author: WALLACE, Circuit Judge: ENRIGHT, District Judge

text:
    Thomas Richard MANN, Petitioner-Appellant, v. Stewart C. SMITH, Chief Probation Officer, San Bernardino County, and Lowell E. Lathrop, District Attorney, San Bernardino County, Respondents-Appellees.
    No. 71-1932.
    United States Court of Appeals, Ninth Circuit.
    July 9, 1973.
    Rehearing Denied Nov. 15, 1973.
    Certiorari Denied Feb. 19, 1974.
    See 94 S.Ct. 1445.

      Robert F. Mann, (argued), of Gilbert, Mann & Sarno, Santa Monica, Cal., for petitioner-appellant.
    Russell Iungerich, Deputy Atty. Gen. (argued), Evelle J. Younger, Atty. Gen., Daniel W. McGovern, Deputy Atty. Gen., Los Angeles, Cal., Lowell E. Lathrop, Dist. Atty., San Bernardino, Cal., for respondents-appellees.
    Before BARNES and WALLACE, Circuit Judges, and ENRIGHT, District Judge.

       Honorable William B. Enright, United States District Judge, San Diego, California, sitting by designation.

   WALLACE, Circuit Judge:

The State of California charged Mann with possessing marijuana and maintaining a place for use of narcotics (Cal.Health- & Safety Code §§ 11530, 11557). He pleaded not guilty and moved to suppress the marijuana seized at his home, charging violation of his Fourth Amendment rights.

His motion was denied after an evidentiary hearing in the state trial court. Mann then sought a writ of mandate directing the trial court to suppress the challenged evidence. This was denied by the Court of Appeal and then by the Supreme Court of California. Mann v. Superior Court, 3 Cal.3d 1, 472 P.2d 468, 88 Cal.Rptr. 380 (1970), cert. denied, 400 U.S. 1023, 91 S.Ct. 588, 27 L.Ed.2d 635 (1971).

Mann then pleaded guilty to the possession of marijuana count. The state’s motion to dismiss the remaining count was granted. One month later, Mann petitioned the United States District Court for a writ of habeas corpus. The denial of that petition is the subject of this appeal. We affirm.

Mann again claims a violation of his Fourth Amendment rights. But, having pleaded guilty, he has lost his right to raise this challenge. In Tollett v. Henderson, 411 U.S. 258, 267, 93 S.Ct. 1602, 1608, 36 L.Ed.2d 235 (1973), the Court stated:

We thus reaffirm the principle recognized in the Brady trilogy: a guilty plea represents a break in the chain of events which has preceded it in the criminal process. When a criminal defendant has solemnly admitted in open court that he is in fact guilty of the offense with which he is charged, he may not thereafter raise independent claims relating to the deprivation of constitutional rights that occurred prior to the entry of the guilty plea. He may only attack the voluntary and intelligent character of the guilty plea by showing that the advice he received from counsel was not within the standards set forth in McMann.

The voluntariness and intelligent character of Mann’s plea are not here questioned. No other issue remains.

The dissent suggests the rule should be different where there is a state procedure, such as in California and New York, which allows a defendant to appeal the denial of his .motion to suppress even after a conviction predicated upon a plea of guilty. An analogous question was specifically left open in McMann v. Richardson, 397 U.S. 759, 770 n.13, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970). Our brothers . of the Second Circuit have made such an exception. However, their decision predated Tollett which made no mention of any exceptions.

While states may institute various internal procedural rules for testing questions on state appeal, we believe the wise course is to have a uniform rule applicable to all states when federal habeas corpus is requested. While this question was not specifically presented, Tollett states a rule which appears to cover all federal habeas corpus petitioners. We hold that, subsequent to a plea of guilty, there can be no federal collateral attack based upon an alleged violation of constitutional rights occurring prior to the guilty plea.

If, in fact, Mann did rely on the erroneous advice of his attorney and believed that he could still raise his constitutional claims subsequent to the guilty plea, he should raise that question by attacking the voluntariness and intelligent character of his plea. Tollett, supra, 411 U.S. at 267, 93 S.Ct. 1602.

Affirmed.

ENRIGHT, District Judge

(dissenting) :

I respectfully dissent.

The majority rely upon the following language in Tollett v. Henderson, 411 U.S. 258, 267, 93 S.Ct. 1602, 1608, 36 L. Ed.2d 235 (1973):

We thus reaffirm the principle recognized in the Brady trilogy: a guilty plea represents a break in the chain of events which has preceded it in the criminal process. When a criminal defendant has solemnly admitted in open court that he is in fact guilty of the offense with which he is charged, he may not thereafter raise independent claims relating to the deprivation of constitutional rights that occurred prior to the entry of the guilty plea. He may only attack the voluntary and intelligent character of the guilty plea by showing that the advice he received from counsel was not within the standards set forth in McMann.

I am unable to agree with the court’s position on the problems posed and the specific issues reserved in McMann v. Richardson, 397 U.S. 759, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970), one of the Brady triology.

In McMann, the court wrote:

A conviction after a plea of guilty normally rests on the defendant’s own admission in open court that he committed the acts with which he is charged. [Citations omitted.] That admission may not be compelled, and since the plea is also a waiver of trial — and unless the applicable law otherwise provides,11 a waiver of the right to contest the admissiblity of any evidence the state might have offered against the defendant — it must be an intelligent act “done with sufficient awareness of the relevant circumstances and likely consequences.” Brady v. United States, 397 U.S., at 748, 90 S. Ct., at 1469. . . .

397 U.S. at 766, 90 S.Ct. at 1446 (emphasis added).

The accompanying footnote reads:

11. New York law now permits a defendant to challenge the admissibility of a confession in a pre-trial hearing and to appeal from an adverse ruling on the admissibility of the confession even if the conviction is based on a plea of guilty. N.Y.Code Crim.Proc. § 813-g (Supp.1969) (effective July 16, 1965). A similar provision permits a defendant to appeal an adverse ruling on a Fourth Amendment claim after a plea of guilty. N.Y.Code Crim.Proc. § 813-c (Supp.1969) (effective April 29, 1962).

Id. n.ll (emphasis added).

The McMann court also wrote that

13. We do not here consider whether a conviction, based on a plea of guilty entered in a State permitting the defendant pleading guilty to challenge on appeal the admissibility of his confession (as in New York after July 16, 1965, see n.11, supra), would be open to attack in federal habeas corpus proceedings on the grounds that the confession was coerced. Cf. United States ex rel. Rogers v. Warden of Attica State Prison, 381 F.2d 209 (C. A.2d Cir. 1967).

Id. at 770, 90 S.Ct. at 1448, n.13.

In United States ex rel. Rogers v. Warden of Attica State Prison, 381 F.2d 209 (2d Cir. 1967), the Second Circuit held that under the criminal statutory scheme of New York, following an unsuccessful motion to suppress evidence, a defendant, by pleading guilty, does not thereby forfeit his right to apply for federal habeas corpus relief should his state appeal prove unsuccessful.

Since the California Penal Code § 1538.5(m) (West Supp.1973) provides a similar statutory scheme, I would hold as had the Second Circuit that petitioner should not be deprived of federal habeas corpus relief.

The California procedure encourages competent counsel to resolve all else but the legal issues specifically reserved for precisely the reasons advanced in United States ex rel. Rogers v. Warden of Attica State Prison. Its purpose is to negate the very relinquishment of which Tollett speaks. This statutory scheme does not waive the petitioner’s rights, as the majority suggests Tollett mandates, but was specially enacted to preserve those rights — and preserved they were by the petitioner’s adherence to the procedures outlined in § 1538.5 (m). Hence, based on the Brady trilogy itself, Tollett cannot be considered persuasive authority as to the petitioner’s claim. The competence of counsel discussed in Tol-lett is clearly not applicable here; any competent California attorney would assure his client that he had specifically reserved (as here) by his plea that which the majority now holds as a matter of law, he has forever and affirmatively waived by that very same plea. The rationale of Tollett should not, therefore, be used on a procedural basis as authority for disposing of the substantive claim herein involved.

On the merits of the petition, I would reverse the judgment of the district court and would concur in the dissenting opinion filed by Justice Peters in Mann v. Superior Court, 3 C.3d 1, 88 Cal.Rptr. 380, 472 P.2d 468 (1970). Police, while engaged in the investigation of a private party in the home of a school teacher, first, came upon the petitioner’s property and surveyed the interior while standing between bushes and a window, and thereafter, entered the petitioner’s premises following closely behind invited guests. (Unknown voices answered “come in,” in response to a knock.) Serious issues as to probable cause and the validity of consent were raised by the petitioner. A small quantity of marijuana was found inside the residence and all persons present were arrested. Admittedly and concededly, the officers were without lawful probable cause at the time they approached the front door, and by the only prosecution testimony offered, specifically eliminated the odor of marijuana (which was detected when they entered the residence), as any factor in the probable cause for the subsequent arrests. The consent issue was crucial to the resolution of the violations alleged.

Certainly the facts of this case are subject to the interpretation that the only tenable opportunity remaining open to the officers in retrieving a tainted situation was to finesse a constitutional violation and construe a simple knock with the expected “come in,” voiced by persons who could only reasonably anticipate other guests, and certainly not governmental agencies, into a consent which would permit the blanket arrests and a comprehensive search of the premises. To torture such wording into a knowing and intelligent waiver of such a fundamental constitutional right by the householder does a disservice to elemental justice, given the totality of circumstances. It would seem that there should have been some attempt on the part of the officers, knowing as they did their own purpose and intent, to announce their identity prior to seeking consent to enter onto the premises as envisioned in the underlying rationale of California Penal Code § 844 (West 1970). The essence of the fourth amendment would seem to require no less. These were officers about to execute a mass arrest without any attempt to seek or comply with any legal process, and indeed their initial activity flew in the face of the constitutional mandate. I would, therefore, hold that the constitutional rights assured to the petitioner by the fourth and fourteenth amendments were violated. I would remand the matter to the district court with instructions to grant the petition.

      . Cal.Penal Code § 1538.5(m) (West 1970). It is questionable whether Mann was availing himself of this procedure. He did not plead guilty -with the expectation of appealing to the state court. Rather, he pleaded not guilty and petitioned for a writ of mandate based upon the denial of his motion to suppress. It was denied by the California appellate courts and the United States Supreme Court denied certiorari. Then, he pleaded guilty.
      Apparently a plea bargain was made in which Mann entered his plea in exchange for the dismissal of one count of the two-count indictment. This would be more consistent with a relinquishment of his Fourth Amendment claims than an attempt to preserve them. See Tollett, supra, 411 U.S. at 267, 93 S.Ct. 1602.

      . N.Y.Code Crim.Proc. § 813-c (Supp. 1969).

      . United States ex rel. Rogers v. Warden, 381 F.2d 209 (2d Cir. 1967) ; United States ex rel. Molloy v. Follette, 391 F.2d 231 (2d Cir.), cert. denied, 391 U.S. 917, 88 S.Ct. 1812, 20 L.Ed.2d 658 (1968). We have heretofore entertained a federal habeas corpus petition subsequent to a plea of guilty in a California state court. Houser v. Geary, 465 F.2d 193 (9th Cir. 1972), cert. denied, 409 U.S. 1113, 93 S.Ct. 927, 34 L.Ed.2d 696 (1973). However, we did not discuss the point at issue here and the case was decided prior to the direction of the Court in Tollett.

      . Brady v. United States, 397 U.S. 742, 90 S.Ct. 1463, 25 L.Ed.2d 747 (1970) ; McMann v. Richardson, 397 U.S. 759, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970) ; Parker v. North Carolina, 397 U.S. 790, 90 S.Ct. 1458, 25 L.Ed.2d 785 (1970).

      . The rationale of the Second Circuit was as follows:
      New York has thus provided a specific statutory exception to the general rule that a plea of guilty bars a defendant from raising on appeal alleged nonjuris-dictional defects. And, we are quite easily able to discern legitimate and powerfully compelling reasons for establishing such an exception. In the greater number of cases, the present one being illustrative, a defendant in a criminal case recognizes that unless he succeeds in suppressing the evidence seized, the state will have little difficulty in proving the charges filed against him. A defendant may well have no desire to go to trial once his pre-trial suppression motion has been denied, and thereafter may lose heart for any defense to the charges. If, however, the defendant is confronted with state law which decrees that a plea of guilty bars him from appealing the denial of his motion, then he will be presented with a fait accompli and be forced to proceed to trial just so that he can preserve his right to appeal. Section 813-c is an enlightened statute and was designed to alleviate this undesirable and archaic end which can only result in cluttering trial calendars. The guilty plea in such circumstances is merely a procedural step which permits review of the defendant’s constitutional claims without the necessity of a trial that would be a waste of time, money and manpower.
      381 F.2d at 214.

      . Cal.Pen.Code § 1538.5 (m) provides in part: “A defendant may seek further review of the validity of a search or seizure on appeal from a conviction in a criminal case notwithstanding the fact that such judgment of conviction is predicated upon a plea of guilty.”

      . I also concur with the language of the Second Circuit in reaffirming the principle enunciated in United States ex rel. Rogers v. Warden of Attica State Prison:
      There is some initial appeal in the State’s argument that habeas corpus tests the legality of custody, that the State’s custody of Molloy is pursuant to his conviction on his plea of guilty, that there is no claim that the plea was improperly induced, and that New York’s decision to allow a criminal defendant to appeal from a judgment of conviction on the ground of error in a suppression ruling notwithstanding a guilty plea goes beyond the requirements of the Constitution and should not enlarge a prisoner’s right to federal ha-beas corpus. [Footnote omitted.] But acceptance of the State’s contention would make the final paragraph of § 813-e a trap rather than the beneficient and “enlightened statute,” 381 F.2d at 214, it was meant to be. While in strict letter New York has said only that a plea of guilty will not foreclose appeal from the denial of a motion to suppress, defendants and their counsel would scarcely read the statute so narrowly; the natural interpretation would be rather that they might plead guilty and still preserve all remedies with respect to the alleged unlawful search that would otherwise have been available— including ultimate resort to a federal court. What the result should be if New York were to say in so many words that the sole remedy with respect to an illegal search preserved on a plea of guilty was by an appeal or other remedies in the state system, we are not now required to decide.
      United States ex rel. Molloy v. Follette, 391 F.2d 231, 232 (2d Cir. 1968) (emphasis original).

      . Compare Lorenzana v. Superior Court of Los Angeles County, 9 Cal.3d 626, 511 P.2d 33, 108 Cal.Rptr. 585 (1973).

      . “Q. [by defense counsel] As you were knocking on the door, at that time you intended to arrest all the occupants of that house except the three which you followed in, is that correct? A. [by Lieutenant Olmos] Correct. Q. And you had reached that conclusion after seeing what you saw in the window? A. That is correct. Q. And, therefore, when you walked into the house and smelled the odor of marijuana, that certainly did not contribute to your conclusion in that regard, is that correct? A. Just confirmed my suspicions. Q. But it was an element, as far as you are concerned, of reaching that particular conclusion? A. No sir. Q. I beg your pardon? A. No, sir.”
      Mann v. Superior Court, 3 Cal.3d at 13, 88 Cal.Rptr. at 387, 472 P.2d at 475 (1970) (Peters, J. dissenting).

      . The search was prior to the decision in Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969).

      . Schneckloth v. Bustamonte, 412 U.S. 218, 93 S.Ct. 2041, 2047-2048, 36 L.Ed.2d 854 (1973) ; Bumper v. North Carolina, 391 U.S. 543, 548, 88 S.Ct. 1788, 20 L. Ed.2d 797 (1968) ; Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 82 L.Ed. 1461 (1938).

      . Cal.Pen.Code § 844 provides :
      To make an arrest, a private person, if the offense be a felony, and in all cases a peace officer, may break open the door or window of the house in which the person to be arrested is, or in which they have reasonable grounds for believing him to be, after having demanded admittance and explained the purpose for which admittance is desired.


source: Caselaw Access Project

author: PHILLIPS, Chief Judge.

license: Public Domain

text:
    Charles E. JOHNSON, Plaintiff-Appellee, v. GENERAL DRIVERS, WAREHOUSEMEN AND HELPERS, LOCAL UNION NO. 89, Defendant-Appellant. Charles E. JOHNSON, Plaintiff-Cross-Appellant, v. GENERAL DRIVERS, WAREHOUSEMEN AND HELPERS, LOCAL UNION NO. 89, Defendant-Cross-Appellee.
    Nos. 73-1245, 73-1246.
    United States Court of Appeals, Sixth Circuit.
    Argued Oct. 3, 1973.
    Decided Nov. 30, 1973.

      Ralph H. Logan, Louisville, Ky., for defendant-appellant; Hardy, Logan & Hastings, Louisville, Ky., on brief.
    James R. Voyles, Louisville, Ky., for plaintif f-appellee; S. Arnold Lynch, Sales, Lynch & Fowler, Louisville, Ky., on brief.
    Before PHILLIPS, Chief Judge, and McCREE and MILLER, Circuit Judges.
   PHILLIPS, Chief Judge.

This is an action against a labor union for alleged violation of its duty of fair representation of a member in processing a grievance against his employer. Jurisdiction is based on § 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a) et seq.

Charles E. Johnson was discharged for participating in a wildcat strike in violation of the no-strike clause contained in the collective bargaining agreement between his employer and his Union. Johnson joined in picketing on the premises of his employer, shouted at nonstriking employees entering the plant, and refused to obey an order restraining picketing issued by a State Circuit Court.

Following his discharge, Johnson filed a grievance which was processed by the Union through the first three steps of the grievance procedure prescribed by the collective bargaining agreement. The fourth step in this contract provides for arbitration. Because Johnson had participated in the wildcat strike in violation of the collective bargaining agreement and because the employer had not been guilty of any violations of the contract, the Union refused to demand arbitration. This is the established policy of the Union in handling a “hat in hand” grievance where an employee has violated a collective bargaining agreement and the employer has not been guilty of any violations.

The District Judge denied a motion for a directed verdict and submitted the case to the jury, which returned a verdict in favor of Johnson and against the Union for $7,339.40, including $5,572.19 for lost wages and $1,767.21 in lost fringe benefits. The District Court overruled the Union’s motion for judgment n. o. v. and entered judgment in the amount found by the jury.

The Union appeals from the judgment. Johnson cross-appeals from the action of the District Court in refusing to allow him a recovery against the Union of attorney’s fees, expenses and prejudgment interest.

We reverse the judgment against the Union.

A breach of the statutory duty of fair representation occurs only when the conduct of a union toward a member of the collective bargaining unit is arbitrary, discriminatory or in bad faith. Vaca v. Sipes, 386 U.S. 171, 190, 87 S.Ct. 903, 17 L.Ed.2d 842 (1967); Humphrey v. Moore, 375 U.S. 335, 350, 84 S.Ct. 363, 11 L.Ed.2d 370 (1964); Ford Motor Co. v. Huffman, 345 U.S. 330, 338, 73 S. Ct. 681, 97 L.Ed. 1048 (1953); Dill v. Greyhound Corp., 435 F.2d 231, 238 (6th Cir. 1970); St. Clair v. Local Union, 422 F.2d 128, 130 (6th Cir. 1969); Balowski v. International Union, 372 F.2d 829, 833-834 (6th Cir. 1967); Williams v. Kroger Co., 369 F.2d 85, 87 (6th Cir. 1966).

In Ford Motor Co. v. Huffman, supra, the Supreme Court said: “A wide range of reasonableness must be allowed a statutory bargaining representative in serving the unit it represents, subject always to complete good faith and honesty of purpose in the exercise of its discretion.” 345 U.S. at 338, 73 S.Ct. at 686.

In Vaca v. Sipes, supra, the Court said:

“Nor do we see substantial danger to the interests of the individual employee if his statutory agent is given the contractual power honestly and in good faith to settle grievances short of arbitration. For these reasons, we conclude that a union does not breach its duty of fair representation, and thereby open up a suit by the employee for breach of contract, merely because it settled the grievance short of arbitration.” 386 U.S. at 192, 87 S.Ct. at 918.

There is no evidence in the present record from which the jury could have found the Union guilty of arbitrary, discriminatory or bad faith conduct toward Johnson or other members of the collective bargaining unit within the meaning of Vaca, Humphrey and the other decisions cited above.

Article XV of the collective bargaining agreement provides that:

“Except as provided in Step 4 of the grievance procedure, there shall be no strike on the part of the Union or lockouts on the part of the Employer, during the life of this Agreement . This provision will in no way conflict with Management’s rights as provided for in Article XII.”

The latter article provides for a right to “hire, assign, transfer, promote, discharge or discipline for just cause.”

In violation of the no-strike clause, certain employees, including Johnson, engaged in a four-day unauthorized strike beginning Monday, September 8, 1969. The cause of the strike is said to have been the action of management in closing one door to the plant which previously had been available to employees. The incident of the closed door was processed through the grievance procedure provided in the contract and finally was submitted to arbitration. The dispute over the closed door was determined in accordance with the provisions of the contract. The trouble which resulted from the discharge of Johnson began when certain members of the Union struck because the door had been closed, without pursuing the grievance procedure as required by the contract. Leonard McCracken, Business Agent for the Union, testified that he told the employees to go back to work on the day the strike began, but they refused to do so.

On September 10 the Circuit Court of Jefferson County, Kentucky, issued a temporary restraining order enjoining employees from continuing the strike, from blocking entrances, or harassing or interfering with any other employees seeking to enter the premises.

The record shows that, in addition to striking and picketing, Johnson stood in or near the doorway to the plant and shouted at employees who were returning to work in compliance with the State court restraining order. When handed the restraining order, Johnson demanded to know if the closed door had been opened, and when informed that it had not, he threw the restraining order to the ground and continued to engage in loud and obnoxious conduct. He admitted that he had drunk two and possibly three beers shortly before this incident.

Rather than showing bad faith on the part of the Union, as asserted by Johnson, the record demonstrates diligent and effective efforts by the Union on behalf of all its members who engaged in this unauthorized strike. The employer undoubtedly had the right to discharge every employee who participated in the strike. The Union succeeded in preventing the discharge of any employee except Johnson. The other striking employees were merely disciplined.

At one stage of the dispute certain employees filed a charge against the employer with the National Labor Relations Board. On November 14, 1969, the Regional Director ruled as follows:

“The above-captioned case charging a violation under Section 8 of the National Labor Relations Act, as amended, has been carefully investigated and considered.
“The investigation discloses that on September 8, 1969, and for three days thereafter, you, along with the other employees named in the charge engaged in an unauthorized strike in violation of the existing contract between the Employer and your Union. It is clear from the evidence that the work stoppage was not caused by any unfair labor practices on the part of the Employer. The strike, therefore, constituted unprotected activity against which the Employer was privileged to take defensive action by suspension and discharge of those who engaged in the unprotected activity.”

No review was sought from this action of the Regional Director.

With respect to Johnson, the record shows that the Union processed his grievance through the first three steps of the grievance procedure prescribed by the collective bargaining agreement. Three or four meetings were held at the step three level. The Union undertook to persuade the employer to reinstate Johnson but these efforts were unsuccessful. The employer adhered to its de-cisión to discharge Johnson for his misconduct in the picket line and his participation in the illegal strike. At the final meeting at the step three level on October 7, 1969, which was attended by Johnson, the following written disposition of his grievance was made: “Because of his participation and his conduct during the illegal work stoppage during the week of 9/8/69 the aggrieved is terminated.” This disposition was signed by two representatives of management and by Leonard McCracken, Business Agent for the Union. This third step disposition was accepted by the Union.

Demands to pursue the grievance to arbitration were rejected by the Union.

The refusal of the Union to pursue the grievance to arbitration is supported by the decision of the Supreme Court in Vaca v. Sipes, supra, 386 U.S. at 192, 87 S.Ct. 903, and by the decision of this court in Amanda Bent Bolt v. United Auto Workers, 451 F.2d 1277 (6th Cir. 1971).

Mr. McCracken testified as follows as to the efforts of the Union on behalf of the grievance of Johnson:

“Q. In your duties assigned to you as a Business Agent, were you the agent in charge of the Fawcett Printing Corporation in the period of 1969 when this strike took place?

“A. Yes, sir.

“Q. When did you first hear that there was a work stoppage in September of 1969 ?

“A. I believe it was on the evening of September the 8th.

“Q. Do you know what day of the week that was ?

“A. I believe it was a Monday.

******

“Q. All right. Did you ever tell the employees to go back to work?

“A. Yes.

“Q. And when did you first tell them to return to work?

“A. When I — when I found out what their problem was, I told them at that time to return to work.

“Q. Well, was that Monday night?

“A. Yes, sir.

“Q. And did they return to work?

“A. No, sir.

* * * * * *

“Q. All right. Did you come back on Tuesday?

“A. Yes, sir.

“Q. And were the men still out from work on Tuesday?

“A. Yes, sir.

“Q. Did you at that time tell any of the men that this was an unauthorized work stoppage?

“A. The men all seemed to know that it was an unauthorized work stoppage. We discussed the- — they wanted to take the position that they were locked out, and I told them the front door was still open, which they all knew. Their argument wasn’t a valid argument.

“Q. Did you ask them again to return to work?

“A. Yes, sir.

******

“Q. All right. What attracted your attention to Mr. Johnson on that Thursday morning?

“A. His conduct.

“Q. What — describe his conduct ?

“A. He was using profanity, swearing at the secretaries, the office employees, as they went through the Eleventh Street entrance.

“Q. Now, where was Mr. Johnson at the time this was taking place?

“A. Down near the door and in the doorway.

* * * * * *

“A. There was possibly a dozen people gathered around wanting to talk to me. I asked them, I said, ‘Can any of you all get Johnson out of the doorway, get him away from here.’ ”

******

“Q. All right. Did you direct Mr. Johnson if he felt aggrieved to file a grievance ?

“A. Yes, sir.

“Q. Did he file a grievance?

“A. Yes, sir.

“Q. Was a hearing held on that grievance ?

“A. Yes, sir.

“Q. Tell me how many hearings were held, where-they were held and who was present?

“A. The hearings were held at the office of the Labor Relations Director at Fawcett Printing Company.

“Q. All right.

“A. We had a meeting on September the 15th, I believe was the day, and present were Owen Swanson, Art Young and James Pike for the company.

“Q. Now, was that a third-step meeting?

“A. Yes, sir.

“Q. All right.

“A. For the union, there was myself and the chief stewards, Leroy Jeffers and Dennis Wright.

“Q. All right. Now, was other members’ cases, as well as Jeffers’, discussed —I mean, as well as Johnson’s discussed on that occasion?

“A. Yes, sir.

“Q. Were they cases arising out of this same strike?

“A. Yes, sir.

“Q. All right. Now, what disposition was made of Mr. Johnson’s case on that date?

“A. None..

“Q. All right. Was any disposition made — why were you talking about some of the other people if only Johnson filed a grievance?

“A. We were trying to get the company to be as lenient as possible with all of the employees that they had intended to take disciplinary action against.

“Q. At that time had they actually sent out disciplinary notices?

“A. I believe so.

“Q. All right. Now, did you subsequently or after that date, have another Step 3 meeting with the company ?

“A. Yes, sir; on September the 18th, I believe.

“Q. All right. Did you know who was present on that date?

“A. Mr. Swanson, Mr. Young, and during these meetings there was one meeting when Mr. Pike wasn’t there, but a Dennis Rollins was for the company.

“But in the second Third Step grievance meeting we had pertaining to Johnson, for the union there was myself, Leroy Jeffers and Dennis Wright.

“Q. At that time Jeffers was chief steward, is that correct?

“A. Yes, sir.

“Q. All right. Now, what matters were discussed at that meeting?

“A. The disciplinary action, the discharge of Johnson and the discharge of Washington Spencer.

*****

“Q. All right. Now, was there later another Step 3 grievance hearing with the company with reference to any of these employees?

“A. Yes, sir.

“Q. All right. When was that and who was considered — what was the consideration on — what happened on that occasion ?

“A. That was on September the 29th. Prior to that time Mr. Johnson and myself had had telephone conversations, and he wanted to come to the meeting and plead his case.

“Q. All right.

“A. And I told him what time the meeting was and to be there.

“On that particular day, for the company, Mr., Swanson, Mr. Art Young— and I don’t know who the third member from management was; either Mr. Pike or Mr. Rollins.

“Q. All right.

“A. Myself, from the union. Mr. Jef-fers had been suspended.

“Q. By whom?

“A. By the company.

“Q. All right.

“A. Mr. Sanders appeared at the meeting and told me that the Cheshire employees had sent him to replace Jeffers in this meeting as chief steward, which was usually what happened if something happened to one of the chief stewards, one of the day shift stewards from the department the chief steward is from would come in and set in his place on the Grievance Committee.

“Q. All right. Now, did Mr. Johnson appear?

“A. Yes, sir.

“Q. Was his case presented on this third Third Step meeting?

“A. Yes, sir.

“Q. What was the request of the union on that occasion ?

“A. That he be put back to work.

“Q. And was Mr. — Mr. Johnson was in the room?

“A. Yes, sir.

“Q. Did he offer any evidence?

“A. No.

“Q. I believe he testified something about he asked for Mr. Jeffers. Do you recall what that situation was ?

“A. No.

“Q. Did he request Mr. Jeffers be brought in, in your presence?

“A. I don’t recall it.

“Q. Now, did you — there’s some question about whether there was any investigation made of Mr. Johnson’s case. What did you know about Mr. Johnson’s case when you went into that — these— all of these grievance steps, Third Step hearing ?

“A. Mr. Johnson had been discharged for his participation in and his action during an illegal work stoppage.

“Q. Did you know that he had participated in an illegal work stoppage?

“A. Yes, sir.

“Q. Did you know what his conduct was that the company complained of ?

“A. I seen some of his conduct that the company complained of.

“Q. Now, you’re talking about the Thursday morning actions you have described ?

“A. Yes, sir.

“Q. Did the company subsequently make a decision on Mr. Johnson’s grievance? Did they make a decision on the grievance ?

“A. They made a decision — the company had made their decision when they discharged him. Their position never changed.

“Q. All right. Now, at this point then did the union agree with the company that they had the right to discharge Johnson?

“A. No.

“Q. At any point did you so agree ?

“A. Later.

“Q. All right. Now, can you tell us why you, as the union representative, agreed that the company was proper or had the right, whether it was proper or not, to discharge Johnson?

“A. Please restate your question.

“Q. Well, let me make — see if I can simplify it. Why didn’t you go on to arbitration ?

“A. It is not the policy of the union to arbitrate any disciplinary action taken by any employer against an employee who is involved in an illegal work stoppage.

“Q. All right. That was your reason?

“A. Correct.

“Q. And the company’s reason was what ? In addition to that, did they have another reason? Did the company say why they were doing this to Johnson and not to anybody else ?

“A. Just because of his actions and his participation in it.

“Q. All right. Could you then and can you now point to a violation of the contract in effect by the company as to Mr. Johnson?

“A. No.

“Q. To arbitrate a case, in your experience as a Business Agent, is it necessary to show a violation of the contract by the company?

“A. Yes.

* * * * , * *

“Q. All right. Did you treat Mr. Johnson any different from any other employee in representing them in the grievance procedures?

“A. No, sir.

“Q. Did you do all you knew how to do to try to assist in getting Mr. Johnson re-employed by the company?

“A. Yes, sir. This was the reason that we had four Third Step grievance meetings pertaining to Mr. Johnson instead of one.

“Q. Did you — -well, just what did you say to the company in trying to get them to not be as severe on Mr. Johnson?

“A. We had a hat-in-our-hand grievance. We didn’t have a demanding type grievance where the company had violated any article or section of the contract. And what they did, they had a right to do, the action that they had taken. Therefore, all that we could do was ask them to reconsider this — the action that they had taken and to consider this man’s family. And we approached this from that line, that we had a hat-in-our-hand grievance from the beginning, and we knew it. And all that we could do was beg for the man’s job back.”

Accepting the testimony of Johnson and his witnesses at face value, which the jury was entitled to do, and considering this testimony in the light most favorable to Johnson, we determine that his evidence was insufficient to make out a cause of action against the Union under the authorities hereinabove discussed.

Much of Johnson’s testimony was directed toward the failure of the Union to demand arbitration. As stated above, the action of the Union in refusing to submit the grievance to arbitration is supported by Vaca v. Sipes, supra, 386 U.S. at 192, 87 S.Ct. 903, and Amanda Bent Bolt v. United Auto Workers, supra, 451 F.2d 1277 (6th Cir. 1971).

There is a conflict in the testimony as to whether Johnson used profane language and obscenities in shouting at returning workers. He admitted that he called the returning workers “scabs” and dropped to the ground the copy of the State court restraining order. He also admitted drinking two or three beers between 7:00 and 8:30 a. m. on the morning of the picketing. His discharge at the end of the step three proceeding was “[b]ecause of his participation and his conduct during the illegal work stoppage.” There was no finding that he used profanity and this does not appear to have been a controlling issue.

Johnson asserts that he was denied the right to be heard and to present witnesses. The Collective Bargaining Agreement contains the following provisions concerning the first three steps of processing a grievance:

“Step 1. The aggrieved employee shall present his grievance to his foreman orally immediately, but not later than one day after the employee has knowledge that a grievance exists. The aggrieved employee’s shop steward shall have an opportunity to be present.
“Step 2. Failure to resolve the dispute in Step 1, hereof, the grievance shall be reduced to writing and shall be discussed between the superintendent, the chief steward, the aggrieved employee or employees and the shop steward within five working days from the filing of the grievance. Any disposition of the grievance at this step shall be reduced to writing.
“Step 3. Failure to resolve the dispute in Step 2, hereof the grievance shall be discussed at the next regular monthly meeting of the Grievance Committee, composed of the business agent and chief stewards, representing the Union and three representatives of the Employer, one of which is the Director of Industrial Relations. At this hearing either party shall have the right to present their evidence by testimony from the aggrieved employee or any supporting witness. A majority decision by this committee shall be final and binding on all parties. In the event there is no majority decision, the dispute shall be considered deadlocked and may be settled by an arbitrator as provided for in Step 4 hereof. Any disposition of the grievance in this Step 3 shall be put in writing.”

In step three proceedings either the company or the Union had the “right to present their evidence by testimony from the aggrieved party or any supporting witness.” Aggrieved employees are not parties to the contract. The record shows that three or four meetings were held at the step three level. Johnáon was present at the last of these meetings and asked to be reinstated. In spite of the efforts of the Union on behalf of Johnson, the Committee remained deadlocked as to his grievance.

Johnson relies upon Griffin v. International Union, 469 F.2d 181 (4th Cir. 1972). In Balowski v. International Union, supra, this court said: “Whether a bargaining representative has acted fairly, impartially and without hostile discrimination depends upon the facts of each case.” 372 F.2d at 834. The facts of Griffin are readily distinguishable from the facts of the case at bar.

Johnson charges discrimination because he was the only striking employee who was not returned to his job. As said by the Supreme Court in Ford Motor Co. v. Huffman, supra: “The complete satisfaction of all who are represented is hardly to be expected.” 345 U.S. at 338, 73 S.Ct. at 686. The record demonstrates that the discharge of Johnson came about as a result of his own misconduct despite the persistent but unsuccessful efforts of the Union in support of his “hat-in-hand” grievance.

We hold that there is insufficient evidence in this case to warrant taking it to the jury. The District Court erred in refusing to grant the motions for a directed verdict and for judgment n. o. v. The cross-appeal of Johnson for attorney’s fees, expenses and prejudgment interest is dismissed. The judgment of the District Court is reversed and the case is remanded with instructions to dismiss the complaint.

      . The employer orginally was a party defendant. The action between Johnson and the employer was compromised and settled before trial.


author: COLEMAN, Circuit Judge.

text:
    Daniel DEVERS, Plaintiff-Appellee, v. MOBIL CHEMICAL CORPORATION, Defendant-Appellant, Argonaut Insurance Company, Intervenor-Appellee.
    No. 73-1547.
    United States Court of Appeals, Fifth Circuit.
    Dec. 13, 1973.
    Rehearing Denied Jan. 16, 1974.

      Cleve Bachman, Beaumont, Tex., Maurice Amidei, Dallas, Tex., for defendant-appellant.
    Woodson E. Dryden, Beaumont, Tex., for plaintiff-appellee.
    James W. Mehaffy, Sr., Beaumont, Tex., for intervenor.
    Before BELL, COLEMAN and RO-NEY, Circuit Judges.
   COLEMAN, Circuit Judge.

This diversity personal injury action has had a turbulent career. It was first tried to a jury and the verdict was set aside. The next jury could not agree on a verdict. The parties then agreed to submit the case to the District Judge on the record compiled in the second trial. He filed findings of fact and conclusions of law, awarding damages in the sum of $50,000. Mobil Chemical Corporation appeals. We affirm.

The Plaintiff-Appellee, Devers, was an employee of Pierose Maintenance Company, which had a maintenance contract with Mobil Chemical Corporation. Under this agreement, Mobil supplied all the equipment needed by Pierose for its maintenance duties. One of Devers’ jobs was to keep equipment filled with gasoline. To accomplish this he was required to use a two wheeled trailer, called a gas “buggy”. This gas buggy had an “A-frame tongue”, to which was attached a jack for use when the tongue was raised from the ground to be hitched, trailer fashion, to the truck which towed it.

For about a year prior to the accident in which Devers was hurt, the tongue jack had not functioned, so he had manually lifted the tongue in order to connect it to the truck. This was done four or five times a week, more than 150 times before Devers suffered a serious back injury while lifting the tongue. The actual weight of the tongue and buggy was never established. It varied because the weight was less when full; at such times the liquid was balanced and would not “run to the front”. In any event, Devers testified that it was heavy, although prior to the injury neither he nor his partner experienced any trouble lifting it.

It appears that Devers had notified Mobil of the defective condition of the jack, but it was never repaired.

Mobil contends, nevertheless, that because of Devers’ repeated exposure to the defective condition that it was so “open and obvious” that no duty was owed to him; moreover, that Devers voluntarily assumed the risk (volenti non fit injuria). It is accordingly argued that a finding for the plaintiff was erroneous as a matter' of law.

While this case involves the supply of a chattel for mutual benefit, we are controlled by the same rules of law which govern the duty of a landowner to his invitees, Ellis v. Moore, 401 S.W.2d 789, 794 (Tex., 1966); Roosth & Genecov Production Co. v. White, 152 Tex. 619, 262 S.W.2d 99 (1953).

The Texas Supreme Court in Adam Dante Corp. v. Sharpe, 483 S.W.2d 452, 455-458 (Tex., 1972), has recently said of the two principles in issue:

“Under such issues (open and obvious) it would be Mrs. Sharpe’s (plaintiff) burden at trial to prove the existence and violation of a legal duty owed to her by Adam Dante.
* * * That includes her burden to prove that she did not possess actual knowledge of the danger, that she did not fully appreciate the nature and extent of the danger, and that the danger complained of was not so open and obvious as to charge her, as a matter of law, with such knowledge and appreciation.” [At p. 455]
“Volenti non fit injuria was Adam Dante’s second pleaded defense. The thrust of the defense is actual knowledge by Mrs. Sharpe of the specific dangers, which, with full appreciation, she voluntarily encountered.” [At p. 456]
“The fourth area of confusion arises out of the overlap of the so-called no-duty issues and the volenti issues. We recognized this situation in McKee v. Patterson, 153 Tex. 517, 271 S.W.2d 391 (1954), where we said, ‘Actually, in their application to a given fact situation the two theories so completely overlap as to be almost indistinguishable.’ A plaintiff’s failure to overcome the no-duty issues and a defendant’s proof of the volenti issues both go toward the same goal.” [At pp.457-458]

It is evident from the above that while the plaintiff has the burden in the no-duty issue and the defendant the burden in the volenti defense, knowledge and appreciation of the danger, either actual or chargeable as a matter of law, are essential ingredients of both principles. The question, then, is whether Appellee had knowledge and appreciation of the danger involved. This is a subjective determination, and not whether Devers “should have known” of the danger, Halepeska v. Callihan Interests, Inc., 371 S.W.2d 368 (Tex., 1963).

The Appellant urges that since the Appellee admitted the gas buggy was heavy and that lifting heavy objects might strain his back, he, as a matter of law, should be charged with knowledge and appreciation of the danger. Appel-lee argues that the proper interpretation of the law is that he must have appreciated the nature and extent of the injury which might result from the defective condition.

While Devers’ interpretation of Texas law is not completely foreclosed by the cases, it would most certainly be an expansion of established principles. It is not our function to expand the law of Texas. Rather, we must apply the interpretation which most likely would be applied by the Texas court of last resort. In this effort, due to his experience and familiarity with Texas law, precedent directs us to extend great deference to the Trial Judge’s understanding of it, Harris v. Hercules, 8 Cir., 1972, 455 F. 2d 267.

It is not altogether clear from the Judge’s findings of fact and conclusions of law just which standard he used —“nature and extent of danger” or “nature and extent of injury”. If the “nature and extent of injury” standard was used, then the Judgment is clearly due to be affirmed. We, however, do not have to decide that point for we conclude that an affirmance is warranted even under the Appellant’s “nature and extent of danger” standard.

Mobil cites many “slip and fall” cases, but they are of no help because in the instant case the Appellee never alleged that he did not know of the defective condition but alleges, instead, that he did not appreciate the nature and extent of the danger associated with the defective condition. Appellant relies on cases where the danger associated with the defective condition is so apparent that the plaintiff was charged with appreciation of the nature and extent of the danger, but here the danger was not so apparent. See, Triangle Motors of Dallas v. Richmond, 152 Tex. 354, 258 S.W.2d 60 (1953).

Appellant repeatedly points out that Devers lifted the buggy some 150 times. This would certainly charge him with the knowledge of the defective condition, but the numerous liftings without injury lend support to the view that he did not appreciate the fact that the weight involved was fraught with danger (Cf. Schiller v. Rice, 151 Tex. 116, 246 S.W. 2d 607, 1952).

The determinative factor is that at the time of the injury nothing new entered the sequence of events. Therefore, the more times the Appellee lifted the tongue (buggy) without injury, the more reasonable the likelihood that he did not appreciate the nature and extent of danger, Ellis v. Moore, 401 S.W.2d 789 (Tex., 1966). This is reinforced by the fact that he lifted the object only several times a day and not repeatedly at frequent intervals, which might have raised an awareness from the related strain and stress.

The Judgment of the District Court is Affirmed.

      . E. g., Collins v. Singer Sewing Machine Co., 239 F.2d 705 (5 Cir., 1957) ; Wesson v. Gillespie, 382 S.W.2d 921 (Tex., 1964) ; McKee v. Patterson, 271 S.W.2d 391 (Tex., 1954).

      . Rabb v. Coleman, 469 S.W.2d 384 (Tex., 1971) [combustible gas] ; Greenwood v. Lowe Chemical Co., 433 S.W.2d 695 (Tex., 1968) [vat of dangerous chemicals] ; Howard v. Jackson Electric Co., 430 S.W.2d 689 (Tex. Civ.App.—Waco, 1968, writ ref’d, n. r. e.) [electrical wires] ; and Texas Bitulithic Co. v. Caterpillar Tractor Co., 357 S.W.2d 406 (Tex.Civ.App.—Dallas, 1962, writ ref’d, n. r. e.) [danger of tractor when uncontrollable due to jammed throttle].


author: TALBOT SMITH, Senior District Judge.

text:
    The REGENTS OF the UNIVERSITY OF COLORADO, a body corporate, Plaintiff-Appellee, v. K.D.I. PRECISION PRODUCTS, INC., a Delaware corporation, Defendant-Appellant.
    No. 72-1892.
    United States Court of Appeals, Tenth Circuit.
    Aug. 14, 1973.
    Decided Dec. 3, 1973.
    Rehearing Denied Dec. 27, 1973.

      Harlan C. Stientjes, Greeley, Colo., for plaintiff-appellee.
    Thomas T. Crumpacker, Aspen, Colo., for defendant-appellant.
    Before HILL and SETH, Circuit Judges, and TALBOT SMITH.

       Hon. Talbot Smith, United States Senior District Judge, Eastern District of Michigan, sitting by designation.

   TALBOT SMITH, Senior District Judge.

This case involves the construction and interpretation of a research and development contract entered into between the Regents of the University of Colorado (hereafter University) on the one hand and K.D.I. Precision Products, Inc., a Delaware corporation (hereafter KDI or Precision Products) and its parent corporation, K.D.I. Corporation, a Delaware corporation (hereafter, jointly, the Sponsors). A jury trial resulted in a verdict in favor of the University for work and services performed in the amount of $195,000.

The research and development contract before us consists of two basic documents: a three page “Memorandum Agreement” and a seventeen page “Proposal” entitled “Semiconductor Studies in Ion Implantation”. This Proposal, incorporated into and made a part of the Memorandum Agreement, itself incorporated two attached exhibits: a “Patent Agreement” which the University agreed to obtain from its employees who worked on the contract, and a “Three-Year Budget” specifying the University’s budget limitations.

Under the terms of the contract it was the obligation of the University, in return for stated financial remuneration, to undertake a Proposed Research Program for the sponsors. This program related to ion implantation equipment, a liquid electrostatic high-voltage generator, a heavy mass linear accelerator and separator, general heavy mass accelerator studies, and a real time recording monochromator, as well as additional research in six other categories. The type of research to be undertaken may be partially exemplified by the provisions relating to the last-mentioned project, the real time recording monochromator, which will be found in the margin hereof. In addition the contract contained detailed provisions concerning the reports to be submitted, the budget limitations to be observed, and, under the general contract heading “Patent Right”, the rights granted KDI, particularly the University’s agreement to transfer to the sponsors the entire right, title and interest in each invention conceived or reduced to practice in the course of the program.

The contract, which was for a three year period, was terminated by the sponsors at the end of the first contract year, because of the corporation’s serious financial problems. The letter of cancellation thanked “the University of Colorado and the people involved for the excellence of the research program conducted on our behalf over the past four years” and stated, as well, that if economic conditions changed sufficiently prior to the completion of the program, KDI would reconsider its level of support. Sixty days notice of termination was given (letter dated August 31, 1970), and, in order “To accomplish a more gradual phasing of the program and to allow some continuity of work, we would propose to spread the $55,556 [a prorated portion of the allotted budget] over the full academic year.”

The litigation before us concerns the rights and obligations of the parties upon termination. The University claimed that it was unpaid for its work under the contract and brought action for the amount due according to its reckoning. In defense Precision Products asserted shortcomings in the University’s performance, and, in addition, asserted setoffs arising from the University’s alleged overdraft in its account and its “conversion” of “the technical data, scientific know-how, materials, equipment, and other products of the research.” The errors asserted on appeal cover a broad front, including the issues of substantial performance by the University, the ownership of the various pieces of equipment and machines involved in the project, and the computation of damages.

We will first consider the assertion going to the root of the University’s right to recover for its work done, namely, the charge that it failed to perform substantially its duties under the contract. 3A Corbin on Contracts § 660, pp. 164-165, Reynolds v. Armstead, 166 Colo. 372, 443 P.2d 990 (1968). In this area we find three principal charges of error, the first relating to the technical data under the programs. KDI asserts that the contract gave it exclusive rights to such data, which rights were not accorded it by the University. The contract, however, does not support this claim. The rights of KDI, specified in the contract, Paragraph F(2)(a), were not exclusive, as it claims, but “unlimited” the latter term being defined in Paragraph F(l)(b) in the following terms:

“b. ‘Unlimited rights’ means rights to use, duplicate, or disclose technical data, in whole or in part, in any manner and for any purpose whatsoever, and to have or permit others to do so.” App. Vol. II, p. 328.

In this respect appellant does not cite to us any authority, or, indeed, usage, for the synonymous use of “unlimited” and “exclusive”. Moreover, such interpretation would require the University to relinquish the original of the plans and designs, a result obviously not contemplated in a contract giving KDI merely the right to use, duplicate, or disclose the technical data. The University, through Dr. Chernow of its faculty, who was “the one we [KDI] looked to to control and direct the program” did, in fact, give KDI unlimited access to the plans and designs, and the right to have copies, which were KDI’s full rights, in this respect, under the contract. Since KDI had no rights to the original plans, testimony as to written requests therefor was properly excluded.

The trial court also excluded appellant’s tendered testimony concerning the University’s record of performance under a prior contract as disclosed in progress reports thereon. Although it is clear that the contract before us continued the work of prior contracts, what we have before us is a contract complete in itself as to the duties and obligations of the parties thereto. It comprises a separate research contract and there is no intimation therein of the incorporation by reference of prior contracts, whatever they may have provided. There was no error in the exclusion of such evidence. In fact, in this whole controverted area of reports and technical data requested, received, denied, or delayed, the jury may well have been impressed by the testimony of Mr. Cox (KDI’s President) that “No time that I requested one [oral or written report from Dr. Chernow] that we didn’t receive it,” that no one employed by the University in its research contract ever refused to disclose any data derived from the research to the sponsors, and that he had the cooperation of the University’s employees with respect to technical data retrieval and patent application prosecutions. Three invention disclosures were, in fact, it was testified, made from this project.

Additional argument concerning the University’s alleged substantial failure of performance involved a device termed in the record the “OCL”, or Optical Communications Link. This is a device sending out infrared light, consisting essentially of two sets of flashlights at each end, one flashlight being a transmitter, the other a receiver. The device is not new, relatively speaking, the first such link disclosed by the record having appeared in the 1967 World’s Fair in Montreal.

So far as concerns the present case, the OCL was developed by Professors Baird and Hays with the help of two students. None of the funds therefor came from KDI, all having been furnished by the Computer Center of the University of Colorado. It was developed, it was testified “for one purpose and one purpose only.” The University had decided to put a remote terminal, the Numerical Analysis Center, at the Engineering School, some six-tenths of a mile distant, but in their budgeting the cost of communications had through oversight been omitted. Telephone wires were sought to be used but the cost was prohibitive and thus the optical communications link was developed “to solve the problem of the University.”

No KDI money went into the development. It was not developed by KDI employees, although there was testimony that Professor Baird, supra, shared laboratory space with Dr. Chernow, and that one Hassan Bahrami, while being paid from funds from the KDI project, built some circuits for it, but such, after being “checked out,” were never used. It is not known what became of them.

The device was not developed under the KDI contract. The argument presented by KDI, that the OCL was developed to connect the University Computer with the DKI ion implanter (referring to Paragraph B(l)(e) of the contract) lacks both logical and eviden-tiary support. The contractual reference made is not to the University computer but to the Department computer, located only two floors below in the same building. It is highly illogical to argue that the development of OCL was thus necessary for the KDI program, a short distance away in the same building. Actually, Professor Baird, feeling that there was “no patentability for the optical communications link” as he developed it for use at the University, offered the “know-how” with respect thereto to KDI “because of the large amount of money that KDI had been expending on our program. We felt it would be just nice to make this offer available to KDI.” KDI, however, after evaluating the OCL, decided that it was not of interest to them. We need not trace the further history of the OCL through another corporation which wound up in bankruptcy.

It was the conclusion of the trial court, after receiving extensive testimony and numerous exhibits, out of the presence of the jury, that, since OCL had not, beyond question, been a development under the KDI contract, there was no obligation on the part of the University to disclose the OCL to KDI. There being no legal duty of disclosure, failure to disclose could not constitute a breach and we find no error in the Court’s exclusion of evidence before the jury of alleged breach of' obligation.

In sum, the question of substantial performance was vigorously contested by both litigants and there was evidence both pro and con. The matter went to the jury under instructions substantially correct and we find no basis for disturbing the verdict. And we said in Baer Bros. Land and Cattle Co. v. Reed, 197 F.2d 569 (10th Cir. 1952):

“Implicit in the jury’s verdict is a finding of substantial performance of the contract. That finding is supported by competent evidence and it has binding effect here.” 197 F.2d at 573.

KDI also sought damages, by way of setoff, for the value of “certain inventions, equipment and technical data” which it claims were converted by the University. This contention, embodied in KDI’s submitted Instruction 22, was rejected by the trial court in its entirety. It is well to bear in mind at the onset of our examination of this particular claim that the contract before us contains a section entitled “Rights Granted to KDI” specifying in detail just what KDI is to receive under the contract. The thrust thereof is that the University will assign “entire right, title, and interest in and to each Subject Invention and any application thereto for Letters Patent of the United States . ” to the sponsors. Ancillary thereto are clauses of implementation: That the University will obtain from each “technical person employed pursuant to this contract” an agreement that he will assign all his rights to any Subject Invention to the University or its assigns, and that the University shall make a written disclosure of each invention within a limited time, and further provisions of like import. But no claim is made to us on appeal that the University has asserted patent rights belonging to KDI. In fact, the University “concedes that any patents arising out of Precision Products” sponsored research belong to Precision Products. . . . ”. Rather the dispute centers upon the ownership of certain equipment employed in the research undertaken, principally the quadrupole ion implanter, the liquid electrostatic high voltage machinery, the crossed-field ion implanter and the monochromater.

This equipment was not that of the sponsors, loaned or assigned to the University for further research, although KDI funds contributed in part thereto. Thus, as to the quadrupole ion implan-ter, it was built in the summer of 1970, the testimony of Dr. Chernow being that the funds and equipment employed were those of the University itself, the Public Service Company, and General Electric. The most expensive part was an acceleration tube costing $8,000, of which sum KDI furnished $150 and the University the balance. A device denominated as “Granville Phillips nitrogen baffle,” worth from $1500 to $2,000, was taken from another project and donated to the KDI project. The electrostatic high voltage generator was built in England, at the College of North Wales, and shipped to the University. “There was a period of reconstruction under the KDI contract at the University of Colorado to try to correct some of the problems with the machine.”

It is unnecessary for our purpose to comb the record further for the origins of, and contributions of KDI to, the various pieces of equipment in controversy. The plain fact of the matter is that this is a research contract. The draftsmen thereof defined with care the “Patent Rights” that were to go to KDI as a result of the research, being careful to obtain commitment from the University that it would obtain an agreement covering patents from its employees who worked on the contract. We are aware that in the definitions sub-section of the Patent Rights paragraph of the contract the term “Subject Invention” is defined to include, but is not limited to any “art, method, process, machine, manufacture, design or composition of matter”, a collocation of words apparently deriving from 35 U.S.C. §§ 100 and 101. But in the operative and dispositive portions of the contract, as it describes the research to be undertaken, there is no suggestion that title to the equipment was either in KDI or was to vest therein. As we have noted, various donors had contributed equipment to the programs and it is inconceivable to us, as it was to the trial court, that their contributions to the project, made to the University, should be vested in another program sponsor. We do not express an opinion, one way or the other, on whether the University might, by definitive document, vest title in another to such gifts. But it was clearly not done in the instrument before us. If the University were to be divested of its rights in the instruments under consideration, such divestiture, upon these facts, must appear from specific and unequivocal language relating thereto, which, as we see from the action granting patents rights, the parties were both able and willing to employ. The absence from the contract of such language does not, as KDI asserts, make for ambiguity but rather the opposite.

Under the circumstances here presented and above outlined, such cases as Solomons v. United States, 137 U.S. 342, 11 S.Ct. 88, 34 L.Ed. 667 (1890) and Standard Parts v. Peck, 264 U.S. 52, 44 S.Ct. 239, 68 L.Ed. 560 (1924), cited by KDI, are inapplicable. Solomons, a suit for specific performance, held merely that where the chief of the Bureau of Engraving had devised a revenue stamp at the request of his superiors, and in his work he had used machinery of the Bureau at the expense of the United States, the United States had no implied license or shopright to use the stamp. Standard Parts was cited in United States v. Dubilier Condenser Corp., 289 U.S. 178, 53 S.Ct. 554, 77 L.Ed. 1114 (1933) for the proposition that “One employed to make an invention, who succeeds, during his term of service, in ac-eomplishmg that task, is bound to assign to his employer any patent obtained. The reason, is that he has only produced that which he was employed to invent. His intention is the precise subject of the contract of employment.” So here. The subject of the University’s employment was research directed towards the obtaining of patents. There is no argument here over title to or the assignment of patent rights. In fact “The University concedes that any patents arising out of Precision Products’ sponsored research belong to Precision Products, and it does not now nor has it ever asserted any patent rights in the ion im-planters, the high voltage generator or any other devise [sic] arising out of the research.”

It was the conclusion of the trial court that the contract under consideration being silent, either by apt word or necessary implication, as to the ownership of the equipment, was clear and unambiguous on its face and conferred no rights to the laboratory equipment or machines to Precision Products. We agree.

Various objections are made to the instructions given on this phase of the case, in two of which we find merit. The court gave University’s Instruction 34, to the effect that where an employee is hired to invent, the resulting invention belongs to the employer, and University’s Instruction 32, regarding the circumstances under which a patent may be obtained by an inventor. Since, however, as a matter of law the court had ruled that title to the equipment and machines remained in the University, and since the patentability of inventions was not in issue, the giving of these instructions was error, not because of inaccuracy in their content, but under the familiar rule that instructions must relate to and cover the issues presented in the proofs. However, we fail to perceive how prejudice to the defendant could have resulted and we are unwarranted in ordering a reversal on such grounds. The Oklahoma court, in Gaddy v. Mid-Continent Freight Lines, Inc., Okl., 406 P.2d 479 (1965) well expresses the preferable rule in this situation:

“An instruction which states a correct proposition of law, but which has no application to the issues involved, on the proof, will not warrant a reversal of the case, unless it is apparent that the erroneous instruction probably misled the jury.” 406 P.2d at 481.

Error is charged with respect to the use by the University, in proving its damages, of computer print-outs, the appellant asserting that no foundation was laid as to input, programming, or functioning, and that no witness was called “who worked with the computer.” With respect to such proofs error is also charged with respect to the court’s refusal to permit the questioning of one Sybil Hume, an office worker, who “prepare [d] the invoices” as to what she knew “about the operation of the computer”, the court ruling that her knowledge with respect thereto was immaterial.

All of the above ignores the actual issue presented in court. The computer print-out was offered as a summary only of voluminous records of charges to KDI. All of the original invoices pertaining to the KDI project were in court and available to all parties. Although KDI complains that “There was no evidence that any of the invoices in the boxes the University brought into the courtroom were part of the input into the computer or had anything to do with the computer” it would have been a simple matter for KDI to run a check as to any particular dates or invoices. Not having done so it is in no position to complain to this court as to possible omissions of invoices or of possible additions thereto.

It is well established, of course, that where original records are admissible as business records under 28 U.S.C. § 1732, summaries and tabulations thereof are likewise admissible. Fairchild Stratos Corp. v. Lear Siegler, Inc., 337 F.2d 785 (4th Cir. 1964). The topic is fully discussed in 5 Wigmore on Evidence, § 1530 (3rd Ed.). There was no error in the use of the computer print-outs under these circumstances.

With respect to its claim of setoff, KDI tendered proofs as to an alleged overdraft in the University’s account with KDI at the end of the contract year. During the year covered by the contract before us the University had spent less than the amount budgeted for the year, $250,015. Obviously there was no overdraft here. KDI, however, sought to prove that in past years the University had spent more than the amounts budgeted to it for such years. As counsel for KDI put it, the overdraft sought to be established was “for an overdraft that occurred on the prior contract, and this is what I am going into this for, an overdraft on KDI project.” Counsel thus sought to review the accounting and budgeting on the entire project, involving the past contracts. It was the ruling of the court, after hearing testimony and receiving offers of proof, that KDI was attempting “to treat this as one account from the year 1966 through the completion of the September, 1969 contract” which, he held, “The facts elicited in the evidence do not justify . . . The ruling was consistent with that theretofore made concerning the admissibility of progress reports on former contracts, and with respect to it, and for the same reasons, we also concur.

KDI also urges that there was error in allowing Dr. Chernow to testify that he had oral authorization from Mr. Cox to transfer charges erroneously entered against the Air Force to the KDI account. The situation here was that the Air Force program was coming to an end on August 30, 1969. It was thought desirable to continue the cadmium sulfide work and, accordingly, it was assumed by KDI. In the billing, however, the charges of some $5,000 were continued against the Air Force, “so that it appeared as if the Air Force program had an overdraft.” When the situation was brought to the attention of Mr. Cox he approved “formally transferring that obligation from the Air Force contract to the KDI contract.” KDI asserts that such aúthorization violated the University-KDI contract which provided that the University would not exceed the budget without specific written authorization from the sponsors. But here there was no exceeding of the budget limitations of the contract before us. The overdraft was in the Air Force contract. We find no error in the receipt of such testimony or the instructions relating thereto in view of the arguments made.

The court rejected KDI’s tendered instruction on damages and substituted another, which, appellant asserts, was not in sufficient detail fully to apprise the jury of the issues before it. We do not so regard it. The instruction given, while not as detailed as that submitted, adequately covered the issues submitted. The situation presented in Kendall v. Hargrave, 142 Colo. 120, 349 P.2d 993 (1960), where, in a personal injury case, the jury was given “no guidance in the matter of compensation for physical injuries, loss of time, or pain and suffering resulting from the accident is clearly not before us. Many of the charges, particularly those pertaining to post-termination activities, were the subject of much dispute and, as the court observed in colloquy, “he can present his argument to the jury. You can present yours. And then what the jury ends up determining is, I assume, you will have to accept .” The verdict returned for the University was substantially less than the amount claimed and we find no prejudicial error with respect thereto.

What we have considered here is a case of some complexity, both as to subject matter and accounting therefor. The case was fairly tried and the verdict well within the proofs. We have carefully considered the remaining allegations of error and find them without merit.

The judgment is affirmed.

      . Proceedings against K.D.I. Corporation were stayed by the United States District Court for the Southern District of Ohio, Western Division, in Bankruptcy, Case No. 61463.

      . “5. Real Time Recording Monochromator The program in this area of study is to:
      a) Develop an infrared version of the present monochromator; b) Improve the signal-to-noise ratio of the vidicon system to enhance sensitivity; c) Evaluate the probable success in developing a UV model and far infrared model of the present instrument; and d) Evaluate the limit in resolution and sensitivity and wave-length range that an ultimate system could be expected to achieve.
      The IR development requires the use of an infrared vidicon which is presently available with reasonable sensitivity to 1.5 microns. Signal-to-noise ratio enhancement will be accomplished by frequency shifting the information detected by the vidicon from base band to 455 kc. This can be accomplished with a ronchi ruling and reversing the fast and slow sweeps. In this manner a vertical line is swept rapidly recovering information from within the wavelength resolution of the vidicon. Since the ronchi ruling is selected to chop this information so that it is swept at a frequency of 455 kc for a vertical illuminated line the output signal of the vidicon will have a carrier frequency of 455 kc. Preliminary tests indicate that this method will be useful in eliminating the major component of noise in the vidicon (1/f noise).” App. Vol. II, pp. 322-323.

      . App. Yol. II, Exhibit C, pp. 334-335.

      . Deposition of Walter G. Cox, President of KDI during the duration of the contract. App. Yol. I, p. 190.

      . “SEMICONDUCTOR STUDIES IN ION IMPLANTATION
      A. INTRODUCTION
      This proposal is for a renewal of the contract work presently being sponsored by the KDI Corporation and KDI Precision Products, Inc., at the University of Colorado (C. U.). The original contract was written between the Electro-Tec Corporation and C.U. and was limited to studies of electroluminescent materials, ferroelectrics and their application to display systems. The incorporation of Electro-Tec as a division of KDI brought with it a substantial broadening of the goals of this program. In this proposal for a continuation of the program, some new projects have been incorporated.” Proposal, incorporated into and made a part of the Memorandum Agreement. App. Yol. II, p. 319.

      . Brief for the University, p. 8.

      . 35 U.S.O. § 100. Definitions
      When used in this title unless the context otherwise indicates—
      (b) The term “process” means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.

        35 U.S.C. § 101. Inventions patentable
      Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

      . University’s Brief, p. 9.

      . App. Vol. II, p. 302.

      . App. Yol. II, p. 212.

      . App. Vol. II, p. 257.

      . “Plaintiff has brought this action to recover the amount which it claims is due it under the contract for the work and services performed up to the effective date of the termination of the agreement.
      The plaintiff claims that this amount due is $202,657.42.”
      # * * * *
      “If the plaintiff did not substantially perform the contract, it can recover nothing. If it did substantially perform the contract, it is entitled to recover the amount which is due it under the contract, and that is one of the duties of the jury is to determine that amount.
      The burden of proof is upon the plaintiff to prove by the preponderance of the evidence that it substantially performed the contract, also, to prove the amount it is entitled to recover.”
      “In order for the plaintiff to recover, you must find that the defendant failed to pay the plaintiff’s research costs which were to include (a) that portion of salaries paid by the University to staff properly chargeable to the project, and the wages of others used by the project.
      (b) The cost of materials, services, and equipment contracted for the project.
      (c) A charge equal to 50 per cent of (a), that is the salaries, covering the normal use of available University facilities and indirect costs in accordance with the University’s customary accounting methods. Should the use of power, water or space become abnormal, it would be charged for under (b) above the prevailing rates.” App. Yol. II, pp. 299, 301-302.


author: EUGENE A. WRIGHT, Circuit Judge:

text:
    Walter KIRSCHENMANN et al., Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 72-1730.
    United States Court of Appeals, Ninth Circuit.
    Nov. 12, 1973.
    Curtis Darling (argued), Darling & Maclin, Bakersfield, Cal., for petitioners-appellants.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Michael L. Paup, Attys. (argued), Tax Div., U. S. Dept, of Justice, Washington, D.C., Lee H. Hen-kel, Jr., Acting Chief Counsel, Internal Revenue Service, Washington, D.C., for respondent-appellee.
    Before HUFSTEDLER and WRIGHT, Circuit Judges, and EAST, District Judge.

       Of the District of Oregon.

   OPINION

EUGENE A. WRIGHT, Circuit Judge:

In this case we must interpret Treasury Regulation § 1.453-4(c) (1958) to determine whether taxpayers may report their gain from the sale of a farm using the installment sale method of Int.Rev. Code § 453. The decision turns on whether the taxpayers’ selling expenses are an adjustment to their basis in the property. The Tax Court, 57 T.C. 524, held that they were not and that the sale did not qualify for § 453 installment treatment. We reverse.

I

Section 453 permits taxpayers to spread the gain from an installment sale of real property proportionately over the years in which payments are received rather than to recognize the entire gain in the year of sale. For the sale to qualify for installment treatment, payments received in the year of sale must comprise less than 30 percent of the selling price. Treas.Reg. § 1.453-4(e) provides that a mortgage assumed by the purchaser, to the extent that it exceeds the seller’s adjusted basis, counts as a payment in the year of sale,.

II

In 1965 the taxpayers sold the farm in a transaction that is summarized thus:

(1) Cost of property to taxpayers $304,552.22

Minus Depreciation claimed by taxpayers prior to sale $206,042.86

Equals Taxpayers’ Depreciated Basis $ 98,509.36

(2) Commissions and other costs incurred by taxpayers in making the sale $ 23,378.42

(3) Cash paid by purchaser $ 80,011.54

Plus Mortgage on the property assumed by purchaser $160,000.00

Plus Purchaser’s note payable over period of years $191,988.46

Equals Total selling price $432,000.00

In their 1965 and 1966 tax returns, taxpayers reported $118,123.76 as payments in the year of sale, using the computations:

(1) Taxpayers’Depreciated Basis $ 98,509.36

Plus Selling costs $ 23,378.42

Equals Taxpayers’ Adjusted Basis $121,887.78

(2) Mortgage Assumed by Purchaser $160,000.00

Minus Taxpayers’ Adjusted Basis $121,887.78

Equals Excess of Assumed Mortgage over Basis $38,112.22

(3) Excess of Assumed Mortgage over Basis $ 38,112.22

Plus Cash payment $ 80,011.54

Equals Payment in year of sale $118,123.76

Since $118,123.76 is less than 30 percent of the total selling price ($118,123.76/$432,000.00 = .27), taxpayers utilized the installment provisions of § 453.

The Commissioner disallowed taxpayers' inclusion of selling costs in their adjusted basis and computed the payment in the year of sale thus:

(1) Mortgage Assumed by Purchaser $160,000.00

Minus Taxpayers’ Adjusted Basis without selling costs $ 98,509.36

Equals Excess of Assumed Mortgage over Basis $ 61,490.64

(2) Excess of Assumed Mortgage over Basis $ 61,490.64

Plus Cash Payment $ 80,011.54

Equals Payment in year of sale $141,502.18

Since $141,502.18 is more than 30 percent of the selling price ($141,-502.18/$432,000.00 = .33), the Commissioner disallowed taxpayers’ use of installment reporting.

The Commissioner and taxpayers agree that selling costs reduce the taxable gain from the sale. The Commissioner would offset selling costs directly against the selling price and then subtract adjusted basis (without selling costs) to compute gain:

Selling price $432,000.00

Minus Selling costs as a direct offset $ 23,378.42

Minus Adjusted basis without selling costs $ 98,509.36

Equals Total Taxable Gain $310,112.22

Taxpayers obtain the same total taxable gain in their computations by including selling costs in their adjusted basis:

Selling price $432,000.00

Minus Adjusted Basis including selling costs $121,887.78

Equals Total Taxable Gain $310,112.22

The only difference between the two approaches is the method by which selling costs reduce the total taxable gain. The only tax consequence is the size of the payment in the year of sale. This affects both the taxpayers’ eligibility for installment reporting under the 30 percent test of § 453 and the proportionate amount of gain that must be recognized in the year of sale.

We are left with the narrow question of whether selling costs are an adjustment to the seller’s basis or a subtraction from the total selling price. We hold that they are an adjustment to the seller’s basis in the property.

Ill

Int. Rev. Code § 1011(a) defines “adjusted basis” as follows:

The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis [cost] . . . adjusted as provided in section 1016.

§ 1016(a) provides that:

Proper adjustment in respect to the property shall in all cases be made—
(1) for expenditures, receipts, losses, or other items, properly chargeable to capital account. [Emphasis added.]

The Tax Court, relying on Dwight v. Ward, 20 T.C. 332, 341-342 (1953), affd. 224 F.2d 547 (9th Cir. 1955), held that selling expenses are not “properly chargeable to. capital account,” but rather that they are an “offset against the gross profit from the sale” as “expenditures ‘made in connection with the sale of a capital asset.’ ” The Commissioner also cites a line of authority in support of the proposition that selling costs are an “offset” against gross profit rather than an adjustment to basis as an item “properly chargeable to capital account.” See, e. g., Spreckels v. Commissioner of Internal Revenue, 315 U.S. 626, 629, 62 S.Ct. 777, 86 L.Ed. 1073 (1942); Godfrey v. Commissioner of Internal Revenue, 335 F.2d 82, 85-86 (6th Cir. 1964); Treas. Reg. § 1.263(a)-2(e); 4A Mertens, Law of Federal Income Taxation, § 25.26.

These authorities characterize selling expenses as an “offset” against either the selling price or the gain from the sale. The Commissioner relies on the use of the term “offset,” arguing that an “offset” is a direct deduction rather than an adjustment to basis. But an offset can be effected either directly, through a direct deduction from gain, or indirectly, through an adjustment to basis. The use of the term “offset” in these authorities does not help us to decide the method by which the offset is to be accomplished.

More important,,none of these authorities addresses the problem now before us. They merely hold that selling expenses are not deductible against ordinary income but rather must be deducted from the capital gain with which they are associated. None of these authorities considers whether the deduction against capital gain is effected by an adjustment to basis or by a direct subtraction from the gain itself, and in none of the cases would the difference between the two approaches have had any tax consequences. Even if the term “offset” carried the implications that the Commissioner claims, it is unlikely that the authors of the authorities referred to had considered the difference between an adjustment to basis and a direct subtraction from gain. Surely, they did not have the problems of § 453 in mind when the term “offset" was selected.

While the “offset” language of these cases does not support the Commissioner’s position, their holdings do support the taxpayers’ position that selling costs are an adjustment to basis as an item “properly chargeable to capital account.” The rationale of these cases is that since selling expenses are capital expenses, they are not deductible from ordinary income. If we were to adopt the Commissioner’s position, we would be required to hold that while selling expenses are capital expenses, they are not “properly chargeable to capital account.” This would be a strained interpretation of a “capital account” under § 1016, and we decline to adopt it. As a capital expense, selling costs are “properly chargeable to capital account” and are therefore an adjustment to basis under § 1016.

IV

The Tax Court also relied on the fact that the taxpayers’ position would permit them to fully deduct selling expenses in the year of sale rather than spread the deduction over the years in which payments are made. The Tax Court felt that such a consequence of taxpayers’ position is inconsistent with Treas. Reg. § 1.453-1 (b) (1) (1963) and the legislative intent of § 453.

Treas. Reg. § 1.453-l(b) (1) provides that:

Gross profit ... is reduced by commissions and other selling expenses for purposes of determining the proportion of installment payments returnable as income.

This provision has the effect of spreading the deduction of selling expenses proportionately over the years in which payments are received. In upholding a predecessor of Treas. Reg. § 1.453-1(b)(1), the Board of Tax Appeals stated:

The effect of this method of computation is that in cases where the taxpayer elects to project the profit realized into years beyond that in which the sale is made, the expenses incident to the sale are taken into account over the same period of time. This seems to us to be the result intended by law .... Mrs. E. A. Giffin, 19 B.T.A. 1243, 1246 (1930).

In a situation where the purchaser assumes a mortgage, the inclusion of selling expenses in adjusted basis reduced the payment in the year of sale by reducing excess of assumed mortgage over basis. Therefore, taxpayers’ position permits them effectively to deduct all selling expenses in the year of sale rather than deduct them proportionately in the years payments are received as envisioned by Treas. Reg. 1.453-l(b)(1). It is incongruous that taxpayers are permitted to defer recognition of their gain while deducting immediately an expense that produced it. But the incongruity is inherent in the requirement that the excess of assumed mortgage over basis be included as a payment in the year of sale. The incongruity is not limited to the treatment of selling expenses; it pervades any item that is included in basis. Since the incongruity in the case of selling expenses does not differentiate them from other items of basis, the existence of the incongruity does not provide an argument for excluding selling costs from basis.

V

Commissioner also argues that the inclusion of selling expenses in adjusted basis would create internal inconsistencies in Treas. Regs. §§ 1.453-l(b)(l) and 1.453-4(c). Treas. Reg. § 1.453-1(b)(1) provides that

gross profit means the selling price less the adjusted basis as defined in section 1011 .... Gross profit . . . is reduced by commissions and other selling expenses for the purposes of determining the proportion of installment payments returnable as income.

If selling expenses are included in adjusted basis, there is no need further to reduce gross profit by selling expenses as provided in the regulation. Our holding renders Treas. Reg. § 1.453-l(b)(1) redundant.

Our holding also creates an internal inconsistency in Treas. Reg. § 1.453-4(c). After stating that excess of assumed mortgage over basis is a payment in the year of sale, that section states:

Commissions and other selling expenses paid or incurred by the vendor shall not reduce the amount of the payments, the total contract price, or the selling price. (Emphasis added.)

By adding selling costs to adjusted basis, the taxpayers will reduce the payment in the year of sale, thereby contravening this proscription.

These internal inconsistencies, however, have been created by the Commissioner’s misuse of the term “adjusted basis” in the regulations. Under the circumstances of this case, we decline to adopt a meaning of “adjusted basis” that is contrary to §§ 1011 and 1016 of the Code in order to rectify the inconsistencies.

We do not hold that the § 1016 meaning of “adjusted basis” is always controlling when that term is used in a Treasury Regulation. We hold only that Treas. Reg. § 1.453-4(c) does not present an appropriate case for departing from the § 1016 definition. Whether selling costs reduce the payment in the year of sale for the purpose of the 30 percent test is an arbitrary and technical determination. Either approach is consistent with installment reporting and the concept of capital gain. Our holding will not affect the integrity of the 30 percent test by creating a loophole through which installment reporting can be abused. Under these circumstances, there is no convincing reason to depart from the § 1016 meaning of “adjusted basis.”

The judgment of the Tax Court is reversed.

      . Jurisdiction on appeal is based on Int.Rev. Code § 7482.

      . See Int.Rev.Code § 1012.

      . That the term “offset” is not inconsistent with an adjustment to basis is demonstrated by Great Lakes Pipe Line Co. v. United States, 352 F.Supp. 1159 (W.D.Mo.1972). Citing Spreckles v. Commissioner of Internal Revenue, supra, which used the term “offset,” the court said:
      Generally, the costs incurred in the acquisition or disposition of a capital asset are to be treated as capital expenditures. . . . These costs are added to or subtracted from the basis of the assets in computing the gain or loss realized on the sale or purchase. 352 F.Supp. at 1167-1168 (emphasis added).

      . Similarly, the language in Great Lakes Pipe Line Co. v. United States, supra, is dictum.

      . This can be demonstrated by the following example. In a sale of land not encumbered by a mortgage, items that are clearly elements of adjusted basis (e. g., cost minus depreciation) are not deducted fully in the year of sale. The seller’s adjusted basis is accounted for proportionately over the years in which payments are made. If sellers have a $10,000 basis in the property and sell it for $100,000, payable $10,000 per year for 10 years, the seller must recognize $9,000 gain each year, reducing gain by $1,000 per year. The seller may not account for the full $10,000 adjusted basis in the first year, recognizing no gain, and then recognize a gain of $10,000 in each of the following years.
      If an assumed mortgage is involved, the situation changes. If the seller has a $10,000 basis in a piece of property sold for $100,000, the purchaser assuming a $10,000 mortgage and making payments of $10,000 in years 2 through 10, the seller will recognize no gain in the year of sale and recognize a $10,000 gain in each subsequent year. If the seller’s basis had been zero, the $10,000 assumed mortgage would have been recognized as gain in the year of sale. Thus, the seller effectively recoups any basis in the property in the year of sale when a mortgage exceeding basis is assumed by the purchaser.

      . Specifically, we do not hold that the § 1016 meaning of “adjusted basis” must be applied in Treas.Reg. § 1.453-1 (b) (1) in a way that permits a double deduction of selling expenses.

      . At most, our refusal to overlook the Commissioner’s misuse of “adjusted basis” shifts the 30 percent line, which is itself arbitrary, to a position slightly more favorable to the taxpayer.