parts.
      “This warranty shall not apply to (i) tires or tubes (appropriate adjustment for them being provided by their manufacturers), or (ii) to normal maintenance services (such as engine tuneup, fuel system cleaning and wheel, brake and clutch adjustments), or (iii) to normal replacement of service items (such as filters, spark plugs, ignition points, wiper blades and brake or clutch linings), or (iv) to deterioration of soft trim and appearance items due to normal use or exposure.
      “This warranty is expressly IN LIEU OF any other express or implied warranty, including any implied WARRANTY of MERCHANTABILITY or FITNESS, and of any other obligation on the part of the Company or the selling Dealer.”
      Ford also furnished Matthews a full warranty statement which was essentially similar to the warranty in the purchase order.

      . Va.Code Ann. § 8.2-316 provides in part:
      “(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this title on parol or extrinsic evidence (§ 8.2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
      “ . . . to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. . . . ”
      Va.Code Ann. § 8.2-302(1) provides:
      “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”

        See Ford Motor Co. v. Reid, 250 Ark. 176, 465 S.E.2d 80 (1971); Zabriskie Chevrolet, Inc. v. Smith, 99 N.J.Super. 441, 240 A.2d 195 (1968); Berg v. Stromme, 79 Wash.2d 184, 484 P.2d 380 (1971). See generally L. Frumer & M. Friedman, Products Liability § 19.07 [6] (1972); C. Bunn, H. Snead, and R. Speidel, An Introduction to the Uniform Commercial Code § 2.28(B) (1964) ; Ellinghaus, In Defense of Unconscionability, 78 Yale L.J. 757 (1969); Moyle, Exclusion and Modification of Warranty under the U.C.C., 46 Denver L.J. 579 (1969); Note, Unconscionable Contracts under the Uniform Commercial Code, 109 U.Pa.L.Rev. 401 (1961).

      . Va.Code Ann. § 8.2-318 provides in part: “Lack of privity between plaintiff and defendant shall be no defense in any action brought against the manufacturer or seller of goods to recover damages for breach of warranty, express or implied, or for negligence, although the plaintiff did not purchase the goods from the defendant, if the plaintiff was a person whom the manufacturer or seller might reasonably have expected to use, consume, or be affected by the goods "

      . Va.Code Ann. § 8.2-719(3) provides:
      “Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.”
      Va.Code Ann. § 8.2-715(2) defines consequential damages:
      “(2) Consequential damages resulting from the seller’s breach include
      “(b) injury to person or property proximately resulting from any breach of warranty.”

      . Va.Code Ann. § 8.2-315 provides:
      “Implied warranty: Fitness for particular purpose. — Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.”
      The district court did not instruct the jury on the implied warranty of merchantability created by Va.Code Ann. § 8.2-314.

      . Kimnach’s argument may be self-defeating. It has been suggested that total disclaimer of warranties would be unconscionable with respect to personal injuries. See L. Frummer & M. Friedman, Products Liability § 19.07 [6] (1972).

      . “10. It is expressly agreed that there are no warranties, express or implied, made either by the Dealer or the manufacturer on the motor vehicle, chassis, parts or accessories furnished hereunder, unless a separate written warranty is given by the Dealer to the Buyer at the time of sale. This applies to new motor vehicles as well' as used motor vehicles. The Buyer must have a written guarantee in his possession to secure an adjustment.”
      This clause was printed in type much smaller than the warranty set forth in note 3, supra.

      . Va.Code Ann. § 8.2-316(2) provides in part:
      “[T]o exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. . . ”

      . Va.Code Ann. § 8.1-201(10) provides:
      “A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals ... is conspicuous. Language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color .... Whether a term or clause is ‘conspicuous’ or not is for decision by the court.”

        See Moyle, supra note 4, at 607.

      . See note 7, supra.

      . At the instance of Ford and Kimnach, the district court ruled that Kimnach was not the agent of Ford.

      . See note 6, supra.


author: McENTEE, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff, Appellee, v. 6.321 ACRES OF LAND MORE OR LESS Situated IN SUFFOLK COUNTY et al., Defendants, Appellees, City of Boston, Defendant, Appellant.
    No. 73-1033.
    United States Court of Appeals, First Circuit.
    Heard April 10, 1973.
    Decided May 30, 1973.

      Mack K. Greenberg, Asst. Corp. Counsel, Boston, Mass., with whom Herbert P. Gleason, Corp. Counsel, Boston, Mass., was on brief for appellant.
    Jacques B. Gelin, Atty., Dept, of Justice, with whom Kent Frizzell, Asst. Atty. Gen., James N. Gabriel, U. S. Atty., Edmund B. Clark, and Peter H. Ruvolo, Attys., Dept, of Justice, were on brief, for appellee.
    Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.
   McENTEE, Circuit Judge.

This appeal arises from a suit by the United States to condemn certain property located in the City of Boston for use as an addition to an existing postal facility. In April 1966 the Post Office Department notified the City of Boston that it planned to expand the South Boston Postal Annex through the medium of a lease-construction arrangement. Under this plan the proposed addition was to be built and owned by private parties and then leased to the Department, thus remaining subject .to local taxation. In September of that year the Department filed an application for a building permit for this project which was denied when a number of potential zoning violations became apparent. This denial was appealed, however, and in March 1967, upon further assurances to the city that the proposed structure would remain on the tax rolls, the necessary variances to the zoning law were granted. Thereafter, the parcel in question was conveyed by the government to private developers, construction proceeded for four years, and, on December 7, 1971, the addition was leased to the Postal Service for a term of thirty years with certain options for renewal for substantial periods of time.

Some two weeks later, however, in an abrupt change of policy, the Postal Service filed a “Declaration of Taking” with reference to this property and, on December 30, 1971, filed the instant condemnation suit in which the City of Boston and all other parties thought to have an interest in this property were joined as defendants. After the value of the interests of all the other claimants had been agreed upon, the United States moved to dismiss the city as a party. Upon hearing, the district court granted this mo-ton finding that the city had not demonstrated ownership of any compensable interest in the property and, to the extent that the city sought to recover for breach of an alleged agreement with the Postal Service, that it lacked jurisdiction to entertain this claim in this proceeding. This appeal followed.

The initial issue which must be examined on appeal is the nature of appellant’s interest in the condemned property. In this regard the city first argues that the Postal Service’s promise, allegedly made in exchange for the approval of the building permit, that this facility would remain on the tax rolls for at least thirty years afforded it “a special and unique interest in the property” which is compensable within the meaning of the fifth amendment. In the alternative, the city contends that an agreement between itself and the Postal Service arose out of the circumstances detailed above and that it is entitled to compensation because this agreement was appropriated in this proceeding. We find neither of these contentions persuasive.

Turning first to appellant’s contract-appropriation argument, while recognizing that compensation may be required where a contract is taken, Brooks-Scanlon Corp. v. United States, 265 U.S. 106, 44 S.Ct. 471, 68 L.Ed. 934 (1924); Omnia Commercial Co., Inc. v. United States, 261 U.S. 502, 508, 43 S.Ct. 437, 67 L.Ed. 773 (1928), we do not agree that this rule advances appellant’s claim since, in the instant case, if any agreement was taken, it was one between the Postal Service and the lessor of ,the condemned property. Under these circumstances, even assuming that a contract did exist between appellant and the government, the most that can be said is that its performance was frustrated by this taking, a contingency deemed non-compensable by the Court in Omnia,, supra. See Mullen Benevolent Corp. v. United States, 290 U.S. 89, 54 S.Ct. 38, 78 L.Ed. 192 (1933). The argument based upon appellant’s alleged “special” interest in the property fares no better since, in our view, regardless of how this interest is described, it amounts to nothing more than ah expectation of collecting future taxes on the parcel in question. That such an expectation is not a compensable interest in a condemned parcel is well settled since to permit a state or municipality to recover on such a claim would violate the long recognized immunity of the federal government from the taxing power of the states. See M’Culloch v. State of Maryland, 17 U.S. (4 Wheat.) 316, 4 L.Ed. 579 (1819); Adaman Mutual Water Company v. United States, 278 F.2d 842, 849 (9th Cir. 1960) and cases cited; United States v. City of Glen Cove, 322 F.Supp. 149, 155 (E.D.N.Y.), aff’d 450 F.2d 884 (2d Cir. 1971). As this court observed in People of Puerto Rico v. United States, 134 F.2d 267 (1st Cir.), cert. denied, 320 U.S. 753, 64 S.Ct. 59, 88 L.Ed. 448 (1943), a condemnation action in which an irrigation service sought additional compensation for the diminution of its tax base,

“Appellant . . . [argues] that it has a legal right and duty to levy and collect special taxes and assessments on the land within the irrigation district for the purpose of repaying the money borrowed on the irrigation bonds, and that this legal right is a franchise, ... We find no merit in this contention. It is true that under the laws of Puerto Rico there existed the right to levy special assessments upon the lands for the payment of the bonds but it does not follow that the right to exact special assessments is a franchise. If this were so, it could equally be argued that the right to tax is a franchise for which upon condemnation the United States must pay just compensation. We know of no valid distinction for the purpose of the present discussion between the right to tax in general and the right to levy special assessments. [Citation omitted.] Any piece of property taken in condemnation by the United States is withdrawn from the scope of local taxation. But to say that the power to tax is a franchise or property right is to say that a state or municipality may in effect levy taxes upon property taken by the United States in condemnation proceedings. This obviously is not so.” Id. at 270-271.

While the city had received a specific commitment of taxes for a fixed period, we do not see that this additional factor takes this case out of the general rule making non-compensable an expectation of taxes. The trial court was thus clearly correct in concluding that appellant failed to establish ownership of a com-pensable interest in the property taken.

Appellant’s further contention that it should be entitled to assert a counterclaim for breach of its alleged agreement with the Postal Service in this proceeding is also without merit. This argument flies directly in the face of the fundamental precept of sovereign immunity that the United States may not be sued unless it has consented and, where this has occurred, that such consent is to be strictly construed. United States v. Sherwood, 312 U.S. 584, 590, 61 S.Ct. 767, 85 L.Ed. 1058 (1941). In light of this rule, since the counterclaim in question is based upon an alleged breach of contract and sums in excess of $10,000 are in issue, it is clear, under the Tucker Act, 28 U.S.C. §§ 1346(a)(2), 1491 (1970), that it may be heard only in the Court of Claims. See United States v. 83.70 Acres, Etc., State of Washington, 430 F.2d 1130, 1132 (9th Cir. 1970). The further suggestion that raising this counterclaim is permissible under rule 71A, Fed.R.Civ.P., the rule which governs procedure in federal condemnation actions, is also not convincing. While this rule has been construed to permit joint defendants to assert cross-claims against one another in these proceedings, see United States v. Merchants Matrix Cut Syndicate, Inc., 219 F.2d 90, 93-96 (7th Cir.), cert. denied, 349 U.S. 945, 75 S.Ct. 873, 99 L.Ed. 1271 (1955); United States v. Eight Tracts of Land, Brookhaven, N. Y., 270 F.Supp. 160 (E.D.N.Y.1967); but see United States v. 76.15 Acres of Land, 103 F.Supp. 478 (N.D.Cal.1952), its promulgation did not effect a waiver of the government’s immunity and counterclaims by defendants against the United States, like the one in issue, have not been permitted. See United States v. 3,317.39 Acres, Etc., Jefferson County, Arkansas, 443 F.2d 104, 106 (8th Cir. 1971), cert. denied, 404 U.S. 1025, 92 S.Ct. 674, 30 L.Ed.2d 675 (1972); United States v. 9 Acres, Etc., St. Mary Parish, Louisiana, 100 F.Supp. 378 (E.D.La.1951), aff’d sub nom., Oyster Shell Products Corp., Inc. v. United States, 197 F.2d 1022 (5th Cir.), cert. denied, 344 U.S. 885, 73 S.Ct. 184, 97 L.Ed. 685 (1952). We see no reason to depart from these decisions on the instant record.

Finally, appellant’s challenge to the necessity of this taking merits little comment. The taking was for a legitimate public purpose; whether it is better for the government to own rather than lease is a matter of practical judgment beyond judicial scrutiny. See Berman v. Parker, 348 U.S. 26, 35-36, 75 S.Ct. 98, 99 L.Ed. 27 (1954).

Affirmed.

      . The district court held that jurisdiction to hear such a claim would lie only in the Court of Claims under the Tucker Act, 28 U.S.C. §§ 1346(a)(2), 1491 (1970).


author: WALLACE, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. George C. WALKER and Marie H. Walker, Defendants-Appellants.
    No. 72-2667.
    United States Court of Appeals, Ninth Circuit.
    April 27, 1973.

      George Constable (argued), Seattle, Wash., for defendants-appellants.
    Robert S. Linnell, Asst. U. S. Atty. (argued); Dean Smith, U. S. Atty., Yakima, Wash., for plaintiff-appellee.
    Before TRASK, GOODWIN and WALLACE, Circuit Judges.
   WALLACE, Circuit Judge:

A jury found Walker guilty of failure to file income tax returns for 1965 and 1966 in violation of 26 U.S.C. § 7203. No question is raised as to whether he should have filed — his defense was that the failure was not willful. He alleges that the trial court erred in failing to instruct the jury properly as to willfulness, refusing to admit evidence that no tax was due, and improperly admitting evidence pertaining to the net worth of certain of his assets. We concur with the last cohtention and reverse.

Walker engaged in farming, land lev-elling and concrete irrigation ditch lining. His wife kept his books. Walker’s income tax returns for 1955 and 1956 had been prepared together and both were filed late. Likewise, his 1957, 1958 and 1959 tax returns were all prepared together and filed late. In both instances, Walker experienced “no trouble” from the Internal Revenue Service.

Walker had his 1960 and 1961 tax returns prepared together but, due to a dispute with his accountant, these returns were never filed. In late 1967 or early 1968, Walker contacted another accounting firm and asked it to prepare his tax returns for 1960 through 1966. Subsequently, he was indicted, tried and convicted of failure to file tax returns for 1965 and 1966.

Over objection, the trial court allowed proof of an increase of $248,241 in Walker’s net worth between 1958 and 1967. Because the facts indicated Walker’s gross income for both years exceeded the statutory minimum, the prosecution had already proved that he was required to file returns. Therefore, this evidence was unnecessary to show the duty to file. Moreover, unrealized increases in net worth resulting from a higher market value are not probative of gross income. Holland v. United States, 348 U.S. 121, 137-138, 75 S.Ct. 127, 99 L.Ed. 150 (1954); Eisner v. Macomber, 252 U.S. 189, 214-215, 40 S.Ct. 189, 64 L.Ed. 521 (1920). The admission of this evidence would have a definite tendency to prejudice a jury in a failure to file case where the defense is a lack of knowledge of the need to file. When there is no legitimate basis for admissibility and the prejudice is such that the defendant could not receive a fair trial, a reversal is required.

Because the case must be retried, we will discuss the remaining issues raised.

The trial court instructed the jury that:

It is the gross income of $600.00 or more, according to the law, that requires one to file an income tax return. Whether the taxpayer’s return would show that he owed a tax is irrelevant, and should not be considered by you on the question of the taxpayer’s duty to file a return.

Walker contends that this instruction is erroneous. We disagree. At most, it presents the possibility of slight confusion because the jury might believe that the instruction also referred to Walker’s defense, but it does not amount to reversible error.

Walker also contends that the trial court erred by refusing to give his following proposed instruction:

If a taxpayer honestly thinks he owes no income tax for a certain year and if he honestly believes that a lack of tax due affects his duty to file a return, such are factors to be considered in determining whether his failure to file a return for that year was willful.

The government’s position is that the content of the proposed instruction was essentially covered by the general instruction on willfulness and that the trial court has considerable discretion in determining whether to give such an instruction. Suhl v. United States, 390 F.2d 547, 556 (9th Cir.), cert. denied, 391 U.S. 964, 88 S.Ct. 2035, 20 L.Ed.2d 879 (1968). We agree.

The trial court rejected Walker’s offer of proof that in fact there was no federal income tax owing for any year during the period 1960 through 1966, with the exception of $2,720.87 owing for 1962. The purpose for offering this evidence, and the reason it was admissible, was to substantiate Walker’s testimony and sole defense: that he did not think he had to file his returns promptly because he honestly did not think he owed any taxes. Whether or not a jury will believe his story, even with this evidence, only a new trial will tell. But it is obvious that he has the right to introduce this corroborating evidence. If he had taxable income in these prior years, the government could have shown that fact to attempt to have the opposite inference drawn.

Reversed and remanded for further proceedings consistent with this opinion.

      . For the sake of clarity, however, the instruction might read:
      Whether the taxpayer’s return would show that he owed a tax should not be considered by you on the question of the taxpayer’s duty to file a return. Compare 2 E. Devitt & C. Blackmar, Federal Jury Practice and Instructions § 52.30 (2d ed. 1970).

      . The court instructed the jury that:
      The word “willful” as used in this particular statute, that is, Section 7203 of Title 26, United States Code, means with a bad purpose or without grounds for believing one’s act is lawful, or without reasonable cause, capriciously, or with a careless disregard whether one has the right so to act. In other words, the prosecution must establish, beyond any reasonable doubt that the failure to file returns was intentional, as opposed to being by accident or other innocent cause.

        Compare Devitt & Blackmar, supra note 1, § 52.31.