author: WILLIAM E. DOYLE, Circuit Judge.

text:
    WESTRIC BATTERY COMPANY, a Colorado corporation, Plaintiff-Appellee, v. STANDARD ELECTRIC COMPANY, INC., a Texas corporation, Defendant-Appellant.
    No. 72-1734.
    United States Court of Appeals, Tenth Circuit.
    Argued and Submitted May 22, 1973.
    Decided July 6, 1973.
    Rehearing Denied Aug. 1, 1973.

      Kenneth C. Groves, Denver, Colo., for plaintiff-appellee.
    Reed L. Winbourn, of Zarlengo, Mott & Zarlengo, Denver, Colo. (Theo. F. Weiss, of Clemens, Weiss, Spencer & Welmaker, San Antonio, Tex., on the brief), for defendant-appellant.
    Before SETH, Circuit Judge, LARAMORE, Senior Judge, Court of Claims, and DOYLE, Circuit Judge.

       Sitting by designation.

   WILLIAM E. DOYLE, Circuit Judge.

This is a products liability case in which the plaintiff Westric Battery Company recovered a judgment based on a jury award in the amount of $472,067.28 from Standard Electric Company, Inc. Liability theories employed at the trial were breach of warranty (express and implied), negligence and strict liability. In seeking reversal the appellant stresses the proposition that strict liability was not applicable since the case was not a personal injury one but, rather, was one in which the plaintiff’s losses were strictly property or business losses resulting from out-of-pocket expenditures, loss of profits and injury to business. It also claimed that the verdict is excessive, and it is further contended that the various damage elements resulted in doubling damages. There are numerous alleged errors, but they generally revolve around the contentions just mentioned.

Westric has been for many years in the automotive and truck battery manufacturing and sales business. One aspect of its business since 1960 has been the furnishing of batteries for golf carts. These were sold to golf and country clubs. The evidence shows that Westric’s golf cart battery business has been more productive than the remainder of its business. There is some dispute as to whether the business consistently suffered losses during all the times here in question from the automotive and truck battery business. Standard says it did and that it was bound to ultimately fail. Standard also disputes whether there was any remarkable success in the golf cart battery part of the business. However, the record would indicate that it showed some profit at least until the problem in question commenced.

The relationship between Standard and Westric started in 1960 when the latter commenced purchasing so-called battery separators from Standard. Defendant Standard manufactured its own automotive, truck and golf cart batteries under the trade name of “Reliable” and supplied separators for these under the trade name of “Permalife.” About 1957, Westric decided to begin manufacturing golf cart batteries. The president of Westric, Lee Hill, visited the Standard plant in Texas. He was given certain samples of Permalife separators, as well as certain technical brochures, pamphlets and catalogs. He testified that Standard personnel specifically told him that the Permalife separator would be satisfactory for Westric’s proposed golf cart batteries.

In late 1960, Westric began manufacturing golf cart batteries utilizing Per-malife separators. By 1964 Westric was using Permalife separators exclusively in its golf cart, automotive and truck batteries. From 1960 through about 1966, these batteries performed remarkably ; only about one-half of one percent were returned by customers as defective. Westric guaranteed the batteries for full refund or replacement up to ninety days from installation and made an adjustment, by way of credit, for up to two years.

In January of 1967, Standard changed, without notifying Westric, the chemical used as its wetting agent and furthermore removed about twenty percent of the material used in its separator. Thereafter, Westric began to experience a marked increase in battery failures. During the spring of 1968 the return rate reached one hundred percent. Westric sought to discover the cause of these failures, but . Standard denied, when questioned by Westric, that its product had been changed or could be responsible for the failures. However, tests conducted by Westric convinced it that the separators were responsible, and so in August of 1968 Westric discontinued purchasing Permalife separators and switched to another brand.

The purpose of the separator is to avoid contact between the positive and the negative plates in the battery, for if they are not kept separated a short circuit will develop and the plates will fail. Battery plates, positive and negative, are initially made up of lead oxide which undergoes chemical change when sulfuric acid is introduced. In the positive plate the lead oxide becomes lead dioxide. In the negative plate the lead oxide becomes lead. As noted, the separator prevents the positive and negative plates from coming together, whereby a short would be produced. At the same time, the electricity must be transmitted through the separator and for this purpose the separators have a large number of small holes which allow the current to flow through. Also, the separators are coated with a special wetting agent which allows the separator to absorb acid much faster and thus permit the current, which flows by means of the acid, to flow more rapidly.

Plaintiff’s evidence from numerous experts, while not entirely consistent, tended to advance the theory that the separators which produced the problem had an excessive' number of pinholes together with an unstable wetting agent and that this resulted in contaminating the batteries and causing the positive plate to go soft and fail. Standard, on the other hand, maintained that the fault was in the manufacture and that it derived from allowing the batteries to run down too far which, in turn, damaged the positive plate so that there could never be a full recharge. In any event, the jury obviously found that the separators were defective and there was evidence to support this, and so we need not struggle with the intricacies of chemistry here present. Standard argued their factual theories to the jury, but the jury did not accept them. These we cannot consider. The questions which we are to determine are those legal questions which we have summarized.

I.

THE TRIAL COURT’S CHARGE ON THEORIES OF LIABILITY

The trial court instructed the jury on what it considered three different theories, namely, negligence, strict liability of the manufacturer and breach of express and implied warranties.

A. On negligence, the instruction was that if the defendant failed to exercise reasonable care in the manufacture of its product and that this negligence was the proximate cause of the plaintiff’s suffering damage, that the plaintiff was entitled to recover. The specification was failure to make any tests and inspections of the separators before placing them on the market.

B. In the express warranty instruction the jury was instructed that in the buyer and seller relationship, if the seller makes an affirmation of fact or promise orally or in writing relating to the goods, which is a basis for the sale, it creates an express warranty that the goods will conform to the affirmation or promise. A description of the goods which is part of the basis for the sale creates an express warranty that the goods shall conform to the description.

The jury was told that in order for the plaintiff to recover, the jury would have to believe that the defendant expressly warranted either the quality of the product or the testing or inspection thereof; if the jury found that the separators were not as warranted, whereby the plaintiff suffered damages, he would be entitled to recover.

C. The subject of implied warranty had two aspects; the court first instructed the jury as to the implied warranty that the goods were merchantable. This the court said is implied from the sale. Merchantable was defined as that which would pass without objection in the trade or industry and that it is fit for the ordinary purposes for which it is used.

The second part of the charge considered implied warranty and said that goods are fit or suitable for a particular purpose if the seller at the time he makes the contract of sale has reason to know of any particular purpose for which the goods are required and knows also that the buyer is relying on the seller’s skill or judgment to select dr furnish suitable goods for that purpose and if the buyer does rely on such skill or judgment.

D. Finally, the court submitted the theory of strict liability to the jury. This was defined as applying to a situation in which the seller makes to the public a misrepresentation of the material facts concerning the character or quality of the product sold by him. The court further stated that if the buyer justifiably relies on the statement, he may recover damages suffered if the representation was not true and if it resulted in an injury to the buyer. Thus, “strict liability” was described as a species of eommerical misrepresentation.

II.

INSTRUCTIONS ON DAMAGES

On the question of damages, the jury was told that it could assess actual damages consisting of out-of-pocket losses incurred in the replacement, refund or adjustment to customers for batteries, the actual cost of the separators during the period in question, the impairment of capital directly flowing from these losses and, in addition, the loss of net profit that the plaintiff could reasonably have earned because of the negligence or breach of warranty or misrepresentations on the part of the defendant. Loss of future profits was also allowed so far as they were natural and probable consequences of the wrongdoing, that is, negligence or breach of warranty or misrepresentation.

III.

ISSUES TO BE CONSIDERED

Appellant Standard advances numerous contentions (approximately 37). We do not deem it necessary to consider the vast majority of these. The determinative questions, that is, those which appear to have some merit, are (1) the nature of the case is such that all of the theories of liability were appropriately submitted; (2) a particularly important inquiry is whether due to the fact that this is a case in which business injury is alleged, the theory of strict liability should have been given; (3) or stated differently, whether the plaintiff can recover on a strict liability theory where the defendant’s only wrongdoing has been the sale of a defective product which has produced property loss.

Other than that, there remains a question whether it was proper to allow the jury to award to the plaintiff all of his out-of-pocket losses from refunds or adjustments together with costs of the separators and at the same time allow him to recover for impairment of capital, that is, overall injury to his business. The propriety of this raises a question because an award of damage for out-of-pocket outlay could well be the same damage suffered from so-called impairment of capital. The question is whether you can recover the out-of-pocket losses and then recover, another head of damages for indirect consequences of the losses. Still another area of damage which is to be considered is the allowance of loss of net profits. Thus, under the trial court’s formula, the plaintiff is allowed to recover not only the out-of-pocket loss but, in effect, the value of the bargain as well.

IV.

LIABILITY QUESTIONS

A. Applicable Law.

It was assumed at trial that Colorado law was applicable, and indeed the trial judge appears to have applied •Colorado definitions as they are set forth in the Colorado Jury Instructions. Apart from the fact that the parties have not been and are not now at conflict on this, it would appear that the applicable Colorado conflicts rule would call for application of the law of the place of the tort. The Colorado court has not spoken on many of the questions, but evidences have been examined and Erie predictions have been made that such doctrines would be applied. The view of the trial judge on this is entitled to great weight. Dallison v. Sears, Roebuck and Co., 313 F.2d 343, 347 (10th Cir. 1963).

B. Liability Based on Negligence.

Standard concedes that the manufacturer is liable for negligence in turning out a defective product. Standard contends that the court erred in instructing the jury that a manufacturer must make such tests and inspections of its products as are generally recognized as being necessary to create a non-defective product. It is true that Colorado has not expressly embraced the doctrine of MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916). There are evidences, however, that Colorado would apply this doctrine in a proper case. See United States Radiator Corp. v. Henderson, supra. See also Colorado Jury Instructions, Civil, 14:1 promulgated by the Supreme Court of Colorado, and see Colorado Jury Instructions, Civil, 14:2 which states that a manufacturer is duty bound to make reasonable tests and inspections of any components supplied by an outside source “to the end that safety of the finished (article) (product) for the intended or invited use will be reasonably certain.” It would follow that the manufacturer having the duty to inspect components has the duty to inspect the finished product.

This court has recognized MaePherson v. Buick Motor Company, supra, insofar as it establishes the duty on the part of a manufacturer to inspect and discover defects in its products. See International Harvester Co. v. Sharoff, 202 F.2d 52, 54 (10th Cir. 1953). This doctrine now has almost universal recognition. See 63 Am.Jur.2d Products Liability § 37, and see 6 A.L.R.3d 91, 98 (1966). There was evidence in the record that Standard failed to test its separators after 1967 following the change of the chemical composition of its wetting agent. Following the failures experienced by Westric, tests were made and there was evidence that these results were unfavorable, but this fact was not revealed to Westric. This constituted sufficient evidence for submission of the negligence theory.

C. The Breach of Warranty Theory of Liability.

The Uniform Commercial Code provisions for sales warranties have been adopted in Colorado. Thus, the Colorado statutes recognize express warranties by affirmation, promise, description and sample, C.R.S.1963 § 155-2-313: implied warranties of merchantability, C. R.S.1963 § 155-2-314; implied warranties of fitness for particular purpose, C. R.S.1963 § 155-2-315.

The argument of Standard here is that the evidence does not justify the giving of the instructions on express and implied warranties. We disagree. The several types of warranties coexist. See Jacobson v. Dahlberg, 171 Colo. 42, 464 P.2d 298 (1970).

The evidence supports the conclusion that Standard disseminated information using advertising materials, trade publications or technical publications and oral statements representing the quality of its separators. This activity qualifies in law as warranties. Norton v. Lindsay, 350 F.2d 46 (10th Cir. 1965).

There was ample evidence also that the excessive number of pinholes coupled with the defective wetting agent rendered the product unacceptable to the industry as failing to satisfy industry standards. Each box of separators contained an advertisement that the separator was immune to the effects of sulfuric acid, a representation which was untrue.

Unquestionably Standard was aware that Westric intended to use the separators for a particular purpose and that Westric relied on Standard’s testing and inspecting processes. It is therefore a jury question as to whether Standard knew of Westrie’s needs and as to whether Westric relied upon Standard’s skill in manufacturing a proper product. See Wallower v. Elder, 126 Colo. 109, 247 P.2d 682 (1952).

Since there was evidence, even though it was conflicting, as to whether the excessive pinholes coupled with the new wetting agent produced the failures, the question was one for the jury.

D. The Strict Liability Theory.

As previously noted, the trial court gave an instruction which it called strict liability. The judge described this as liability without negligence or breach of warranty. The elements of the court’s charge on this were, first, the making of a misrepresentation of material facts concerning the character and quality of the product sold and, secondly, justifiable reliance upon the misrepresentation. The source of this instruction was § 402B, Restatement of the Law of Torts 2d modified from personal and consumer harm to pecuniary or business loss. Comment a. to § 402B does call attention to the parallel rule to it, applicable to pecuniary loss resulting from misrepresentation “stated in § 552D,” a section which has not yet been published. We regard the issue whether this submission was reversible error as the crucial problem presented.

So far the Colorado Jury Instructions, Civil, 14:5 have applied strict liability to persons and against manufacturers of food and beverages in sealed containers, and this court has expressed its belief that the Colorado court would embrace the concept of strict liability for all products. See Schenfeld v. Norton Co., 391 F.2d 420, 425 (10th Cir. 1968).

The early cases applied strict liability only to foodstuffs or products intended for bodily use and were designed to protect persons from hazardous products. One such case which extended liability to an automobile manufacturer on an implied warranty theory was Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960). Our court has had occasion to apply state law in which the tort theory of implied warranty has been utilized. See White Motor Corp. v. Stewart, 465 F.2d 1085 (10th Cir. 1972); Speed Fasteners, Inc. v. Newsom, 382 F.2d 395, 398 (10th Cir. 1967); B. F. Goodrich Co. v. Hammond, 269 F.2d 501 (10th Cir. 1959).

Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897 (1962), is the leading case in modern times for the so-called doctrine of strict liability. In that case Justice Traynor, writing for the California court, formulated a doctrine which was free of warranty requirements, especially the need for privity. The basis for recovery was the defect in design and manufacture which made the product unsafe for its intended use.

Out of the Greenman v. Yuba decision emerged § 402A of the Restatement of the Law of Torts 2d which prescribes a remedy where a consumer is injured by a product sold in a defective condition, unreasonably dangerous to the user or consumer or to his property, and § 402B which holds a seller liable for making a misrepresentation of the material fact concerning the character or quality of the chattel sold by him where the consumer justifiably relies upon the misrepresentation and suffers personal injury. Liability attaches regardless of whether the misrepresentation was fraudulently or negligently made. The trial court in the ease at bar carried § 402B beyond its terms so as to allow award of property damages resulting from the misrepresentation.

The California Supreme Court’s subsequent decision in Seely v. White Motor Co., 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145 (1965), allowed a purchaser of a defective truck to recover for resulting property damages suffered. He was awarded his previous payments together with lost profits. This recovery was allowed on an express warranty basis. The theory of recovery approved in that case is generally similar to the strict liability theory followed here.

We have briefly outlined the history of this in order to furnish some perspective for determining whether the submission of the strict liability theory compels a reversal. The question is whether it introduced a unique theory substantially different from the other submissions and unacceptable so that it could be argued that its adoption by the jury to the exclusion of the other theories constituted error. This speculation would have been obviated had the trial court eliminated some of these theories or required the jury to make a finding as to which theory it was following. We are, however, of the opinion that prejudice is not shown by the appellant on this account because the theory which the court denominated strict liability is not remarkably different from the other theories submitted, particularly the theory of express warranty. In essence it is the same in that both call for a representation. In the case of express warranty there must also be a violation of the representation or promise. In the case of the instant doctrine there must be proof that the representation was false which is in effect a showing of an unfulfilled promise or representation. Apart then from the possible confusion, it cannot be said that the submission of this improvised theory was prejudicial so as to justify a reversal and retrial of this complex lawsuit, for even if the jury employed it in arriving at a verdict, it was not so different so that its use could have introduced prejudicial error. The innovation looms relatively insignificant in relation to the record as a whole. Since Colorado has express warranty in accordance with the Uniform Commercial Code, it is unlikely that the Supreme Court would determine this “strict liability” to be unpalatable.

V.

THE DAMAGE PROBLEM

The propriety of the award of items of consequential damages is the final issue. Defendant-appellant contends that the consequential economic losses such as diminution of capital and permanent loss of profits cannot be recovered together with out-of-pocket losses. We are of the opinion that certain of the items of consequential damage cannot be awarded and were invalidly submitted in this case. To understand the conclusion we reach we must review what occurred.

The jury awarded the sum of $472,067.28. The plaintiff’s demands were in the amount of $536,227. The items sought were as follows:

Out-of-pocket loss $132,672.00
Cost of separators 18,953.00
Loss of profits to the time of trial 64,402.00
.Loss of future profits 80,200.00
Impairment of the assets of the plaintiff 240,000.00

Exactly how the jury computed the $472,000 plus does not appear and so we are unable to say which of the several items suffered. We put that question to one side and consider the principal issue which is whether all of these elements of damages are valid.

There is evidence upon which the jury could have awarded actual out-of-pocket loss together with lost profits. Testimony was given by Westric’s president and accountant on these aspects. They testified as to the amount paid for the defective separators, expenses incurred in attempting to correct the batteries and debts incurred when customers returned batteries which had failed. As noted, these items totaled $151,625.

These witnesses further testified that the golf cart battery division had been showing a net profit of about $16,000 per year prior to 1968, amounts which were lost during 1969 and 1970. The accountant opined that these profits would have continued for five years after the time of trial.

Unquestionably out-of-pocket losses are proper. See Parks v. Sullivan, 46 Colo. 340, 104 P. 1035, 1036 (1909), and see U. S. Radiator Corp. v. Henderson, supra. Similarly, loss of net profits is recoverable if proven sufficiently. We see a problem here, however. While it is in some instances permissible to award loss of future earnings or profits for personal injuries, the rationale for property damage is different from personal loss of earnings. One who is permanently injured is in truth impaired in his ability to produce. On the other hand, property is replaceable and the loss resulting from it is measurable and can only be temporary, whereas they are often regarded as permanent in the personal injury area.

An even more questionable item is that designed to support Westric’s claim for recovery for impairment of capital. This is a most unusual item of damage, being measured as it is by a debt and mortgage plus the loss of the assets, the value of which is not even proven. In 1970, Westric made an agreement with its creditors, whereby it gave a third mortgage on its assets which amounted to $240,000. Later Westric defaulted and the creditors foreclosed. Westric claimed that the property pledged had a value of $240,000 and that this was a consequence of its impaired economic condition, all of which resulted from the alleged wrongdoing of Standard in furnishing defective battery separators. What this produced, according to its further argument, was a repercussion flowing from the defective separators. How impairment of capital can be measured by the amount of a loan and mortgage is not explained, and we fail to see how it can occur. It is clear though that the $240,000 amount is so disproportionate as compared to the profits from this phase of the business as to itself demonstrate its excessiveness.

It is conceivable that there could be capital loss shown in addition to out-of-pocket expenses and loss of profits. An example which comes to mind is loss of good will. There may be others, but they must clearly exist independently of the out-of-pocket loss. The jury must be cautioned about duplicative items of damage. They must be made aware of the award of out-of-pocket loss and reasonable loss of profits and must limit any capital losses to items which are demonstrated losses and not mere bookkeeping losses. Here the witnesses testified that the creditors agreement was designed to allow Westric to meet its obligations including battery refunds, and so it would appear to have been a marshaling of debts and a composition arrangement. These were ordinary business obligations as is indicated by the list submitted in Exhibit WW. It is not shown that these debts are attributable to the separators, directly or indirectly, and if an effort is made to recover these or to use them as a measure, it inevitably duplicates the out-of-pocket losses which have already been recovered. Unquestionably double or duplicative recoveries are invalid.

If out-of-pocket loss and loss of profits had not been utilized, Westric could have sought damages based on reduction of its total net worth. This would have been the difference between the total net worth of this business as a whole before the defective separators were supplied and the total net worth of the business after the defective separators had done their damage. It is doubtful whether the appellee would choose this formula in preference to out-of-pocket expenses and loss of profits because this business was at all times a shaky one which had been showing an overall loss for many years. Therefore, this orthodox damage formula had limited capacity to produce a substantial recovery.

It is now apparent that the jury, after awarding damages for actual losses and actual loss of profits, was allowed to speculate in the area of future profits and to consider indirect consequences of all of this on a business which admittedly was shaky and failing.

In summary, then, the matter must be retried on the issue of damage, and Westric must carefully formulate its damage theory and must proceed so as to avoid any duplication. Appellant is entitled to be compensated for losses attributable to the injury inflicted, but it is not entitled to earn a profit or necessarily to come out whole because some of its troubles could be attributable to causes other than the defendant’s separators. It must be emphasized that it is only the damage flowing legally from the defendant’s misdeeds which counts.

VI.

INTEREST

One final point — the trial court awarded interest as damages from the date of the filing of the complaint. The Colorado statute dealing with interest, 1963 C.R.S. § 41-2-1, provides that in personal injury cases interest commences as of the date of the filing of the complaint. No mention is made of property injuries or torts. Inasmuch as these are unliquidated, the general rule is that the interest commences to run as of the date of judgment. See 1963 C.R. S. § 73-1-2. See Morland v. Austin, 138 Colo. 78, 330 P.2d 136 (1958), and see Holland Furnace Co. v. Robson, 157 Colo. 347, 402 P.2d 628, 631 (1965). See also York Plumbing and Heating Co. v. Groussman Investment Co., 166 Colo. 382, 443 P.2d 986, 987 (1968), holding that there can be no recovery on unliqui-dated claims arising from breach of warranty prior to the entry of judgment. Accordingly, on remand, this interest matter must also be adjusted.

We have examined the additional contentions of defendant-appellant and find them to be without merit.

In summary, then, we determine that the diminution of capital item in the amount of $240,000 cannot be sustained either in law or in good conscience. Similarly, the loss of profits for five years after the trial in the amount of $80,200 (demand) is too remote since, as indicated, there is no assurance that defendant would be supplying the defective separators indefinitely or even for five years and thus producing a continued source of damage, whereby the plaintiff would receive a pension. It must mitigate damages.

A remittitur approach has been considered here, but has been rejected as unworkable to both sides. The cause must be remanded for a partial new trial.

The judgment is reversed and the cause remanded to district court for a retrial on the issue of damages, each side to bear its own costs of the appeal.

      . Westric proposed to utilize a “one-shot” formation process. In the “one-shot” process, a strong sulfuric acid is placed in the battery to create a chemical change in the plates, thereby beginning the flow of elec-trie current. Expert testimony demonstrated that this is an especially sensitive process, requiring components of good quality.

      . Klaxon v. Stentor Electrical Manufacturing Company, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Bannowsky v. Krauser, 294 F.Supp. 1204 (D.Colo.1969). See, generally, 63 Am.Jur.2d Products Liability §§ 212, 213, 214.

      . See, for example, United States Radiator Corp. v. Henderson, 68 F.2d 87 (10th Cir. 1933), cert. denied, 292 U.S. 650, 54 S.Ct. 860, 78 L.Ed. 1500 (1934) (negligence of manufacturer under Colorado law); Schenfeld v. Norton, 391 F.2d 420 (10th Cir. 1968) (warranty and strict liability under Colorado law).

      . We have experienced some difficulty in relating the objections of appellant to the charge because the objections were made to numbered instructions, whereas the paragraphs in the charge arc unnumbered. We are limited to consideration of the objections to the charge which have been specifically raised. Union Pacific RR Co. v. Lumbert, 401 F.2d 699, 701 (10th Cir. 1968); Von Lackum v. Allen, 219 F.2d 937, 940 (10th Cir. 1955); Jones v. Griffin, 216 F.2d 885, 890 (10th Cir. 1954).

      . The full text of this instruction is as follows:
      Ladies and gentlemen, the prevailing law in Colorado, as well as in the State of Texas, is that a manufacturer of a product, such as Defendant here, may be held strictly liable without being guilty of negligence or breach of warranty for the product which he manufactures or sells, but only under the circumstances or conditions which will now be described to you by the Court.
      You are instructed that one engaged in the business of selling a product, who, by advertising, labels, or otherwise, makes to the public a misrepresentation of the material facts concerning the character or quality of the product sold by him is subject to liability for damages and losses to a consumer of the
      product caused by justifiable reliance upon the misrepresentation, even though it is not made fraudulently or negligently-
      Therefore, if you find from a preponderance of the evidence that the Plaintiff has established that the Defendant made a misrepresentation of a material fact upon which Plaintiff justifiably relied concerning the character or quality of it product, the separator here in question, in its advertising, literature, brochures, or labels, thereby causing loss and damage to the Plaintiff, then your verdict must be in favor of the Plaintiff and against the Defendant on the complaint. This must be your verdict notwithstanding that such misrepresentation was ■ not made fraudulently or negligently.

      . The California Supreme Court rejected a broader and somewhat more expansive defective product rule which had been enunciated in the New Jersey case of Santor v. A and M Karagheusian, Inc., 44 N.J. 52, 207 A.2d 305 (1965). It is difficult to distinguish between express warranty and the strict liability theory now under scrutiny. See Raritan Trucking Corp. v. Aero Commander, Inc., 458 F.2d 1106, 1113 (3d Cir. 1972); Passwaters v. General Motors Corp., 454 F.2d 1270, 1277 (8th Cir. 1972); Basko v. Sterling Drug, Inc., 416 F.2d 417, 427 (2d Cir.
      1969); Davis v. Wyeth Laboratories, Inc., 399 F.2d 121, 126 (9th Cir. 1968).
      There is a good deal of ease law recognizing the liability of the manufacturer for damages following the reliance by purchasers of product sold on the basis of false representations. See Baxter v. Ford Motor Co., 168 Wash. 456, 12 P.2d 409; aff’d on rehearing, 15 P.2d 1118 (1932); aff’d on second appeal, 179 Wash. 123, 35 P.2d 1090 (1934); Prosser, The Assault Upon the Citadel, 69 Yale L.J. 1099 at 1134-38 (1960). Cf. Helene Curtis Industries, Inc. v. Pruitt, 385 F.2d 841 (5th Cir. 1967).

      . The charge was conelusory in form. It said:
      In assessing such damages, you shall consider the actual out-of-pocket losses incurred by Plaintiff, in the replacement, refund or adjustment to customers for batteries; the actual cost of the separators during the period of time in question ; and the impairment of capital directly flowing from these losses, insofar as each of such items have been established by the evidence, and were proximately caused by the negligence or breach of warranty or of misrepresentation of the Defendant.
      Ladies and gentlemen, you shall also consider any loss of net profit to date that Plaintiff could reasonably have earned, but did not earn because of the negligence or breach of warranty or misrepresentations on the part of the Defendant. You shall also consider any losses of net business profits in the
      future that reasonably could be expected, provided as to these damages you not only find by a preponderance of the evidence that they were and will be a natural and probable consequence of the claimed negligence or breach of warranty or misrepresentations of the Defendant. Also that at the time the products in question were sold to the Plaintiff, the Defendant reasonably could have anticipated from the facts or circumstances that it knew or should have known these damages would probably be incurred by the Plaintiff in consequence of the sale of the products here in question.
      On loss of profits, the only limitation was that as to the future they were not to be “speculative, remote, conjectural or imaginary.” Thus, in the area of both impairment of capital and loss of profits, the jury was given a more or less free hand.

      . Lee v. Durango Music, 144 Colo. 270, 355 P.2d 1083 (1960); Lockwood Grader Corp. v. Bockhaus, 129 Colo. 339, 270 P.2d 193 (1954). See also DeVries v. Starr, 393 F.2d 9 (10th Cir. 1968); Comet Industries, Inc. v. Best Plastic Container Corp., 222 F.Supp. 723 (D.Colo.1963).

      . Lanfranconi v. Tidewater Oil Co., 376 F.2d 91 (2d Cir.), cert. denied, 389 U.S. 951, 88 S.Ct. 334, 19 L.Ed.2d 361 (1967); W. H. Elliott & Sons Co. v. E. & F. King & Co., 291 F.2d 79 (1st Cir. 1961).

      . Colorado adopted the “benefit of bargain” rule in Otis & Co. v. Grimes, 97 Colo. 219, 48 P.2d 788 (1935). See also Farmer v. Norm “Fair Trade” Stamp, Inc., 164 Colo. 156, 433 P.2d 490 (1967); Stamp v. Rippe, 29 Colo.App. 185, 483 P.2d 420 (1971).


source: Caselaw Access Project

author: HAMLIN, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Seymour MATANKY, M.D., Defendant-Appellant.
    No. 73-1190.
    United States Court of Appeals, Ninth Circuit.
    July 5, 1973.
    Rehearing Denied July 25, 1973.
    Certiorari Denied Nov. 19, 1973.
    See 94 S.Ct. 539.

      Morris Lavine (argued), Los Angeles, Cal., for defendant-appellant.
    Robert C. Bonner, Asst. U. S. Atty. (argued), William D. Keller, U. S. Atty., Eric A. Nobles, Asst. U. S. Atty., Los Angeles, Cal., for plaintiff-appellee.
    Before HAMLIN and CARTER, Circuit Judges, and BOLDT, District Judge.

       The Honorable George H. Boldt, United States District Judge, Western District of Washington, sitting by designation.

   HAMLIN, Circuit Judge:

Seymour Matanky, M.D., appellant herein, appeals from his conviction in the United States District Court for the Central District of California on all 39 counts of an indictment for violations of 18 U.S.C. § 1001. Appellant received a suspended prison sentence and fines totaling $58,500.00. We affirm.

Matanky is a medical doctor, practicing in the San Fernando Valley, Los An-geles County, California. During the period covered in the indictment (November, 1968-Oetober, 1970), appellant had numerous patients at various San Fernando Valley convalescent hospitals. Many of his patients were over 65 and covered by the Medicare Act of 1965, 42 U.S.C. §§ 1395 et seq.

Medicare is administered 'by the Social Security Administration, an agency of the United States Department of Health, Education and Welfare (H.E.W.). To process and pay Medicare claims, H.E. W. has entered into contracts with certain private insurance carriers, including California Blue Shield, Occidental Life Insurance Company, and Travelers Insurance Company. See 42 U.S.C. § 1395u.

Claims made by medical doctors for services rendered to Medicare patients are submitted to the private carriers on a document entitled “Request for Medicare Payment.” (Social Security Form 1490). The private carriers utilize federal funds to pay Medicare claims. See generally, Aquavella v. Richardson, 437 F.2d 397, 399 (2 Cir. 1971).

During the period in question, Matan-ky submitted thirty-nine 1490 forms to the aforementioned private insurance carriers, who were under contract with the federal government to process and pay Medicare claims. All of the 1490 forms contained appellant’s representation that he had made a certain number of convalescent hospital visits to particular patients in given months. The 1490 forms further contained representations as to the particular dates of the months that the visits were made to the patients.

In April, 1972, the grand jury returned a forty-six count indictment, charging appellant with the section 1001 violations. Each count thereof alleged in essence that appellant had made or caused to be made false statements and representations in a matter “within the jurisdiction of [a] department or agency of the United States.” Specifically, the indictment alleged that appellant had submitted to certain private insurance carriers, acting as government paying agents, documents entitled “Request for Medicare Payments” (form 1490), representing thereon that he had rendered certain described medical services to named patients, reimbursable under Medicare, when in fact he had not rendered such services.

Appellant was arraigned in May, 1972, pleading not guilty to each count. In June, 1972, he filed a Motion to Dismiss, upon the grounds that 42 U.S.C. § 408, proscribing false statements in an application for payment under the Social Security Act, precluded a prosecution under section 1001. The district court denied the motion. United States v. Matanky, 346 F.Supp. 116 (D.C.Cal.1972).

Prior to the trial’s commencement, and upon the Government’s motion, Counts thirty-three through thirty-nine of the indictment were dismissed. After a three week jury trial during October, 1972, the jury returned verdicts of guilty as to each of the thirty-nine remaining counts.

After the denial of the various post-trial motions, appellant filed a timely notice of appeal. Our jurisdiction is predicated upon 28 U.S.C. §§ 1291 and 1294.

Appellant raises numerous issues in this appeal, none of which we find meritorious, and many of which are frivolous.

I.

Appellant first contends that the indictment fails to state an offense against the United States. He further argues that “the language of section 1001 is sufficiently unclear and indefinite to violate due process of law.” See, e. g., Winters v. New Jersey, 333 U.S. 507, 68 S.Ct. 665, 92 L.Ed. 840 (1948); Connally v. General Construction Co., 269 U.S. 385, 46 S.Ct. 126, 70 L.Ed. 322 (1926).

In support of the first above noted contention, appellant urges that inasmuch as the 1490 forms were submitted to the private insurance carriers rather than directly to the government, they cannot be deemed to contain statements “in a matter within the jurisdiction of any department or agency of the United States,” within the meaning of section 1001. A similar contention was raised and rejected by this court in United States v. Kraude, 467 F.2d 37, 38 (9 Cir.), cert. denied, 409 U.S. 1076, 93 S.Ct. 684, 34 L.Ed.2d 664 (1972), wherein the private carriers were viewed as Government paying agents for the purposes of section 1001.

As such, we find no vagueness problems with section 1001, either as construed or as applied to this case. United States v. Kraude, supra. See Haddad v. United States, 349 F.2d 511, 514 (9 Cir.), cert. denied, 382 U.S. 896, 86 S.Ct. 193, 15 L.Ed.2d 153 (1965); United States v. Johnson. 284 F.Supp. 273, 278 (W.D.Mo.1968), aff’d 410 F.2d 38 (8 Cir.), cert. denied 396 U.S. 822, 90 S.Ct. 63, 24 L.Ed.2d 72 (1969); United States v. Houcks, 224 F.Supp. 778, 779-780 (W.D.Mo.1963). See also, United States v. Gilliland, 312 U.S. 86, 61 S.Ct. 518, 85 L.Ed. 598 (1941).

II.

Another contention is that appellant was denied due process of law because of the multitude of counts charged in the indictment. His reliance upon Bramblett v. United States, 97 U.S.App.D.C. 330, 231 F.2d 489, cert. denied, 350 U.S. 1015, 76 S.Ct. 658, 100 L.Ed. 874 (1956), in support of this contention is misplaced. The Bramblett appellant was charged in seven counts of an indictment with violating section 1001, but only one false misrepresentation was ever made or submitted. Unlike Bramblett, here each count was based upon a different factual misrepresentation. Different proofs of fact were required, and proved, for each misrepresentation. There was no error. United States v. Schrenzel, 462 F.2d 765, 771 (8 Cir. 1972); United States v. Eskow, 422 F.2d 1060, 1064 (2 Cir.), cert. denied, 398 U.S. 959, 90 S.Ct. 2174, 26 L.Ed.2d 544 (1970).

Braverman v. United States, 317 U.S. 49, 63 S.Ct. 99, 87 L.Ed. 23 (1942), is not in point.

III.

Appellant’s further contention is that the evidence produced at trial is insufficient to support the jury’s verdicts of guilty.

We briefly summarize the relevant testimony elicited at trial, mindful that the evidence must be considered in the light most favorable to the Government. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1943); United States v. Baxter (9 Cir., February 16, 1973, No. 71-2082) (slip opinion at 3).

Testimony at trial was received from appellant’s former convalescent hospital patients, and from nursing personnel at the various facilities. The testimony of the former patients concerning the- frequency of visits to them by appellant severely contradicted his own claims. For instance, while appellant claimed to have visited certain patients two • or more times per week, these same patients testified that the visits occurred at a frequency of once or twice per month. Testimony by the nursing personnel corroborated the testimony of the patients.

The record indicates that certain patients were absent from particular hospitals on dates appellant allegedly visited them.

Circumstantial evidence produced at trial established that appellant had a busy private office practice, and that he was not absent from that office for the substantial periods of time which would have been necessary to have made all the visits alleged on the 1490 forms. Further, the Government indicated at trial that appellant changed his billing practices after an investigation of his practices was commenced in October, 1970.

We have carefully reviewed the record in this case. We are convinced that there is substantial evidence supporting the jury verdicts. It was for the jury to weigh any conflicting testimony. In attempting to retry his case here, appellant misconstrues the function of an appellate tribunal.

IV.

Appellant also contends that he was denied a fair trial because he was referred to by the prosecutor at trial as the “man with the beard.” This contention is untenable. The record indicates that reference to appellant’s plumage was solely for ease of identification. There was no prejudice. Cf. Ham v. South Carolina, 409 U.S. 524, 93 S.Ct. 848, 35 L.Ed.2d 46 (1973); id., at 529-530, 93 S.Ct. at 851-852 (Douglas, J., dissenting and concurring).

V.

Appellant next contends that the district court erred in permitting testimony relating to the “quality of care” as rendered by appellant to his patients. This assignment of error is based upon the testimony of Dr. Lowell Ford, an expert witness called by the Government.

Our review of the record indicates that Dr. Ford testified as to the meaning of certain codes used by medical doctors in noting particular treatments administered to particular patients. His testimony did not relate to appellant’s “quality of care.” We see nothing prejudicial in this testimony.

But even assuming arguendo that there was some testimony regarding “quality of care,” admissibility thereof must be weighed in relation to its relevance. This is an area wherein the trial judge has traditionally enjoyed a wide discretion. United States v. Campbell, 466 F.2d 529, 530-531 (9 Cir. 1972).

VI.

Another contention is that allegedly prejudicial pretrial publicity resulted in an unfair trial.

The morning of the day the grand jury returned the indictment against appellant, April 5, 1972, there appeared in the Los Angeles Times an article concerning the Government charges against appellant. Appellant contends that this one article prejudiced the trial conducted six months later. There was, however, no showing that any members of the trial jury read or were aware of the newspaper article. United States v. Orand (9 Cir. March 6, 1973), No. 72-2064 (slip opinion at 4). Cf. Sheppard v. Maxwell, 384 U.S. 333, 86 S.Ct. 1507, 16 L.Ed.2d 600 (1966).

To the extent appellant claims prejudicial impact upon the grand jury which returned the indictment, we are referred to no authority indicating that prejudicial pre-trial publicity, assuming the existence thereof here, may void a grand jury indictment.

VII.

Appellant further assigns error to a statement made by the prosecution in its closing argument to the jury to the effect that the instant case involved $60,000-$70,000 in false billings. Appellant notes that only $2,156.60 was involved.

The objected-to statement was offered apparently in response to a defense statement belittling the amount involved in one of the counts. Further, documents introduced into evidence could be seen as permitting certain inferences, including the sum quoted by the prosecution. We again deal with an area traditionally shunned by appellate courts, and we are unable to conclude that the trial judge abused his discretion in permitting the above statement. United States v. Roth, 466 F.2d 1111, 1113 (9 Cir. 1972); United States v. Cotter, 425 F.2d 450, 452 (1 Cir. 1970).

Further, in light of the overall posture of the Government’s case, any possible prejudice would have been harmless error. Chapman v. California, 386 U.S. 18, 24, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967); Rule 52(a), F.R.Crim.P.

VIII.

Appellant’s contention regarding jury instructions given, and refused, by the trial court are without merit. As to those instructions, given or omitted, not objected to at trial, appellant cannot raise objections thereto for the first time on appeal. United States v. Liantaud, 466 F.2d 1342, 1343 (9 Cir. 1972); Rule 30, F.R.Crim.P. Further, we find no error in the trial court’s proffered instructions, nor in its refusal to give those offered by appellant. Cf. United States v. Bagby, 451 F.2d 920, 927 (9 Cir. 1971); United States v. Harvey, 428 F.2d 782, 783, n. 1 (9 Cir. 1970).

IX.

Appellant’s contention that the district court erroneously permitted certain allegedly incompetent witnesses to testify is likewise without merit.

Appellant on appeal urges that Mrs. Gunderson, a Government witness and former patient of the appellant, was insane at the time of her testimony. The record does not support this contention. The record shows only that there was testimony that on admission to the hospital, her diagnosis was “schizophrenia,” and that she had previously been a patient at Camarillo State Hospital. Appellant was aware of these facts, and made no objection at trial to her competency as a witness. There was no Brady deception practiced by the prosecution. Cf. Giglio v. United States, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972). Mrs. Gunderson’s credibility was a matter for the jury to determine. Shibley v. United States, 237 F.2d 327, 334 (9 Cir.), cert. denied, 352 U.S. 873, 77 S.Ct. 94, 1 L.Ed.2d 77 (1956).

Appellant further asserts that the district court improperly permitted another Government witness, Robert Lane, to testify. Appellant urges that Lane, another of appellant’s former patients, was a victim of alcoholic and mental problems. Nothing in the record indicates that Lane was insane at the time of his testimony. His medical records were admitted into evidence. Again, his credibility was a matter for the jury to determine. See Shibley v. United States, supra.

X.

Finally, appellant contends that he was denied effective assistance of counsel at trial. We disagree, as did the trial judge who, at the conclusion of trial, stated that Mr. Cantillion, the defense counsel, “gave a fine representation” of appellant. R.T. 1435.

“Our careful perusal of the entire record convinces us that appellant was convicted not by reason of incompetent or inadequate representation by counsel, but by reason of the overwhelming weight of the evidence produced against him.” United States v. Valenzuela-Mendoza, 452 F.2d 773, 774 (9 Cir. 1971).

XI.

Other appellate contentions, not detailed above, have been carefully reviewed, and found to be similarly without merit.

Affirmed.

      . 18 U.S.C. § 1001 provides as follows:
      Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or device a material fact or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry shall be fined not more than $10,000 or imprisoned not more than five years, or both.

      . Between the times of the indictment and throughout the trial, appellant was represented by James P. Cantillion. In November, 1972, Morris Lavine became appellant’s attorney of record. Mr. Lavine has been responsible for the prosecution of this appeal.

      . From the 1490 forms in evidence, there was evidence from which it might be inferred that until October, 1970, the appellant billed as if he had seen all of his Medicare patients on an average of eight times per month. The appellant billed Medicare for $16.00 per visit, which would equal $180.00 per month average per patient. With an average of only 50 patients the billings would come to $76,-800.00 a year.

      . The trial court’s failure to include the concept of “bad purpose or evil intent” in its charge regarding “willful.” as required in criminal tax prosecutions. Bishop v. United States, 412 U.S. 346, 93 S.Ct. 2008, 36 L.Ed.2d 941 (1973), to which no objection was made, is not here plain error requiring reversal. Cf. Bloch v. United States, 221 F.2d 786, 788 (9 Cir. 1955).

      . Appellant’s reliance upon District of Columbia v. Armes, 107 U.S. 519, 2 S.Ct. 840, 27 L.Ed. 618 (1882), is misplaced.

      . Brady v. Maryland, 373 U.S. 83, 87, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963).


author: HOLDEN, District Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Richard BAUM and Joseph Scapoli, Defendants-Appellants.
    Nos. 370, 468, Docket 72-1966, 72-2134.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 3, 1973.
    Decided March 22, 1973.
    As Amended on Denial of Rehearing June 4, 1973.

      Michael B. Mukasey, Peter L. Trueb-ner, John W. Nields, Jr., Asst. U. S. Attys., Whitney North Seymour, Jr., U. S. Atty., 'for appellee.
    Arthur S. Olick, Kreindler, Relkin, 01-ick & Goldberg, New York City, for defendant-appellant Baum.
    Irving Anolik, New York City, Lanna, Coppola & Rosato, Yonkers, N. Y., for defendant-appellant Scapoli.
    Before FRIENDLY, Chief Judge, FEINBERG, Circuit Judge, and HOLDEN, District Judge.

       Chief Judge of the District Court for the District of Vermont, sitting by designation.

   HOLDEN, District Judge:

Richard Baum and Joseph Scapoli appeal their conviction, after trial by jury, of criminal possession of Panasonic radios stolen from a foreign and interstate shipment of freight, knowing the same to have been stolen, in violation of 18 U.S.C. § 659. The trial began on July 17, 1972 in the Southern District of New York, Judge MacMahon presiding. The evidence was completed and the cause submitted on the same day. The jury returned its verdict the following morning, finding the appellants guilty. Their co-defendant Stuart Fields was acquitted.

On November 12, 1971 a ship’s container, holding approximately one thousand cartons of Panasonic radios, was stolen from the Hoboken, New Jersey terminal of Smith Transport, an interstate carrier. The container included five different models of radios manufactured in Japan by the Matsushita Electric Company, under the trade name Panasonic and ordered by Leeds Fox, a customer in New Jersey. The models in the ship’s container were designated as R-70, R-1241, RC-7021, RE-7670 and RF-951.

Fields and Scapoli were business associates. They operated a radio, tape and record shop known as The Royal Rhythm No. 1 Record Shop, North Main Street, Yonkers, New York. They also operated another store known as The Music Man. Fields and Scapoli were retailers and distributors of Panasonic radios.

About five o’clock in the afternoon of November 12, 1971 an unidentified tractor trailer unit was halted near the front door of the Royal Rhythm store in Yonkers. Keith Lurkens, a government witness at the trial, arrived to pick up his girlfriend, who was employed at the Royal Rhythm. Lurkens was requested by Fields and Scapoli to assist them in unloading “a couple of packages” from the truck. The witness complied and during the next hour aided in the removal of fifty or sixty cartons, bearing the Panasonic seal, from the trailer to the store basement.

During the following week, on November 19, an agent of the Federal Bureau of Investigation observed two men, who were not specifically identified at the trial, arrive at the Royal Rhythm store in Yonkers. They proceeded to remove a number of cartons, bearing three of the model numbers and the Panasonic label, which corresponded with those in the stolen shipment. The boxes were loaded into a small van that was later identified as registered to Jaymie Records. After loading, the truck departed. It was followed by the agent. It proceeded from Yonkers to New York City and traveled on to the residence of one Fernando Gil, 5912 Xenia Street, Queens. The execution of a warranted search of the garage at the Gil premises the following day produced four cartons of radios, model RF-951, six cartons of model RE-7670 and forty-four cartons of model RC-7021.

On the next day the defendant Baum and another man, identified as Sam Bari, also known as Sam Cope, arrived at Royal Rhythm in a bronze Dodge Van. The vehicle was loaded with cartons bearing the name Panasonic, which included forty-five boxes, the model number 7021. Baum was taken into custody at the Royal Rhythm.

At about the same time agents of the Federal Bureau of Investigation executed a search warrant and recovered forty-four Panasonic radios from the Royal Rhythm store. The recovery included nineteen model R-1241, twenty model R-70, one RF-951, two RE-7670 and two model RC-7021. Further down the same street, other radios, which came from the Royal Rhythm store, were recovered.

In a telephone conversation with the defendant Scapoli, following the search of November 20, Special Agent Teel of the F.B.I. inquired about the source of the radios that were uncovered. Scapoli responded: “I won’t kid you. I got the radios from someone off the street at a great price, and I have nothing to prove that I bought them.”

A search of Scapoli’s father’s garage December 1, 1971 yielded 447 cartons of Panasonic radios model RC-7021, 22 cartons of model RF-951, along with several loose sets in models which corresponded with those that were the subject of the theft from the terminal at Hoboken.

The appellants join to challenge the convictions on two common claims of error. First, they contend that the evidence is insufficient to establish that the radios recovered from them were stolen. Secondly, it is urged that that evidence is insufficient to prove that either defendant knew the radios were Stolen.

Conviction for possession of goods stolen from interstate shipment requires evidence of dominion and control of the property that was the subject of the theft. United States v. Kearse, 444 F.2d 62, 63 (2d Cir. 1971); United States v. Casalinuovo, 350 F.2d 207, 209 (2d Cir. 1965). The evidence is clear and undisputed that both defendants were in actual possession of various cartons of Panasonic radios that were of the same models as those contained in the shipment stolen from the freight terminal at Hoboken. Both defendants manually transported the property in the shipping cartons. The goods were seized at the Royal Rhythm, a store jointly owned and operated by the defendant Scapoli. Other cartons were recovered in the van registered to Jaymie Records, a business enterprise of the defendant Baum’s association. The record presents substantially more than the mere presence as bystanders, at or near the contraband. The defendants were observed as active participants in the transportation and disposition of the property. See, United States v. Romano, 382 U.S. 136, 141, 86 S.Ct. 279, 15 L.Ed.2d 210 (1965).

Neither appellant questions the fact that a ship’s containers loaded with 906 cartons of Panasonic radios, imported from Japan, of the type and model seized from their possession were stolen on November 12, 1971. However, they maintain the prosecution failed to prove that the radios taken from their possession were stolen property within 18 U.S.C. § 659.

The Government was not required to present direct evidence that the radios found in the defendants’ possession were stolen. United States v. DeKunchak, 467 F.2d 432, 436 (2d Cir. 1972); United States v. Marcus, 429 F.2d 654, 656 (3d Cir. 1970). There was substantial convincing evidence from which the jury could infer the cartons which the Government recovered from them were indeed the same property that was the subject of the theft, from the terminal at Hoboken.

The radios were unloaded at the Royal Rhythm store the day the shipment was stolen from the freight terminal. The Royal Rhythm store sold only two or three Panasonic radios in a week. No preparation had been made to receive the shipment. The cartons were soon transported to distant storage locations.

“Possession of the fruits of crime, recently after its commission, justifies the inference that the possession is guilty possession, and, though only prima facie evidence of guilt, may be of controlling weight, unless explained by the circumstances or accounted for in some way consistent with innocence.” Wilson v. United States, 162 U.S. 613, 619, 16 S.Ct. 895, 898, 40 L.Ed. 1090 (1896). Rugendorf v. United States, 376 U.S. 528, 536, 84 S.Ct. 825, 11 L.Ed.2d 887 (1963).

The defendant Baum offered no accounting for his possession of the stolen property. The explanation given by Scapoli that he got the radios off the street at a great price is not consistent with innocence. There is ample evidence to sustain the jury’s finding that the defendant Scapoli knew the radios were stolen from interstate shipment. Surely with the testimony of the witness Greenhalgh, which is later considered, there is evidence to sustain such a finding as to the defendant Baum. See United States v. DeKunchak, supra, 467 F.2d at 436; United States v. Casalinuovo, supra, 350 F.2d at 209 (2d Cir. 1965); United States v. Crisafi, 304 F.2d 803, 804 (2d Cir. 1962).

In referring to the cartons found in the possession of the defendant Baum, Agent Smith testified that authorization had been obtained “to arrest anyone in custody of the cartons which had been identified as stolen.” The defendants’ objection was sustained and the court ordered the answer to be stricken. The appellant’s argument that the failure of the trial judge to further admonish the jury, particularly in the absence of a request, is without substance.

The remaining question concerns evidence of a prior offense which involved the defendant Baum and the Government’s witness Lawrence Greenhalgh. Both appellants claim prejudice by the evidence given by this witness.

Before trial, counsel for the defendant Baum requested the names, addresses and telephone numbers of all Government witnesses which the prosecution intended to call, together with any record of prior felony convictions. At the hearing in the discovery motion, defense counsel stated that the United States Attorney had informed Baum that various persons in custody would testify against him concerning his character and past criminal activity. It was urged upon the court that the defendant had no knowledge of these matters and since the prospective witnesses were in custody, disclosure could have no detrimental effect on their safety or well-being. The motion was denied.

Greenhalgh was offered as the Government’s final witness to prove Baum’s knowledge that the radios were stolen. The defendants Fields and Scapoli moved for severance on the ground that the proposed evidence, although offered against' Baum alone, would prejudice them as well. Over the objection of all defendants, the witness testified that he met Baum shortly before the Easter holidays in 1970 and sold him a trailer load of 42,000 records for $52,000. He related that the records were sold to Baum in several deliveries at his store on Flat-bush Avenue in Brooklyn. Baum was known to the witness as “Dick from Jaymie Records.” According to Green-halgh, the first payment of $12,000 was in cash.

At the completion of direct examination the defendant Baum asked for a continuance until the next day in order' to prepare for cross-examination. The court inquired if counsel had the witness’ criminal record. When the question was answered in the affirmative, the court indicated that was enough and ordered the trial to proceed.

On cross examination the witness testified that he asked the government for a reduction of his sentence as consideration for testifying concerning his conviction for possession of a trailer load of stolen goods. He also gave evidence that he had been involved in some sixty-two hijackings.

The witness testified that he was brought to Baum’s store by Joseph Diaz. Greenhalgh insisted that no check was given to him nor to Diaz by Baum, and that, payment for the records was in cash. Counsel renewed the request for a continuance to produce the checks which were given by Baum to Diaz. The request for a continuance was denied when the government unilaterally stipulated that if the defendant’s bookkeeper were called, he would testify that a check for $4,697 was paid by Baum to Diaz on June 17, 1970.

The question of the reception of evidence of the knowing possession of stolen goods, other than the crime charged in the indictment, is unsettled by conflicting precedents. See, 2 J. Wigmore § 326 (3d Ed.). In this circuit it is clear that such evidence may be received, discriminately. There is no hard and fast rule to control in all cases. Admissibility is governed by considerations explained by Judge Learned Hand writing in United States v. Brand, 79 F.2d 605, 606 (2d Cir. 1935):

The argument [for exclusion] is based on the doctrine of Regina v. Oddy, 2 Denison, C.C. 272, Copperman v. People, 56 N.Y. 591, and Edwards v. U.S., 18 F.2d 402 (C.C.A. 8), that evidence of the receipt of other stolen goods is not admissible unless the prosecution proves that the accused knew them to have been stolen. At least in this circuit there is no such doctrine . . . for the competence of such evidence does not depend upon conformity with any fixed conditions, such as upon direct proof of scienter, or the identity of the thief in the ear-Her instance, or of the victim, or the number of instances in which the accused received stolen goods, or the similarity of the goods stolen. These are all relevant circumstances but not necessary constituents. Nor can we see any basis for distinguishing between knowledge and intent in such cases. The judge must decide each time whether the other instance or instances form a basis for sound inference as to the guilty knowledge of the accused in the transaction under inquiry ; that is all that can be ■ said about the matter.

It is clear that Judge MacMahon’s admission of Greenhalgh’s testimony cannot be disturbed on the question of relevancy. The court’s, ruling was well within the boundaries of a long line of decisions that extend from Sapir v. United States, 174 F. 219 (2d Cir. 1909) to United States v. Birrell, 447 F.2d 1168, 1173 (2d Cir. 1971). See also Proposed Federal Rules of Evidence 404(b).

Yet the question presented in this appeal cannot be answered in terms of relevance and probative value alone. The appellant Baum contends the prejudicial impact of Greenhalgh’s testimony, coupled with the denial of prior witness identification by the government deprived the accused of a fair trial.

Given the undoubtable relevancy,' the question is not that the evidence is without probative value, but that it probes too deeply into the past life and character of the accused concerning conduct which the indictment does not call -upon him to answer. Wigmore has mar-shalled the varied reasons for exclusion of prior criminal conduct and reduced them to three: “(1) The overstrong tendency to believe the defendant guilty of the charge merely because he is a likely person to do such acts; (2) the tendency to condemn, not because he is believed guilty of the present charge, but because he has escaped unpunished from other offenses; — (3) the injustice of attacking one necessarily unprepared to demonstrate the attacking evidence is fabricated. . . . ” J. Wigmore, Evidence § 194, pp. 646, 648 (3d Ed.). Each and all of these factors are present in Baum’s case.

The question of the admissibility of the 1970 offense requires the trial judge to balance all the relevant considerations that might bear on the competing factors of probative value against undue prejudice. United States v. Bradwell, 388 F.2d 619, 620-622 (2d Cir. 1968); United States v. Deaton, 381 F.2d 114, 117 (2d Cir. 1967). The balance was found in favor of the needs of the government to prove guilty knowledge at the risk of prejudice to the accused.

While this ruling was a proper exercise of the district court’s discretion, cf. United States v. Bradwell, supra, 388 F.2d at 622, the effect of the evidence was such as to require that the defense be given fair opportunity to meet it. The government offer, as far as the defense was concerned, was made in the dark. The identity of the witness and the substance of his testimony was apparently unknown to the trial judge — and it was withheld from the defense until Greenhalgh was called as the prosecution’s final witness of the trial.

Confronted for the first time with the accusation of prior criminal conduct and the identity of the accuser, the defendant had little or no opportunity to meet the impact of this attack in the midst of the trial. This precarious predicament was precipitated by the prosecutor.

Ordinarily it is disclosure, rather than suppression, that promotes the proper administration of criminal justice. See Dennis v. United States, 384 U.S. 855, 870, 86 S.Ct. 1840, 16 L.Ed.2d 973 (1966); United States v. Youngblood, 379 F.2d 365 (2d Cir. 1967).

There were no valid considerations to justify the concealment of Greenhalgh’s identity as a prospective witness, as in United States v. Persico, 425 F.2d 1375 (2d Cir. 1970). Greenhalgh was in federal custody. Advance disclosure presented no possible source of present danger to the witness or others. There was no thought that this witness would be reluctant to testify upon disclosure since he was a volunteer who solicited the government to call upon him in the hope of early release from confinement.

It is the duty of the government to present its case against the defendant fairly. Little can be added to Justice Traynor’s statement — “A defendant has hardly had a fair trial if he has been denied the opportunity to discover evidence or information crucial to his defense.”

The failure to reveal Greenhalgh’s identity until he was presented as a witness, confronted the trial judge with the hard choice of interruption of the trial or denial to the defense of a reasonable opportunity of meeting the severe impact of this aspect of the prosecutor’s evidence. Such tactics were condemned, and called for the reversal in United States v. Kelly, 420 F.2d 26, 29 (2d Cir. 1969). In the language of Judge Smith “The course of the government smacks too much of a trial by ambush, in violation of the spirit of the rules.” To be sure, Baum’s attorney did not make a very forceful showing in the district court of what cross-examination or rebuttal material he could secure. But in a case so close as this, we would rather give the defendant the benefit of the doubt than let the Government reap even a slight possibility of benefit from what we regard as a lack of candor unworthy of a prosecutor.

Here, no reason for nondisclosure was advanced by the government. Greenhalgh’s testimony was crucial to the prosecution; it was equally crucial to the defense. Cf. Rovario v. United States, 353 U.S. 53, 60, 77 S.Ct. 623, 1 L.Ed.2d 639 (1957); United States ex rel Wilkins, 326 F.2d 135, 140 (2d Cir. 1964). We hold a new trial is required to afford the defendant Baum a fair opportunity to meet the critical and damaging proof of an offense not presented against him in the indictment.

Scapoli’s appeal has a different bearing. When Greenhalgh’s testimony was given concerning his dealing with Baum, and at the request of counsel for his co-defendants, Judge MacMahon specifically cautioned the jury — -“Yes, none of it is binding on the defendants Scapoli and Fields. This testimony is being taken solely on the question of whether the defendant Baum committed a prior similar act if you believe this witness, whether he knew that the goods in question were stolen.”

Later, in submitting the case, the court referred to Greenhalgh’s testimony and specifically instructed the jury on this point. — “You may not and you must not consider that testimony against any defendant other than Baum. In short, you cannot consider him in any way in determining the guilt or innocence of the defendants Fields or Seapoli.”

The fact that Fields was acquitted is a convincing indication that the jury heeded the court’s cautionary instructions. Absent anything to the contrary, we take it that they did. We find no error in the court's failure to grant the defendant Scapoli’s motion for severance.

The judgment of conviction of the defendant Seapoli is affirmed. The judgment is reversed as to the defendant Baum and the case remanded.

      . During a pretrial conference, called by the court, counsel for the defendants Fields and Scapoli stipulated that the radios recovered from these defendants were stolen from an interstate shipment in Hoboken, New Jersey. Counsel for Baum asked for an opportunity to discuss with co-counsel whether he should Similarly stipulate as to his client. The result of the consultation is not shown in the record.

      . After Greenhalgh’s direct examination Baum’s counsel requested:
      Mr. Todel: As a result of having this witness called, the Government calling this witness, I would want a continuance because to check out certain information which I am in the process of doing now, and I would like to have this witness called back tomorrow so that I can be in a position to—
      The Court: Oh, no. Your client is there. He knows whether this happened or whether it didn’t.
      Mr. Todel: It is not with reference to what did or didn’t happen, your Honor, but it is a question of my preparing a cross-examination of this particular witness.
      The Court: Do you have his criminal record ?
      Mr. Todel: Yes, I do.
      The Court: That is enough.

      . Absent these factors or other valid considerations, prevailing concepts of criminal justice oblige the prosecuting attorney to disclose to the defense the names and addresses of witnesses he intends to call at the trial. American Bar Association Standards Relating to Discovery and Procedure Before Trial § 2.1 (iv) (Approved Draft 1970) ; Proposed Rules of Federal Criminal Procedure § 16(a)(1) (VI), 48 F.R.D. 553 (1970) ; 3 C. Wright, Federal Practice and Procedure (Criminal) § 254, p. 514.

      . Traynor, Ground Lost and Found in Criminal Discovery, 39 N.Y.U.L.Rev. 228, 242 (1964).

      . Unlike Scapoli, however, there was no evidence that Fields knew the property was “bought on the street at a great price” without any evidence of title.