author: VAN OOSTERHOUT, Judge.

text:
    Milton I. STOCKTON and Rose R. Stockton, Appellants, v. Marilyn LUCAS and Norman LeBeau, Appellees.
    No. 2-8.
    Temporary Emergency Court of Appeals.
    Aug. 15, 1973.

      Jacob W. Friedman, New York City, for appellants.
    Joseph Gaier, Luster, Gaier & Luster, New York City, for appellees.
    Before TAMM, Chief Judge, and HASTIE and VAN OOSTERHOUT, Judges.
   VAN OOSTERHOUT, Judge.

Plaintiffs Milton I. Stockton and Rose R. Stockton have taken this timely appeal from order of the United States District Court for the Southern District of New York, entered March 14, 1973, dismissing their amended complaint upon defendants’ motion for summary judgment and from order entered March 29, 1973, denying plaintiffs’ motion for reargument and reaffirming the dismissal order. Plaintiffs in their complaint sought damages of $9,000.00 for defendants’ alleged violation of Phase I price regulations.

Defendants’ motion for summary judgment asserts many grounds for dismissal. We will hereinafter elaborate on the grounds thereof which we deem pertinent to this appeal.

Defendants filed a cross-appeal from the judgment to the extent that it denied relief upon grounds urged in the motion which were not sustained by the trial court. Such notice was filed on May 17, 1972. This .court properly dismissed the cross-appeal upon the ground that it was not filed within the time required by Rule 4(a) F.R.A.P.

The fact that no valid cross-appeal was taken is of no significance under the record made in the case before us. It is well-established law that if the decision of the trial court is sustained by applicable law, the judgment must be affirmed although the trial court relied upon a wrong ground or gave a wrong reason for its decision. Riley v. Commissioner, 311 U.S. 55, 59, 61 S.Ct. 95, 85 L.Ed. 36 (1940); Helvering v. Gowran, 302 U.S. 238, 245, 58 S.Ct. 154, 82 L.Ed. 224 (1937); Barrett v. Baylor, 457 F.2d 119, 122 (7th Cir. 1972). Our jurisdiction is established by § 211(b)(2) of the Economic Stabilization Act of 1970 as amended.

Defendants filed an affidavit in support of the motion for summary judgment. Plaintiffs filed a resistance to the motion, supported by affidavit. There is no dispute as to any material relevant fact pertinent to the decision of this ease. Such facts are summarized by the trial court in its memorandum opinion (not reported) as follows:

“On September 9, 1971, plaintiffs purchased from defendants, for the sum of $18,000.00, 143 shares of a New York corporation, ‘360 East 72nd Street Owners Incorporated’. Stock certificate No. 582, acquired by'plaintiffs, on its face limited transferability in accordance with the by-laws of the corporation, and ‘the Proprietary Lease appurtenant thereto’. An endorsement thereon contained the following provisions:
‘The rights of any holder of this Certificate are subject to the provisions of the By-Laws of the Corporation and to all the terms, covenants, conditions and provisions of a certain Proprietary Lease made between the Corporation, as Lessor, and the person in whose name this Certificate is issued, as Lessee, for an apartment in the apartment house in the City of New York which is owned by the Corporation and operated as a “co-operative”, which Proprietary Lease limits and restricts the title and rights of any transferee of this Certificate.
‘The. shares represented by this Certificate are transferable only as an entirety and only as to an as-signee of such Proprietary Lease approved in writing in accordance with the provisions of the Proprietary Lease.’
“Ownership of the stock entitles plaintiffs to a proprietary lease of an apartment in the building owned by the Corporation, on paying a ratable share of the expenses and carrying charges, and otherwise complying with all provisions of the corporate bylaws, and after obtaining approval of an owners’ committee of the Corporation.”

Based upon such facts, plaintiffs sought to recover $9,000.00 from the defendants as damages inflicted upon them by defendants’ alleged violation of Phase I of economic laws established by the President by Executive Order No. 11615, effective August 15, 1971, for a period of ninety days under authority of the Economic Stabilization Act of 1970.

Subsequent to the purchase, on December 7, 1971, plaintiffs filed a complaint with the Internal Revenue Service seeking a determination to the effect that the sale price was in excess of that permitted under the Phase I Economic Stabilization Program rules governing real estate transactions. E.S.Reg.No.l, § 2(d), 36 F.Reg. 16515 (Aug. 21, 1971), CCH Economic Controls 8024.45. On or about March 13, 1972, the IRS ruled by letter that there had been no violation because the transaction in question involved the sale of a stock, exempt from controls under Phase I. E.S.Reg.No.1, § 4, 36 F.Reg. 16515 (Aug. 21, 1971), CCH Economic Controls ¶ 82555. See also CCH Economic Controls ¶ 8060, 8075, 8289.900.

Plaintiffs originally filed this suit in April 1972 as a joint action against the present defendants, Marilyn Lucas and Norman LeBeau, and the Internal Revenue Service. The trial court dismissed the suit upon the ground plaintiffs had failed to exhaust their administrative remedies. Plaintiffs appealed to this court from such order.

Subsequent to the filing of the notice of appeal, plaintiffs moved this court “to remand the case . . . for the purpose of permitting plaintiffs to seek . an amendment'or modification of [the July 24] order . . . .” The basis for this motion was plaintiffs’ then recent discovery of 6 C.F.R. § 300.-513(c), 36 F.Reg. 23972 (Dec. 16, 1971), deleted in 37 F.Reg. 1007 (Jan. 21, 1971), which limited the scope of IRS rulings to “prospective transactions.” Plaintiffs stated this provision “was apparently overlooked by those concerned, including the District Court.” We granted the motion to remand.

On October 24, 1972, the District Court, with the consent of all parties, modified its July 24 order by adding the following provisions:

“The plaintiffs shall have leave, if so advised, to serve and file an amended complaint, on or prior to November 14, 1972, setting forth such claims, if any, as they may have against defendants Marilyn Lucas and Norman Le-Beau only, arising out of the transactions referred to in the original complaint. Defendant Internal Revenue Service is dropped as a party defendant, and all future proceedings shall be conducted without notice to it. The amended complaint shall set forth the basis of jurisdiction of this Court, as required by Rule 8(a)(1), F.R.Civ. P. and shall disclose the basis for plaintiffs’ claims.”

Upon stipulation of the parties, the prior appeal to this court was dismissed on November 6,1972.

On November 3, 1972, plaintiffs filed the amended complaint now before us, which we have heretofore summarized, against defendants Lucas and LeBeau.

Defendants’ motion for summary judgment is based upon many grounds, including: (1) Failure to state a claim upon which relief can be granted; (2) the alleged complained of transaction was not within the prohibition of the Economic Stabilization Law and/or the Phase I regulations promulgated thereunder in that the sale of the stock in a co-operative corporation was not a regulated transaction.

The trial court’s dismissal of the action is based upon, its determination that no private right of action in favor of a party was created by the Economic Stabilization Act of 1970 or the Phase I Executive Order issued thereunder and the accompanying regulations issued pursuant thereto. The court also implicitly determined that § 210(a) of the Economic Stabilization Act Amendments of 1971, adopted subsequent to the transaction here in question, does not create a remedy through retroactive application.

In our view, the threshold issue here presented is whether the defendants were in fact guilty of Phase I violations in making the transfer hereinabove described. For the reasons hereinafter stated, we hold that under the undisputed facts the transaction here involved constituted a sale of stock and that no violation has been established. Consequently, we deem it unnecessary for us to reach the more complex and controversial problem of whether the dismissal was proper upon the ground stated by the trial court.

Section 4 of E.S.Reg.No.1, effective August 21, 1971, to the extent here pertinent, holds:

“Prices of the following categories of goods and services are not subject to the provisions of Executive Order No. 11615 and this regulation: .
* * * * *
(2) Stocks and bonds.” 36 F.Reg. 16515 (Aug. 21, 1971) CCH Economic Controls ¶ 8255.

Such exemption regulation was in full force at the time of the transaction here involved.

The sale price of real estate is frozen for the Phase I period here applicable. Economic Stabilization Regulation No. 1, Chapter I, § 2(d), supra. Thus, if the subject matter of the sale here involved is stock, it is exempt from prior controls. Coverage exists only if the subject matter is real estate.

The trial court held the subject matter of the sale to be real estate. We disagree with such conclusion. The decisions cited by the trial court do not support its conclusion and the reasoning underlying the decision is not persuasive.

Stock has been described “as an ‘interest or right which the owner has in the management, profits and assets of a corporation . . or as “ ‘an individual interest giving the stockholder a right to a proportional part of the dividends [if any] and the effects of the corporation when dissolved, after payment of its debts.’ ” Federal Employees’ Dist. Co. v. United States, 206 F.Supp. 330, 334 (S.D.Cal.1962). “‘The characteristics of stock are a right to participate proportionately in all profits [if any], and in management, and in the distribution of net assets on liquidation. .’” United States v. Evans, 375 F.2d 730 (9th Cir. 1967). See also Prentis v. United States, 273 F.Supp. 449, 476 (S.D.N.Y.1964); Carlberg v. United States, 281 F.2d 507, 513-14 n. 8 (8th Cir. 1960). “A share of stock is a unit of interest in a corporation Shares of stock constitute property distinct from the capital or tangible property of the corporation. . The capital is the property of the artificial person, . . . the shares of stock are the property of the several stockholders.” 18 Am.Jur. Corporations § 209. The fact that the entire capital stock of a corporation is invested in realty does not alter the character of the shares of stock as personalty. See id. n. 9. In short, stock is incorporeal personal property representing a capital interest in a corporation.

Restrictions on the right to transfer are permitted under New York law and do not alter the characterization of the property as stock. See Ryan v. J. Walter Thompson Co., 322 F.Supp. 307 (S.D.N.Y.), affd., 453 F.2d 444 (2d Cir. 1971); Globe Slicing Mach. Co. v. Hasner, 333 F.2d 413 (2d Cir. 1964), cert. den., 379 U.S. 969, 85 S.Ct. 666, 13 L.Ed.2d 562 (1965); Mathews v. United States, 226 F.Supp. 1003 (E.D.N.Y.1964); Penthouse Properties, Inc. v. 1158 Fifth Ave., Inc., 256 App.Div. 685, 11 N.Y.S.2d 417 (1939).

The District Court states, and we agree, that the issue is “whether what was sold was in fact an interest in realty or stock.” The court held the transaction in this case to be a sale of realty and cited Penthouse Properties, Inc. v. 1158 Fifth Ave., Inc., supra, as supporting authority. While we agree with the District Court that “we need not be bound by New York State decided cases concerning co-operative apartments,” it is clear to us that neither Penthouse nor any other New York case supports the holding that this transaction was a sale of realty rather than stock. In fact, the New York cases seem to be precisely to the contrary.

The issue in Penthouse involved the validity of various restraints on the transfer of stock in a co-operative corporation. The facts in Penthouse were similar to those in the instant case. The court in Penthouse held only that the “restraint on alienation of the stock [was] reasonable and appropriate to the lawful purposes to be attained,” and that such stock was “not included in the general rule against restraint on the sale of stock in corporations organized for profit.” 11 N.Y.S.2d at 423. The court in Penthouse did not hold that a sale of shares of stock in a co-operative corporation was in fact a sale of realty. Nor do any of the three New York cases cited in plaintiffs’ reply brief reach such a result. See 1165 Fifth Ave. Corp. v. Alger, 261 App.Div. 608, 26 N.Y.S.2d 671 (S.Ct.1941); Application of Miller, 173 Misc. 347, 18 N.Y.S.2d 59 (S.Ct.1940); Tompkins v. Hale, 172 Misc. 1071, 15 N.Y.S.2d 854 (S.Ct.1939).

Several New York cases have in fact clearly held that a sale of stock in a cooperative corporation is a sale of personalty and not a sale of realty. In the instant case, the District Court states: “In the vernacular, plaintiffs ‘bought a co-operative apartment,’ . . . and that is all they bought.” Whatever the vernacular usage may be, we think the New York law on the question was clearly stated in Susskind v. 1136 Tenants Corp., 43 Misc.2d 588, 598, 251 N.Y.S.2d 321, 325 (N.Y.City Civil Ct. 1964), where the court held: “It is the shares of the corporation that are sold, and, despite a vernacular use to the contrary, the apartment is not sold but leased under a so-called proprietary lease. . . .” (Emphasis added). Two other cases strongly support our conclusion that the transaction in the instant case was not a sale of realty under New York Law. See Silverman v. Alcoa Plaza Associates, 37 App.Div.2d 166, 323 N.Y.S.2d 39 (S.Ct.1971); In re Miller’s Estate, 205 Misc. 770, 130 N.Y.S.2d 295 (N.Y.Co.Surrog.Ct.1954). Furthermore, we find quite persuasive appellees’ common-sense argument in which it is stated:

“[A]n owner of stock in a co-operative corporation, although he is entitled to possession of an accommodation, is only entitled to it so long as he complies with the terms and conditions of a proprietary lease. Should he default under such terms possession could be forfeited although the stock ownership under such circumstances could be retained. The ownership therefor is that of the stock.”

There is nothing suspect about this corporation. As the District Court acknowledged, “[t]he New York Legislature recognizes as a purpose for which a general co-operative corporation may be formed, the ‘buying, selling or leasing [of] homes or farms for its members’ . . . .” The District Court notes its concern that characterizing this property as stock would make it “entirely feasible for sellers to evade the price controls by incorporating every piece of realty desired to be sold, and selling the stock, which gives the purchaser sole use rights and transferability of the underlying realty.” We would readily share this concern in the case of a corporation set up either wholly or partly for the purpose of evading price control regulations. This, however, is not such a case. There is not the slightest suggestion that any evasive purpose prompted the formation of this corporation; this corporation pre-dates the imposition of Phase I controls. Corporate “veils” are pierced only when there is a compelling reason for doing so. E. g., Bankers Life & Casualty Co. v. Kirtley, 338 F.2d 1006, 1013 (8th Cir. 1964). We find none here.

The regulations contain no definition of stock. Thus the word “stock” must be given its usual and ordinary meaning. If it were intended to limit the stock exemption to particular types of stock, it would be easy to so state. As heretofore stated, the item sold here clearly meets the definition of a stock. The transfer is made by a stock certificate. The certificate of stock issued covers 143 shares and bears Certificate No. 582. The certificate on its face contains the words “Authorized Shares 188,-320 — Par Value $1.00 each.” In the affidavit supporting the motion to dismiss, it is stated that the contract entered into was for 143 shares of stock; that the corporation is a publicly held corporation with assets of $22,000,000.00 with 188,-320 shares of stock outstanding; that the sale of stock was offered to the public pursuant to the prospectus filed in accordance with New York law, and that the stockholders attend stockholders’ meetings, and vote their stock to choose directors. Such allegations are not denied in the counter-affidavit.

The fact that the plaintiffs as an incident to their stock ownership were entitled to a proprietary lease of an apartment does not convert the stock to real estate. We hold that under the undisputed facts in this case the transaction here involved was a sale of stock and as such, exempt from Phase I price controls. Thus the plaintiffs have failed to state a cause of action and the complaint was properly dismissed for failure' to state a cause of action. We further hold that the trial court properly dismissed the complaint for failure to state a cause of action. The trial court’s judgment of dismissal was correct and is entitled to be affirmed, despite the fact that the trial court reached its result on grounds that differ from our own basis for reaching the same result. See Riley v. Commissioner, supra.

The judgment is affirmed.

      . It would appear that the IRS did not possess the authority to apply this determination to the transaction in this case. At the time the determination was made, the IRS authority was apparently limited to issuing rulings “with respect to prospective transactions” only. 6 C.F.R. § 300.513(c), 36 F.Reg. 23972 (Dec. 16, 1971), deleted in 37 F.Reg. 1007 (Jan. 27 1972, CCH Economic Controls ¶ 3945. Moreover, plaintiffs, without contradiction, allege by affidavit that “the Assistant U.S. Attorney in charge of the case in behalf of the Service [conceded] that the Internal Revenue Service exceeded its authority” in determining that this transaction was a sale of stock. In spite of the fact that the IRS determination is not strictly applicable to this case, we think it is entitled to some weight. It gives some indication of how the IRS would interpret the word “stock”. Even though the IRS may not have been free to apply its determination to a completed transaction, we are not prevented from doing so.
      Subsequent to the completion of this transaction, the IRS assumed jurisdiction to receive and act on “requests for determinations” and “complaints” with respect to completed transactions. See 6 C.F.R. Ch. IV, part 401, subparts A-D, F, originally enacted in 37 F.Reg. 1010 (Jan. 21, 1972), partially terminated in 38 F.Reg. 2983 (Jan. 31, 1973), CCH Economic Controls If 4201-4219A, 4225-4227. However, this authority exists only “with respect to acts and transactions occurring after November 13, 1971,” and thus does not affect this case. See 6 C.F.R. § 401.1(a), 37 F.Reg. 1010 (Jan. 21, 1972), CCH Economic Controls If 4202.05.

      . The exemption was continued after Phase I. See 6 C.F.R. § 101.34(h), formerly § 101.32(h), 37 F.Reg. 21788 (Nov. 13, 1971) , amended by 37 F.Reg. 21952 (Nov. 17, 1971) and 37 F.Reg. 1237 (Jan. 27, 1972) , CCH Economic Controls ¶ 3531.40 ; 6 C.F.R. § 101.2, formerly § 101.51, 36 F.Reg. § 21788 (Nov. 13, 1971), recodified in 37 F.Reg. 1237 (Jan. 27, 1972), COH Economic Controls ¶ 3513.80; 6 C.F.R. § 130.33(h), 38 F. Reg. 1479 (Jan. 12, 1973), CCH Economic Controls ¶ 35,044.40.

      . Subsequent to this transaction a definition of “security” has been promulgated. See 6 C.F.R. § 101.2, formerly § 101.51, 36 F.Reg. 21788 (Nov. 13, 1971), recodi-fied in 37 F.Reg. 1237 (Jan. 27, 1972) COH Economic Controls $ 3513.80. It is unhelpful for deciding this case.


source: Caselaw Access Project

author: JOHNSON, Judge.

license: Public Domain

text:
    Honorable George H. BOLDT, Individually, and as Chairman of the Pay Board, Defendant-Appellant, v. INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW) and International Association of Machinists and Aerospace Workers (IAMAW), AFL-CIO, Plaintiffs-Appellees.
    No. DC-3.
    Temporary Emergency Court of Appeals.
    June 21, 1973.

      William C. White, Atty., U. S. Dept, of Justice, Washington, D. C., for defendant-appellant.
    Stephen I. Schlossberg, Gen. Counsel, International Union, UAW, Detroit, Mich., and Plato E. Papps, Washington, D. C., Atty., for International Association of Machinists and Aerospace Workers, AFL-CIO, for plaintiffs-appellees.
    Before TAMM, Chief Judge, and HASTIE and JOHNSON, Judges.

      . The Regulation was issued November 13, 1971, 36 Eed.Reg. 21790, the last day of Phase I of the- wage-price controls, and slightly modified on December 27, 1971, 35 Fed.Reg. 25427. At the time the Board made its decision, the Regulation read in relevant part as follows:
      Effective on and after November 14, 1971, the general wage and salary standard ... is established as 5.5 percent. The standard shall apply to any wage and salary increase payable with respect to an appropriate employee unit pursuant to an employment contract entered into or modified on or after November 14, 1971, or to a pay practice established, modified or administered with discretion on or after November 14, 1971.

   JOHNSON, Judge.

This is an appeal from the District Court’s grant of summary judgment in favor of the appellee unions. The court below held that certain agreements between the International Association of Machinists and Aerospace Workers (IAM) and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and various aerospace companies are contracts executed prior to August 15, 1971, within the meaning of Section 203(c)(1) of the Economic Stabilization Act Amendments of 1971 (hereinafter the Act). We affirm.

In 1968, the UAW entered into three-year collective bargaining agreements, scheduled to expire in the Fall of 1971, with McDonnell Douglas Corporation, LTV Aerospace Corporation and North American Rockwell Corporation. Besides providing for periodic increases in wages, each of these contracts contained a cost of living adjustment, referred to by the parties as COLA, clause which allowed for additional adjustments in the hourly wage rate to reflect changes in the cost of living as measured by the Bureau of Labor Statistics Consumer Price Index (CPI). Each such clause contained what is referred to as a “cap”, or a provision which limited the COLA increase allowable to eight cents per hour per man in each of the last two years of the agreements irrespective of the changes in the CPI. Shortly after execution of the master contracts in 1968, the UAW and each company signed certain letters purporting to confirm COLA “overage” agreements between the parties. A COLA overage agreement provides for a “catch-up” in wages or other benefits at the end of the term of a collective bargaining agreement by removal of the limitation imposed by the “cap”. The overage agreements described in the letters provided in each case that wages and other benefits were to be increased to the extent that the COLA adjustment previously allowed was less than what would have been allowed if an increase of one cent for each 0.4 point change in the CPI had been permitted during the three-year term of the collective bargaining agreement without regard to the cap. The increase in wages attributable to the overage agreements was to “be available” as of certain specified dates in September and October, 1971, “for wages and/or other benefits as may be agreed upon by the Company and the Union in the collective bargaining agreement next succeeding the 1968 Agreement.” The amount of the overage, subsequently calculated, was 34 cents per hour. In December 1971, the UAW and the respective aerospace companies entered into a new collective bargaining agreement which provided for a wage increase of approximately 51 cents per man per hour, of which 34 cents was attributable to the COLA overage adjustment, the remaining approximately 17 cents being a general wage increase.

In 1968, the I AM entered into a three-year collective bargaining agreement, scheduled to expire July 23, 1971, with three divisions of Lockheed Aircraft Corporation. This contract contained the same COLA agreement as the UAW contracts, with the same cap, but with no overage provision. The affidavit of Floyd E. Smith, President of the I AM, states that on July 14, 1971, after negotiations, the parties reached an agreement that COLA adjustments would be retroactive to July 23, 1971, and would follow the industry pattern— i. e., would be calculated in the manner specified in the UAW overage agreements. At the time, the COLA overage adjustment had already reached approximately 34 cents. This agreement was purportedly confirmed by letter from Lockheed dated July 19, 1971. As consideration, the union agreed to extend the terms of the expiring contract, including the no-strike clause. In December 1971, the IAM and Lockheed executed a new three-year collective bargaining agreement. Total wage increases provided for amounted to approximately 51 cents — 34 cents residual COLA and approximately 17 cents general wage increase.

On December 21, 1971, the Pay Board conducted a hearing to review the new three-year agreements between the UAW and the IAM and their respective companies, and on January 5, 1972, issued a resolution disapproving the wage increases provided in those agreements as being unreasonably inconsistent with the purposes and objectives of the Economic Stabilization Act of 1970, as amended. The Board acted pursuant to Section 201.10 of its Regulations, which placed a ceiling of 5.5 percent on any wage increase payable under a contract entered into or modified on or after November 14, 1971. The Pay Board considered the entire 51 cents per hour increase to be an increase payable pursuant to a contract entered into after November 14,-1971, since the increase was included in the provisions of the new agreements signed in December 1971. This increase exceeded the allowable 5.5 percent.

Section 203(c)(1) of the Act provides that any wage scheduled to take effect after November 13, 1971, cannot be limited to a level below that which was agreed to in a contract relating to the wage and executed prior to the freeze on wages and prices which began August 15, 1971, unless the President determines that the proposed increase is unreasonably inconsistent with the general standards of wage and salary increases published under the authority of the Act. At the time the Pay Board acted upon the UAW and IAM contracts in this case, the policy of the Board, as provided by regulation issued pursuant to Section 203(c)(1), was to allow all such deferred wages to be paid as scheduled, subject to review if challenged by a party in interest or by five or more members of the Pay Board. The unions maintain that the 34 cents COLA overage portion of the proposed wage increase was agreed to prior to August 15, 1971, and scheduled to take effect after November 13, 1971, and that since no one sought to challenge the increase as provided by regulation, it should have been allowed. The 34 cents would then have become a part of the base wage; and the 17 cents general wage increase would have been measured against that base to determine if the increase exceeded the 5.5 percent standard. The district court agreed with the unions that the 34 cents COLA amount should be considered as agreed to prior to August 15, 1971, pursuant to the provisions of Section 203(c)(1), and remanded the cases to the Pay Board for reconsideration.

The thrust of appellant’s argument is that the purported overage agreements between the unions and their respective companies were in fact nothing more than preliminary negotiations, or agreements to agree in the future. If changing economic conditions or the availability of new trade-offs indicated a different compromise might be possible, the parties were free to later withdraw from these “preliminary positions.” At best, appellant maintains, the agreements each contained a condition precedent to any increase in wages, that being the subsequent execution of a new collective bargaining agreement between the same parties setting forth the exact amount of COLA overage due, if any, and how it would be paid. Since the overage increases were conditional, appellant continues, no legal obligation to pay arose until new agreements were reached several months after August 15, 1971. Appellant concludes, then, that the COLA overage increases cannot be said to have been agreed upon in a contract executed prior to August 15, 1971, within the meaning of Section 203(c)(1). For the purposes of the Act, the 34 cents COLA overage must be considered “new money”, agreed to when the new collective bargaining agreements were signed in December finally satisfying the condition precedent to payment.

Since appellant couches its argument in terms of traditional contract principles, it bears repeating at the outset that labor agreements are not considered to be, or construed as, ordinary commercial contracts. A collective bargaining compact must be interpreted in light of the “common law” of the shop —a composite of the history and practices of the industry and the disputing company and union. United Steelworkers v. American Mfg. Co., 363 U.S. 564, 80 S.Ct. 1343, 4 L.Ed.2d 1403 (1960); United Steelworkers v. Warrier & Gulf Navigation Co., 363 U.S. 574, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); United Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960). This is not to say that principles familiar to the law of contracts are not sometimes useful in construing the terms of collective bargaining agreements. See, generally, Summers, Collective Agreements and the Law of Contracts, 78 Yale L.Rev. 525 (1969). The overriding concern of the courts in interpreting collective agreements, however, is to further the national policy of promoting labor peace. With this as a goal, arguments which dwell on the technicalities of contract law are peculiarly inappropriate.

The appellant’s contention that the COLA overage agreements were merely preliminary negotiations or, if contracts, were conditional upon the signing of a new agreement, is simply not borne out by the record in this case. The UAW COLA letters express in clear and definite language the intent of the parties that wages increase in a specified proportion to an increase in the cost of living as measured by the CPI, and that this increase “be available” as of specified dates. The parties to these agreements do not dispute their validity. Only the Pay Board argues they were not binding. While some terms were left open — the form of payment and the exact date payment was to begin were to be determined in the new three-year contracts — this does not signify that the duty to pay was conditioned upon the signing of new agreements. Stipulations entered into in this case indicate that, in each case, the company and the UAW agree that in the Fall of 1968 the company was under a present binding contractual obligation to pay whatever amounts might arise under the overage agreement.

In support of its argument, appellant points out that the TJÁW COLA overage letters were not signed until after the 1968 master agreements with the companies had been signed. Appellant claims, therefore, that the letters were not part of the master agreements and thus were not “offered in connection with an employment contract”. In addition, it is argued that the COLA letters, if not part of the 1968 master agreements, must have been only agreements to agree or preliminary negotiations in anticipation of the 1971 master agreements. This argument ignores a common practice in complex labor negotiations of the type involved here whereby parties enter into a master agreement covering only some of the points in issue and thereafter continue negotiating supplemental agreements. These supplemental agreements are no less binding than the earlier provisions of the master agreements. See, e. g., Ford Motor Co. v. Huffman, 345 U.S. 330, 73 S.Ct. 681, 97 L.Ed. 1048 (1953) ; Kentucky Skilled Craft Guild v. General Electric Co., 431 F.2d 62 (6th Cir. 1970).

The appellant’s argument that the agreements were in fact merely preliminary negotiations in connection with the 1971 agreements has more substance in the case of IAM, where overage agreements were not reached until a few days before the scheduled expiration of the 1968 agreements. The union and Lockheed had indeed begun negotiations for the new agreement, and the letter signed by Lockheed during these negotiations is admittedly ambiguous as to whether a binding overage agreement had been reached between the parties. As noted earlier, however, the affidavit of Floyd E. Smith indicates that a definite and binding overage agreement was reached on July 14, 1971. As quid pro quo for retroactivity, IAM agreed to extend the terms of the expiring contract including the no-strike clause. If this affidavit is accepted — and it stands unrefuted — it must be concluded that the IAM agreements as to COLA overage were binding contractual agreements prior to August 15. It should be noted that such extensions of existing agreements in return for some guaranteed benefit are not uncommon. See, e. g., Waters v. Wisconsin Steel Works of Intern’l Harvester Co., 427 F.2d 476 (7th Cir.), cert. denied, 400 U.S. 911, 91 S.Ct. 137, 27 L.Ed.2d 151 (1970). As in the UAW overage agreements, the duty to pay was not conditioned upon the signing of a new agreement. The Smith affidavit indicates payment was deferred only for the purpose of completing other contract changes so as to avoid piecemeal effectuation of contract terms, not because there was no existing obligation to pay.

In arguing that the overage agreements were conditional, the appellant attaches significance to the fact that the unions could have been decertified or replaced prior to the date overage payments were to begin, which was to be set in the 1971 agreement. The COLA overage agreements then would never have taken effect. Therefore, the appellant argues, there was no obligation to pay the overage amounts until the execution of a succeeding bargaining agreement with the same collective bargaining representative had triggered payment.

The possibility always exists that a representative union may be decertified or replaced, or, for that matter, that an employer may be replaced by a successor, thus nullifying previous agreements. Under the appellant’s reasoning, then, contracts for deferred wages would never be binding until the time for payment had arrived. If this were true, it would have been pointless for Congress to pass Section 203(c)(1), which applies only to contracts for deferred wages and salaries. Obviously the Congress recognized that obligations under a labor contract, like those under a commercial contract, are not conditional merely because the possibility exists that the parties may be relieved of their duties by the occurrence of some later event. It could be argued that Congress intended Section 203(e)(1) to apply only to deferred wage increases scheduled to take effect at some time during the term of the collective bargaining agreement in which the increase was agreed to instead of at a date after the expiration of the agreement as is the case here. The contract bar rule, which prohibits decertification or replacement of a union during the term of a contract of three years or less, would make the ultimate performance of the deferred wage term more certain if the increases were scheduled to take place within the protected period. Continuation of the bargaining relationship for the term of the contract is by no means certain, however, since other circumstances, such as a schism within the union, the defunetness of the union, or certain company changes in operations, may intervene at any time to raise the contract bar. See, generally, Morris, The Developing Labor Law 162-182 (1971). The certainty of performance, therefore, is simply a matter of degree, and the legislative history of Section 203(c)(1) shows no intent on the part of Congress to make fine distinctions based upon the dates deferred pay increases are to begin. The important concern is with the expectations of the workers, see text accompanying note 13 infra, and, with this in mind, each case must be considered in light of its own circumstances.

The legislative history of the Act clearly supports our conclusion that the overage agreements at issue here are contracts within the meaning of Section 203(c)(1). A contrary ruling would frustrate the intent of Congress in passing the legislation. On August 15, 1971, without prior warning, a freeze was placed on wages and prices, and when lifted 90 days later was replaced with strict limitations on yearly wage increases. In passing Section 203(c), Congress intended to ensure equitable treatment to wage earners who expected wage increases which were scheduled prior to the freeze but which Were not to take effect until after August 15, 1971. One of the principal concerns of Congress was to prevent unnecessary hardship on workers who had made “important financial commitments in rightful anticipation of receiving scheduled wage and salary increases”. The evidence in this case reflects that, prior to August 15, 1971, the employees of the aerospace companies had every reason to expect to receive the COLA increases provided for in the overage agreements here at issue. The overage agreements were valid and binding on the parties. There was no evidence of any sort to indicate that the unions had lost their majority status. The old contracts between IAM and Lockheed had been extended, and the parties were in the process of negotiating new agreements. The termination dates of the UAW agreements were only a few weeks away and no challenge had been made to the union. Furthermore, the record reflects a history of stable bargaining relationships and consistently tandem increases in wages in the aerospace companies involved in this ease. Quite clearly the workers were justified in committing themselves financially in anticipation of receiving the COLA overage adjustments. If the COLA overage agreements, then, are not considered contracts within the meaning of Section 203(c)(1), one of the principal aims of the section will be thwarted.

In sum, the decision of the District Court is consistent with the law and the facts in this cause, and it is hereby AFFIRMED. The case is remanded to the Pay Board, or other appropriate body designated by the President, for further consideration in light of this holding.

      . § 203(c)(1) — The authority conferred on the President by this section shall not be exercised to limit the level of any wage or salary (including any insurance, or other fringe benefit offered in connection with an employment contract) scheduled to take effect after November 13, 1971 to a level below that which has been agreed to in a contract which (A) related to such wage or salary, and (B) was executed prior to August 15, 1971, unless the President determines that the increase provided in such contract is unreasonably inconsistent with the standards for wage and salary increases published under subsection (b).
      P.L. No. 92-210, § 2 (Dec. 22, 1971).
      August 15, 1971, marked the beginning of the 90-day freeze on all wages, salaries, rents and prices, ordered by the President under the authorization of the Economic Stabilization Act of 1970, P.L. No. 91-379 (Aug. 15, 1970) and referred to as Phase I of the economic stabilization program. November 14, 1971, was the beginning of Phase II of the program, during which strict wage-price controls were in effect. Section 203(c) was passed to meet the problem of deferred wage increases that were affected by the imposition of these wage-price controls. While it was clear that the automatic granting of all deferred wage increases would severely undermine the objectives of the stabilization program, it was also thought inequitable to wage earners to treat anticipated deferred increases in the same manner as new wage increases scheduled after the controls took effect. See text accompanying notes 12 and 13, infra.

      . An overage agreement is advantageous to both parties. Since the overage takes effect only toward the end of the term of the collective bargaining agreement, the employer benefits because a ceiling is placed on potential out-of-pocket costs, or cash outlay, during most of the life of the contract. The company is, therefore, more willing to agree to the total COLA increase. The union is satisfied since workers obtain a present right to an overage benefit which will help offset the impact of inflation and since the union can begin subsequent negotiations with this amount already “in the package”.

      . The relevant portion of the UAW-Douglas COLA overage letter reads as follows :
      The parties agree that to the extent the Oost-of-Living Adjustment in effect on July 19, 1971, plus the one cent (10) that was diverted to the Dental Plan, is less than the allowance that would have been in effect at such time if the total Cost-of-Living Adjustment increase during the term of the 1968 Agreement had been one cent (10) for each full 0.4 point change in the BLS Consumer Price Index from the average at the March, April and May, 1968 Indexes to the average of the March, April and May, 1971 Indexes, the difference in cents per hour will be available on September 16, 1971, retroactive to July 19, 1971, for wages and/or other benefits as may be agreed upon by the Company and the Union in the Collective Bargaining Agreement next succeeding the 1968 Agreement.
      With the exception of the various dates listed, the LTV and North American Rockwell letters are substantially identical to the Douglas letter.

      . The relevant portion of the letter reads as follows:
      At the joint LAC/IAM-AW meeting in San Francisco on July 14, 1971, the union asked for the Company’s position and attitude toward certain major issues in the current collective bargaining negotiations between Calac, Gelas, and LMSC and their respective IAM-AW units. In response to the unions’ request that the views stated by the Company in this meeting be expressed in writing, the attached statements have been prepared. We sincerely hope these will provide a basis for resolution of these issues in the negotiations being conducted at these respective divisions.
      RETROACTIVITY
      A. Wages, Mínimums and Máximums of Rate Ramges, Oost-of-Hving Allowances, and Labor (Grade Placements of Job Glassifications

      Negotiated increases in wages and míni-mums and máximums of rate ranges, and changes in cost-of-living allowances, and in labor grade placements of job glassifi-cations shall be retroactive to the payroll period commencing on the next after July 23, 1971, the anniversary date of the current collective bargaining agreements.

      . Subsequently, the Board approved a 340 increase for the first year of the new contract, even though it exceeded the 5.5% standard, and, in addition, approved a 170 increase for the second year.

      . The Regulation read as follows:
      Existing contracts and pay practices previously set forth will be allowed to operate according to their terms except that specific contracts or pay practices are subject to review, when challenged by a party at interest or by five or more members of the Pay Board, to determine whether any increase is unreasonably inconsistent with the criteria established by this Board.1 (November 13, 1971)
      Regulation § 201.14, 36 Fed.Reg. 21790.

      . Since the Pay Board had always considered the entire 510 to he new wages, members of the Board had never had an opportunity to object to and review the 340 as a deferred wage increase under the provisions of Reg. § 201.14, note 6 supra..

      . Section 203(c)(1), supra, note 1.

      . It is irrelevant that the COLA overage agreements extended beyond the term of the 1968 agreement, since it is clear that parties to a collective bargaining agreement may provide for the survival of obligations beyond the term of the agreement. See, e. g., Monroe Sander Corp. v. Livingston, 377 F.2d 6 (2d Cir.), cert. denied, 389 U.S. 831, 88 S.Ct. 97, 19 L.Ed.2d 89 (1967). Appellant also argues that (c) (1) is inapplicable since the COLA overage increases were scheduled to “take effect” prior to, not after, November 13, 1971, inasmuch as they were retroactive to dates prior to November 13. It seems clear that the District Court was correct, however, when it stated that the increases did not “take effect” until the new contracts were made in December of 1971. To hold otherwise would in some cases exclude altogether from the provisions of Section 203(c) contracts providing for deferred wage increases retroactive to November 13 or before, a gap in coverage clearly not intended by Congress.

      . In addition, the affidavit is supported by the union’s minutes of negotiation meetings held on July 13 and 14 which, although sketchy, are entirely consistent with the affidavit.

      . See, generally, H.R.Rep.No.714, 92d Cong., 1st Sess. (1971); S.Rep.No.507, 92d Cong., 1st Sess. (1971); Conf.Rep.No.753, 92d Cong., 1st Sess. (1971), U.S.Code Cong. & Admin.News 1971, p. 2283.

      . H.R.Rep.No.714, 92d Cong., 1st Sess. (1971).

      . Since 1965, hourly wage increases at these companies have followed each other in time and amount.


author: THORNBERRY, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. James Earl YOUNG, Sr., Defendant-Appellant.
    No. 72-3672
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Aug. 8, 1973.

      Jack H. Young, Jackson, Miss., court-appointed, for defendant-appellant.
    Robert E. Hauberg, U. S. Atty., Daniel E. Lynn, Asst. U. S. Atty., Jackson, Miss., for plaintiff-appellee.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.

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

   THORNBERRY, Circuit Judge:

Appellant was convicted below of assaulting a federal officer in violation of 18 U.S.C.A. § 111 and destruction of government property in violation of 18 U.S.C.A. § 1361. He raises principally the issue of whether the district court erred in failing to appoint another attorney for him after he expressed dissatisfaction with appointed counsel then representing him. We affirm.

After giving notice of their official status, F.B.I. agents Garvie and Stringer used their automobile to force appellant to halt his automobile. Testimony at trial indicated that both vehicles stopped, with the right side of the F.B.I. automobile at a 45° angle to the front of appellant’s automobile. The agents testified that as agent Garvie exited from the Government car, appellant suddenly drove his car forward, forcing agent Garvie to dive back into the government .vehicle to avoid injury. Appellant’s bumper struck and damaged the door of the Government car. Appellant testified in defense that the automobiles had not stopped at the time of the collision and that the impact was accidental.

Appellant was initially convicted of the offenses charged, but his conviction was reversed and remanded by a panel of this court because of an erroneous jury instruction. United States v. Young, 5th Cir. 1972, 464 F.2d 160. Appellant was again convicted at the second trial and this appeal ensued.

Appellant argues that he was deprived of effective assistance of counsel at his second trial. The lawyer who represented him at the second trial, Mr. Jack H. Young, also represented him at the first trial and on the successful appeal from the resulting conviction. On the first day of the second trial, after the jury had been impaneled, appellant expressed dissatisfaction with Mr. Young’s legal services. He complained first that Mr. Young had not notified him that he would be transferred from Atlanta, Georgia, where he was confined pending trial, to the place of his trial in Jackson, Mississippi. The objection plainly did not amount to a claim of deprivation of Sixth Amendment rights, and the district court properly disregarded it. Secondly, appellant expressed suspicion that Mr. Young had communicated confidential defense matters to the prosecutor. On the basis of his longstanding professional acquaintance with Mr. Young, the District Judge rejected out of hand the suggestion of improper professional conduct on Mr. Young’s part. Appellant then retreated to a more general objection: “Well, Your Honor, I am not trying to tell you that you don’t know Mr. Young. I feel that he won’t represent me.” The district court declined to appoint another lawyer for appellant and the trial began.

Although an indigent criminal defendant has a right to be represented by counsel, he does not have a right to be represented by a particular lawyer, or to demand a different appointed lawyer except for good cause. See United States v. Sexton, 5th Cir. 1973, 473 F.2d 512, 514. Unless a Sixth Amendment violation is shown, whether to appoint a different lawyer for an indigent criminal defendant who expresses dissatisfaction with his court-appointed counsel is a matter committed to the sound discretion of the district court. The Second Circuit has recently summarized the applicable principles:

In order to warrant a substitution of counsel during trial, the defendant must show good cause, such as a conflict of interest, a complete breakdown in communication or an irreconcilable conflict which leads to an apparently unjust verdict. Brown v. Craven, 424 F.2d 1166 (9th Cir. 1970); United States v. Grow, 394 F.2d 182, 209 (4th Cir.), cert. denied, 393 U.S. 840, 89 S.Ct. 118, 21 L.Ed.2d 111 (1968); United States v. Gutterman, 147 F.2d 540 (2d Cir. 1945). If a court refuses to inquire into a seemingly substantial complaint about counsel when he has no reason to suspect the bona fides of the defendant, or if on discovering justifiable dissatisfaction a court refuses to replace the attorney, the defendant may then properly claim denial of his Sixth Amendment right. Brown v. Craven, supra. In the absence of a conflict which presents such a Sixth Amendment problem, the trial court has discretion to decide whether to grant a continuance during the course of trial for the substitution of counsel, and that decision will be reversed only if the court has abused its discretion.

United States v. Calabro, 2d Cir. 1972, 467 F.2d 973, 986. See also United States v. Sexton, supra; United States v. Morrissey, 2d Cir. 1972, 461 F.2d 666; Brown v. Craven, 9th Cir. 1970, 424 F.2d 1166; Bowman v. United States, 5th Cir. 1969, 409 F.2d 225, cert. denied, 398 U.S. 967, 90 S.Ct. 2183, 26 L.Ed.2d 552, reh. denied, 400 U.S. 912, 91 S.Ct. 128, 27 L.Ed.2d 152; United States v. Grow, 4th Cir. 1968, 394 F.2d 182, 209, cert. denied, 393 U.S. 840, 89 S.Ct. 118, 21 L.Ed.2d 111; United States v. Gutterman, 2d Cir. 1945, 147 F.2d 540; United States v. Mitchell, 2d Cir. 1943, 138 F.2d 831.

A showing that appellant’s appointed attorney had disclosed confidential defense matters to the prosecutor which would damage the defense would have amounted to “good cause” for not proceeding to trial with the same counsel. See United States v. Gutterman, supra, 147 F.2d at 542. At the time appellant’s objections were raised below, no opportunity to make such a showing was afforded. Notwithstanding the District Judge’s professional acquaintance with Mr. Young, the Judge should have inquired more thoroughly into the source and factual basis, if any, of appellant’s dissatisfaction. Normally, failure to conduct such an inquiry constitutes reversible error. United States v. Morrissey, supra, 461 F.2d at 669.

We conclude that reversal is not required in this case, however, because the record as a whole reflects that appellant’s claim was insubstantial and that he received vigorous and able representation at trial. The second trial was a virtual duplicate of the first. Defense strategy was the same at the two trials ■ — appellant attempted to convince the jury that the collision between the two automobiles was accidental and not caused by his intentional act. The question of appellant’s intent was the single significant factual issue, and evidence on both sides was presented straight-forwardly for evaluation by the jury. The jury evidently credited the Government witnesses rather than appellant. Upon a careful review of the record we do not find, and the appellate briefs do not suggest, any plausible instance of prejudice to the defense through prosecutorial awareness of defense matters, confidential or otherwise.

Nor are we persuaded by appellant’s argument that, apart from the question of whether Mr. Young actually did betray appellant’s confidence, appellant’s distrust of his appointed counsel made effective representation by Mr. Young impossible. Appellant relies on Brown v. Craven, supra, in which the court held that an indigent defendant was deprived of effective representation of counsel where he and his appointed counsel had become “embroiled in irreconcilable conflict” from the beginning of their relationship, the defendant refused to communicate with his attorney at all, and the court felt on the basis of the record that the defense could probably have been more effective if conducted by a lawyer in whom the defendant had confidence. The instant case is clearly distinguishable from Brown. The record demonstrates no irreconcilable conflict between appellant and Mr. Young or any breakdown of communication between them. No contention is made that appellant refused to consult with Mr. Young. In view of the circumstance that Mr. Young conducted the first trial and prosecuted the successful appeal from the conviction which resulted, it is abundantly clear that he was intimately familiar with both the facts and the law of the case. Our review of the record convinces us that his representation of appellant at the first and at the second trial was more than adequate under Sixth Amendment standards.

The district court did not abuse its discretion in refusing to appoint a new attorney for appellant. Even if some facts had been shown which suggested the desirability of substituting different counsel at the second trial, we would be slow to find an abuse of discretion in the district court’s denial of appellant’s eleventh-hour request. “Judges must be vigilant that requests for appointment of a new attorney on the eve of trial should not become a vehicle for achieving delay.” United States v. Llanes, 2d Cir. 1967, 374 F.2d 712, 717.

Appellant further objects on this appeal that his conviction for two offenses based on evidence of a single incident offends the Double Jeopardy Clause. The two offenses are separate and distinct, since they require proof of different facts and different elements. Further, “ [different crimes may be committed by the same act, and prosecution may be had for either or both.” Hattaway v. United States, 5th Cir. 1968, 399 F.2d 431, 433.

In appellant’s two remaining assignments of error, he challenges the sufficiency of the evidence and contends that bias and hostility on the part of the trial judge rendered his trial unfair. We have considered both contentions and find them to be without merit.

Affirmed.

      . Coincidentally, appellant’s surname is also Young. All references to Mr. Young in the text indicate the lawyer rather than the client, who will be designated as appellant.

      . Appellant stated to the district court:
      Well, Your Honor, I feel that uhh ruh if me and Mr. Young talk something in private lie runs to the District Attorney telling the District Attorney uhh uhh about this, just what me and him talk about.
      On this appeal appellant has filed a pro se brief, supplementing the brief filed on his behalf by Mr. Young. In his brief appellant further states:
      Appellant’s repeated conversations concerning defenses in his ease were discussed with his Attorney and at later times the United States Attorney would know his'every move and would counter each defensive movement of the Appellant.


author: CHOY, Circuit Judge:

text:
    Barry JABLON, Plaintiff-Appellee, v. TRUSTEES OF the CALIFORNIA STATE COLLEGES et al., Defendants-Appellants.
    No. 73-1485.
    United States Court of Appeals, Ninth Circuit.
    Aug. 9, 1973.
    Rehearing Denied Sept. 5, 1973.
    John J. Klee, Jr., Deputy Atty. Gen., (argued), Evelle J. Younger, Atty. Gen., Elizabeth Palmer, Asst. Atty. Gen., San Francisco, Cal., for defendants-appellants.
    Sheldon L. Greene (argued), of Lorenz & Greene, Levy & Van Bourg, San Francisco, Cal., for plaintiff-appellee.
    Before BARNES and CHOY, Circuit Judges, and MURRAY , District Judge.

       The Honorable W. D. Murray, Sr. U. S. District Judge for the District of Montana, sitting by designation.

   CHOY, Circuit Judge:

Dr. Barry Jablon, an untenured-assist-ant professor of English at San Francisco State College (the College), brought this suit charging that his employment was unlawfully terminated at the end of the 1970-1971 academic year. In the fall of 1969, Jablon was informed that the president of the College, Dr. S. I. Hayakawa, had determined that 1970-1971 would be Jablon's terminal year. However, Hayakawa indicated that his decision was not final and that he was calling for a later reevaluation.

Hayakawa’s decision not to rehire Ja-blpn did not follow the formal written recommendations of the department’s Hiring, Retention and Tenure Committee (HRT), the department chairman, or the dean of the School of Humanities. And, despite a further recommendation of HRT that Jablon be rehired, Hayaka-wa decided in the spring of 1970 not to change his original decision.

Jablon then initiated proceedings under the Interim Grievance Procedures for Academic Personnel then in effect on the campus. The grievance procedures provide for a hearing before a committee composed of tenured faculty members and permit the aggrieved instructor to introduce evidence of his own and examine any witnesses against him. Although the recommendation of the committee is not binding upon the president, the grievance procedures provide:

6.3 The decision of the President, except in rare cases and for compelling reasons, shall concur with the judgment of the hearing committee. In the event that the President’s decision is not in accord with the grievance committee’s judgment, the compelling reasons for his decision shall be stated in writing to the aggrieved and to the hearing committee.

At the hearing, Jablon argued only that he was academically qualified and, therefore, he should be retained. After deliberating, the committee voted 4-1 that the president should review the decision not to retain Jablon. Hayakawa requested a clarification of what the committee meant by the vote. The chairman, without consulting the other members indicated that he interpreted the four votes for review to mean votes for retention. But when the individual members of the committee were asked to interpret their votes, two members said Jablon should be retained; one member said he should not be retained; and two members declared that their votes had •only been for an additional review of the case.

In view of this split, Hayakawa concluded that the committee had failed to reach a decision on the issue of Jablon’s retention and that it was impossible for him to concur as required by Section 6.3 of the Grievance Procedures. He reviewed the decision again since it was clear that a majority of the committee wanted a review and determined that his original decision should stand.

Jablon was notified of the decision and registered an appeal with the Chancellor of the California State Colleges as is permitted under the grievance procedures. The chancellor, however, can only review those decisions when the president fails to concur with the hearing committee and the chancellor interpreted Hayakawa’s decision as a concurrence with the hearing committee’s decision requesting a review.

Thereafter, Jablon commenced this lawsuit. The basis of the lawsuit is substantially different from the issue raised in the grievance proceedings. Whereas the grievance proceeding dealt only with Jablon’s academic qualification, the gravamen of the lawsuit is that Jablon was not retained because of his political beliefs and union membership. The district court, however, never reached this issue because it had not been raised at the college administrative proceeding.

But the court ordered the College to reinstate Jablon with back pay, ruling that the president had violated the College rules in not remanding the matter to the committee for further deliberation until the committee reached a definite decision on the retention issue. The court felt that if the committee were unable to break its deadlock, the president would have to request that a new committee be formed to hear the matter de novo.

As an alternate ground for ruling in favor of Jablon, the court held that the College had imposed a stigma upon Ja-blon, so he was entitled by procedural due process concepts to an evidentiary hearing on his termination, and that the grievance procedure hearing did not fulfill the constitutional requirement. We reverse.

We agree with the district court that we cannot consider Jablon’s first amendment claims. Formal presentation of a claim in the administrative proceeding is a prerequisite to a lawsuit. Toney v. Reagan, 467 F.2d 953 (9th Cir. 1972); Whitner v. Davis, 410 F.2d 24 (9th Cir. 1969).

However, we disagree with the court’s conclusion that rights guaranteed Jablon by Section 6.3 were violated. The court interpreted the college rules to require a majority recommendation on the issue of retention before the president could act. The rules do not require the committee’s recommendation to be either for retention or nonretention. The rules only state that:

Upon arriving at a decision by majority vote, the hearing committee shall forthwith transmit to the President or to the acting chief administrative officer of the college, and to the aggrieved, a written statement of the committee’s findings and recommendations together with a complete record of the committee’s proceedings .... Rule 5.51.

The Vice President of the College, Dr. Garrity, testified that recommendations to review without any specific recommendation with regard to retention had often been accepted in the past as valid recommendations.

Nothing in the rules provides that in the case of a split vote on the issue of retention, a remand or de novo hearing is required, or suggests that the president must require a split vote to be reconsidered, or that a deadlocked committee must be disbanded and a new committee appointed. While such procedures would be reasonable for the College to adopt, we have no authority to amend the grievance procedures accordingly. The issue before us is only whether the College complied with its existing rules.

The committee agreed that the president should review his original decision. The president did just that. A majority of the committee did not conclude that Jablon should be retained. The committee’s decision was in effect that the president in his discretion should resolve the problem. He did.

Since the action of the president was consistent with the recommendation of the hearing committee, Jablon was properly denied his right to appeal to the chancellor.

We are dealing with a set of rules drafted and adopted by the College in conformity with guidelines issued by the Board of Trustees of the State College System. Both the College and the chancellor’s office reviewed this matter and concluded that the proper procedures had been followed. When a local regulation is silent on a particular problem and the point has been considered by those who drafted the regulation and have dealt with it on a day-to-day basis since its adoption, considerable weight must be given to their interpretation. We think the College fairly and substantially complied with its own regulations.

We also disagree with the district court’s alternate ground for its decision. The court found that the College’s decision not to rehire Jablon, coupled with the president’s charges against Jablon, imposed a stigma upon Jablon which damaged his standing in the community and his opportunities for future employment; therefore, he was entitled to a hearing on his nonretention by due process concepts, citing Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972).

We think the court below misapplied Roth. A hearing is only required when a charge is made that “might seriously damage his standing and associations in the community . . . for example, that he had been guilty of dishonesty or immorality. Had it [the State] done so, this would be a different case. For ‘[w]here a person’s good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential.’ . . . ” Roth, supra at 573, 92 S.Ct. at 2707.

Thus, only a limited type of stigma that seriously damages a person’s reputation or significantly forecloses his freedom to take advantage of other employment opportunities requires a hearing. In the instant case, Jablon was not so disadvantaged. The College did not attack his honesty or integrity. The reasons raised at the grievance hearing all related to his academic performance at the College, which did not deem him to be a good enough overall teacher and scholar to merit retention. This is not the type of stigma that the Court was referring to in Roth. Moreover, the fact that this may have a deleterious effect upon Jablon’s future employment prospects is unfortunate, but the Supreme Court specifically noted in Roth, supra at 574, n. 13, 92 S.Ct. 2701 that this “kind of foreclosure of opportunities” does not give rise to a right to a hearing. Accordingly, due process concepts do not require that the college grant Jablon another hearing on the issue of his retention.

In light of our decision, we need not determine whether the district court was prohibited by the Eleventh Amendment from ordering the State to pay Jablon back wages.

Reversed.

      . From 1968 through 1970, the college was in turmoil and the faculty and students were divided on many academic and political issues. There were both student and faculty strikes during the period. Jablon ■was an active and vocal member of the teachers’ union which actively supported the strike. President Hayakawa was a vocal opponent of the strikes and allegedly very hostile to the leaders of the strike.


author: HAYNSWORTH, Chief Judge:

text:
    RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, Appellant, v. SWARTZ, BRESENOFF, YAVNER & JACOBS, a Virginia partnership, et al., Appellees.
    No. 71-1284.
    United States Court of Appeals, Fourth Circuit.
    Argued Feb. 5, 1973.
    Decided Aug. 1, 1973.

      William C. Worthington, Norfolk, Va., (Allan. M. Shine, Winograd, Shine & Zacks, Providence, R. I., James L. Miller, Gerard P. Rowe and Williams, Wor-rell, Kelly & Worthington, Norfolk, Va., on brief), for appellant.
    William B. Eley, Norfolk, Va., (Rixey & Rixey, Norfolk, Va., on brief), for ap-pellees.
    Before HAYNSWORTH, Chief Judge, WINTER, Circuit Judge, and MURRAY, District Judge.
   HAYNSWORTH, Chief Judge:

Rhode Island Hospital National Bank sued Swartz, Bresenoff, Yavner & Jacobs, a firm of certified public accountants, each of the partners of the firm and the estate of a deceased partner, alleging, inter alia, that the accountants had negligently audited the financial statements of International Trading Corp. and related companies in consequence of which the bank had made loans to International which was unable to repay them, and the bank sustained a loss. The District Court, sitting without a jury, concluded that the evidence failed to establish “fraud or collusion on the part of Accountants, any lack of good faith, misrepresentation, breach of duty, negligence, or failure to use reasonable care in the preparation and issuance of the financial statements,” and it dismissed the complaint. We disagreed with the District Court’s conclusions with regard to negligence in our first consideration of this matter. We, therefore, reversed and remanded the action to the District Court to determine if the bank had relied on the accountants’ negligent misrepresentations. Rhode Island Hospital Trust National Bank v. Swartz, Bresenoff, Yavner & Jacobs, 4 Cir., 455 F.2d 847.

On remand, no new evidence was presented, and after reconsidering the issue, the District Court found no reliance by the bank and therefore no right of recovery. The District Court did go on to consider the question of damages, in the event we should later find there was reliance. We do find reliance, and direct the entry of judgment for the plaintiff for damages in the amount found by the District Court.

• International, an importer of cement, became a customer of the bank in 1962 when it expanded its operations to New England. It obtained a line of credit from the bank to be secured by a pledge of inventories and accounts receivable, in the amount of 75% of collateral but not to exceed $200,000. At approximately the same time, International undertook to change its method of handling cement from bags to bulk in order to reduce labor costs and achieve more profitable operations.

This change necessitated modification of facilities and the expenditure of considerable sums for leasehold improvements. In 1962 more than $155,000 was so spent, primarily on its Florida facilities. Such expenditures naturally tended to deplete International’s working capital. Although the bank had made a number of loans to it during the year, by the end of 1962 there were no outstanding obligations to the bank.

In 1963 International sought long-term financing of leasehold improvements from the bank, but the bank was unwilling to lend on that basis. The bank, however, did accede to International’s request that the maximum amount of its line of credit be exceeded upon International’s assurance that economies from savings on labor costs, expected to result from bulk handling, would enable it to operate more profitably and to meet greater loan obligations.

In June 1964 International represented to the bank that during 1963 it had expended $212,000 for leasehold improvements to facilities in Florida, Georgia and Rhode Island. The work was purportedly done by International, using its own labor and materials. In fact, the claimed 1963 leasehold improvements were totally fictitious. The labor expenses claimed to have been incurred were incurred as operating expenses in handling and storing cement. No materials were purchased. An inspection of these facilities in 1964 disclosed that they were in the same condition as at the end of 1962.

In accordance with their loan arrangement, International was obligated to furnish the bank with financial statements for each year, ending December 31. Beginning March 27, 1964, the bank pressed to obtain the statements for 1963. They were not forthcoming until June 24, 1964. The income statement showed that the total operating expenses, amounting to $609,956.42, were reduced by $212,000 designated “Estimated Expenses Contained in Operating Expenses Representing Cost of Leasehold Improvements,” with the net effect that International had a net operating profit of $1,654.17. There was other income, and the statement showed a profit of $12,741.89 and a net profit after taxes of $9,257.60. The balance sheet similarly capitalized the $212,000 on the asset side, and showed a net worth of $339,427.28. If the $212,000 had not been capitalized, the income statement would have shown a loss from operations of over $210,000 and the balance sheet would have shown a net worth of only $131,000.

When the accountants transmitted the financial statements to their client, they wrote a cover letter expressing certain reservations about the “fairness of the accompanying statements.” With respect to the critical item, the 1963 leasehold improvements, however, the accountants’ qualification was only to the effect that since “fully complete detailed cost records were not kept * * * no exact determination could be made as to the actual cost of said improvements.” The accountants made no suggestion that the improvements were nonexistent or insubstantial.

While there is uncertainty as to precisely what the accountants did in the preparation of the statements, what the bank did after copies, together with the accountants’ letter, were delivered to it appears from a memorandum, made on the day the statements were received by Peter Toulmin, the bank’s loan officer. Toulmin recorded that the statements “show continued effect of the cost-cutting automation expenses initiated * * * in 1962 and completed shortly before the end of 1963.” His memo called attention to his belief that altogether approximately $400,000 had been invested in new equipment and leasehold improvements and that this investment had enabled International to drastically “reduce the cost of handling cement both in unloading it from the ships and loading it into the tank trucks.”

After Toulmin finished briefly looking over them, he referred the statements to the credit analysis department of the bank for detailed study. On September 24, 1964, the analysis department reported critically on the statements.

As of the date of receipt of the copies of the financial statements, June 24, 1964, International’s total obligations to the bank were approximately $220,000. Toulmin testified that if he had known on that date that $212,000. of International’s leasehold improvements were fictitious, no further credit would have been extended. Toulmin stated that had the truth been known the account would probably have been immediately assigned to the bank’s classified loan department for strenuous efforts to collect it. Since he was unaware of these crucial facts, International’s loan balance was allowed to increase during the summer of 1964 until it reached $336,685.-61 on September 24, 1964, the date of the analysis department’s adverse report.

After the analysis department reported critically on International’s financial statements, the bank made no new commitments. Instead, collections were effected from collateral pledges and were routinely applied to International’s oldest loan standing on the bank’s books. Total collections reduced the unpaid balance to $116,685.61, and this sum has become uncollectible.

In its first opinion, the District Court found that the accountants had broken no duty in their audit and preparation of the financial statements and therefore denied relief. We rejected this conclusion and found that the accountants had been negligent. We then remanded the action to the District Court to determine if the bank had relied on the erroneous reports. The District Court concluded that the bank had not.

We find this ruling to be clearly erroneous. We accept, however, that alternative portion of the District Court’s opinion fixing damages in the amount of $67,217.50, plus six per cent interest from January 14, 1971 (the date of the District Court’s first opinion).

The issue before us is a narrow one: was the District Court clearly in error in finding that the bank did not rely on the financial statements in extending credit to International from June 24, 1964, to September 24,1964?

We have already held that the accountants were negligent in conducting their audit and preparing the statements. We determined before that the accountants’ disclaimer was insufficient to preclude a finding of negligence. Similarly, it fell short of adequately alerting the bank to International’s financial ills so grave as to amount to a collapse. It is true that Toulmin was familiar with the difference between a qualified and an unqualified financial report and one with a disclaimer. A fair reading of the accountants’ cover letter and disclaimer indicates, however, that the disclaimer went only to the precise amount which had been expended on leasehold improvements. The statements were a clear representation that, while the leasehold improvements may have had a value of more or less than $212,000 a substantial sum had been spent upon them during the year and they had substantial value.

The District Court reasoned that since the bank’s loans to International were secured by a pledge of inventories and accounts receivable (which were not falsely represented), any reliance on misrepresented improvements was immaterial. Such a conclusion overlooks the realities of the situation. ■ The bank’s sole reason for allowing International to borrow beyond the established maximum credit was its belief that International was using most of its operating capital to make leasehold improvements. It was believed that these improvements would significantly increase the efficiency of International’s cement handling operations and thereby produce greater profits in the near future. The bank would have hardly continued to extend credit to International if the 1963 financial statements had accurately pictured its financial situation. Instead, the bank would have done as Toulmin testified — frozen the account and attempted immediate collection.

The accountants have suggested that the circumstances surrounding the bank’s dealings with International were such that the bank was already convinced of the existence of the fictitious improvements prior to receiving the 1963 financial statements. It is true that, prior to receiving the statements, the bank had no reason to question the existence of the improvements it had been told had been wrought in 1963. But it was due to the accountants’ negligence that the bank had no reason to question their existence after receiving the statements. Had the bank been advised of International’s actual position, the disastrous operating losses in 1963 and the tremendous shrinkage in net worth, it is obvious that the bank would not have acted as it did. This amounts to a clear showing of reliance by the bank. It is immaterial that preceding circumstances caused the bank to be more receptive to the false information.

It can hardly be gainsaid that if the accountants had not misrepresented the expenditure of substantial sums on leasehold improvements and had disclosed the calamitous losses, one of two things would have happened. International might have withheld the statements from the bank, but by late June surely the time was close when the bank would stop all fresh credit because of its failure to 'receive the statements it had been seeking since late March. If copies of a true statement had been furnished the bank, it is obvious that disclosed financial reverses would have deprived it of fresh credit. Either way, International could not have continued to receive fresh credit without the aid of the accountants’ false statement.

The fact that the bank did not sever all financial relations with International after Toulmin had received the critical analysis from his analysis department does not mean that the bank did not rely on the accountants’ statements. The analysis, while strongly criticizing International’s fiscal condition, did not disclose that the 1963 improvements had never been made.

We are thus led to but one conclusion. The bank clearly did rely on the accountants’ audit and preparation of the financial statements to its detriment. This coupled with the accountants’ negligence gives the bank a cause of action. We, therefore, reverse the District Court’s judgment and direct the entry of a judgment for the bank for damages in the amount determined by the District Court.

Reversed.

      . Maury Spencer, International’s chief stockholder and president, delivered the statements to Peter Toulmin, the bank’s loan officer in charge of International’s account. Spencer remained while Toul-min briefly looked over the statements. Spencer said nothing to warn Toulmin that the 1963 improvements had not been made.

      . The exact amount of International’s obligation to the bank on September 24, 1904, has been a subject of some controversy. Both Michael Rhee, a member of the bank's classified loan department, and Toulmin testified that the figure of $336,-685.01 was correct (although Toulmin did give a different figure at one point). Mr. Iselin of the credit analysis department put the amount at $246,685.01 with another $90,000 in unmatured acceptances in the bank’s international department (half maturing on October 5, 1964, and the remainder on November 23, 1964). Iselin’s total would also be $336,685.01.

      . The District Court arrived at this figure by starting with undisputed increased liabilities of $27,217.50 from June 24, 1964, to September 24, 1964. As mentioned in note 2, there was also an additional $90,-000 on the books committed to International. This sum was to be advanced in two increments of $45,000 each, one on October 5, 1964, and the other on November 23, 1964. The District Court could find no evidence of any loan, payment or advance of $90,000 or any of $45,000 or any combination of advances showing $90,000. There was, however, an advance of $40,000 on October 5, 1964• The District Court assumed this sum was advanced as part of the $45,000 acceptance due on that date and concluded that it should be included in the damages due the bank.

      . Accountants had included a similar disclaimer in International’s 1962 financial report — 19G2 was the year in which International actually had made substantial leasehold improvements.

      . Toulmin stated that at the time he received the financial statements he
      felt that the corporation was making progress, that they had been initiating cost-cutting improvements, which would show up in higher profits in the future, and that the loan, while under margin * * * would — once the corporation rounded the corner, as indicated by these improvements, would begin to pay down.

      . International had made substantial improvements in 1962 which certainly led the bank to believe that the alleged continuing improvements of 1963 were also made. In February of 1963, Toulmin, himself, saw some of International’s improvements, evidently made in 1962. Also, in January of 1964, Toulmin received a telephone call from a Florida banker regarding the nature of the improvements made there by International “last year” (this statement could have referred to 1962 or 1963). Finally, there was the presence of Spencer when he gave the statements to Toulmin in June of 1964. Toulmin surely talked with Spencer to some extent about International’s new operations, but Spencer did not disclose the fact that portions of the reports were erroneous. There was no reason for Toulmin to suspect this was the case and closely question Spencer on the subject.

      . [I]t is not required that the defendant shall have been the sole cause of the damage; and indeed it is seldom, if ever, that the plaintiff is not influenced to some extent by many other factors, most of which are not connected with the defendant at all. It is enough that the representation has had a material influence upon the plaintiff’s conduct, and been a substantial factor in bringing about his action.
      W. Prosser, Handbook of the Law of Torts ch. 20 § 103 (3d ed. 1964).


author: SETH, Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. Richard James DOTA, Appellant.
    No. 73-1062.
    United States Court of Appeals, Tenth Circuit.
    Aug. 9, 1973.
    Certiorari Denied Dec. 3, 1973.
    See 94 S.Ct. 583.
    Donald K. Bain, Denver, Colo., for appellant.

      Richard J. Spelts, Asst. U. S. Atty. (James L. Treeee, U. S. Atty., with him on the brief), for appellee.
    Before SETH, JONES, and DOYLE, Circuit Judges.

       Of the Fifth Circuit, sitting by designation.

   SETH, Circuit Judge.

Appellant was found guilty after a jury trial of violating 18 U.S.C. § 1014. This section makes it a crime to knowingly make a false statement as to a material fact in applying for a loan at a bank insured by the Federal Deposit Insurance Corporation for the purpose of influencing the bank to make the loan.

The indictment was in one count, charging appellant with making seven different false representations. The trial court struck two of the allegedly false representations from the indictment. As to one of them, the bank president testified that it would not have influenced the bank one way or another in making the loan. The other representation dealt with another charge pending against appellant, and the trial court determined that introduction of facts relating to that statement would be prejudicial to appellant.

The jury was instructed that if they found that appellant had intentionally falsified any one of the five statements, they should find appellant guilty. The jury instructions were not objected to, and the jury returned a general verdict of guilty.

Appellant argues that there was no substantial evidence as to certain of the alleged false statements, and since there is no method of determining which of the false statements the jury relied upon in reaching its vei’dict, we are requiz*ed to reverse.

If in fact there was insufficient evidence to send the ease to’ the jury as to any one of the alleged false statements, a reversal is necessary under the general verdict. It is thus necessary that we examine the evidence as to each of the statements as appellant claims none were supported by sufficient evidence, and all were submitted to the juz*y. Those statements were that: (a) appellant was the president of Stezding Entez'prises, 8000 West 14th Avenue, Denvez*, Coloz*ado, and had served in that capacity for two yeaz's; (b) appellant had $22,400.00 cash in banks and on hand; (c) appellant had $253,500.00 invested in his own business; (d) appellant owned a grain elevator in Des Moines, Iowa, valued at $176,000.00 with an outstanding mortgage of $92,000.00; and (e) appellant owned two 1971 Cadil-lacs.

A review of the evidence, taken in the light most favorable to the Government, discloses the following:

As to the statement denominated (a) above, the Govezmment introduced evidence that another enterprise was operating from the address given by appellant, that although a Sterling Enterprises had previously been licensed to do business in Colorado, appellant had not been connected with that organization in any manner*, and that shortly before applying for the loan involved herein, appellant had been “running short of money” and had been inquiring about finding himself employment.

The evidence as to the statement in (d) indicated that neither appellant nor Sterling Enterprises had ever been listed as an owner of a state-licensed grain elevator in Iowa, nor had he or Sterling Enterprises been shown as an owner of any grain elevator in the tax records of the City of Des Moines or the surrounding county. There was also evidence that no mortgage had ever been recorded on the grain elevator. Appellant’s allegation that his name would not appear in the records as an owner if he owned stock in a corporation that in turn owned the grain elevator is refuted by the very financial statement in issue on which he left a blank under the heading, “Schedule of Bonds and Stocks.”

The evidence as to (e) showed that appellant applied for a Colorado driver’s license and indicated that he held no license from any other state. The Cadillac he showed to the bank president had Colorado license plates. There was evidence that appellant had not registered any automobiles in Colorado. At the time he applied for the loan, appellant showed that his wife was driving the other 1971 Cadillac. It was stipulated at trial that appellant was single. There was also evidence that appellant “hung around” the offices of a company that had leased nine 1971 Cadillacs with Colorado license plates and that he occasionally took them to be washed.

The evidence presented on (b) and (c), although not direct evidence, was sufficient, we believe, to permit the jury to find that the statements made were false. As to both of the statements, there was evidence that appellant was “running short of money,” was looking for a job, and had only small sums of money in the bank. From this evidence, and evidence as to the small sums that appellant had in the bank, the jury could properly find that appellant did not have over $22,000.00 in cash on hand. Likewise, the jury could properly find from the evidence that appellant did not own a valuable grain elevator, that he was not the president of a nonexistent Sterling Enterprises, and that appellant did not have more than a quarter of a million dollars invested in his own business.

We therefore hold that there was sufficient evidence as to each of the portions of the financial statement alleged by the Government to be false to submit each of those allegations to the jury.

Appellant finally argues that certificates from the Jefferson County and Logan County, Colorado, Clerks and Recorders to the effect that no trade name affidavit for Sterling Enterprises had been filed in their respective offices were not properly authenticated because they failed to recite that a diligent search of the records had been undertaken. Fed.R.Civ.P. rule 44(b) incorporated by Fed.R.Crim.P. rule 27. The Government urges that the certificates were properly admissible under 28 U.S. C. § 1739, as permitted by Fed.R.Civ.P. rule 44(c). Section 1739, while providing for the admission of state and territorial nonjudicial records, makes no provision for certification by the custodian of such records that a certain document is not of record. The certificate from the Jefferson County Clerk and Recorder recited that “. . .a search of the corporation and trade name files from Jan. 2, 1968 to Nov. 16, 1972 of this County, does not reveal any record of the Sterling Enterprises or Sterling Enterprises Inc.” The certificate from the Logan County Clerk and Recorder certified that “. . . according to the real property records of this office, there is no record of a TRADE NAME AFFIDAVIT having been filed or recorded . . . .” There has been substantial compliance with the rule, and reversing this case simply because the certificates failed to recite the word “diligent” would protect no substantial right of appellant and would indicate nothing but a total capitulation to form over substance.

Affirmed.