author: JAMES HUNTER, III, Circuit Judge:

text:
    HOPEWELL TOWNSHIP CITIZENS I-95 COMMITTEE et al., Appellants, v. John A. VOLPE, as Secretary of the United States Department of Transportation, et al., Appellees.
    No. 72-1941.
    United States Court of Appeals, Third Circuit.
    Argued June 7, 1973.
    Decided July 2, 1973.

      Levy, Levy, Albert & Marcus, Trenton, N. J., David Sive, James A. Burke, Wi-ner, Neuburger & Sive, New York City, for appellants.
    Richard L. Rudin, Dept, of Transp., Trenton, N. J., Herbert J. Stern, U. S. Atty., Carl R. Woodward, III, Asst. U. S. Atty., Newark, N. J., George F. Kugler, Atty. Gen., Richard L. Rudin, and Daly D. E. Temehine, Deputy Attys. Gen., for appellees.
    Before SEITZ, Chief Judge, and STALEY and HUNTER, Circuit Judges.
   OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

This is an appeal from an order of the United States District Court for the District of New Jersey denying plaintiffs’ application for a preliminary injunction and granting defendants’ motion for summary judgment.

Plaintiffs are the Hopewell Township Citizens 1-95 Committee (“Committee”) and Lewis Terpening, Keith Robertson, Martin Katz and Win Straube, individually. They filed this action to enjoin the federal and state defendants from proceeding with the construction of a section of Interstate Highway 95 (“1-95”) in Hopewell Township, New Jersey. This section is approximately 3.4 miles in length and, if built as presently planned, will connect the existing westerly terminus of 1-95 at Scotch Road in Hopewell Township with Interstate Route 295 in the vicinity of Federal City Road in Lawrence Township to the east. The validity of the New Jersey Department of Transportation’s recommendation regarding the location of this segment of 1-95 and the federal approval thereof has already been challenged unsuccessfully in two different lawsuits brought by the Township of Hopewell. Township of Hopewell v. Goldberg, 101 N.J.Super. 589, 245 A.2d 67 (App.Div. 1968), certif. denied, 52 N.J. 500, 246 A.2d 457 (1966), and Township of Hopewell v. Volpe, Civil No. 1390-68 (D.N.J. December 12, 1969), aff’d. 446 F.2d 167 (3d Cir. 1971). Location approval is not involved in this appeal.

In granting defendants’ motion for summary judgment, the district court characterized the instant action as “old hat” and concluded that there was no genuine issue of material fact and that the defendants should prevail as a matter of law. In addition, without using the formal legal terms, the court also seemed to rest its decision on the alternative ground that plaintiffs’ claims were barred by the doctrines of res judicata and collateral estoppel. Plaintiffs challenge both of these rulings, and their central argument is that the state defendants failed to hold a design public hearing on the 3.4 mile section of 1-95 in dispute here prior to federal approval of and participation in the project. We reverse the summary judgment because we find that there exists a genuine fact issue as to whether or not federal design approval or its equivalent was completed before the requirement for a public design hearing became effective. We also find that res judicata and collateral estoppel do not apply in this ease because we believe that the issue of a design public hearing was not adjudicated and could not reasonably have been adjudicated in the previous litigation.

On August 23, 1968, Congress amended § 128(a) of the Federal Aid-Highway Act (“FAHA”) to specifically require any state highway department to certify not only that it has considered the economic effects of a location, but also that it has considered “social effects of such a location, its impact on the environment, and its consistency with the goals and objectives of such urban planning as has been promulgated by the community.” 23 U.S.C. § 128(a) (Supp. V, 1970). The Department of Transportation has construed § 128(a) of the FAHA in Policy and Procedure Memorandum 20-8 (“PPM 20-8”), 23 C.F.R., Part I, App. A (1972), which became effective on January 29, 1969. PPM 20-8 deals with what a state highway department must do before submitting location and design proposals to the Federal Highway Administration (“FHWA”) for approval. It provides for two hearings, a corridor public hearing and a highway design public hearing, and paragraph 4 (b) defines a highway design public hearing as one that:

“(1) Is held after the route location has been approved, but before the State highway department is committed to a specific design proposal;
“(2) Is held to ensure that an opportunity is afforded for effective participation by interested persons in the process of determining the specific location and major design features of a Federal-aid highway; and
“(3) Provides a public forum that affords a full opportunity for presenting views on major highway design features, including the social, economic, environmental, and other effects of alternate designs.”

Consequently, under § 128(a) of the FAHA and PPM 20-8, a design public hearing must precede federal design approval of Federal-aid highway projects like I-95.

In Concerned Citizens of Marlboro v. Volpe, 459 F.2d 332, 335 (3d Cir. 1972), and Wildlife Preserves, Inc. v. Volpe, 443 F.2d 1273, 1274, (3d Cir. 1971), this court determined that § 128 (a) of the FAHA and PPM 20-8 do not apply retroactively to projects which received federal design approval or its equivalent prior to the passage of either provision. Therefore, the basic problem confronting the district court in this case was whether or not the FHWA had approved the design for the section of I-95 between Scotch Road and 1-295 before August 23, 1968, the effective date of § 128(a) of the FAHA. If such approval had been given by this date, no further hearings would be necessary. If it had not been given by then, the statutory and regulatory scheme described above would apply.

In resolving this critical question, the district court had before it a number of items of evidence including two affidavits which on their face appear contradictory. One of these affidavits was taken from Robert I. Kellum, the Division Engineer for the FHWA in New Jersey. According to paragraph 6(i) of this affidavit:

“(i) On August 2, 1968, FHWA approved the design for the section of I-95 between Scotch Road and I-295 (Exhibit 13).”

The second affidavit with which we are concerned was given in 1969 by Edgar H. Swick, the then Deputy Director of the Bureau of Public Roads, an agency of the United States Department of Transportation. This affidavit was used by the federal government in Township of Hopewell v. Volpe, supra, but it was introduced as plaintiffs’ Exhibit 6 in the present case. In paragraph 7 of that affidavit, in an apparent reference to part of proposed 1-95 including the segment of road in dispute here, Mr. Swick stated:

“7. The approval of the location is not authorization for the state to initiate purchase of right-of-way for or to start construction for the route. Pursuant to BPR Policy and Procedure Memorandum 20-8, paragraph 10, design approval must be obtained (34 Fed.Reg. 727 (1969)). Among the steps that must be completed before design approval can be given is a public hearing on the design of the project.”

After quoting all of paragraph 6 of the Kellum affidavit, the district court found as a fact that “all the approval requisite by law was completed by August of 1968.” It then determined that the defendants should prevail as a matter of law, whereupon it granted their motion for summary judgment. The Swick affidavit was not mentioned in the court’s opinion.

It is well settled in the federal courts that a district court cannot grant summary judgment under F.R.Civ.P. 56(c) if there is a genuine issue presented as to the existence of any material fact. First Pa. B. & T. Co. v. United States Life Ins. Co., 421 F.2d 959 (3d Cir. 1969); Bolt Associates, Inc. v. Alpine Geophysical Associates, Inc., 365 F.2d 742 (3d Cir. 1966); Associated Hardware Supply Co. v. Big Wheel Distributing Co., 355 F.2d 114, 17 A.L.R.3d 998 (3d Cir. 1966). In addition, it is clear that all doubts as to the existence of a genuine issue of material fact must be resolved against the party moving for summary judgment. Sarnoff v. Ciaglia, 165 F.2d 167 (3d Cir. 1947).

A key fact in this case, as we have previously indicated, is whether the proposed segment of 1-95 between Scotch Road and 1-295 received federal design approval or its equivalent prior to August 23, 1968. Since the Kellum and Swick affidavits appear to conflict on this important point, and since any doubts must be resolved in favor of the plaintiffs, we conclude that the district court improperly granted defendants’ motion for summary judgment. It may turn out that Kellum is right and Swick is wrong, or that the affidavits can in some way be reconciled, but this cannot be done in the context of summary judgment.

With respect to the district court’s second ground of decision, res judicata and collateral estoppel, we do not believe that this case is “old hat” or “the same old ballgame.” Res judicata and collateral estoppel represent rules designed to prevent needless relitigation over rights and liabilities which have been previously determined. See Commissioner v. Sunnen, 333 U.S. 591, 68 S. Ct. 715, 92 L.Ed. 898 (1948), which defines these doctrines as follows:

“The general rule of res judicata applies to repetitious suits involving the same cause of action .... The rule provides that when a court of competent jurisdiction has entered a final judgment on the merits of a cause of action, the parties to the suit and their privies are thereafter bound ‘not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose’ if
“But where the second action between the same parties is upon a different cause or demand, the principle of res judicata is applied much more narrowly. In this situation, the judgment in the prior action operates as an estop-pel, not as to matters which might have been litigated and determined, but ‘only as to those matters in issue or points controverted, upon the determination of which the finding was rendered’ ... In this sense, res ju-dicata is usually . . . referred to as collateral estoppel.” 333 U.S. at 597-598, 68 S.Ct. at 719.

In order to understand why res judi-cata and collateral estoppel do not bar the present action, it is necessary to examine the two earlier cases involving Hopewell Township. In Township of Hopewell v. Goldberg, supra, the Appellate Division of the Superior Court of New Jersey held that New Jersey had not acted arbitrarily or capriciously in choosing the route alignment of 1-95 between Scotch Road and 1-295 and it also found that the federal requirements had been met with respect to it. Since this case was argued June 24, 1968 and decided July 10, 1968, and since the specific concept of “design public hearing” did not come into existence until August 23, 1968, the requirement of a design public hearing prior to federal design approval was not a matter which could have been litigated in that forum.

After failing to gain relief in state court, Hopewell Township filed a similar lawsuit in the United States District Court in New Jersey. Township of Hopewell v. Volpe, supra. The case was heard before Judge Whipple who granted summary judgment in favor of the defendants and dismissed the complaint on the theory that the Township was barred by res judicata from again litigating the issue of route alignment against New Jersey and by collateral estoppel from litigating it against the federal government. We affirmed in an opinion by Judge McLaughlin which was relied upon by the district court in the present case in finding that “this subject has been litigated heretofore” and that “the issues have been litigated.” The question of a public hearing was not raised in Township of Hopewell v. Volpe, however, and apparently it could not have been since, according to Judge Whipple, the federal government’s position was that a public design hearing would be held in the future:

“The federal defendants argue, further, that the case will be ripe for adjudication, as to it, only after federal funds can be committed, prior to which a hearing must be had and design approval granted. But the Township contests, not the future design, but the state recommendation and federal approval of the route alignment of 1-95. For the Township to have waited until after the design approval had been granted and the right-of-way purchases had been initiated would, in my opinion, have exposed it to the defendants successfully pleading laches.” (emphasis added).

From the above, then, it is obvious that at least much of the subject matter of the present lawsuit has not been and could not have been argued in the previous actions instituted by Hopewell Township. Consequently, it was reversible error for the district court to decide this ease against the plaintiffs on the basis of res judicata and collateral estoppel.

The judgment of the district court granting the defendants’ motion for summary judgment will be reversed. We do not disturb the district court’s denial of a preliminary injunction; however, we remand this ease to the district court and order that it hold an expedited final hearing on plaintiffs’ motion for a declaratory judgment and a permanent injunction.

      . “1. PURPOSE
      “a. The purpose of this PPM is to ensure, to the maximum extent practicable, that highway locations and designs reflect and are consistent with Federal, State and local goals and objectives. The rules, policies, and procedures established by this PPM are intended to afford full opportunity for effective public participation in the consideration of highway location and design proposals by highway departments before submission to the Federal Highway Administration for approval, They provide a medium for free and open discussion and are designed to encourage early and amicable resolution of controversial issues that may arise.
      “b. The PPM requires State highway departments to consider fully a wide range of factors in determining highway locations and highway designs. It provides for extensive coordination of proposals with public and private interests. In addition, it provides for a two-hearing procedure designed to give all interested persons an opportunity to become fully acquainted with highway proposals of concern to them and to express their views at those stages of a proposal’s development when the flexibility to respond to these views still exists.”

      . “6. HEARING REQUIREMENTS
      “a. Both a corridor public hearing and a design public hearing must be held, or an opportunity afforded for those hearings, with respect to each Federal-aid highway project that:
      “ (1) Is on a new location; or
      “(2) Would have a substantially different social, economic or environmental effect; or
      “(3) Would essentially change the layout or function of connecting roads or streets.”

      . Paragraphs 6(j), 6(k) and 6(1) read as follows :
      “(j) On October 16, 1970, FIIWA concurred in the Department’s determination as discussed in their letter of September 29, 1970 that a design public hearing would not be required for this section of 1-95 (Exhibits 14 and 15).
      “(k) On March 10, 1972, FIIWA approved the Stage 2 program for the construction of I-95 from Scotch Road to 1-295 under Project I-IG-95-5(16) 3 (Exhibit 16) and thereby an additional $9,720,000 in Federal funds were committed.
      “(l) On June 19, 1972, FHWA concurred with the State’s 'determination of June 5, 1972 that our plan approval action of August 2, 1968, constituted design approval (Exhibit 17) within the moaning of Policy and Procedure Memorandum (PPM) 90-1, dated August 24, 1971 (Exhibit 18). Paragraph 5e(l) of PPM 90-1 provides that design approval was that action or series of actions set out in paragraph 10 of PPM 20-8 dated January 14, 1969 (Exhibit 19). Paragrapli 5e(l) also provides that the FIIWA’s concurrence in the Deiiartment’s citation of documents, which it believes are equivalent to design approval, will serve as verification that design approval has in fact been given. Thus, design approval was in fact granted on August 2, 1968, which preceded by seventeen months the effective date of the National Environmental Policy Act of 1969.”

      . Commissioner v. Sunnen, supra, indicates that not only named parties but also their privies are bound by final judgments. Since we find that res judicata and collateral estoppel do not operate as a bar to tlie claims in this case, it is unnecessary for us to reach the question of whether the 1-95 Committee and the individual private plaintiffs would be privies of Hopewell Township.


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    In the Matter of Christine Frances Jackson BISHOP, Bankrupt. ROANOKE INDUSTRIAL LOAN AND THRIFT CORPORATION, Appellant, v. Christine Frances Jackson BISHOP, Appellee.
    No. 72-2216.
    United States Court of Appeals, Fourth Circuit.
    Submitted April 4, 1973.
    Decided July 18, 1973.

      Dale Myers, Roanoke, Va., on brief, for appellant.
    Franklin Pierce Pulley, III, Roanoke, Va., on brief, for appellee.
    Before BUTZNER, RUSSELL and FIELD, Circuit Judges.

       This case originally was submitted on briefs to a panel over which Senior Circuit Judge Sobeloff presided. He did preliminary work on the opinion, but unfortunately illness prevented his completing it.

   PER CURIAM:

Roanoke Industrial Loan & Thrift Corporation appeals from an order of the district court which denied its.petition to stay the discharge in bankruptcy of Mrs. Christine J. Bishop while it brought suit in state court to subject property owned by Mr. and Mrs. Bishop as tenants by the entirety to its claim of indebtedness. We affirm the order denying the stay.

Mrs. Bishop and her husband had purchased an outboard motorboat and trailer costing $3,313. They paid $413 down and jointly executed a note for $4,041 representing the balance due, creditor life insurance premiums, and finance charges. The seller assigned the note without recourse to Roanoke along with a purchase money security interest. After paying eight installments aggregating $674, the Bishops defaulted on the note. Roanoke repossessed the boat and its equipment, credited the proceeds from its resale in the amount of $2,000 on the debt, and claimed a deficiency of $1,088 including costs. Several months after the sale, but before Roanoke obtained a judgment for the deficiency, Mrs. Bishop filed a voluntary petition in bankruptcy.

Mr. and Mrs. Bishop owned a house and lot as tenants by the entirety. Under Virginia law, as at common law, a creditor of both husband and wife may subject property held by the entirety to their joint debt, but a creditor of only one spouse may not obtain a lien against the property, or the interest of the spouse in the property. Moreover, neither spouse alone can transfer an interest in the property. Vasilion v. Vasilion, 192 Va. 735, 66 S.E.2d 599, 602 (1951). Since Mrs. Bishop could not transfer any interest in the property and her creditors could not levy on it, her interest did not pass to the trustee in bankruptcy. 11 U.S.C. § 110(a) (5) (1970), Reid v. Richardson, 304 F.2d 351, 353 (4th Cir. 1962); 4A Collier, Bankruptcy § 70.17(8) (14th ed. 1971). Nevertheless, Mrs. Bishop’s discharge from bankruptcy would prevent Roanoke from obtaining a judgment against both her and her husband, a prerequisite to levy against the house. Harris v. Manufacturers Nat’l Bank, 457 F.2d 631, 635 (6th Cir. 1972). Phillips v. Krakower, 46 F.2d 764, 765 (4th Cir. 1931). However, because discharge affects only a bankrupt’s personal liability, if Roanoke could obtain and record a judgment against Mr. and Mrs. Bishop before Mrs. Bishop’s discharge, the judgment lien would not be released by her subsequent discharge. 1A Collier, Bankruptcy § 17.29 (14th ed. 1972). For these reasons, Roanoke petitioned the referee to delay granting the discharge while it sought to obtain a judgment against Mr. and Mrs. Bishop in a state court so it could levy on the property held by the entireties.

The referee conducted an evidentiary hearing on Roanoke’s petition for a stay. He found that Roanoke had failed to comply with the provisions of the Uniform Commercial Code, which Virginia has adopted, governing the sale of repossessed collateral. Concluding, therefore, that Roanoke was not entitled to collect the deficiency, the referee denied the stay, and the district court affirmed.

Roanoke asserts that the referee lacked jurisdiction to rule on the merits of its claim against Mrs. Bishop because it does not seek to collect the indebtedness from an asset of the bankruptcy estate. As a corollary, it asserts that the referee was obligated to stay Mrs. Bishop’s discharge. Roanoke’s contention, we believe, is based on a misconception of the function of a bankruptcy court when it considers a motion for a stay of discharge. Clearly, the court had jurisdiction to consider the petition to grant a stay. Lockwood v. Exchange Bank, 190 U.S. 294, 23 S.Ct. 751, 47 L.Ed. 1061 (1903). In deciding whether to grant or deny a stay, the court undertakes a judicial, not a ministerial, duty. The Bankruptcy Act vests referees with jurisdiction at law and in equity to allow or disallow claims and to discharge or refuse to discharge bankrupts. 11 U.S.C. §§ 11(a), (a)(2), and (a) (12) (1970). The referee is required to discharge the bankrupt unless timely objection is filed, and when a creditor objects, the referee must afford both parties a full hearing. 11 U.S.C. § 32(b) (1970). Proceedings conducted under these and related sections of the Act ordinarily involve the ultimate discharge of the debtor. Obviously, they require the referee to exercise judicial discretion. No less discretion is required when the referee grants or denies a motion to stay a discharge for this decision may affect the orderly, efficient administration of the bankrupt’s estate.

Once the bankruptcy court’s jurisdiction was invoked to consider a motion for a stay, the court was not precluded from exercising judicial discretion because the controversy between Roanoke and Mrs. Bishop involved property that was not a part of the bankrupt’s estate. We read Lockwood v. Exchange Bank, 190 U.S. 294, 23 S.Ct. 751, 47 L.Ed. 1061 (1903), and Phillips v. Krakower, 46 F.2d 764 (4th Cir. 1931), the leading cases granting stays so creditors could levy on property that was not a part of the bankrupt’s estate, as requiring the bankruptcy court, in its capacity as a court of equity, to exercise sound discretion in acting on a motion to stay. In each of those cases the bankruptcy court ascertained that the creditor’s claim was valid and that it would be inequitable to deny the creditor a remedy. We do not depart from this precedent in ruling that the referee should consider the validity of a claim when he is asked to stay a discharge. Our narrow holding in this case is that a stay is not mandatory when it would serve only to allow a creditor to press a claim that is clearly invalid under state law.

Roanoke next contends that the bankruptcy court erred in holding that the sale of the Bishop collateral did not comply with the law. We find no merit in this assignment of error.

The Uniform Commercial Code provides that a secured creditor may purchase repossessed collateral only at a public sale unless the collateral is of the type customarily sold in a recognized market, or is subject to standard price quotations.

The evidence disclosed that Roanoke’s notice of sale to the Bishops was returned unclaimed. Roanoke then moved the boat to a used car lot. It did not advertise the sale in any newspaper. It posted no signs announcing the event. Roanoke’s collection manager testified he mentioned the sale to anyone he thought would be interested. The credit manager, who held the sale, testified that he neither advertised it nor invited anyone to attend. No one passing the lot could have known an auction was taking place. Other than Roanoke’s representatives, only two people were present at the sale. The manager admitted that they were probably employees of the used car lot. One of them, possibly both, bid at the sale, but how high they bid is not shown. Roanoke purchased the collateral for $1,500 and subsequently resold it for $2,000, which it credited to Mrs. Bishop’s account.

Gilmore, in his commentary on § 9-504(3) of the code, says:

“Presumably the essence of a ‘public sale’ is that the relevant public is not only invited to attend but is also informed, by whatever means of publicity may be appropriate, when and where the sale is to be held. If the sale has not been appropriately publicized, it would not be a public sale no matter where it was held or how it was conducted.” 2 G. Gilmore, Security Interests in Personal Property 1242 (1965).

This observation accords with Restatement of Security § 48, comment c at 139-40 (1941), where, a public sale is defined as, “one to which the public is invited by advertisement to appear and bid at auction for the goods to be sold.” We conclude, therefore, that the bankruptcy court’s ruling that Roanoke did not conduct a public sale is supported by the evidence and the law.

The commercial code imposes liability on a secured creditor who disposes of collateral without complying with the law. It is silent, however, about the creditor’s right to recover a deficiency, and courts have not ruled uniformly on this issue. Several courts have held that complaince is a condition precedent to recovery. See e. g., Skeels v. Universal C.I.T. Credit Corp., 222 F.Supp. 696 (W.D.Pa.1963), modified, on other grounds, 335 F.2d 846 (3d Cir. 1964); Braswell v. American Nat’l Bank, 117 Ga.App. 699, 161 S.E.2d 420 (1968); Leasco Data Process. Equip. Corp. v. Atlas Shirt Co., 66 Misc.2d 1089, 323 N.Y.S.2d 13 (Civ. Ct. 1971). Other courts hold to the contrary.

In the absence of a definitive ruling by the Supreme Court of Virginia, we cannot say that the bankruptcy court erred in concluding that Roanoke was barred from recovering a deficiency judgment because it disposed of the collateral in a manner not permitted by the code. A leading commentator advocates this rule, 2 G. Gilmore, Security Interests in Personal Property 1264 (1964), and the result is consistent with the pre-code Virginia law. Va.Code Ann. § 8.9-501, Va. Comment (1965).

But the outcome of this appeal need not rest on speculation about the rule Virginia ultimately will apply to recovery of deficiencies. Even under the alternative theory adopted by some courts, Roanoke cannot prevail. Courts that allow a secured creditor to recover a deficiency although he has not fully complied with the law hold that the debt is not to be credited merely with the proceeds of sale; instead, the debtor must be credited with the amount that reasonably should have been obtained through a lawful sale — that is, the credit must be equivalent to the market value. Logically, the amount of the proceeds is not evidence of the market value, and a creditor who has not complied with the law has the burden of proving by other evidence that the market value is less than the balance due. See e. g., Universal C.I.T. Credit Co. v. Rone, 248 Ark. 665, 453 S.W.2d 37 (1970); Weaver v. O’Meara Motor Co., 452 P.2d 87 (Alaska 1969); Community Management Ass’n of Colorado Springs v. Tousley, 505 P.2d 1314 (Colo.App.1973).

Roanoke’s credit manager admitted that the collateral did not bring its market value at the sale, but he ventured the opinion that it brought 75 percent of its value. His professional qualifications for making this estimate are not shown. Indeed, he conceded that he could not testify what the collateral actually was worth. Roanoke introduced no other evidence of the market value. Nor did resale of the collateral for an additional $500, and the crediting of this sum on Mrs. Bishop’s account, prove that the disposition of the collateral was commercially reasonable or that the aggregrate credit of both sales represented the market value of the collateral. Roanoke did not introduce an appraisal of the property or even evidence of sales of comparable property. The resale does not appear to have been made through a broker or dealer, or in the usual manner in any recognized market. Circumstances of the resale, including advertising, were not disclosed. In short, the only proof of market value was the amount the collateral brought at sales that were neither lawful nor commercially reasonable. This proof is insufficient, as a matter of law, to secure a deficiency judgment.

Roanoke has not established its claim under either theory pertaining to recovery of deficiency judgments when a secured creditor does not follow the law in disposing of collateral. We conclude, therefore, that the bankruptcy court properly exercised its equitable jurisdiction by declining to stay the bankrupt’s discharge. The judgment is affirmed.

      . Va.Code Ann. § 8.9-504(3) (1965), which enacts the Uniform Commercial Code, provides in part:
      “The secured party may buy at any public sale and if the collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations he may buy at private sale.”

      . Va.Code Ann. § 8.9-507 (1965) which enacts the Uniform Commercial Code, provides in part:
      “ (1) If it is established that the secured party is not proceeding in accordance with the provisions of this part disposition may be ordered or restrained on appropriate terms and conditions. If the disposition has occurred the debt- or or any person entitled to notification or whose security interest has been made known to the secured party prior to the disposition has a right to recover from the secured party any loss caused by a failure to comply with the provisions of this part. If the collateral is consumer goods, the debtor has a right to recover in any event an amount not less than the credit service charge plus ten per cent of the principal amount of the debt or the time price differential plus ten per cent of the cash price.
      “(2) The fact that a better price could have been obtained by a sale at a different time or in a different method from that selected by the secured party is not of itself sufficient to establish that the sale was not made in a commercially reasonable manner. If the secured party either sells the collateral in the usual manner in any recognized market therefor or if he sells at the price current in such market at the time of his sale or if he has otherwise sold in conformity with reasonable commercial practices among dealers in the type of property sold he has sold in a commercially reasonable manner. The principles stated in the two preceding sentences with respect to sales also apply as may be appropriate to other types of disposition.”

      . Unless displaced by the Uniform Commercial Code, a state’s prior commercial law supplements the code. Va.Code Ann. § 8.1-103 (1965). This provision supports the bankruptcy court’s application of precode Virginia law. Cf. Atlas Thrift Co. v. Horan, 27 Cal.App.3d 999, 1001, 104 Cal.Rptr. 315, 320 (1972).


text:
    The NATIONAL RESEARCH BUREAU, INC., Appellee, v. Forrest L. BARTHOLOMEW, Appellant in No. 72-1640. The NATIONAL RESEARCH BUREAU, INC., Appellant in No. 72-1641, v. Forrest L. BARTHOLOMEW, Appellee.
    Nos. 72-1640 and 72-1641.
    United States Court of Appeals, Third Circuit.
    Argued April 30, 1973.
    Decided July 30, 1973.

      Walter J. Blenko, Jr., Pittsburgh, Pa., for appellant in No. 72-1640 and appel-lee in No. 72-1641.
    Robert E. Wagner, Walsh, Case & Coale, Chicago, 111., for appellee in No. 72-1640 and appellant in No. 72-1641.
    Before JAMES HUNTER, III, and WEIS, Circuit Judges, and NEWCOMER, District Judge.
   OPINION OF THE COURT

PER CURIAM:

This case is before the Court on appeal by plaintiff, National Research Bureau, Inc., and cross-appeal by defendant, Forrest L. Bartholomew. The case was originally brought in the United States District Court for the Western District of Pennsylvania by National Research Bureau, plaintiff, against Forrest Bartholomew, defendant, alleging that the defendant, an ex-employee, was violating plaintiff’s trademark, using certain customer lists which constituted trade secrets, and engaging in conduct which constituted unfair competition under both state and federal law. Defendant counterclaimed, alleging anti-trust violations and also a claim of unfair competition based on state law, for which independent jurisdictional grounds were pleaded.

Plaintiff moved to strike defendant’s anti-trust counterclaim for failure to state a cause of action, which motion was granted D.C., 331 F.Supp. 1003. No one has attacked the propriety of this action. Defendant then moved for summary judgment, and during the pen-dency of that motion sought to amend his anti-trust counterclaim to cure its previous defects.

Defendant’s motion for summary judgment was granted as to all of plaintiff’s claims. At the same time, the District Court refused to allow the amended anti-trust counterclaim, and further dismissed defendant’s unfair competition counterclaim, on the ground that it was a compulsory counterclaim, and that the District Court has discretion to dismiss a compulsory counterclaim when the main claim is disposed of, to avoid “the tail wagging the dog.”

National Research Bureau, as appellant, argues that the District Court erred on three grounds in granting the motion for summary judgment against it.

First, it contends that the District Court erred in holding, as a matter of law, that defendant’s use of plaintiff’s customer lists and information did not constitute a breach of confidence and unfair competition under Pennsylvania law.

Second, it contends that the District Court erred in the tests it used to conclude that defendant’s magazine title “Humor” did not infringe plaintiff’s registered trademark “Smiles.”

Third, it contends that the District Court erred in failing to find that defendant had used some, if not all, of the distinguishing characteristics of plaintiff’s publication, thereby causing confusion as to origin, and in so doing the District Court misapplied the Pennsylvania cases on unfair competition, and the test for determination of false designation under 15 U.S.C. § 1125(a).

After carefully considering the briefs, oral argument, and the opinion of the District Court, we conclude that the District Court correctly granted summary judgment for defendant Bartholomew, and that the claims of error urged by National Research Bureau are without merit. Accordingly the judgment of the District Court will be affirmed on those questions.

Forrest Bartholomew, as cross appellant, urges that the District Court erred first in dismissing his unfair competition counterclaim for which independent jurisdictional grounds had been pleaded, and second in refusing to accept the amended anti-trust counterclaim.'

We must agree with the first of these propositions. The plaintiff sued the defendant on both federal and diversity grounds and in so doing, of course, submitted itself to the personal jurisdiction of the Court. The defendant pleaded and served upon the plaintiff the unfair competition counterclaim which was, because of its intimate connection with the incidents which first gave rise to this lawsuit, a compulsory counterclaim under F.R.Civ.P. 13(d). It is of course true that no independent jurisdictional grounds are necessary for such a counterclaim, nor need independent grounds be pleaded even if they exist, because a compulsory counterclaim may properly come before the Court supported only by jurisdiction ancillary to the original claim. If that were the case here, the reliance of the trial court on United States for the use of T-Square Equipment Corp. v. Gregor J. Schaefer Sons, Inc., 272 F.Supp. 962 (E.D.N.Y.1967), would be well founded. That case stands for the generally accepted proposition that a counterclaim before the Court only by virtue of ancillary jurisdiction may, in the discretion of the trial court, be dismissed without prejudice when the original claim upon which ancillary jurisdiction is founded is disposed of prior to a determination of the counterclaim. See Moore’s Federal Practice jf 13.15[1]. Although it is also generally conceded that the trial court has the discretion to retain jurisdiction over such a counterclaim for a decision on the merits if the dismissal of the original claim is on other than jurisdictional grounds, the preferred practice, at least where there have been no extensive proceedings on the counterclaim in Federal Court, is to dismiss the counterclaim so that the litigation will then have to be brought in state court, where, as an individual case, it properly belongs. This relieves the Federal Courts from deciding what have become routine non-diversity state claims.

This reasoning is not applicable to the case at bar. The requisites of Federal diversity jurisdiction for the counterclaim were properly pled. Thus the counterclaim, though compulsory, was supported not only by ancillary jurisdiction but also by allegations of independent jurisdiction. Once an issue with independent subject matter jurisdiction is before the court and jurisdiction over the parties has been perfected, it must be allowed to proceed to a conclusion pursuant to the rules of civil procedure like any other routine federal claim. This principle has been recognized in relation to permissive counterclaims, where the issue more usually arises because permissive counterclaims require independent jurisdiction. See Moore’s Federal Practice, jf 13.23. But the crucial issue is not whether the counterclaim is compulsory or permissive. Indeed, on that consideration alone it would seem more logical to retain compulsory counterclaims and dismiss permissive ones. The issue rather is the nature of the jurisdiction supporting the counterclaim, whether compulsory or permissive. Where jurisdiction is merely ancillary, the Court has discretion to dismiss if the original claim supporting it is disposed of. But where, as here, jurisdiction is independent, the counterclaim must be allowed to proceed without regard to the fate of the original claim, and it was error to dismiss it out of hand. There is no justification for putting the plaintiff in counterclaim to the expense, effort and risk of refiling his claim and attempting to re-establish personal jurisdiction over the opposing party.

As for the issue of the anti-trust counterclaim, we do not feel that the District Court abused its discretion in refusing to accept the amended antitrust counterclaim on the state of the record as it appeared to exist when the refusal was made, but this in no way prejudges the propriety of any proffered amendment after the case is remanded.

Accordingly, the judgment of the District Court will be affirmed on all questions except the dismissal of defendant’s counterclaim for unfair competition, and on that issue the judgment of the District Court will be reversed, and the case will be remanded for further consideration of that counterclaim.

      . This was recognized in the very case relied on by the District Court, United States v. Schaefer Sons, supra, at 965, when the Court said in the penultimate paragraph of its opinion that the counterclaim was dismissed “for failure to state an independent ground of jurisdiction.”

      . For purposes of this opinion we accept the allegations of diversity and jurisdictional amount as pleaded in the counterclaim. By so doing, of course, we do not preclude a challenge to their existence in fact if such should be raised during the ensuing proceedings.


author: INGRAHAM, Circuit Judge: BOOTLE, District Judge

text:
    SOUTH GWINNETT VENTURE, a partnership composed of South Gwinnett Apartments, Inc., et al., Plaintiffs-Appellants, v. W. R. (Dudge) PRUITT et al., Defendants-Appellees. ROCKBRIDGE ASSOCIATES, LTD., a Georgia Limited Partnership, Plaintiff-Appellant, v. W. R. (Dudge) PRUITT et al., Defendants-Appellees.
    Nos. 71-3420, 71-3421.
    United States Court of Appeals, Fifth Circuit.
    April 4, 1973.
    Rehearing Granted Dec. 3, 1973.

      Robert F. Cook, Dean Booth, Atlanta, Ga., for plaintiffs-appellants.
    Homer M. Stark, Lawrenceville, Ga., for defendants-appellees.
    Before WISDOM and INGRAHAM, Circuit Judges and BOOTLE, District Judge.
   INGRAHAM, Circuit Judge:

These appeals arose from suits filed in the district court by the respective plaintiffs, each against the Commissioners and the Chief Building Inspector of Gwinnett County, Georgia, each praying that certain portions of the zoning ordinance enacted by the Commissioners be declared unconstitutional and that the Chief Building Inspector issue building permits for the constructions of apartments upon the subject property. The district court dismissed the suits upon the motions of the defendants, holding that the rezoning applications called for a quasi legislative judgment by the zoning board, and as such the district court was without subject-matter jurisdiction to review the actions for anything more than arbitrariness and interest on the part of the board members.

The use of non-record secret evidence by the Gwinnett County Commissioners in denying appellants’ application for the rezoning of certain tracts of land from single family residential classification to multi-family apartment use designations has projected purely local land use questions into a federal forum.

Contending that their applications had been denied by the Commissioners on evidence dehors the record and that the Commissioners’ reliance on such evidence deprived them of due process, the appellants brought suit against the County Commissioners in federal district court asserting jurisdiction under 28 U.S.C. § 1331(a). The district court, noting that federal courts are properly loathe to stretch their limited jurisdiction to become super zoning boards of appeal, found the denial of an application for rezoning to be a quasi-legislative act. As such, the court reasoned it was not impermissible for the quasi-legislators to use non-record materials in exercising their judgment. Consequently, the court dismissed appellants’ complaint. 341 F.Supp. 703 (N.D.Ga., 1971).

We differ in only one salient regard from the decision of the district court. Our difference concerns the nature of an application for the rezoning of a tract of land. As we recently noted in Higginbotham v. Barrett, 473 F.2d 745 (5th Cir., 1973) [1973] :

“The law is settled that the zoning of property, including the preparation of comprehensive land use plans, involves the exercise of judgment which is legislative in character and is subject to judicial control only if arbitrary and without rational basis. Shenk v. Zoning Commission of the District of Columbia, 142 U.S.App.D.C. 267, 440 F.2d 295, 297; Diedrich v. Zoning Commission of the District of Columbia, 129 U.S.App.D.C. 265, 393 F.2d 666; City of St. Paul v. Chicago, St. Paul, Minneapolis and Omaha Railway Company, 8 Cir., 1969, 413 F.2d 762, 766-767. Cf. Goldblatt v. Town of Hempstead, 1962, 369 U.S. 590, 594-595, 82 S.Ct. 987, 8 L.Ed.2d 130.”

The adoption of a legislative plan for the entire community must be distinguished from the treatment which a specific tract of land receives when its owner petitions for reclassification under that plan. As the record in this case demonstrates, consideration of that petition is an exercise of legislative power in a case by case adjudicative setting. Compare, Londoner v. Denver, 210 U.S. 373, 28 S.Ct. 708, 52 L.Ed. 1103 (1908) with Bi-Metallic Inv. Co. v. State Board of Equalization, 239 U.S. 441, 36 S.Ct. 141, 60 L.Ed. 372 (1915). See, Hot Shoppes, Inc. v. Clouser, 231 F.Supp. 825 (D.C., 1964), affirmed 120 U.S.App.D.C. 353, 346 F.2d 834 (1965); and Donovan v. Clarke, 222 F.Supp. 632 (D.C., 1963). Cf. State ex rel. Ludlow v. Guffey, 306 S.W.2d 552 (Mo., 1957); Morton v. Mayor and Council of Clark Township, 102 N.J.Super. 84, 245 A.2d 377 (1968). See, generally, K. Davis Administrative Law Text. Thus distinguished from the legislative action of adopting a comprehensive zoning plan, the adjudicative decision inherent in tract rezoning requires the decision maker to adhere to concepts of minimal due process. Hornsby v. Allen, 326 F.2d 605 (5th Cir., 1964); Hot Shoppes, Inc. v. Clouser, supra; Donovan v. Clark, supra. Here, appellants’ complaint alleged that rezoning of the property had been denied by the Commissioners without a statement of their reasons and by recourse to evidence which was not in the record. Such administrative action has long been condemned, Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 82 L.Ed. 1129 (1938); Ohio Bell Telephone Co. v. Public Utilities Commission, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093 (1937); United States v. Abilene & Southern Ry. Co., 265 U.S. 274, 44 S.Ct. 565, 68 L.Ed. 1016 (1924); Interstate Commerce Commission v. Louisville & Nashville RR Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431 (1913); Hornsby v. Allen, supra, and we do so here.

The orders of the district court are reversed and the causes remanded for proceedings consistent herewith.

BOOTLE, District Judge

(dissenting) :

I respectfully dissent. I would affirm for all reasons stated by the Trial Court in his memorandum opinion, Rockbridge Associates, Ltd. v. Pruitt, 341 F.Supp. 703 (N.D.Ga.1971), plus an additional reason to be stated. I agree with the Trial Court “that plaintiff was afforded procedural due process in connection with the various hearings before local zoning authorities” and that “there is nothing to indicate that the decision of the Commissioners could be found to be arbitrary.” The majority opinion groups these two cases together and over-reacts, I think, to the contention of one of the plaintiffs that as to it the County Commissioners in star chamber fashion used non-record secret evidence. I, naturally, have examined that charge carefully. First, it must be noted that only Rockbridge Associates, Ltd. makes this contention. South Gwinnett Venture’s case was considered by the Commissioners on November 24, 1970, and again on December 1, 1970, and there is no contention that any secret evidence was used in the consideration of that case. The Rockbridge case was considered by the Commissioners earlier on August 25, 1970 and September 9, 1970, and it is in connection with these earlier hearings that Rockbridge claims the use of secret evidence. Secondly, I think this charge is unsubstantiated. What happened is this: at the August 25, 1970 hearing one of the Commissioners moved to “table the decision for two weeks so that he could obtain additional studies and consult with the Engineering Department.” This does not sound star chamberish. His intentions were announced in open meeting. The postponement was for two weeks. The Engineering Department of Gwinnett County is probably not so large that plaintiffs could not have ascertained whatever information it furnished the Commissioners had they so desired. Nor does any reason appear why they did not inquire at the resumed hearing on September 9, 1970 as to what additional studies, if any, the Commissioners had obtained. Rockbridge argues that the Commissioners have refused to disclose the contents of their conversation with the Engineering Department and the additional studies. Nothing in the record substantiates this argument. Nor was there any request by plaintiffs for any more complete or detailed findings of fact by the Commissioners. All this suggests that plaintiffs’ desire to make a federal case exceeded their fear of deprivation of due process.

An additional reason not specifically assigned by the Trial Court for dismissing the complaint is failure of the plaintiffs to exhaust their administrative remedies. While a litigant normally need not exhaust his state “judicial” remedies, normally he must exhaust his state “legislative” or “administrative” remedies before challenging state action in federal court. See Wright, Federal Courts, § 49, p. 187 (2d ed.). Under the applicable zoning ordinance plaintiffs had the right to appeal to the Zoning Board of Appeals from any decision of the Chief Building Inspector, and said Board of Appeals is empowered:

“1. To hear and decide appeals when it is alleged there is error in any order, requirement, decision or determination made by the Chief Building Inspector in the enforcement of this Zoning Resolution.
“2. To hear and decide requests for the Special Exceptions of the Zoning Resolution upon which the Zoning Board of Appeals is required to pass.
“3. To authorize, upon appeal in specific cases, such variances from the terms of the Zoning Resolution as will not be contrary to the public interest where, owing to special conditions, a literal enforcement of the Zoning Resolution will, in an individual case result in unnecessary hardship, so that the spirit of the Zoning Resolution shall be observed, public safety and welfare secured and substantial justice done. Such variances may be granted in such individual cases of unnecessary hardship upon a finding by the Zoning Board of Appeals that:
“a. There are extraordinary and exceptional conditions pertaining to the particular property in question because of its size, shape or topography, and
“b. the application of the Resolution to this particular piece of property would create an unnecessary hardship, and
“c. such conditions are peculiar to the particular piece of property involved, and
“d. such conditions are not the result of any actions of the property owner, and
“e. relief, if granted, would not cause substantial detriment to the public good nor impair the purposes or intent of this Resolution, and
“f. no variance may be granted for a use of land or building or structure that is prohibited by this Resolution.
“4. In exercising the above powers, the Zoning Board of Appeals may, in conformity with the provisions of this Resolution, reverse or affirm, wholly or partly, or may modify the order, requirements, decisions or determination from which the appeal is taken and, to that end, shall have all the powers of the Chief Building Inspector from whom the appeal is taken and may issue or direct the issuance of a Building or Occupancy permit.”

The foregoing itemization of instances in which the Zoning Board of Appeals might grant variances from the terms of the Zoning Resolution when read in connection with Article I of the Zoning Resolution stating its objectives:

“ . . . [F]or the purposes of promoting the health, safety, morals, convenience, order, prosperity or the general welfare of the present and future inhabitants of Gwinnett County; of lessening congestion in the streets; securing safety from fire, panic and other dangers; providing adequate light and air; preventing the overcrowding of land, avoiding both undue concentration and urban sprawl; facilitating the adequate provision of transportation, water, sewerage, schools, parks and other public requirements ; protecting ’ property against blight and depreciation; encouraging the most appropriate use of land, buildings and other structures throughout the County; securing economy in government expenditures; and for other purposes, all in accordance with a comprehensive plan for the development of Gwinnett County, the County Commissioners of Gwin-nett County do hereby ordain and enact into law the following Articles and Sections of the Zoning Resolution of Gwinnett County, Georgia”

fully answers plaintiffs’ contention of lack of standards. See Atlanta Bowling Center, Inc. v. Allen, 389 F.2d 713 (5th Cir. 1968).

Granted that what is unquestionably a legislative function, the adoption of a general zoning plan or the zoning of an entire area, becomes, next day, to some extent a judicial function, when one of the affected property owners petitions for relief from the zoning restriction, certainly the metamorphosis is not complete. What was all legislative one day remains at least quasi-legislative the next day. See Higginbotham, Etc. v. Barrett, et al., 473 F.2d 745 (5th Cir. 1973) and Donovan v. Clarke, 222 F.Supp. 632 (D.C.1963). The requirements of procedural due process are not Procrustean. The Supreme Court said in Cafeteria Workers v. McElroy, 367 U.S. 886, 895, 81 S.Ct. 1743, 1748, 6 L.Ed.2d 1230, 1236 (1961) “ . . . consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action.” See also Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). In Dixon v. Alabama State Board of Education, 294 F.2d 150 (5th Cir. 1961), it was held that in some instances, to-wit: suspension of students from a tax-supported college, procedural due process does not require “a full-dress judicial hearing, with the right to cross-examine witnesses.” Under the facts of this case it was not an infirmity of Constitutional proportions for one of the Commissioners to move for an adjournment of two weeks stating his intention to obtain additional studies and consult-with the Engineering Department, particularly since no objection was voiced by petitioners at the public hearing at which that announcement of intention was made, and since no effort was made by plaintiffs to obtain information as to the content of such studies or consultation until after the filing of this suit.

Public hearings were held. Plaintiffs attended. At least one of them, South Gwinnett Venture, was accompanied and represented by counsel. The other plaintiff, whether or not accompanied and represented by counsel, fully participated in the public hearing by presenting evidence.

The Trial Court recognized that plaintiffs were entitled to due process and concluded specifically that they had not been deprived thereof. A hearing was held in the court below at which plaintiffs clarified their contentions and the facts in the case. Thus the court was not acting solely on pleadings but was fully informed. The complaints were dismissed not for lack of jurisdiction but for failure to present any substantial federal question.

As was said in Confederación de la Raza Unida v. City of Morgan Hill, 324 F.Supp. 895 (N.D.Cal.1971): “the courts have traditionally recognized that zoning matters are of particular concern to, and the province of, the local communities involved and . . . should interfere with the judgment of the local authorities only in the most extreme eases, and under the most extreme circumstances. This attitude goes back at least as far as Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S.Ct. 114, 71 L.Ed. 303 . . . . ” And it was said in Donovan v. Clarke, supra, 222 F.Supp. at 634: “Such a determination (on the petition of a resident for a change in the zoning of his property) is subject to review by the courts, not on the merits of the-issues presented, but as to whether the action was justified or was capricious, arbitrary, unreasonable or discriminatory.” And this court said in Higginbotham, etc. v. Barrett, et al., supra, “The law is settled that the zoning of property, including the preparation of comprehensive land use plans, involves the exercise of judgment which is legislative in character and is subject to judicial control only if arbitrary and without rational basis.” (Emphasis added). The quoted holding indicates that zoning in general, and not just the preparation of comprehensive land use plans is a legislative function.

Even in a criminal trial where the requirements of due process are strictissimi juris a perfect trial is not demanded, only a fair trial. Lutwak v. United States, 344 U.S. 604, 73 S.Ct. 481, 97 L.Ed. 593 (1953); United States v. Rhoden, 453 F.2d 598 (5th Cir. 1972).

The case of Hot Shoppes, Inc. v. Clouser, 231 F.Supp. 825 (D.C.1964), relied upon by appellants is easily distinguishable on two grounds: first, there the Board of Zoning Adjustment violated the detailed regulations governing its own procedure; and, second, the members of the Board conducted an inspection of the premises and failed to set forth the facts which it claimed it discovered as a result of the inspection. The court said “plaintiff did not know that such inspection had taken place, and had no opportunity to question or refute the results of such inspection.” That is not the case sub judice. Our appellants knew that one Commissioner planned to obtain additional studies and to consult with the Engineering Department prior to the next meeting. It would have been an easy matter for our appellants to have attended the next regular meeting, to have requested that Commissioner to inform them as to exactly what new information, if any, he had obtained through the additional studies and from his consultation with the Engineering Department, and to have requested, if needed or desired, an opportunity to refute the same.


author: WEICK, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Burton R. SIGNER, Defendant-Appellant.
    No. 72-1978.
    United States Court of Appeals, Sixth Circuit.
    Argued April 13, 1973.
    Decided July 25, 1973.

      John Kennedy Lynch, Cleveland, Ohio, for defendant-appellant.
    Ralph Winkler, Asst. U. S. Atty., for plaintiff-appellee; William W. Milligan, U. S. Atty., Cincinnati, Ohio, on brief.
    Before WEICK, Circuit Judge, and CECIL and O’SULLIVAN, Senior Circuit Judges.
   WEICK, Circuit Judge.

Signer, a Cincinnati attorney and building and loan association executive, was charged in a two-count indictment with attempted income tax evasion and with making and signing a false income tax return, in violation of 26 U.S.C. §§ 7201 and 7206(1). He entered a plea of not guilty, and upon trial before a jury he was found guilty on both counts. He was sentenced to one year and a day imprisonment only on Count I.

The Government’s case initially was composed of six specific items of unreported income. During the trial one item was dropped; the five remaining items totaled $58,075.34 and were summarized by the Government as follows:

"SUMMARY OF ADDITIONAL INCOME — 1965 .

ITEM EXPLANATION AMOUNT

1. INCOME FROM NEGOTIATIONS FOR RINGGOLD PURCHASE $10,000.00

2. INCOME FROM ACQUISITION OF CONTROL OF RINGGOLD BUILDING AND LOAN 20,000.00

3. INSURANCE REFUNDS DEPOSITED BY DEFENDANT 1,001.72

4. INCOME DERIVED FROM G.G.S. TRANSACTIONS 9,500.00

5. INCOME ON TRANSACTIONS INVOLVING BEECH CORPORATION 17,573.62

TOTAL $58,075.34"

Signer had been attorney for, and president and director of, Ringgold Building & Loan Association (Ringgold) since 1963. The board of directors consisted of seven members, each of whom had paid $15,000 for his seat on the board. In 1964 there was disagreement among the board members, and six of them, not including Signer, desired to sell their seats for what they had paid for them.

In December, 1964. Signer met with Edward Guilfoyle and Gene Graff, neither of whom had any previous connection with Ringgold, to discuss a plan to purchase the seats of the other six directors and thereby acquire control of the building and loan association at no cost to themselves.

Under the plan Signer would continue as president, director, and attorney for the building .and loan. Guilfoyle and Graff would become directors and secretary and treasurer, respectively. All three would constitute the Executive Committee. Signer was authorized by the group to draw the contract to purchase the seats of the six directors.

The money to pay the six directors who were selling their seats had to be raised within ninety days. Signer arranged for a temporary loan of $42,000 from his friend, Edward Hoemmelmeyer, evidenced by a cognovit note in the amount of $45,000, executed by Signer, Guilfoyle, and Graff and Graff’s wife. Signer deposited this money to his checking account.' He issued his cheek to Hoemmelmeyer for $2,500, as payment of advance interest on the loan: On December 30, 1964, Signer wrote his check for $35,000, payable to a trustee for the old directors, and delivered to him that check plus two checks of Graff totaling $10,000, which paid the old directors $45,000. The three, Signer, Guilfoyle and Graff, then assumed control of Ringgold.

In order to obtain money to repay the temporary loan of Hoemmelmeyer and to pay the balance owing to the old directors, a real estate company, Market Realty, was to be organized by Graff with Signer drawing the incorporation papers. Until the corporation was set up, Graff was to operate in his own name. He was to acquire a large number of parcels of real estate, obtaining loans therefor from Ringgold, in excess of the cost of the real estate, and the overage was to be used to pay off the old directors. Title to the properties so purchased was taken in the name of nominees, who consisted of employees of Graff and friends who would execute notes and mortgages to Ringgold and receive checks for the proceeds of the loans, which checks they would endorse to Graff or to Market Realty, without even looking at the face of the checks.

Between January 1, 1965 and March 3, 1965, seventeen checks of Ringgold, signed by Signer, totaling $99,722.87, for these overloans, were deposited in the bank account of Graff or Market Realty. In addition, three other Ring-gold checks totaling $30,341.45, for over-loans, were deposited in Graff’s checking account.

On January 11, 1965, Graff gave to Signer his check for $2,657.14, which Signer deposited in his checking account, making a notation that $2,500 of the deposit was repayment of advance for interest payment which Signer had paid Hoemmelmeyer. Signer took a deduction on his 1964 income tax return for the interest payment to Hoemmel-meyer, although he had been reimbursed for this item by Graff prior to the filing of that return.

On February 11, 1965 Graff issued his check to Signer for $45,000 “for purchase of the Bldg. & Loan”, which Signer deposited in his cheeking account “to be used to repay loan with Ed Hoemmel-meyer.” Signer then issued his check to Hoemmelmeyer for $42,000 to repay the loan, which left a balance of $45,000 owing to the old directors.

On March 24, 1965 Graff drew a check for $35,000 payable to G.G.S. Inc., a corporation owned and controlled by the three associates, and drew another check for $10,000 payable to Ringgold. G.G.S. Inc. issued its check to Ringgold for $35,000, and Signer then issued Ringgold’s check for $45,000 to pay off the old directors and a certificate of deposit that had been issued by Ringgold pursuant to the purchase agreement.

Item 1 in the Summary, showing $10,000, represents the amount received by Signer from Graff out of the over-loans in excess of the sums paid out by Signer. Signer claims that when he purchased the stock of Graff in G.G.S. Inc. and paid him $10,000, Graff signed a general release discharging him (Signer) of all claims owing to Graff, including the $10,000 in the Summary. The trouble with this rather ingenious contention is that Graff could not relieve Signer of his liability for the receipt of overloan funds diverted from Ringgold, or of his duty to report the $10,000 so received, as income on his 1965 income tax return.

Item 2 in the Summary is an allocation of income resulting from the acquisition of control of Ringgold. Six seats on the board of directors cost $90,000, or $15,000 per seat. Seven seats would cost $105,000; and the value of one-third control would be $35,000. Crediting Signer with one-seventh control, or $15,000, already owned by him, leaves the cost of additional control acquired by Signer as $20,000. That the control was valuable to Signer is evidenced by the fact that he was able to acquire it without resorting to use of his own funds. Also, he was able to sell property in which he and his wife were interested, to Ringgold, at a large profit.

Item 3 in the Summary, $1001.72, represents the refund of premiums on life insurance policies taken out by Market Realty on the lives of Signer (his wife was beneficiary), Guilfoyle, and Graff, and by Beech Corporation on the life of Signer (with his wife as beneficiary). Signer deposited the insurance premium refund checks in his checking account. Market Realty and Beech Corporation had paid the premiums on these policies. Signer received the refund of premiums on the policies on his own life; he had no authority to receive and retain the refund of premiums on the policies of Graff and Guilfoyle.

Item 4 in the Summary, $9,500. Signer admitted receiving $10,000 from G.G. S. Inc., but he claims that he repaid $1,000 thereof by cheek to Graff, and that the balance was part of a check of Hickman Realty Company to G.G.S. Inc. There was evidence, however, that Signer did make a loan of $1,000 to Graff, but that Graff repaid the loan in full. The check of Hickman Realty to G.G.S. Inc. for $50,000 was the purchase price of shares of G.G.S. Inc. stock. Hickman Realty was owned and controlled by Signer and his wife.

Item 5 in the Summary: Beech Corporation, $17,573.62. Beech Corporation during 1965 was performing construction work on the building which housed Ringgold. The work was financed by a construction loan made by Home Federal Savings & Loan to Hickman Realty Company, the then owner of the property. The loan was secured by a note and mortgage executed by Hickman, which note was also signed by Signer. A false affidavit was filed with Home Federal indicating that $27,031.86 of work had been performed by Beech Corporation, whereas in truth and in fact only $7,000 of work had been performed. As a result of this false affidavit, Home Federal issued its check to Beech Corporation and Hickman Realty for $27,031.86, and of this sum Signer received the amount of $17,573.62. He claimed that this amount was not income to him because he was personally liable on the Home Federal note. The trouble with this contention is that Home Federal was paid the full amount due on its note and mortgage when Hickman Realty sold the property to Ringgold in 1965, at a large profit. There was nothing in the papers to indicate that Home Federal or Hickman was lending this sum to Signer. On the contrary, in the 1965 income tax return of Hickman Realty its basis for the property included the entire cost of the Home Federal mortgage loan without any credit for the moneys paid under the false affidavit.

Among his defenses, Signer contends that his auditor prepared and signed his income tax return. The auditor, however, was not furnished full information by Signer; the auditor knew nothing of the Ringgold overloans.

Signer claims error in the denial of his motions for judgment of acquittal. While the evidence in some particulars is conflicting, we are of the opinion that there was substantial evidence to support the verdict of the jury. There was evidence of a substantial understatement of tax in the return which Signer filed; he had knowledge that the return was incorrect, and the omissions were wilful. Spies v. United States, 317 U.S. 492, 63 S.Ct. 364, 87 L.Ed. 418 (1943); United States v. DeNiro, 392 F.2d 753 (6th Cir.), cert. denied, 393 U.S. 826, 89 S.Ct. 89, 21 L.Ed.2d 97 (1968).

In the consideration of a motion for judgment of acquittal the trial court must consider the evidence, as well as the inferences to be drawn therefrom, in the most favorable light to the Government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942); United States v. Collon, 426 F.2d 939 (6th Cir. 1970).

Signer contends that the Court erred in not withdrawing entirely from consideration by the jury, the evidence concerning his profit of about $100,000 in the sale of a building to Ringgold in October, 1965. This was item 6, and was included in the indictment, but during the trial the Government withdrew that item. The Court was careful to instruct the jury that the evidence could not be considered as additional income in 1965, but could be considered only for such “weight as you see fit to give it under such questions as wilfulness and intent of the defendant, if any, and the general relationship, if any, with the Ringgold Association.” It was an item of self-dealing, and was relevant on the issue of control which Signer and his associates purchased with funds diverted from Ringgold. Moore v. United States, 412 F.2d 974 (5th Cir. 1969).

Signer argues that there was no proof that Ringgold lost any money on the over-loan mortgages, and intimates that they were paid in full. It is clear to us that Ringgold did lose the funds which were diverted on these overloans and which totaled more than $130,000.

Signer contends that he was deprived of a fair trial because of prejudicial remarks made by the Assistant United States Attorney in his opening statement to the jury and in the opening and closing arguments to the jury of the United States Attorney.

The opening statement of the Assistant United States Attorney contained the following language:

“You will find that after hearing all the evidence in the case, ladies and gentlemen, that Mr. Signer could not have done a more effective job of getting money out of Ringgold Building and Loan if he had went out and bought a mask, got an acetylene torch, gone in there one night and blown the vault door open.”

Objection was made by counsel for defendant, which objection was sustained by the Court, and the jury was instructed to disregard the statement.

Signer was on trial for income tax evasion and not for diversion or misapplication of building and loan funds. The statement was improper and, in our judgment, very prejudicial.

The purpose of the opening statement of the prosecution is to outline broadly the facts of the case so that the jury will understand the evidence as it unfolds. The opening statement should not be used to poison the minds of the jury against the defendant before the jury has heard the evidence, or to improperly prejudice the defendant in the eyes of the jurors,, or to destroy his credibility. Government of Virgin Islands v. Turner, 409 F.2d 102 (1st Cir. 1969); Leonard v. United States, 277 F.2d 834 (9th Cir. 1960).

But this was not all. In the United States Attorney’s opening argument to the jury, he recited a fable which he composed, with apologies to Aesop, using Signer as the fox in the chicken coop.

As if this were not enough, in his closing argument to the jury the United States Attorney displayed to the jury a blown-up cartoon of a “Boss Tweed Tammany Ring”, measuring four by four feet, and showing a number of disreputable looking characters, each pointing a finger at the one standing next to him. Under the cartoon, in large letters appeared the following: “Who Stole the Money?” “It was Him.” This cartoon was not in evidence.

In his remarks during final argument, the United States Attorney told the jury:

“I like political cartoons, and I hope you won’t consider it humorous because I don’t think it’s humorous; I think it illustrates the point, if I show you a cartoon for the Last Century Cleveland, which was the New York Tribune, and it was to get a lot of money of New York—
“MR. LYNCH: May I see that first.
“MR. MILLIGAN: Go right ahead, take a look.
“‘Who stole the people’s money:’ They have a ring, everyone pointing to the man next to him.
“Who took the money from the Ringgold? Was it Graff? Was it Guilfoyle? Was it Signer?” (Record, 1378-9).

As before stated, Signer was on trial for income tax evasion only, and it was not proper to attempt to try him for something else; nor is it proper to appeal to the passions and prejudices of the jurors. Cincinnati is well-known as a building and loan center, with a large number of associations doing business in the city, which associ-tions without a doubt had many depositors. The depicting of Signer as a thief looting a building and loan association, could not help but prejudice him in the eyes of the jury.

It should be pointed out further that the factual issues in this case were complex and were admitted by the prosecution to be confusing. In this posture, the defendant had the right to have the issue of whether he wilfully attempted to evade income taxes, determined dispassionately. Signer, along with his associates, did divert funds from the building and loan but he could not properly be likened to a thief or a masked burglar.

Even though the cartoon was not objected to by the defendant, we may notice it as a plain error affecting the substantial right of the defendant to a fair trial. Rule 52(b), Fed.R.Crim.P.; United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940); United States v. Benson, 389 F.2d 376 (6th Cir. 1966), cert. denied, 391 U.S. 903, 88 S.Ct. 1652, 20 L.Ed.2d 418 (1968).

Because of prejudicial remarks made by the Assistant United States Attorney in his opening statement to the jury, and prejudicial remarks of the United States Attorney in his opening and closing arguments to the jury, including the exhibition of the cartoon to the jury, all of which in our opinion operated to deprive the defendant of a fair trial, the judgment of conviction is reversed and the case is remanded for a new trial.

In view of this disposition of the case, it is not necessary to discuss other errors asserted.

Reversed.

      . The following excerpt from plaintiff’s opening statement appears at pages 1324 to 1326 of the transcript:
      “The testimony indicates that the original plan to take over the Ringgold was hatched by Signer, Graff and Guilfoyle at the Fox and Crow. I have been thinking about that word ‘Fox’. I think it’s sort of suggestive in this particular case. My thinking after hearing all the testimony is that putting Burt Signer in charge of the building and loan was like putting a fox in charge of the hen house. Now, with that thought in mind, I have written a little fable which I will share will you with some apologies to Mr. Aesop.
      “One upon a time there was a farmer named Ringgold who had a fine flock of chickens. One day a certain fox stopped by the farm and applied for the job of guarding the chickens. The farmer was impressed by his credentials and put the fox in charge of the hen house.
      “The next morning four of the chickens were missing. At this time the fox called upon his accountants, who happened to be named Milton Foreman, to conduct an audit. Mr. Foreman noticed the missing chickens and listed them under his chicken-suspense account, meaning he didn’t know what happened to them. After consulting with his client, the fox, he made adjusting entries—
      “MR. LYNCH: Objection.
      “MR. MILLIGAN: —listing the missing chickens under the chicken-exchange account, meaning someone doubtless would come along and replace the chickens, and two under his chicken-loan account.
      “Farmer Ringgold was also concerned, so he called his accountant, John Shriver, to conduct an independent audit. Shriver also noted the chickens were missing while in the fox’s custody, and he recorded the matter under his ehick-ens-payable-fox account. He asked the fox about it, who told him, ‘One, there weren’t any chickens missing; and two, if there were any, he didn’t owe anybody any chickens.’ Accountant Shriver couldn’t figure it out so he didn’t complete his audit.
      “The insurance company, which had insured the chickens, was also concerned and sent out an investigator, Don Hunsche, to inquire. Well, he reported the missing chickens under unscheduled items, meaning that there were some unexplained losses.
      “The government was also concerned and sent out Special Agent Robert Ru-we, who noticed some feathers under the roost and also noticed some blood up in the loft where the fox had been staying, and he had his suspicions, but his job was concerned with taxes. So he listed the affair under understated chickens.
      “Now the moral of this particular story, this particular fable, is that the fox ate the chickens and all the accountants in town couldn’t change it.”


author: CHOY, Circuit Judge:

text:
    UNITED STATES of America, Appellant, v. FRANKLIN STEEL PRODUCTS, INC., Appellee.
    No. 71-2428.
    United States Court of Appeals, Ninth Circuit.
    July 16, 1973.
    Rehearing Denied Sept. 10, 1973.

      Michael H. Stein (argued), L. Patrick Gray, III, Asst. Atty. Gen., Washington, D. C., Wm. Mathew Bryne, Jr., Robert L. Meyer, U. S. Attys., Larry L. Dier, Asst. U. S. Atty., Los Angeles, Cal., Walter H. Fleischer, Civil Div., Dept, of Justice, Washington, D. C., for appellant.
    Albert A. Dorn (argued), Los Angeles, Cal., for appellee.

      Before HAMLIN and CHOY, Circuit Judges, and SKOPIL, District Judge.

       The Honorable Otto R. Skopil, Jr., United States District Judge for the District of Oregon, sitting by designation.

   CHOY, Circuit Judge:

The United States sued under 28 U.S. C. § 1345 to recover the contract price plus consequential damages from Franklin Steel Products, Inc. (Franklin) for breach of express warranty to provide aircraft engine bearings which conformed to contract specifications. After a non-jury trial, the district court entered judgment for Franklin. We reverse.

In 1962 Franklin entered into two contracts to furnish the Aviation Supply Office of the Department of the Navy 321 master rod bearings, Curtis-Wright aircraft engine part number 171815, at a cost of $90 each. The contracts required that all bearings be in new and unused condition and meet particular specifications, including a certain percentage of tin to reduce corrosion and steel of a certain hardness to resist stress and fatigue. Failure of the bearings to conform to these specifications could cause complete engine failure and loss of both aircraft and pilots.

The contracts called for inspection by the government before acceptance. Inspection procedures were to include mag-naflux or zyglo or the equivalent thereof and were specified as 100% final inspection by the Navy’s O & R Shop for con-formaee to the applicable specifications. In addition, the contract contained the following warranty clause:

(a) Notwithstanding inspection and acceptance by the Government of articles furnished under this contract or any provision of this contract concerning the conclusiveness thereof, the Contractor warrants that at the time of delivery (i) all materials delivered under this contract will be free from defects in material or workmanship and will conform with the specifications, and all other requirements of this contract; .
(b) Within one year after the delivery of any article under this contract, written notice may be given by the Government to the Contractor of any breach of the warranties in paragraph (a) of this clause as to such article. Within a reasonable time after such notice, the Contracting Officer may either (i) require the prompt correction or replacement of any article or part thereof (including preservation, packaging, packing, and marking) that did not at the time of delivery conform with the requirements of this contract within the meaning of paragraph (a) of this clause, or thereafter does not so conform in consequence of any such breach; or (ii) retain such article, whereupon the contract price thereof shall be reduced by an amount equitable under the circumstances and the Contractor shall promptly make appropriate repayment . . .

* * * * * *

(e) The remedies afforded the Government by paragraph (b) of this clause shall be exclusive as to any breach of the warranties in paragraph (a) of this clause, except any such breach involving latent defects, fraud or such gross mistakes as amount to fraud.

The bearings supplied by Franklin did not comply with the specifications. The tin content was unacceptable; the steel was of insufficient strength; and the part number was in the wrong place. (This last noncomformity did not diminish the functional integrity of the bearing.) In fact, the bearings were not numbered 171815 bearings, but obsolete bearings which had been replated and renumbered so as to resemble the bearings called for in the contract.

The failure to meet specifications was not discovered by the Navy until after all of the bearings had been accepted and 180 of the bearings installed in engines. The enormity of the hazard actuated the Navy to recall all engines in which Franklin bearings had been installed and to refit them with a proper new bearing. This retrofit operation cost the Navy $817 per engine ($147,060).

The district court held that the government had a duty to inspect the bearing and to determine whether they complied with applicable specifications; that by accepting the bearings the government waived any rights by its failure to discover the defects during its inspection; that the warranty provisions were superseded by the inspection provisions; and that in any case, any rights stemming from the breach of the warranty were waived by the government’s failure to return the bearings or make any other demand for breach of the warranty. We disagree.

The 100% inspection clause imposes no duty on the government in favor of Franklin. A reading of the clause and the testimony at trial establish that the clause was inserted only to give further protection to the government beyond that afforded by the warranty. Franklin cannot benefit by the government’s failure to take advantage of this protection. We note that this same issue was raised in United States v. Aerodex, Inc., 469 F.2d 1003 (5th Cir. 1972) and was also rejected there.

Even if the government were obliged to inspect the bearings, the contract specifically provides that inspection and subsequent acceptance are not conclusive “as regards latent defects, fraud, or such gross mistakes as to amount to fraud.” The inspection failed to uncover at least three deviations from the specifications. One of these, the improper placement of the serial numbers, was patent and could have been discovered during visual inspection. Acceptance of the bearings precludes the government from now objecting to this nonconformity. But acceptance does not bar objection to the latent deficiencies in steel and tin not discoverable by visual inspection. The tests specified in the contracts, magnaflux or zyglo or the equivalent thereof, are not directed at discovering either the hardness of steel or tin content. Thus, the inspection clause in no way absolves the contractor from liability for these two major latent defects in the bearings.

In any event, the contract specifically provides that notwithstanding inspection and acceptance the contractor warrants that the goods will conform with the specifications. The warranty supersedes the inspection clause. This reading of the contract applies the settled principle that in the case of an express warranty “it is no defense that the buyer, had he inspected, might have found out the falsity of the seller’s statements” 8 Williston on Contracts, § 973, at 500 (3rd ed. 1964); General Electric Co. v. United States Dynamics, Inc., 403 F.2d 933 (1st Cir. 1968).

The question still remains whether Franklin has an adequate defense to the recovery of damages for the breach of warranty. The warranty clause itself provides for exclusive remedies in case of a breach and the government admittedly did not pursue these remedies. But this does not afford Franklin a defense to the breach of warranty claim because breaches involving latent defects are specifically excepted from the exclusivity provision. Aerodex, supra 469 F.2d at 1012. There being at least two major latent defects in the bearings, government recovery for the breach of the warranty can be sustained.

Furthermore, the district court erred in concluding that the government waived its rights under the warranty clause because it failed to return the bearings or make any demand for breach of warranty. First, the bearings were not returned because they were counterfeit, and it would have been irresponsible for the government to allow them to return to the stream of commerce. At the close of the trial, Franklin agreed that the bearings should be destroyed. Second, Franklin was informed by letter of the breach of the warranty in August 1963, well within the one year period specified in the contract. Third, this suit was brought within the six year limitation period specified for contract actions by the United States. 28 U.S.C. § 2415.

Finally, we must decide the measure of damages awardable to the government. The main issue presented is whether in addition to the contract price paid for the discrepant bearings ($28,890) the govei'nment may recover consequential damages for the retrofit operation ($147,060). In Aerodex, supra the government was permitted to recover both such damages. While in Aerodex the court held that the contractor was also liable for fraud, for purposes of damages, that factor does not differentiate our case from Aerodox since the contracts here treat breaches involving fraud and latent defects alike.

We agree again with Aerodex in holding that Franklin is liable for all damages which are the direct and proximate result of the breach of warranty. Schlottman v. Pressey, 195 F.2d 343 (10th Cir.), cert. denied, 344 U.S. 817, 73 S.Ct. 12, 97 L.Ed. 636 (1952). Such consequential damages may include replacement of defective goods or damages for injuries caused by these defective goods. Grace & Co. (Pacific Coast) v. Pittsburgh Testing Laboratory, 249 F.2d 165 (9th Cir. 1957).

The costs of replacing the bearings were necessary and reasonable. The Navy needed the bearings on an emergency basis and installed them as soon as practicable after they were accepted into airplanes necessary to support the fleet in the Mediterranean and Far East. Since the planes posed a great hazard because of the defective bearings, it was essential that the emergency retrofit opez-ation be conducted. Franklin knew or should have known that unless it supplied the government with the proper bearings such consequences would follow.

We reverse and remand for further proeeedings in conformity herewith.

      . As to acceptance, the contract provided: . . . Acceptance or rejection of the supplies shall be made as promptly as practicable after delivery, except as otherwise provided in this contract; but failure to inspect and accept or reject supplies shall neither relieve the Contractor from responsibility for such supplies as are not in accordance with the contract requirements nor impose liability on the Government therefor.

      . Aerodex, supra presents the same issues raised in this appeal. The only distinction between the cases is that the contractor in Aerodex was also held liable for fraud.

      . The facts of the case suggest that the government could have charged the contractor with fraud or gross mistakes as to amount to fraud in light of the counterfeit nature of the bearings. See United States v. Aerodex, supra. However, since - the government did not argue this theory, we do not consider it on this appeal.

      . Simple, inexpensive, nondestructive tests exist by which the government could have discovered these deficiencies, but such tests were not specified in the contract. The government had every right to rely on Franklin’s express warranty that the bearings would conform to the specifications. “The buyer is justified in taking the seller at his word, and in relying upon the seller’s statement rather than his own examination.” Williston, on Contracts, § 793 at 500 (3d ed. 1964); General Electric Co. v. United States Dynamics, Inc., 403 F.2d 933 (1st Cir. 1968); Norton v. Lindsay, 350 F.2d 46 (10th Cir. 1965); Union Pipe & Machinery v. Luria Steel & Trading Corp., 225 F.2d 829 (6th Cir. 1955). While the government may have been “contributorily negligent” in not conducting a more thorough inspection, that is not a defense to a breach of warranty claim. Brown v. Chapman, 304 F.2d 149 (9th Cir. 1962).

      . We see no merit in Franklin’s argument that other Navy regulations should be read to supersede the warranty clause under the so-called “Christian doctrine.” G. L. Christian & Associates v. United States, 312 F.2d 418, cert. denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314 (1963). Those regulations do not apply where the intent of a contract is for visual inspection and the purpose of the warranty is protection of the government against latent defects.