text:
    Esther MINSKOFF, Executrix of the Estate of Sam Minskoff, Deceased, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
    Nos. 109,110, Dockets 72-1922, 73-1608.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 7, 1974.
    Decided Jan. 9, 1974.

      Herman R. Perper, Spring Valley, N. Y., for plaintiff-appellant.
    David P. Land, Asst. U. S. Atty., S. D. N. Y. (Paul J. Curran, U. S. Atty., S. D. N. Y., Taggart D. Adams, Asst. U. S. Atty., S. D. N. Y., on the brief), for defendant-appellee.
    Before KAUFMAN, Chief Judge, and SMITH and FEINBERG, Circuit Judges.
   PER CURIAM:

Esther Minskoff, executrix of the estate of Sam Minskoff, appeals from the dismissal of her complaint, containing three “causes of action,” for the recovery of estate taxes and income taxes paid on behalf of the decedent. The first cause of action sought a refund of estate taxes allegedly overpaid because of an erroneous valuation of the decedent’s 20% interest in a real estate partnership, the 1 East 66th Street Corporation (the Corporation) venture. The second prayed for recovery of income taxes paid by the estate as a result of a deficiency asserted against the decedent, Sam Minskoff, for failure to report a capital gain on the partnership’s sale of substantially all of the Corporation’s stock before Minskoff’s death. The third cause of action asserted that under the doctrine of equitable recoupment the estate should be permitted to recover estate taxes, even if the statute of limitations were a bar to this claim, on the ground that the Government had improperly collected a “double tax” — an estate tax and an income tax — on the same transaction, namely, the sale of the Corporation’s stock.

Both sides moved for summary judgment on all three claims. Judge Lum-bard, sitting by designation, granted the Government’s motion for summary judgment on claims one and two, finding both claims to founder on the statute of limitations. We affirm this disposition on the well-reasoned opinion below, 72-1 U.S. Tax Cas. 84, 766 (S.D.N.Y. May 12, 1972) (Minskoff I).

In Minskoff I, Judge Lumbard denied the cross-motions for summary judgment on the equitable recoupment claim since a factual dispute existed concerning the Government’s method of computing the value of Minskoff’s 20% partnership interest for estate tax purposes. After a two-day trial on this third claim, Judge Lumbard granted judgment for the Government. He found that the income Minskoff derived from the sale of the Corporation’s shares was pre-death income because the sale took place prior to Minskoff’s death, and he had the money and its unrestricted use before he died. Accordingly, having determined that there were two independent taxable events — (1) the sale of stock giving rise to a capital gain for income tax purposes and (2) the existence of proceeds or a claim to those proceeds as an asset of Minskoff’s at death for estate tax purposes — Judge Lumbar d properly held the doctrine of equitable recoupment, announced in Bull v. United States, 295 U.S. 247, 55 S.Ct. 695, 79 L.Ed. 1421 (1935), inapposite as a means by which the estate could by-pass the statute of limitations and relitigate the factual basis for the estate tax calculation.

We affirm. We find persuasive the following rationale set forth below, 349 F.Supp. 1146, 1149 (S.D.N.Y.1972) (.Minskoff II):

The theory of the doctrine of equitable recoupment is that one taxable event should not be taxed twice, once on a correct theory and once on an incorrect theory, see Rothensies v. Electric Storage Battery Co., supra, 329 U.S. [296] at 300, 67 S.Ct. 271, [91 L.Ed. 296] and that to avoid this happening the statute of limitations will be deemed waived. The doctrine does not allow a litigant to prove any and all mistakes made by him in reporting his tax. Most mistakes must be corrected within the time allowed by the statute of limitations. To succeed in avoiding the statutory bar, the litigant must show that the opposing party seeks to treat the same item inconsistently as a matter of law. Here no such action has been taken by the. Government. Pre-death income has been treated first as income, then as corpus. This result is allowed by the Bull case itself. Accordingly, the. Government is entitled to judgment on the taxpayer’s third cause of action.

Since we consider this reasoning disposi-tive, we need not reach the alternative grounds discussed by the district court as support for its dismissal of the estate’s third claim.

The judgments below are affirmed.

      . We find no inconsistency between our resolution of the instant case and the Third Circuit’s decision in Boyle v. United States, 355 F.2d 233 (3d Cir. 1965), strenuously urged upon us by appellant. In Boyle, as in Bull, the doctrine of equitable recoupment was held applicable to i>ermit the taxpayer to re-litigate a barred claim for estate tax on corpus where the Government had, subsequent to the collection of that tax, asserted that the estate (Bull) or the beneficiaries (Boyle) must pay an income tax on the identical fund. The inconsistent treatment in these two cases is clear: the sum at issue could not have been earned both before the decedent’s death, requisite for inclusion as corpus, and after his death, necessary for treatment as income to the estate or the beneficiaries. A similar inconsistency is not present, however, in the instant case for, as the Court recognized in Bull:
      the amount received from the partnership as profits earned prior to Bull’s death was income earned by him in his lifetime and taxable to him as such; and . . . it was also corpus of his estate and as such to be included in his gross estate for computation of estate tax.
      United States v. Bull, supra, 295 U.S. at 254, 55 S.Ct. at 697. (Emphasis added)


source: Caselaw Access Project

author: EDWARDS, Circuit Judge. PRATT, District Judge WEICK, Circuit Judge

license: Public Domain

text:
    AKRON BOARD OF EDUCATION and Conrad C. Ott, Plaintiffs-Appellants, v. STATE BOARD OF EDUCATION OF OHIO et al., Defendants-Appellees.
    No. 72-2075.
    United States Court of Appeals, Sixth Circuit.
    Argued April 6, 1973.
    Decided Jan. 15, 1974.

      John M. Glenn, Akron, Ohio, for appellants; Edward 0. Erickson, Akron, Ohio, on brief.
    John F. Ray, Jr., Cleveland, Ohio, on brief for appellees, William R. Mc-Clenathen, Akron, Ohio, of counsel.
    Before WEICK and EDWARDS, Circuit .Judges, and PRATT, District Judge.

       Honorable Philip Pratt, United States District Judge for the Eastern District of Michigan, sitting by designation.

   EDWARDS, Circuit Judge.

Plaintiffs, Akron Board of Education and its Superintendent, Conrad C. Ott, appeal from an order dismissing their complaint. The complaint filed before the United States District Court for the Northern District of Ohio sought an injunction against the Ohio State Board of Education (and its members as individuals) restraining the transferring of an area (Sackett Hills) of the previous jurisdiction of the Akron Board of Education to an adjoining school district. Plaintiff’s complaint is founded upon 42 U.S.C. § 1983 (1970), 28 U.S.C. § 1343 (1970), and the Fourteenth Amendment to the United States Constitution. It seeks both a declaratory judgment and injunctive relief.

The complaint alleged:

In the ease of the proposed transfer of Sackett Hills,, * * * unlawful policies and procedures have resulted in approval of a transfer by the defendant State Board of Education, effect of which will or may be to compel plaintiffs to take action in violation of constitutionally and statutorially [sic] protected rights of children in the Akron City School District.
12. Under the proposed transfer of Sackett Hills, children attending public schools will be permitted to attend elementary, junior high, and senior high schools which are all-white in composition instead of attending North Senior High School which is approximately 24% black, Jennings Junior High School which is approximately 31% black, Findley Elementary School which is approximately 63% black, and Harris Elementary School, in the case of some students, which is approximately 7% black.
13. Defendants State Board of Education, their defendant members, and the defendant Essex have exercised the authority otherwise given them by law in an unlawful, discriminatory, and arbitrary manner in violation of the Fourteenth Amendment of the United States Constitution and Title 42, United States Code, Sec. 1983, in that:
A. By reason of the practices and policies of said defendants, the plaintiff Akron School Board has purportedly been required to forfeit the Sackett Hills area from the Akron School District, although there has been no failure to meet requirements of state law respecting transportation and education of school age children therein and notwithstanding the absence of any legal basis to impose such a forfeiture even if there had been a failure to meet any such requirements. Such action by said defendants has been taken on the ground that the plaintiff Board has failed to match the standard of transportation offered to children within-such area which a suburban school district can allegedly maintain;
B. The policies and practices of said defendants impose a standard of transportation for urban school districts which impose the higher costs upon them than obtain on a per capita basis in suburban school districts notwithstanding the fact that the State of Ohio does not compensate for such difference and that state law does not provide or purport to provide legal authority for the defendant State Board of Education to require the same standard of transportation service;
C. The policies and practices of the Defendant State Board of Education permit the use of a standard of comparative convenience in transportation of children to nonpublic schools as required under the provisions of Revised Code Section 3327.01 to be the basis whereby patrons desiring to send their children to all-white public schools outside an urban district in preference to racially mixed public schools within such a district may do so;
D. The policies and practices of said defendants by failing to adopt lawful standards has resulted in the case of the proposed Sackett Hills transfer from the Akron City School District an official state action to cause children from an all-white area to attend public schools on a basis other than the proximity of their residence thereto for reasons not equally applicable to all.
14. Plaintiffs will suffer immediate and irreparable harm in the event that the defendant class members or their attorney, the defendant Mc-Clenathen, file and maintain any action in the state courts seeking to compel the plaintiffs to give effect to the unlawful approval of their detachment petition by the defendant State Board of Education of Ohio. The effect of any such action by said defendants would be to give an eviden-tiary basis for suit by other patrons from the Akron City School District that children otherwise within the district are assigned to attend public schools by reason of race. Such a suit would require great expense and effort on the part of the plaintiffs to defend and would or might result in an order causing a complete alteration of attendance areas historically established without regard to race. Any such alteration of attendance areas would result in great and incalculable expense and would deprive children in the Akron City School District of educational programs necessarily eliminated or curtailed on account thereof or result in an increase in tax levies for Akron taxpayers, or both.

This is a small case in everything except the legal principles involved. The area, Sackett Hills, which the defendant State Board of Education has approved transferring from the Akron School District to an adjacent suburban school district is small. The number of students involved is only 29 (of whom 6 were attending Akron Public Schools).

The facts alleged by the Akron Board are that without any lawful educational justification, white students are being moved by the transfer from desegregated schools in Akron to all white suburban schools, thereby decreasing the tax money available to the Akron School Board and tending to deprive Akron school students of their constitutional right to attend nonsegregated schools. Obviously one such transfer has a very limited influence upon the rights of students to attend nonsegregated schools. Obviously, also, many such transfers based upon such a precedent could have a disastrous effect.

The legal principle involved is the provision in the Fourteenth Amendment to the Constitution of the United States which prohibits any state from denying any citizen the equal protection of the laws.

Thus far the defendants have filed no answer to this complaint. They moved to dismiss it on the grounds that the complaint stated no claim upon which relief could be granted and that the District Court had no jurisdiction over the action. The District Judge (without, of course, ever reaching the merits of the action) granted the motion to dismiss, holding that the federal court had no jurisdiction because neither of the plaintiffs had standing to sue.

We hold that under the facts alleged and stipulated the plaintiffs have standing to bring this action, that the District Court has jurisdiction to enforce the Fourteenth Amendment, that the defendants, members of the State Board of Education, are not immune from suit, and that in the present posture of this case abstention is neither required nor appropriate.

We note, of course, that the State Board has contended, and presumably will do so before the District Court, that its transfer decision was made on grounds of convenience of transportation and had no racial motivation at all. This may be so, but thus far the State Board has not even filed an answer to allege these contentions and, of course, there has been no federal adjudication of the conflicts of fact.

Standing to sue “is only a rule of practice” (Barrows v. Jackson, 346 U.S. 249, 257, 73 S.Ct. 1031, 1035, 97 L.Ed. 1586 (1953)) designed to enforce the constitutional rule that the United States Courts have jurisdiction only of “Cases” or “Controversies.” U.S.Const, art. III, § 2, cl. 1. In its most general form the rule may be stated as holding that no one who is not a member of the class claimed to be offended may bring an action to protect the constitutional rights of such a class. See Barrows v. Jackson, 346 U.S. 249, 255, 73 S.Ct. 1031, 97 L.Ed. 1586 (1953); Coleman v. Miller, 307 U.S. 433, 464-467, 59 S.Ct. 972, 83 L.Ed. 1385 (1939) (Frankfurter, J., separate opinion); Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 346, 56 S.Ct. 466, 80 L.Ed. 688 (1936) (Brandeis, J., concurring). The general rule seeks to guarantee that every suit will truly be an adversary proceeding. Flast v. Cohen, 392 U.S. 83, 101, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968).

Where, however, there is a close relationship between the plaintiffs who seek to bring an action and the class of persons whose constitutional rights are claimed to be violated, standing to sue has frequently been found. NAACP v. Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963); Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070 (1925); Whitley v. Wilson City Board of Education, 427 F.2d 179 (4th Cir. 1970); Board of Education v. York, 429 F.2d 66 (10th Cir. 1970); Brewer v. Hoxie School District No. 46, 238 F.2d 91 (8th Cir. 1956). Cf. Sierra Club v. Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972).

In the Society of Sisters case, supra, a private parochial school brought action to enjoin the enforcement of a state law which required all parents to send their children to public schools. The Supreme Court held the challenged act unconstitutional thereby recognizing the right of the plaintiff school to protect the constitutional rights of the pupils of the school and their parents. It is, of course, clear that the impact of the state action there protested was greater upon the school itself than is the state action protested in our instant suit. But in our instant case, not only are children transferred, but tax dollars otherwise due the Akron School Board are transferred too. The difference between the Society of Sisters case and this case as to standing seems to be a matter of degree rather than of legal principle.

In NAACP v. Button, supra, the Supreme Court recognized the right of an organization to defend the constitutional rights of its members. NAACP v. Button, supra 371 U.S. at 428, 83 S.Ct. 328, 9 L.Ed.2d 405.

We recognize, of course, that there is force to the argument of the District Judge that parents of school children whose rights are alleged to be abridged would be wholly proper plaintiffs as to whom the standing argument could not be raised. But it should be noted that the small area concerned and its minimal present impact would be much less likely to come to the attention of said parents or arouse their concern than it would to come to the attention of and arouse the concern of the School Board, which is the immediate object of the order alleged to be unconstitutional. Thus if jurisdiction is refused in a precedent-setting case because the potential litigants, alert to the possible constitutional abuse, are denied standing, quite a bit of the unconstitutional camel may be in the tent before the tent’s less alert occupants are awakened.

We believe here that in terms of loss of territory and tax dollars and in terms of identity of interest with the asserted rights of the pupils and their parents, the Akron Board of Education and its Superintendent are true adversary parties and that their complaint states a “Case” or “Controversy” to enforce the Fourteenth Amendment within the intendment of Article III of the U. S. Constitution.

Over and above these considerations there is still a third basis for standing for these plaintiffs. Where plaintiffs’ complaint has as yet not been heard on granted motion to dismiss, we assume its well-pleaded allegations to be true. Under this assumption the Akron Board and its Superintendent have been commanded by action of the state board to participate in conduct leading in the direction of segregation of its school system. Such conduct would place the Board and its members and its Superintendent in the position of violating the Fourteenth Amendment to the United States Constitution. It would subject plaintiffs to being defendants in a suit to restrain conduct which they appear to abhor and which they avow to be unconstitutional. At least theoretically it might subject individual members of the Board and the Superintendent to suits for damages under the Civil Rights Act. 42 U.S.C. § 1983 (1970).

In Brewer v. Hoxie School District No. 46, 238 F.2d 91 (8th Cir. 1956), the Eighth Circuit recognized the right of a school board to resist in the federal courts pressures upon it to prevent its performance of its duties in accord with the Constitution of the United States:

Turning first to the question of federal jurisdiction, it is the position of the appellees that federal jurisdiction of the case exists under the general provision of the federal law, in that the complaint presents a civil action arising under the Constitution and laws of the United States wherein the amount in controversy exceeds $3,000, 28 U.S.C.A. § 1331, and it arises under the Supremacy Clause of the Constitution implementing the Fourteenth Amendment, and the corollary or related constitutional provision imposing an oath or affirmation upon state officers to support the Constitution.
Appellees contend that as they are under a constitutional duty to support and obey the Fourteenth Amendment and to accord equal protection of the law in their operation of schools, they have a federal right to be free from wrongful interference with the performance of that duty. They say they rest their claim of a federal constitutional right squarely on the fundamental and pervasive provisions of the Constitution and statutes, and declare that the nubbin of their case against defendants in the federal court is the jurisdiction which stems from the Fourteenth Amendment in conjunction with the Supremacy Clause of the Constitution and the cause of action under section 1331 to which they give rise. That the right of the members of the school board to be free from interference with their performance of a duty which the Constitution itself imposes on them derives directly from the Supremacy Clause and the related constitutional provision imposing upon the state officers an oath or affirmation to support the constitution and it is a federal right. The school board is attempting to obey and apply the federal law laid down by the Supreme Court in the Brown case and the defendants attempt and threaten to subvert and prevent it.
Both of the learned and experienced district judges who rendered decision in the case reached the conclusion that the complaint disclosed that federal jurisdiction existed under the provisions of the general law relied on as above stated, and we are in accord with that conclusion.
Although the defendants contended below and reassert here that the acts complained of against them were acts upon which a suit could have been predicated in the state court and that the acts were of state and not federal cognizance, the complaint was not so drawn. The conspiracy it alleges is a conspiracy to violate a federal right, and recourse to the federal court for its vindication will not be denied merely because a cause of action might likewise exist in the state court. United States v. Cruikshank, 92 U.S. 542, 23 L.Ed. 588; United States v. Waddell, 112 U.S. 76, 5 S.Ct. 35, 28 L.Ed. 673; Romero v. Weakley, 9 Cir., 226 F.2d 399; Dyer v. Kazuhisa Abe, D.C. Hawaii, 138 F.Supp. 220. Brewer v. Hoxie School District No. 46, 238 F.2d 91, 95 (8th Cir. 1956). (Footnotes omitted.)

The . legal conclusions concerning standing, set forth above in the Hoxie School case, are directly applicable to the standing issue in our instant case and we adopt the Eighth Circuit’s reasoning in this regard.

In a still more authoritative statement on this score (albeit in a footnote), the United States Supreme Court held that a local school board in New York State had standing to bring an action in federal court to test the validity of a New York State Statute requiring school boards to lend textbooks to private (including parochial) schools.

Appellees do not challenge the standing of appellants to press their claim in this Court. Appellants have taken an oath to support the United States Constitution. Believing § 701 to be unconstitutional, they are in the position of having to choose between violating their oath and taking a step —refusal to comply with § 701 — that would be likely to bring their expulsion from office and also a reduction in state funds for their school districts. There can be no doubt that appellants thus have a “personal stake in the outcome” of this litigation. Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962).

Board of Education v. Allen, 392 U.S. 236, 241 n. 5, 88 S.Ct. 1923, 1925, 20 L.Ed.2d 1060 (1968).

We hold that in the unique facts of this case the Akron Board of Education has standing to bring this action.

We recognize (in spite of the authority cited above) that the cases argued by the dissent (City of Kenosha v. Bruno, 412 U.S. 507, 93 S.Ct. 2222, 37 L.Ed.2d 109 (1973); Moor v. County of Alameda, 411 U.S. 693, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973); Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961); Johnson v. City of Cincinnati, 450 F.2d 796 (6th Cir. 1971)) holding that municipalities are not “persons” for purposes of the Civil Rights Acts might be extended to apply to state agencies like school boards so as to deprive the Akron Board of standing to sue. While this suit is brought in the name of the Akron Board of Education as a body politic, it is also filed in the name of Conrad C. Ott, the School Superintendent. Mr. Ott clearly is a “person” within the meaning of 42 U.S.C. § 1983 and 28 U.S.C. § 1343 (1970), as, of course, are the members of the Board of Education who on motion on remand may be permitted to be added as plaintiffs.

We have no doubt concerning the jurisdiction of the District Court to hear and decide a ease asserting facts which, if true, would represent a violation of the Fourteenth Amendment. See 28 U.S.C. § 1343; 42 U.S.C. § 1983 (1970).

It is doubtless true that the state as such (and perhaps the State Board of Education as well) are immune from suit, but, of course, injunctive relief may be had to restrain members of a Board of Education (state or local) from violating the Fourteenth Amendment to the United States Constitution. Swann v. Board of Education, 402 U.S. 1, 15, 91 S.Ct. 1267, 28 L.Ed.2d 554 (1971); Brown v. Board of Education of Topeka (II), 349 U.S. 294, 75 S.Ct. 753, 99 L.Ed. 1083 (1955); Bradley v. Milliken, 484 F.2d 215 (6th Cir. 1973). In the instant case the defendants include the individual members of the State Board and the State Superintendent.

While these considerations call for reversal of the District Court’s judgment dismissing this cause of action, abstention might be suggested until state avenues of relief have been exhausted. See Reetz v. Bozanich, 397 U.S. 82, 90 S.Ct. 788, 25 L.Ed.2d 68 (1970); Lake Carriers Assn. v. MacMullan, 406 U.S. 498, 92 S.Ct. 1749, 32 L.Ed.2d 257.

The case of State ex rel. Zellner v. Board of Education, 34 Ohio St.2d 199, 297 N.E.2d 528 (1973), decided after our instant appeal was argued, answers this argument. In it the Supreme Court of Ohio held in a fact situation pertaining to Cincinnati which is very similar to our instant case:

Considerations of orderly procedure,comity, ultimate judicial economy, and the desire to avoid a “collision course,” demand that a state court action dealing with federal civil rights be heard first in the federal forum where a similar action had been previously instituted. State ex rel. Zell-ner v. Board of Education, supra, at 199, 297 N.E.2d at 529.

In view of Judge Weick’s dissenting opinion, a summary of the holding of the court (as stated in this opinion and the concurring opinion of Judge Pratt) may be in order:

1) Plaintiffs, Akron Board of Education and Conrad C. Ott, have standing to sue.

2) The District Court has jurisdiction of the ease under 42 U.S.C. § 1983 and 28 U.S.C. § 1343 since (at least) plaintiff Conrad Ott is a “person” within the meaning of these sections.

3) The individual defendants (members of the State Board of Education) are not immune from injunctive relief if the facts developed at trial prove a Fourteenth Amendment violation.

I am authorized to state that this summary has the full concurrence of Judge Pratt.

The judgment of the District Court is reversed and the case is remanded for further proceedings consistent with this opinion.

PRATT, District Judge

(concurring in part and dissenting in part).

Agreeing as I do with Judge Edwards that the plaintiffs herein have standing to sue, I concur in the remand of this ease to the District Court so that the plaintiffs herein may have an opportunity to amend. (See 3 Moore’s Federal Practice § 15.09).

I also agree with Judge Weick that the Akron Board of Education is not a “person” within the meaning of 42 U.S.C. § 1983 and 28 U.S.C. § 1343 (1970). However, a remand would permit plaintiffs, if they choose, to add parties plaintiff to overcome this obstacle.

Further, plaintiffs should be permitted to amend to allege jurisdiction under 28 U.S.C. § 1331. It appears from the last paragraph of plaintiffs’ Brief that plaintiffs considered they were precluded from asserting that jurisdictional basis in view of the finding of the District Court that plaintiffs lacked standing. The standing issue being otherwise decided here, plaintiffs can now pursue that avenue.

WEICK, Circuit Judge

(dissenting).

Akron Board of Education and Conrad C. Ott, as Superintendent of Schools, filed suit in the District Court against the State Board of Education of Ohio, and others, seeking to invalidate a decision of the State Board approving the transfer of a small segment of territory in the Akron School District, known as Sackett Hills, to the adjoining Summit County Boston-Northampton School District.

The complaint was filed under the Civil Rights Act, 42 U.S.C. § 1983 and 28 U.S.C.A. § 1343, alleging in substance that the School Board’s and Superintendent Ott’s civil rights and constitutional rights under the Fourteenth Amendment to the Constitution were violated by the transfer since it affected the racial balance of the schools to the extent of six pupils and it would deprive the School Board of tax revenues.

The parties filed a written stipulation, in which they agreed to the facts.

The State Board filed a motion to dismiss the amended complaint on the grounds (1) that the Akron Board did not have standing to maintain the suit, and (2) that the Court was without jurisdiction. The District Court, in a well-considered opinion, held that the plaintiffs lacked standing to sue, and that the Court was without jurisdiction. It dismissed the complaint. The plaintiffs have appealed. I would affirm.

In essence, this suit was brought by one body politic of the State of Ohio against another body politic of the same state, the latter being the superior of the former. No precedent for such a suit has been found. We will show that federal law, as declared by the Supreme Court, does not entertain such suits.

The only remedy of the Akron School Board is to review the decision of the State Board under Section 2506.01 of Ohio Rev.Code (1972 Supp.) which provides in relevant part:

“Every final order, adjudication, or decision of any officer, tribunal, authority, board, bureau, commission, department or other division of any political subdivision of the state may be reviewed by the common pleas court of the county in which the principal office of the political subdivision is located . . . .”

Section 2506.04, Ohio Rev.Code (1972 Supp.), vests full power and authority in the common pleas court to determine all questions, including alleged constitutional violations. It provides:

“The court may find that the order, adjudication or decision is unconstitutional, illegal, arbitrary, capricious, unreasonable, or unsupported by the preponderance of substantial, reliable and probative evidence on the whole record. Consistent with its findings, the court may affirm, reverse, vacate, or modify the order, adjudication or decision, or remand the cause to the officer or body appealed from with instructions to enter an order consistent with the findings or opinion of the court. The judgment of the court may be appealed by any party on questions of law pursuant to sections 2505.1 to 2505.45, inclusive, of the Revised Code.”

The Akron Board of Education is a body politic and corporate entity, organized and existing by virtue of Ohio Rev. Code, Sec. 3313.17. It is empowered to manage and control education in its district and it has the power to sue and to be sued with respect to the rights and responsibilities conferred upon it by law.

The State Board of Education of Ohio likewise is a body politic and corporate organized and existing by virtue of Ohio Rev.Code, Secs. 3301.01.1 to 3301.07.1. It has general supervisory power over the system of education throughout the state. Ohio Rev.Code, Sec. 3301.07. In addition, the Legislature delegated to the State Board special power with respect to the transfer of portions of one school district to another school district. Section 3311.24, Ohio Rev.Code, provides in relevant part:

“If the board of education of a city school district . . . deems it advisable to transfer territory from such district . . . to a county school district, or if a petition, signed by seventy-five per cent of the qualified electors residing within that portion of a city or exempted village school district proposed to be transferred voting at the last general election, requests such a transfer. . . .
“Not later than the first day of September the state board of education shall either approve or disapprove a proposed transfer of territory filed with it and provided by this section and shall notify, in writing, the boards of education of the districts affected by such proposed transfer of territory of its decision.
“If the decision of the state board of education is an approval of the proposed transfer of territory then the board of education of the district in which the territory is located shall, within thirty days after receiving the state board of education’s decision, adopt a resolution transferring the territory . . . .”

Early in 1972 some fifty-two residents (all of whom are white) of an area in Akron known as Sackett Hills, caused a petition to be filed with the State Board of Education, seeking the transfer of that area from the Akron City School District to the adjacent rural school district. The residents of Sackett *Hills, the area sought to be transferred, resided near the north corporation line of the City of Akron, but within its boundaries.

On May 23, 1972, a hearing was held in the offices of the Akron Board of Education on the petition to transfer the area. The hearing took place before a Referee appointed pursuant to the state Administrative Procedure Act, Chap. 119, Ohio Rev.Code, and Ohio Rev.Code § 3311.24, at which hearing the parties offered evidence and exhibits. The Referee, on June 15, 1972, made his report to the State Board, with findings of fact and recommendation concerning the approval of the transfer.

The Referee in his report to the State Board recommended to the State Board of Education that the Sackett Hills area be transferred to the adjoining Summit County Boston-Northampton School District. The State Board adopted the recommendation of the Referee and passed a resolution of approval as required under the statute to cause the transfer of the residents’ area to the adjoining school district.

The Akron Board was required by Ohio Rev.Code § 3311.24, within thirty days after receiving the State Board’s decision, to adopt a resolution transferring the territory. The Akron Board has failed and refused to comply with the statute. It did not avail itself of its remedy under Sections 2506.01 and 2506.04 Rev.Code of Ohio (1972 Supp.), but instead it filed the present suit in the District Court seeking to invalidate the transfer.

As before stated, the complaint charged that the transfer will alter the existing racial balances in Akron Public Schools, in violation of the Fourteenth Amendment to the Constitution. The complaint further alleged that only six pupils from Saekett Hills were attending Akron’s public schools. Assuming, but not admitting, that the Fourteenth Amendment requires the balancing of races in the public school system, it would appear here that Akron’s loss of six pupils could well be characterized as de minimus.

It would further appear from the factual findings of the Referee included in the record that valid, nonracial grounds motivated his recommendation for the transfer of the territory. These grounds included consideration of the distance of the territory from the Akron public schools, the geography of the territory, the hills, and roads leading to such schools, and the danger to the pupils involved in the busing of the children long distances to the Akron schools. The findings also took into account the miserably poor busing service provided by the Akron School Board, as a consequence of which the six children arrived at the Akron schools late and left early, and the inordinate amount of time involved.

However, we need not decide the merits of the case, because it was disposed of on the issues of standing and jurisdiction.

The District Court was eminently correct in ruling that a body politic and corporate of a state is not a “person” within the meaning of, and subject to, the Civil Rights Act. Congress never intended to make state political subdivisions amenable to the Act. City of Kenosha v. Bruno, 412 U.S. 507, 93 S.Ct. 2222, 37 L.Ed.2d 109 (1973) ; Moor v. County of Alameda, 411 U.S. 693, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973); Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961); Johnson v. City of Cincinnati, 450 F.2d 796, 798 (6th Cir. 1971). The District Court therefore lacked jurisdiction to entertain the action under Section 1983.

It is obvious that 42 U.S.C. § 1983 (1970), applies only to acts committed under color of state law by a person, and the State Board is not a person. The fact that Conrad C. Ott has joined as party plaintiff does not change the situation since the State Board is still not a person.

28 U.S.C. § 1343(3) (1962) does not help the plaintiffs because they are not asserting any violation of their own constitutional rights but are attempting to assert rights of some school children against other school children who will be affected thereby. As to the rights of the school children, the School Board has no standing to assert them.

We need not speculate whether plaintiffs might have brought suit under 28 U.S.C. § 1331 (1966). No such claim was made in the District Court, or here. To invoke Section 1331 plaintiffs would have been required to plead that the matter in controversy exceeded the amount or value of $10,000, exclusive of interest and costs, and arose under the Constitution of the United States. The Court found that the Akron Board had not established that it sustained any damage as a result of the transfer. The only aspect of the transfer which arguably involves money is the tax base which was transferred from Akron School District to Boston-Northampton School District. This loss, however, would be compensated by the fact that the Akron School Board no longer would be required to educate the children from the transferred area. The net result is a “wash” and there is no monetary amount in controversy. No doubt this is the real reason why counsel for plaintiffs did not attempt to utilize Section 1331.

Furthermore, plaintiffs’ action does not arise under the Fourteenth Amendment to the Constitution. The District Court stated:

“While the Akron Board of Education is to be congratulated for its acceptance of its constitutional burden, it may not attempt to vindicate or preserve what are essentially the rights of the school children of Akron in this case.”

In Sierra Club v. Morton, 405 U.S. 727 at 733, 92 S.Ct. 1361 at 1365, 31 L.Ed.2d 636 (1972), the Supreme Court held that standing to obtain judicial review of agency action was conferred only upon those who could show “that the challenged action had caused them ‘injury in fact.’ ”

In United States v. Students, etc. (SCRAP), 412 U.S. 669, 93 S.Ct. 2405, 37 L.Ed.2d 254 (1973), a divided Court, in following Sierra Club, held that plaintiffs had alleged such injury in fact to themselves, although the Chief Justice and two Associate Justices disagreed.

In our case the Akron School Board and Superintendent Conrad Ott have alleged no injury to themselves. Their claim of possible, theoretical injury to some school children is highly speculative, uncertain, and in my opinion, ill founded.

Nor should an Appellate Court reverse a District Court which has rendered a correct decision, because of the possibility that upon remand additional necessary parties can be added who may or may not be able to present a justicia-ble claim. It is not our function to restructure plaintiffs’ case.

If any of the school children have a claim for constitutional violation, the courts are wide open to receive such a claim brought by their parents or next friends. In our opinion the decision in the present case would not foreclose such action.

Neither the Akron School Board nor its Superintendent Ott have any standing to attack state legislation which they are charged by law with the duty to enforce. As well stated by Chief Judge Battisti in his opinion in the present case:

“Analogous situations do not support their claim. Municipal corporations have regularly been denied standing in the federal courts to attack state legislation as violative of the Federal Constitution. E. g., Pawhuska v. Pawhuska Oil Co., 250 US 394 [39 S.Ct. 526, 63 L.Ed. 1054] (1919); Trenton v. New Jersey, 262 US 182 [43 S.Ct. 534, 67 L.Ed. 937] (1923); Williams v. Mayor, 289 US 36 [53 S.Ct. 431, 77 L.Ed. 1015] (1933). While administrative or executive officers have standing to defend the constitutionality of legislation which he is charged with administering or enforcing, e. g„ Boynton v. Hutchinson Gas Co., 291 US 656 [54 S.Ct. 457, 78 L.Ed. 1048] (1934), a state official did not have the requisite interest necessary to vindicate the Federal Constitution so as to give him standing to attack the validity of a state statute which he was charged with enforcing. Smith v. Indiana, 191 US 138 [24 S.Ct. 51, 48 L.Ed. 125] (1903); Columbus & Greenville Ry. v. Miller, 283 US 96 [51 S.Ct. 392, 75 L.Ed. 861] (1931).”

For purposes of standing to assert claims of unconstitutional acts on the part of the State Board of Education, the Akron Board of Education is assuming two separate and distinct roles. The first role is that of a political entity asserting its own rights inherent in that entity; the second role is that of a group of public officials asserting the constitutional rights of others, namely, their constituents. In either role the Akron Board has no standing to assert that the transfer of the territory ordered by its political superior, the State Board of Education, was in contravention of the Uhited States Constitution.

It has been recognized throughout the history of our legal system that there is substantial distinction between the constitutional rights of private and public entities. In Dartmouth College v. Woodard, 4 Wheat. 518 (1819), the Supreme Court discussed the constitutional rights of political subdivisions, vis-a-vis actions of their political superior, the state itself. The Court explained that since political subdivisions, such as cities, towns and municipalities, are but creatures of the state, they have no rights independent of those expressly provided by the state. Such political subdivisions, therefore, can assert no “constitutional rights” in opposition to acts of the state. 4 Wheat, at 661.

In the present case the Legislature of Ohio has granted a right of appeal to the Common Pleas Court; it has not granted to a local School Board the right to sue its superior. The School Board therefore had no power or authority to institute action in the Federal Court to vitiate the action of its superior.

The principle has been reaffirmed and expanded in a substantial number of cases. E. g., Williams v. Mayor of Baltimore, 289 U.S. 36, 53 S.Ct. 431, 77 L.Ed. 1015 (1933); Risty v. Chicago, R. I. & P. Ry., 270 U.S. 378, 390, 46 S.Ct. 236, 70 L.Ed. 641 (1926); Newark v. New Jersey, 262 U.S. 192, 43 S.Ct. 539, 67 L.Ed. 943 (1923); Trenton v. New Jersey, 262 U.S. 182, 43 S.Ct. 534, 67 L.Ed. 937 (1923); Worcester v. Worcester Consol. St. Ry., 196 U.S. 539, 25 S.Ct. 327,49 L.Ed. 591 (1905).

In Trenton v. New Jersey, supra, the Court articulated the doctrine as follows:

“A municipality is merely a department of the state, and the state may withhold, grant or withdraw powers and privileges as it sees fit. However great or small its sphere of action, it remains the creature of the state exercising and holding powers and privileges subject to the sovereign will. See Barnes v. District of Columbia, 91 U.S. 540, 544, 545, 23 L.Ed. 440.
“The power of the State unrestrained by the contract clause of the Fourteenth Amendment, over the rights and property of cities held and used for ‘governmental purposes’ cannot be questioned.” (262 U.S. at 187-188, 43 S.Ct. at 537).

It might be argued, however, that the instant case is distinguishable from the above line of cases in that the suit of the plaintiffs herein is against the State Board of Education (itself a political subdivision), rather than against the State Legislature. Such a distinction is not legally relevant for purposes of standing.

In New Orleans v. New Orleans Water Works Co., 142 U.S. 79, 12 S.Ct. 142, 35 L.Ed. 943 (1891), the City of New Orleans sued the local Water Works Company on a contract to supply water. The company defended on the ground that legislation had effectively given it the power to break the contract, and therefore it had no liability. The position of the city was that if the Legislature had given the company such power, it was an unconstitutional act (in violation of the contract clause) and therefore there was no defense to the company. The Court accepted the company’s defense, stating that, in effect, this was a suit by the city against the State Legislature on constitutional grounds, a suit that was not maintainable under traditional doctrine.

So too in the instant case, the suit, in effect, is against the State Legislature. The Legislature has expressly provided that the State Board of Education can transfer portions of school districts in the manner in which the transfer complained of, was accomplished. Ohio Rev.Code, § 3311.24.

Since the State Board complied with the legislative prescription, its actions are in effect sanctioned by the State Legislature, and the Akron Board of Education (as a political entity of the State of Ohio) cannot void the State Board’s actions on constitutional grounds.

The second role in which the Akron Board could be said to be bringing this suit, as public officials asserting the constitutional rights of their constituent student body to attend nonsegregated schools, is equally invalid as a basis for standing.

In Smith v. Indiana, 191 U.S. 138, 24 S.Ct. 51, 48 L.Ed. 125 (1903), a public officer, a county auditor, attacked the constitutionality of a state mortgage exemption law. The Court held that the auditor, in his official capacity, could not attack the constitutionality of the exemption, stating:

“It is evident that the auditor had no personal interest in the litigation. He had certain duties as a public officer to perform. The performance of those duties was of no personal benefit to him. Their non-performance was equally so. He neither gained nor lost anything by invoking the advice of the supreme court as to the proper action he should take. He was testing the constitutionality of the law purely in the interest of third persons, viz., the taxpayers, and in this particular the case is analogous to that of Caf-frey v. Oklahoma, 177 U.S. 346, 20 S. Ct. 664, 44 L.Ed. 799. We think the interest of an appellant in this court should be a personal and not an official interest, and that the defendant, having sought the advice of the courts of his own State in his official' capacity, should be content to abide by their decision.” (Emphasis added.) (191 U.S. at 149, 24 S.Ct. at 52).

The holding in Smith was reaffirmed thereafter until it apparently became sufficiently well-established to remove further argument. See Stewart v. Kansas City, 239 U.S. 14, 36 S.Ct. 15, 60 L.Ed. 120 (1915); Marshall v. Dye, 231 U.S. 250, 34 S.Ct. 92, 58 L.Ed. 206 (1913); Braxton County Court v. West Virginia, 208 U.S. 192, 28 S.Ct. 275, 52 L.Ed. 450 (1908). We perceive no compelling logic or reason to resurrect this antiquated issue.

The Akron Board of Education, as a group of public officials, cannot assert the constitutional rights of some of its constituency in opposition to not only the State Board but also to others of its constituency.

In Triplett v. Tiemann, 302 F.Supp. 1239 (D.Neb.1969), a number of local school districts brought an action against the State Board of Education, alleging that actions of the State Board pursuant to statutory authorization were unconstitutional. The Three-Judge Court held that the school districts had no standing to assert constitutional claims against the State Board of Education. The Court stated:

“The plaintiff school districts are legally not subject to injury under the Equal Protection Clause. The Equal Protection Clause of the Fourteenth Amendment has no application to the acts of a State against its own political subdivisions. City of Trenton v. New Jersey, 262 U.S. 182-188, 43 S.Ct. 534, 67 L.Ed. 937 (1923); City of Newark v. New Jersey, 262 U.S. 192, 196, 43 S.Ct. 539, 67 L.Ed. 943 (1923); Williams v. Mayor & City Council of Baltimore, 289 U.S. 36, 40, 53 S.Ct. 431, 77 L.Ed. 1015 (1933). See also Annotation, 116 A.L.R. 1037.” (302 F.Supp. at 1242).

With this conclusion I agree.

The District Court distinguished Brewer v. Hoxie School District, 238 F.2d 91 (8th Cir. 1956), Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070 (1925), and Bartels v. Iowa, 262 U.S. 404, 43 S.Ct. 628, 67 L.Ed. 1047 (1923), and other cases relied on by the plaintiffs. I agree with the District Court that these decisions are not apposite.

It was wholly unnecessary for a School Board to assume to act for aggrieved children, in the place of their parents or legal guardians, and to take legal action in the Federal Court which might seriously affect the substantial rights of other children, in this case the children living in Sackett Hills who are suffering from the poor busing policy of the Akron Board.

Nor is it understandable why the Akron Board invoked a dubious remedy in the Federal Courts when it had an unquestioned right to appeal to the Common Pleas Court from the State Board’s order of transfer and to assert there all of the claims which it is making in the Federal Court.

Controversies and disputes between state political agencies should properly be resolved in the state courts.

In recent years the Federal Courts have been inundated with actions brought under the Civil Rights laws. We think it is inadvisable for Federal Courts to get involved with disputes between state political agencies where plain and adequate remedies for their resolution are provided under state law. We followed this principle in Burks v. Perk, 470 F.2d 163 (6th Cir. 1972), cert, denied, 412 U.S. 905, 93 S.Ct. 2288, 36 L.Ed.2d 970 (1973). In that case we vacated an injunction issued by the District Court against the Mayor of Cleveland which enjoined the Mayor from conducting a hearing on charges for the removal of Civil Service Commissioners.

Three, opinions have been filed in this appeal. 'In the opinion filed by Judge Pratt, he concurs in part with Judge Edwards’ opinion, and dissents, in part. As I interpret the opinions, Judge Pratt agrees with me that the Akron Board is not a person within the meaning of 42 U.S.C. § 1983 and 28 U.S.C. § 1343 (1970). If this is correct then the State Board, like the Akron Board, would not be amenable to the Civil Rights Act. Judge Pratt would remand to allow the plaintiffs to amend. Judge Pratt agrees with Judge Edwards that the plaintiffs have standing to sue and that the District Court had jurisdiction. Judge Edwards would reverse.

I do not concur in either a reversal or a remand. If the case is remanded the District Court is obligated to follow, as it did, the three decisions of the Supreme Court hereinbefore cited, holding that a state political subdivision is not amenable to actions under Section 1983. The District Court is likewise bound to follow the decisions of the Supreme Court holding that one state political subdivision or agency does not have the power and authority to sue another state agency for alleged constitutional violations.

It is clear to me that the Akron Board and Conrad C. Ott have alleged no “injury in fact” to themselves. They have no standing, power or authority to sue for alleged constitutional violation of the rights of other persons.

The Referee who heard the evidence sustained the transfer of the small area which would afford needed relief to six children, on non-racial grounds'. It is ridiculous to contend that affording this relief affects the racial balance of the Akron School District to any material degree. Even if it did, it would not violate the constitutional rights of anyone.

As well stated by Chief Justice Burger in Swann v. Charlotte-Mecklenburg Board of Educ., 402 U.S. 1 at 24, 91 S.Ct. 1267 at 1280, 28 L.Ed.2d 554 (1971):

“If we were to read the holding of the District Court to require, as a matter of substantive constitutional right, any particular degree of racial balance or mixing, that approach would be disapproved and we would be obliged to reverse.”

The amended complaint does not state any claim upon which relief can be granted. The decision of the District Court is correct.

I would affirm.

      . Plaintiffs have not pled a cause of action under 28 U.S.C. § 1331 (1970) (federal question jurisdiction) perhaps because the tax funds involved may not reach the jurisdictional amount required.

      . See Moor v. County of Alameda, 411 U.S. 693, 712, 93 S.Ct. 1785, 36 L.Ed.2d 596 (1973) ; Egan v. City of Aurora, 365 U.S. 514, 81 S.Ct. 684, 5 L.Ed.2d 741 (1961) ; Myers v. Anderson, 238 U.S. 368, 35 S.Ct. 932, 59 L.Ed. 1349 (1915) ; Tinker v. Des Moines Community School District, 393 U.S. 503, 89 S.Ct. 733, 21 L.Ed.2d 731 (1969) ; Birnbaum v. Trussell, 347 F.2d 86 (2d Cir. 1965).

      . “Finally, even if 28 U.S.C. Section 1343 were to be read so narrowly as to prevent the plaintiffs from bringing their action without the requirement of a jurisdictional amount, the provision of 28 U.S.C. Section 1331 would permit them to maintain the aetion. Although this additional jurisdictional basis could have been asserted as was the case in Brewer v. Hoxie School District No. 46, 238 F.2d 91 (8th Cir. 1956), the court below should have permitted an amendment for the purpose of establishing jurisdiction thereunder if necessary. Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946) ; Sikora v. Brenner, [126 U.S.App.D.C. 357, 379 F.2d 134] supra. That it did not do so is clearly attributable to its belief that in any event the plaintiffs lacked standing.” (App. brief pp. 19-20).

      . Unlike City of Kenosha, supra, where the Attorney General was a party defendant, no officer of the State of Ohio is a party to this case.
      Judge Edwards’ opinion recognized that the rule of these cases might be extended to school boards so as to deprive the Akron Board of Education of standing to sue. (Opin. pp. 9, 10). In my opinion it is not necessary to extend the rule, as there is no question but that state agencies are political subdivisions of the state.
      The rule in these cases cannot be circumvented by suing the political subdivisions and joining with them as parties defendant their members and employees individually.

      . It could be argued that this entire doctrine does not refer, technically,' to “standing”, but rather, it is concerned with a fundamental absence of power. However, we will accept Mr. Justice Frankfurter’s characterization of the doctrine as one involving principles of standing. See Baker v. Carr, 369 U.S. 186, 290, n. 23, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962) (dissenting opinion).

      . This does not mean, of course, that the Akron Board was powerless to contest the actions of the State Board if it deviated from the legislative prescription. In fact, as previously pointed out, it had the right to a review of the decision of the State Board in the Common Pleas Court.


author: ROSS, Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. Arvie Ray BURCH, Appellant.
    No. 73-1527.
    United States Court of Appeals, Eighth Circuit.
    Submitted Dec. 12, 1973.
    Decided Jan. 24, 1974.

      Richard L. Dahlen, Minneapolis, Minn., for appellant.
    Elizabeth A. Egan, Asst. U. S. Atty., Minneapolis, Minn., for appellee.
    Before GIBSON and ROSS, Circuit Judges, and TALBOT. SMITH, Senior District Judge.

       The Honorable TALBOT SMITH, Senior District Judge, Eastern District of Michigan, sitting by designation.

   ROSS, Circuit Judge.

Arvie Ray Burch was indicted with a co-defendant for a two count violation of 18 U.S.C. § 495, forging and uttering a United States Treasury check on or about February 4, 1971. Both defendants entered pleas of not guilty and severance was granted by the trial court. Burch was found guilty on both counts by the jury. He appeals from that verdict alleging error in restricting his cross-examination of the prosecution’s chief witness.

In February, 1971, a United States Treasury cheek issued to Kathleen Har-rer, an employee of the United States Department of Agriculture, was allegedly stolen by Burch and an accomplice in a burglary of Harrer’s apartment. Also taken were some identification and credit cards.

Charlotte Scammahorn, the chief prosecution witness, testified at trial that, after the alleged burglary, she received the stolen check from Burch and his accomplice as well as the identification and credit cards. She indicated that she was induced by Burch to practice forging the payee’s signature and then to forge and pass the Treasury check. For her assistance in uttering the check, she and her boyfriend were given part of the proceeds of the check and were allowed to retain the payee’s identification and credit cards.

Subsequent to the uttering Scamma-horn attempted to use the stolen credit cards for the purchase of several coats in a local department store. She was apprehended, charged, and convicted of a felony. That impeaching testimony was brought out on both direct and cross-examination in addition to other impeaching testimony. However, Burch’s attempt to impeach her credibility on another matter was curtailed by the district judge. That curtailment is the subject of this appeal.

Burch’s offer of proof indicates that the matter upon which he sought to cross-examine the witness involved an incident where she had approached a man and solicited him for the purpose of prostitution. However, the solicitation was predicated upon a falsehood, for when she accompanied him to her apartment, and after he had disrobed, she participated in a robbery and mugging of the victim with two other accomplices. She was apprehended on this charge and allegedly admitted in a statement to the police that she had intentionally lied to the victim, that she had never intended to engage in prostitution with him, and that she had intended to victimize him for robbery from the outset.

Scammahorn was charged with simple robbery in connection with this second matter in state court. The colloquy at the bench pertaining to this offer disclosed that she had entered a plea of not guilty and had not, at the time of Burch’s trial, stood trial on the state charge. Scammahorn refused to answer questions on self-incrimination grounds. The court thereupon ruled that inquiry into the matter could not be made, thus curtailing Burch’s cross-examination.

In this appeal, Burch advances two grounds in support of the admissibility of the evidence. First, he argues, the inquiry would disclose a specific act of untruthfulness and thus a propensity for falsehood which would tend to impeach Scammahorn’s credibility. Second, he asserts that the pendency of the charge might suggest that Seammahorn testified in exchange for a promise of leniency in the pending charge and thus, that her testimony was based upon self-interest. Neither of these arguments of reversible error can be sustained.

The character of a witness for truthfulness or mendacity is relevant circumstantial evidence on the question of the truth of particular testimony of a witness. C. McCormick, McCormick on Evidence § 41 (2d ed. 1972). In this case, Seammahorn was the chief government witness without whose testimony a conviction would have been unlikely. As such, an attack upon her credibility was essential to Burch’s defense. Yet, we must determine whether the intended cross-examination was a permissible means of testing Scammahorn’s credibility and, further, whether it was reversible error to exclude the testimony.

It is a general rule that arrest without more does not impeach the integrity nor impair the credibility of a witness. “Only a conviction, therefore, may be inquired about to undermine the trustworthiness of a witness.” Michelson v. United States, 335 U.S. 469, 482, 69 S.Ct. 213, 222, 93 L.Ed. 168 (1948). The pertinent language in the application of that rule to these facts is “arrest without more” for the rule does not automatically serve to insulate a witness from inquiry into specific acts that may have led to an arrest (emphasis supplied). The English common law tradition of “cross-examination to credit” permits counsel to inquire into any particular misconduct which would tend to discredit the witness’ character, though it has not been the basis for conviction of a crime. C. McCormick, McCormick on Evidence § 42 (2d ed. 1972). By the rule obtaining in most jurisdictions of the United States, the repression of possible abuses is left in the discretion of the trial judge. Questions upon facts relevant to character may still be forbidden by him where he believes that under the circumstances it is unnecessary and undesirable. IIIA, J. Wigmore, Wigmore on Evidence § 983 at p. 847 (Chadbourn rev. 1970). This tradition is recognized in Rule 608(b) of the Proposed Rules of Evidence which would permit inquiry into specific instances of conduct for the purpose of attacking the credibility of witnesses:

Specific instances of the conduct of a witness, for the purpose of attacking or supporting his credibility, other than conviction of crime as provided in Rule 609, may not be proved by extrinsic evidence. They may, however, if probative of truthfulness or untruthfulness and not remote in time, be inquired into on cross-examination of the witness himself or on cross-examination of a witness who testifies to his character for truthfulness or untruthfulness.
The giving of testimony, whether by an accused or by any other witness, does not operate as a waiver of his privilege against self-incrimination when examined with respect to matters which relate only to credibility.

Here, the conduct sought to be introduced was evidence of Scammahorn’s untruthfulness. It was a specific act of a false statement made by her to another person and, thus, it was probative of her credibility. Yet, although it was probative of untruthfulness and was not remote in time, there are two impediments to its admissibility in this case.

The Advisory Committee’s note to Proposed Rule 608 recognizes a sound policy that any past criminal act relevant to credibility may not be inquired into on cross-examination in disregard of the privilege against self-incrimination. The United States attorney was without power to offer her immunity on the state charge. Thus, any matter to which she testified in Burch’s trial had possible incriminating effects since it could be used against her in the pending state prosecution.

In response, Burch argued that Seammahorn had waived her privilege against self-incrimination in making a statement to the police. However, a waiver of a witness’ privilege against self-incrimination is limited to the particular proceeding in which the witness volunteers the testimony. VIII J. Wig-more, Wigmore on Evidence § 2276 at 470 (McNaughton rev. 1961). No waiver of her privilege against self-incrimination in Burch’s trial can be imputed to Seammahorn by virtue of the statement she made to the police since she did in fact assert her privilege in Burch’s trial; since she implicitly repudiated the statement in pleading not guilty; and especially since her attorney may move to suppress the statement and be successful thereby giving independent incriminating value to any testimony she rendered at Burch’s trial. This result accords with the policy advanced in the Advisory Committee’s comment:

While it is clear that an ordinary witness cannot make a partial disclosure of incriminating matter and then invoke the privilege on cross-examination, no tenable contention can be made that merely by testifying he waives his right to foreclose inquiry on cross-examination into criminal activities for the purpose of attacking his credibility. So to hold would reduce the privilege to a nullity.

Thus inquiry into the specific act would have been in disregard of her fifth amendment rights. As such, it is improper.

An additional reason for repressing the inquiry into the alleged specific conduct is present on these facts. For, although evidence may be relevant, it is not necessarily admissible:

Relevant evidence, then, is evidence that in some degree advances the inquiry, and thus has probative value, and is prima facie admissible. But relevance is not always enough. . . . There are several counterbalancing factors which may move the court to exclude relevant evidence if they outweigh its probative value.

C. McCormick, McCormick on Evidence § 185 at pp. 438-439 (2d ed. 1972). Among those counterbalancing factors, McCormick lists the danger that the facts offered may unduly arouse the jury’s emotions of prejudice, hostility, or sympathy. Accordingly, we have said that it is the trial judge’s duty to weigh the relevance of the evidence against the possibility of prejudice:

This balancing of intangibles — probative values against probative dangers —is so much a matter where wise judges in particular situations may differ that a leeway of discretion is generally recognized.

C. McCormick, McCormick on Evidence § 185 at p. 440 (2d ed. 1972); United States v. Willis, 482 F.2d 1034 (8th Cir.), cert, denied, 414 U.S. 1112, 94 S.Ct. 841, 38 L.Ed.2d 738 (1973). To this end, the trial court is vested with considerable discretion and will not be overturned unless it has abused that discretion. United States v. Madden, 482 F.2d 850 (8th Cir. 1973); United States v. Willis, supra; United States v. Cole, 449 F.2d 194 (8th Cir. 1971), cert, denied, 405 U.S. 931, 92 S.Ct. 991, 30 L.Ed.2d 806 (1972).

Clearly in this case, inquiry into the alleged specific conduct that was probative of untruthfulness would have unduly aroused the jury’s emotions of prejudice and hostility. Here the evidence necessary to prove the falsehood was so closely related to the commission of a crime that undue emphasis would be placed on the crime for which no conviction had been obtained. Moreover, substantial evidence of an impeaching nature was already before the jury: she had a concubine; she had committed another crime in the use of the identification and charge plate; and she had admitted participation with Burch in the commission of the check uttering crime. In accord with the rules hereinbefore enunciated, no abuse of discretion can be found in the trial judge’s curtailment of this attempt to impeach the witness.

Burch’s second ground for the admission of the evidence is that the proffered testimony would demonstrate self-interest on the part of the witness, her testimony possibly having been procured in exchange for a promise of leniency in a pending prosecution. This argument is defective for the following reasons.

First, the offer of proof was made for the announced purpose of demonstrating her propensity for untruthfulness. The record does not disclose that it was offered in order to show a possible promise of leniency. But even if a proper offer of proof had been made giving both reasons therefor, the simple answer to this argument is that Burch could have probed the possible self-interest by a direct question to that effect without any reference to the specific facts underlying the pending state charge. Because no such question was asked or even attempted, and because the possibility of self-interest was not advanced as a basis for the admission of the testimony, we are left with the conclusion that this second ground for the admissibility of the testimony was not conceived until after the trial.

For the reasons hereinbefore expressed, the judgment of the district court is affirmed.

      . The remoteness in time requirement has been deleted in H.R.Rep. 93-650, 93d Cong., 1st Sess., the report from the House Committee on the Judiciary relating to Federal Rules of Evidence. The report also indicates that a change in Rule 608(b) has been proposed which would emphasize the discretionary power of the judge in admitting such testimony.

      . This policy is recognized by the proposed rules also. Rule 403 acts as a catalyst to the principles enunciated in Rule 608(b) and provides an overriding protection that the probative value of the inquiry not be outweighed by the danger of unfair prejudice, confusion of issues, or misleading the jury,


author: LUCAS, District Judge:

text:
    James J. BIGGINS, Jr., as Trustee for Peterson Ford, a California corporation, Plaintiff/Appellant, v. SOUTHWEST BANK, a California corporation, Defendant/Appellee.
    No. 71-2731.
    United States Court of Appeals, Ninth Circuit.
    Dec. 7, 1973.
    Rehearing Denied Jan. 28, 1974.

      William O. Ward, III, Woolley, Crake, Collins & Ward, San Diego, Cal., for plaintiff/ appellant.
    Leonard A. Goldman, Goldman & Arnold, Los Angeles, Cal., Weil & Fritz, Whittier, Cal., for defendant/appellee.
    Before CHAMBERS and CHOY, Circuit Judges, and LUCAS, District Judge.

       The Honorable Malcolm M. Lucas, United States District Judge, Central District of California, sitting by designation.

   LUCAS, District Judge:

This is an appeal by a trustee in bankruptcy from an adverse decision rendered by the district court sitting under its original jurisdiction over all matters and proceedings in bankruptcy. Jurisdiction lies with this Court under 11 U.S.C. § 47.

The facts were stipulated to at trial, and were set forth by the district court. See 322 F.Supp. 62, 63-64 (S.D.Cal., 1971). For purposes of this discussion, those facts presented by the district will be summarized as follows.

Appellant, as trustee for the bankrupt, Peterson Ford, brought an action against Southwest Bank under section 60 of the Bankruptcy Act, 11 U.S.C. § 96, seeking to recover the value of property and credits allegedly taken and received from Peterson Ford as voidable preferences in relation to other creditors of the same class. Southwest Bank claims that it is entitled to the property and credits by reason of a perfected security interest under the California Commercial Code, and by reason of a banker’s lien exercised under the common law.

Peterson Ford, a retail automobile dealer, was a customer of Southwest Bank, which financed the former’s sales and service of new and used cars. On October 10, 1966, Peterson Ford and Southwest Bank entered into an “Automobile Dealer Agreement,” whereby the latter agreed to purchase “such conditional sales contracts from Dealer covering the sale of motor vehicles as are acceptable to Bank at agreed rates of discount.” The agreement provided that “[e]ach contract shall be assigned and guaranteed by Dealer in form satisfactory to Bank,” and that the purchase price of each contract “shall be paid to Dealer or credited to his account when the contract is purchased and thereupon full title to the contract shall pass to Bank.” The agreement required that a dealer reserve account be deposited with Bank and maintained at an amount equal to three percent of the total value of chattel paper negotiated through the bank.

On December 6, 1966, a “Financing Statement” was executed by Peterson Ford, as “debtor,” and Southwest Bank, as “secured party,” and was presented for filing pursuant to the California Commercial Code on December 12, 1966. This financing statement covered “[s]ales.and service of new and used automobiles,” and was signed, and filed, in compliance with section 9402 of the Commercial Code. Various conditional sales contracts and flooring agreements were executed by Peterson Ford, and assigned to Southwest Bank subsequent to the execution of the agreement and the filing of the statement. Peterson Ford and Southwest Bank also concluded a chattel mortgage covering equipment, furniture and fixtures, and a guarantee covering all indebtedness which Peterson Ford “may now or at any time hereafter owe” Southwest Bank to the extent of 130,000.00 as applied to “wholesale flooring only.”

Pursuant to a voluntary petition, Peterson Ford was adjudged a bankrupt on December 15, 1967. The parties stipulated in the pretrial conference order that, on or after August 15, 1967, a period within four months of bankruptcy, Southwest Bank obtained possession of certain property “on account of balances due prior to August 15, 1967.” The description of property listed 29 automobiles with dates of transfer between August 16, 1967 and October 14, 1967. Seven automobiles were listed twice, with different dates of transfer during this period. The description also listed certain property described as “Peterson Ford Dealer Reserve Accounts,” with “transfers occurring on almost a daily basis since August 15, 1967.” Sixteen of the 22 automobiles (the latter figure accounts for the double listing of the seven automobiles in the figure of 29) were listed in various agreements entitled “Security Agreement — Flooring.” A flooring agreement would grant to Southwest Bank a security interest in the collateral described therein, and in all proceeds of its sale for the payment of a promissory note of the same date'. The various flooring agreements at issue described from one to eight automobiles. (The seven double listed automobiles were described in agreements dated subsequent to August 15, 1967.)

Six of the 22 automobiles were listed in individual conditional sales contracts, three dated December 9, 1966 and three dated December 19, 1966. These conditional sales contracts referred to Peterson Ford as both the seller and the buyer, and required the dealer to make 'financing payments at its account with Southwest Bank in twelve successive monthly installments. The six automobiles covered in these conditional sales contracts were utilized as demonstrator models for Peterson Ford.

The parties presented a variety of questions for review. These questions may be formulated as follows:

(1) whether the “Financing Statement” of December 6, 1966 (listing “[s]ales and service of new and used automobiles”) sufficiently described the subject collateral to comply with the notice requirements of a security interest as to third parties under the California Commerical Code; .
(2) whether the transfer of the after-acquired collateral in the form of the 16 automobiles subject to the flooring security agreements can be successfully defended against a trustee in bankruptcy as property subject to a prior perfected security interest;
(3) whether a valid security interest was created under the circumstances of this case whereby the debtor signed a conditional sales contract as both the seller and buyer of the secured property, and became obligated to make payments in favor of an account established at the secured party’s place of business;
(4) whether Southwest Bank had the power to exercise its common law right of set-off of a preexisting obligation against a trustee in bankruptcy, within four months of bankruptcy, with respect to the dealer reserve account established to secure payment of said obligation.

The applicable provision of the Bankruptcy Act, and this Court’s summarization of said provision in DuBay v. Williams, 417 F.2d 1277, 1286-1287 (9th Cir., 1969), and the purpose of Division 9 of the California Commercial Code were adequately presented by the district court. See 322 F.Supp. at 64-65. Relevant portions of DuBay and Division 9 will be raised subsequently. For purposes of treating the first question on review, it is necessary to focus upon two provisions of Division 9 of the Commercial Code, specifically sections 9402 and 9110.

Section 9402 provides, inter alia, that: (1) A financing statement is sufficient if it is signed by the debtor and by the secured party, gives the name and mailing address of the secured party, the name and mailing address of the debtor and contains a statement indicating the types of collateral or describing the items of collateral.

Only the most basic description of property deemed to be collateral for an Article 9 security interest was contemplated insofar as it might indicate to an interested third party that possible prior encumbrances might exist with respect to prospectively contemplated collateral. Only a “simple notice” was required by this section. Uniform Commercial Code § 9-402, Comment 2.

This reasoning is borne out by related provisions of the Commercial Codé. Section 9110, which as an integrated element of Division 9 should be read in conjunction with section 9402, provides, inter alia, that:

For the purposes of this division any description of personal property or real estate is sufficient whether or not it is specific if it reasonably identifies what is described. Personal property may be referred to by general kind or class if the property can be reasonably identified as falling within such kind or class or if it can be so identified when it is acquired by the debtor, (emphasis added)

The Code thus contemplates no fine distinctions of form as to descriptive language identifying property subject to a Division 9 security interest. It merely looks to the substance of the transaction, and the ordinary and common meaning to be attached to that which the parties contemplate as the encumbered object. Section 9402 was expressly conceived to dispense with the former requirement of detailed, particularized descriptions of collateral which inevitably fostered formal disputes over meanings and interpretations. See Uniform Commercial Code § 9-402, Comments 1, 2 and 5.

In this context, the trustee’s arguments are premised on that which the Code specifically rejects — a nonconstructive exercise in semantics. The attempt to apply extensive textual analysis to the phrase “[s]ales and service of new and used automobiles,” in an effort to demonstrate that inventory financing within the plain and simple terms of the usage of trade was not contemplated, is not consistent with the overall purpose of the Code. See Cal.Comm.Code §§ 1102 and 1205 (West 1964). In light of sections 1102 and 1205, these arguments are frivolous. On another argument, addressing itself to the first question presented for review, the trustee is equally incorrect. He suggests that the description of collateral is insufficient on its face within the financing statement, and that an interested third party should not have to refer to all the documents comprising the security interest to ascertain the encumbered property. The notice premise of Division 9 has been previously discussed. Under the Code, an interested third party has the burden of continuing his investigation as to prior perfected security interests which may affect the proposed collateral for his particular agreement with the debtor. In this sense, the financing statement’s purpose is to merely alert the third party as to the need for further investigation, never to provide a comprehensive data bank as to the details of prior security arrangements. See In re Richards, 455 F.2d 281, 282-284 (6th Cir., 1972); In re Platt, 257 F.Supp. 478, 481 (E.D.Pa., 1966); cf. DuBay, supra 417 F.2d at 1284-1285 (memorandum merely designating accounts without formalities of signatures deemed insufficient against trustee in bankruptcy).

Accordingly, the district court was correct in concluding that “ [c] onstruing the automobile dealer agreement, financing statement, and security agreements together, it is clear that the parties contemplated inventory financing of new and used automobiles.” 322 F.Supp. at 67. The description of property set forth in the financing statement was sufficient notice as to a Division 9 security interest under the California Commercial Code such that an interested third party could have, with further inquiry, adequately determined prior perfected security interests affecting any prospective collateral.

The second issue raises the more narrow question of the validity of a security interest with respect to after-acquired property under Division 9 in the face of a voidable preference challenge contemplated by section 60 of the Bankruptcy Act. The source for the after-acquired property concept is found within the language of section 9204 of the Code. This section provides, inter alia, that:

(1) A security interest cannot attach until there is agreement (subdivision (3) of Section 1201) that it attach and value is given and the debtor has rights in the collateral. It attaches as soon as all of the events in the preceding sentence have taken place unless explicit agreement postpones the time of attaching.

Thus, supplemental agreements pertaining to the changing character of dealer inventories can be dispensed with unless, of course, the parties otherwise stipulate in their agreement.

Section 9204 further provides:

(3) Except as provided in subdivision (4) [pertaining in limited instances to consumer goods and replacements as additional security which are not at issue here] a security agreement may provide that collateral, whenever acquired, shall secure all obligations covered by the security agreement, (emphasis added)

This is an express sanctioning of the concept of the floating lien as it may be applied as a security device with respect to a debtor’s present and future assets. See Uniform Commercial Code § 9-204, Comment 3; see also Cal.Comm.Code § 9110 (West 1964).

More specifically, the trustee takes issue with the adequacy of the description of the after-acquired property involved in this case under the Code. In essential respects, this contention has been previously dealt with by the immediately preceding discussion. All the documents read in conjunction with each other, a practice intended by the draftsmen of the Code, would certainly support the conclusion that after-acquired inventory financing was contemplated by the parties. The absence of the term “inventory” itself is not deemed to be fatal to the inclusion of same within the four corners of the security interest. “Inventory” is defined, inter alia, as goods “held by a person who holds them for sale or lease.” Cal.Comm.Code § 9109(4) (West 1964). Thus, the commercially reasonable description of the collateral contained within the financing statement at issue is equivalent to the definition of “inventory” as set forth in the Code. See also In re Fibre Glass Boat Corp., 324 F.Supp. 1054 (S.D.Fla., 1971); In re Nickerson & Nickerson, Inc., 329 F.Supp. 93 (D.Neb., 1971).

Insofar as such a prior perfected security interest in after-acquired property raises a question as to its validity in the face of a voidable preference challenge from a trustee in bankruptcy, this Court has previously considered such a question in DuBay, supra, and has resolved it in favor of the Division 9 security interest. In that case, this Court commented

Nothing in the legislative history of section 60a(2) suggests that Congress intended to permit a trustee to upset floating liens on accounts receivable, which, as here, were automatically perfected and which involved none of the symptoms of last minute favoritism characterizing true preferences. On the contrary, the history of the section shows that Congress knew how important accounts receivable financing was to the business community, particularly to small-business men, and one of Congress’ principal objectives in amending section 60a(2) was to loosen the flow of credit to small-business men whose financing had been seriously impaired by the old bona fide purchaser test. 417 F.2d at 1289.

Applying the two-fold test discussed at length in DuBay to the facts of the instant case, this Court concludes that a section 60a(2) “transfer” occurred when Southwest Bank “so far perfected” its “transfer of property” from Peterson Ford that no subsequent lien creditor could achieve a higher priority as to the subject property, and that said perfection occurred on the date upon which Southwest Bank filed its financing statement, which was December 12, 1966 — roughly one year prior to bankruptcy. See 417 F.2d at 1287-1288.

Accordingly, the after-acquired inventory contemplated within the financing statement was sufficiently described therein so as to provide notice to any potential subsequent lien creditors, and the financing statement’s filing on the aforementioned date perfected the security interest within a sufficient period of time to enable it to withstand the trustee in bankruptcy challenge instituted in this case.

The third question presented for review raises the validity of the purported security interests created in the six automobiles pursuant to individual conditional sales agreements, which automobiles the district court found to be utilized as demonstrator models. Thus, the financing for these particular automobiles would appear to be of a different character than the remaining sixteen automobiles at issue, which were listed in various flooring security agreements. (The latter automobiles clearly fell within the coverage of the inventory financing security device contemplated by the October 1966 agreement, which was perfected by the filing of the December 1966 financing statement. See discussion, infra.) This particular question appears to raise novel issues for this Court, specifically concerning the precise nature of the Division 9 security device created with respect to these demonstrator models, and the factor of what additional measures, if any, were required to be taken in order to perfect that security device. The district court based its analysis on the language contained within sections 9203 and 9204 of the Code as applied to the facts, noting that the conditional sale agreements designated Southwest Bank as the “secured party,” and that they were delivered to the latter where, presumably, an interested third party could upon appropriate inquiry ascertain the subject encumbrances. This conclusion is correct, and we so hold.

Other provisions within Division 9 appear to be pertinent to the particular facts of the case involving security interests in the same collateral. Section 9303 of the Code provides in part:

(1) A security interest is perfected when it has attached and when all of the applicable steps required for perfection have been taken. Such steps are specified in Sections 9302, 9304, 9305 and 9306. If such steps are taken before the security interest attaches, it is perfected at the time when it attaches.
(2) If a security interest is originally perfected in any way permitted under this division and is subsequently perfected in some other way imder this division, without an intermediate period when it was unperfected, the security interest shall be deemed to be perfected continuously for the purposes of this division.
* * * * * *
(4) If a security interest in goods is perfected in accordance with this division, such security interest does not become unperfected by reason of a subsequent change in the use to which the goods are put. .

(Subdivision (4), along with subdivision (3), of section 9303 is peculiar to the California Commercial Code, and does not appear in section 9-303 of the Uniform Commercial Code.) “These provisions were added to settle any question which might be raised as to the effect of the change in the use of the property after the security interest attaches.” California Commercial Code § 9303, Comment 4. Thus, if the “successive stages” of the secured party’s security interest succeed one other “without an intervening gap, the security interest is ‘continuously perfected’ and the date of perfection is when the interest first became perfected,” which, in the instant case, would be when the December 1966 financing statement initially referred to Peterson Ford’s inventory, by implication, in describing the sales and service of new and used cars as the collateral subject to a prior security interest, from which inventory derived the six demonstrator models subjected to the supplementary purchase money security interests. See Uniform Commercial Code § 9-303, Comment 2.

This analysis is supported elsewhere in the Commercial Code. Section 9306 provides in part:

(1) “Proceeds” includes whatever is received when collateral or proceeds is sold, exchanged, collected or otherwise disposed of. The term also includes the account arising when the right to payment is earned under a contract right. Money, checks and the like are “cash proceeds.” All other proceeds are “noncash proceeds.”

The disposition of the six automobiles (originally contemplated as inventory collateral within the original ' security device) under the six conditional sales agreements altered their collateral status, in theory at least, such as to create a new account which, in this case, happened to be located with the same person who had obtained the prior security interest in the original collateral. (Obviously, this analysis would be less complicated if in fact the succeeding secured party had been a different person from the predecessor secured party, but in this case both were Southwest Bank, first under the inventory security agreement, and then under the conditional sales agreements.) Section 9306 continues:

(3) The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected but it ceases to be a perfected security interest and becomes unperfected 10 days after receipt of the proceeds by the debtor unless (a) A filed financing statement covering the original collateral also covers proceeds. .

The financing statement filed in December 1966 perfected a security interest in the inventory collateral set forth within the description, and in the “[p]roceeds of [the] above described original collateral in which a security interest was perfected.” Therefore, any proceeds received in exchange for the disposition of the original collateral, including that which was received in exchange for the conditional sales agreements pertaining to the six demonstrator models, was subjected to the continuously perfected security interest established in the original inventory collateral by the financing statement. The end result thus created a second security interest (a purchase money security interest) in favor of Southwest Bank, as the secured party, which, however, was subordinated to the prior security interest in the inventory collateral which continued notwithstanding the conditional sales agreements’ dispositions.

The fourth and final question presented for examination pertains to the status of the dealer reserve account under the Commercial Code, and raises the issue whether Southwest Bank had the power to exercise its right of set-off under the common law.

It is clear that the parties contemplated that the dealer reserve account was to be considered part and parcel as part of the property within which the secured party, Southwest Bank, had its security interest. Since this security agreement, contemplating said dealer reserve account as collateral in part securing the inventory financing, was given public notice by a duly filed financing statement, which perfected said security interest in the inventory, the problem of perfection of “general intangibles” under section 9302(1) (g) of the Commercial Code is avoided. See Nunnemaker Transp. Co. v. United California Bank, 456 F.2d 28, 32-34 (9th Cir., 1972).

With respect to the purported banker’s lien found exercised by the district court, the dealer reserve account envisaged as collateral pursuant to the October 1966 security agreement was from its very inception viewed as an integrated part of the commercial collateral securing Peterson Ford’s inventory financing of new and used automobiles. Accordingly, within the meaning of the Commercial Code, the dealer reserve account was never contemplated as that which would be subject to a right of set-off inasmuch as its commercial character was clear and totally embraced within the concept of the Division 9 security interest. Therefore, the argument that a banker’s lien was invalidly implemented is rejected inasmuch as that which was taken was subjected to collateral status as part of a prior perfected Division 9 security interest. Furthermore, the security interest created was a statutory supplement to whatever remedies Southwest Bank had at common law. And as a valid statutory supplement, the Division 9 security interest was an enforceable statutory lien expressly exempted from the application of section 60 of the Bankruptcy Act. See 11 U.S.C. § 96(b). Thus, we deem it unnecessary to reach any alleged constitutional problems of deprivation of property without notice.

Accordingly, since Southwest Bank and Peterson Ford contemplated the dealer reserve account as an integrated element of the collateral securing the inventory financing agreement, and since it was duly perfected by the proper filing of the December 1966 financing statement, which served notice as to the existence of said agreement, therefore, a prior perfected security interest existed in that account which Southwest Bank could deem forfeited and duly transferred upon the failure of the security agreement’s conditions.

The district court’s decision is affirmed, as modified by the above discussion.