author: COWEN, Chief Judge, DAVIS, Judge

text:
    FRUEHAUF CORPORATION v. The UNITED STATES. METRO-GOLDWYN-MAYER, INC. and Consolidated Subsidiaries v. The UNITED STATES.
    Nos. 91-70, 191-71.
    United States Court of Claims.
    Decided April 13, 1973.
    Ernest Getz, Detroit, Mich., attorney of record, for Fruehauf Corp.; Dickinson, Wright, McKean & Cudlip, Detroit, Mich., of counsel.
    Herbert L. Awe, Washington, D. C., attorney of record, for Metro-Goldwyn-Mayer, Inc. and Consolidated Subsidiaries; John P. Lipscomb, Washington, D. C., of counsel.
    Kenneth R. Boiarsky, Washington, D. C., with whom was Asst. Atty. Gen. Scott P. Crampton, for defendant; Gilbert E. Andrews, Jr., and Joseph Kovner, Washington, D. C., of counsel in No. 191-71.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.
   ON PLAINTIFFS’ MOTIONS AND DEFENDANT’S CROSS MOTIONS FOR SUMMARY JUDGMENT

COWEN, Chief Judge,

delivered the opinion of the court:

These actions for the refund of income taxes present another of the perplexing questions that often arise with respect to the computation of interest under the provisions of the Internal Revenue Code. The cases were argued together because Count I of Fruehauf’s petition and Metro-Goldwyn-Mayer’s petition involve similar questions of law and fact. These issues relate to the assessment of interest on potential corporate tax deficiencies and the awarding of interest on corporate tax overpayments. Specifically, we are called upon to decide the proper methods by which to set off the overpayments against the interest due the Government and to determine when that interest becomes a liability for the purposes of the set-off. The issues which are common to both suits are considered in Part I hereof.

Count II of Fruehauf’s petition involves a separate and distinct issue from the claim asserted by Metro-Goldwyn-Mayer and is. considered in Part II of this opinion.

I

At oral argument the parties presented a hypothetical statement of facts which they agree is sufficiently similar to the true facts to provide a basis for deciding the legal issues. The hypothetical facts so presented are as follows:

An Internal Revenue Service audit of plaintiffs’ 1960 tax returns revealed a “potential” deficiency of $1,100,000. The audits also revealed a large net operating loss for 1963. The 1963 net operating loss was carried back to 1960, and the carryback not only extinguished the “potential” deficiency, but also created an overassessment of $500,000 for 1960.

There is no question that the Government is entitled to interest on the “potential” deficiency running from 1960 to the end of the loss year 1963. This interest amounts to $200,000 and specific statutory authority therefor is found in Section 6601(e) and (g) of the Internal Revenue Code of 1954. After assessing this interest, the Internal Revenue Service applied $200,000 of the $500,000 overassessment in satisfaction of such interest due the Government even though the deficiency interest was not actually assessed until February 14, 1969. Interest on the remaining $300,000 was allowed from September 1, 1963, the first day after the end. of the applicable loss year, to February 14, 1969, when the interest due the Government was assessed.

By relating back the interest actually assessed in 1969 to 1963 in order to make the offset, the Service denied plaintiffs interest on the $200,000 for six years, i. e., from the loss year 1963 to 1969. Plaintiffs claim that statutory interest should be awarded on the $200,000 from the loss year to February 14, 1969, the date of the assessment of interest on the deficiency. We agree.

The resolution of this issue depends primarily upon the interpretation of Treasury Regulation § 301.6611-1. This regulation prescribes, in part, that there can be no overpayment of tax until the entire tax liability, including interest, is satisfied:

§ 301.6611-1. Interest on overpayments.
(a) General rule. Except as otherwise provided, interest shall be allowed on any overpayment of any tax at the rate of 6 percent per annum from the date of overpayment of the tax.
(b) Date of overpayment. Except as provided in section 6401(a), relating to assessment and collection after the expiration of the applicable period of limitation, there can be no overpayment of tax until the entire tax liability has been satisfied. Therefore, the dates of overpayment of any tax are the date of payment of the first amount which * * * is in excess of the tax liability (including any interest, addition to the tax, or additional amount) and the dates of payment of all amounts subsequently paid with respect to such tax liability. * * *

However, the regulation goes on to provide special rules in the cases of credits:

(h) Period for which interest allowable in case of credits—
(1) General rule. If an overpayment of tax is credited, interest shall be allowed from the date of overpayment to the due date (as determined under subparagraph (2) of this paragraph) of the amount against which such overpayment is credited.
(2) Determination of due date— * * *
* * * * * *
(v) Assessed interest. In the case of a credit against assessed interest, the due date is the date of the assessment of such interest. [Emphasis added.]
* * * * * *

The Government recognizes that the proper interpretation of the regulation is crucial to the decision in this case and argues that the term “entire tax liability,” as used in section (b) thereof, includes interest, whether assessed or unassessed. Thus, it maintains that the interest on the potential deficiency was a liability at the end of the loss year 1963, even though the interest was not assessed until February 14, 1969. If such a construction of section (b) is adopted, it would conflict with section (h) (2) (v) or render the latter section meaningless. In this case, the date of the overpayments by plaintiffs (the day following the last day of the loss year) was September 1, 1963, and section (h) provides that interest on the overpayments shall be allowed to the due date of the amounts against which they are credited. To find the due date, we turn to section (h)(2)(v), which states unequivocally that it is the date the interest is assessed which, in this case, was February 14, 1969. It is our conclusion, therefore, that until the due date of the interest (the date of the assessment of the interest), there is no tax liability as that term is used in the pertinent regulation. This construction of the regulation enables us to read section (b) in harmony with section (h) (2) (v) and thus avoid the conflict that would exist if defendant’s view is accepted.

Prior to assessment, the liability for deficiency interest was only a contingency. A contingent liability is not the same as the “potential” liability which resulted from the determination of the basic tax deficiency for the year 1960. The 1960 deficiency was “potential” only because there was an immediate offsetting carryback loss for 1963. The liability was determined and fixed as of the filing of the I960 return and as we have said, the Government is entitled to interest on such deficiencies from the due date (which is the date of the filing of the 1960 tax returns) until the end of the loss year. Therefore, it is inherent in the statutory scheme that the due date determines and fixes the liability for both tax and interest.

It was the “current” liability concept that was decisive in Northern Natural Gas Co. v. United States, 354 F.2d 310, 173 Ct.Cl. 881 (1965). In that case, the Internal Revenue Service was restricted from assessing the interest on potential deficiencies pending a determination by the Tax Court of the basic tax due. The parties finally stipulated a settlement in 1961, and the Service tried to relate the satisfaction of the deficiency interest back to 1952, thus avoiding interest on a like amount of overpayment during that time interval. In rejecting the Government’s contention, the court stated:

[Pjlaintiff “knew” in 1952 * * * that it would most likely be liable for some amount [of interest] regardless of section 722 [relief]. However, there was no “current” liability because the Commissioner was restricted from assessing any deficiency during the Tax Court proceeding * * *, and also, because the potential deficiency is based on the “corrected” deficiency which was not determined until 1961. It would not be proper for us, on these facts, to make an ex post facto credit of the 1952 remittance against the potential deficiency interest item which was finalized by the Tax Court decision on December 6, 1961. Accordingly, we find that the interest on the potential deficiencies should be deducted from plaintiff’s total overpayment of taxes and interest as determined in 1961, rather than from the 1952 remittance. [354 F.2d at 318, 173 Ct.Cl. at 892. Emphasis added and footnote omitted.]

The instant cases are even stronger for plaintiffs because of the statute and regulation before us. Since there was no interest liability until February 14, 1969, there remained outstanding a. net overassessment of $500,000 from 1963 until 1969, which is permitted to draw interest under the provisions of Section 6611 of the Code.

Defendant’s cross-motions rely primarily upon Rev.Proc. 60-17, 1960-2 Cum.Bull. 942. This revenue procedure is entitled “Guides and instructions to be followed with respect to the computation of restricted interest under the Internal Revenue Codes of 1954 and 1939.” In its brief, defendant quotes the following from the procedure:

Any part of an overpayment attributable to a carryback loss which is extinguished by a general adjustments deficiency * * * * No interest allowable (In effect, interest is allowed, by terminating interest on the deficiency on the last day of the loss year.)

The defendant asserts that the quoted procedure is appropriate for application under the facts of this case and plaintiffs agree. They concede that they are not entitled to any interest on that portion of the overassessment attributable to the carryback loss that extinguished the potential deficiency of 1960. As previously stated, plaintiffs have also stipulated that the Government is entitled to interest on the potential deficiency running to the last day of the loss year, which was August 31, 1963. Therefore, the quoted procedure does not affect the real issue in these cases.

Although it is not quoted in defendant’s brief, there is another section of Rev.Proc. 60-17 which does support defendant’s position. It is set forth in a table appearing in Section 3(4) of Rev. Proc. 60-17. This portion of the revenue procedure states that when an overpayment is applied as a credit to unpaid interest due for the same year and for the same type of tax, no interest is allowable. It also states that when the overpayment is applied as a credit to unpaid interest due for another year or another type of tax, interest should be computed from the date of the overpayment to the date of the assessment of the amount to which the credit is applied. We believe that this is the revenue procedure upon which defendant bases its argument. It is defendant’s contention that the section of the regulation, upon which plaintiffs rely, relates only to the crediting of overpayments and amounts due for different years and not to the determination of an overpayment for a single year. However, we find nothing in Section 6611(b) of the Code or in Treasury Regulation 301.-6611-1 which authorizes such a distinction. On the contrary, this part of Rev. Proc. 60-17 is at variance with the regulation and is therefore entitled to little or no weight. There is no doubt that the regulation takes precedence over the revenue procedure, and this is acknowledged by the following statement which appears on the first page of the introduction of each Cumulative Bulletin:

Revenue Rulings and Revenue Procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations (including Treasury Decisions), but are published to provide precedents to be used in the disposition of other cases, and may be cited and relied upon for that purpose. * * *

The Government also argues that section 6611 and the pertinent regulation must be interpreted in accordance with defendant’s position in order to carry out the purpose of Section 87 of the Technical Amendments Act of 1958, 72 Stat. 1606. We find no such purpose in our examination of the statute or its legislative history and conclude that the regulation, as we have construed it, fully complies with the intent of Congress. The evil at which the statute was aimed was the disparate running of interest on overpayments and underpayments, and the remedy provided by the Act was termination of the interest on both during any period of time to the extent that they offset each other. The problems associated with the prior law are described in the following portion of the general statement in the Senate Committee Report:

Section 87 — Correlation of interest where overpayment of tax is credited against underpayment of tax
(a) General correlation of interest. —Under present law situations can arise where, even though underpayments and overpayments offset each other, the Internal Revenue Service collects more interest than it pays or the taxpayer is entitled to more interest than he owes the Government. Section 6611(b)(1) of the code provides, for example, that interest on an overpayment which is credited against an additional assessment is to be allowed from the date of the overpayment to the date of the assessment. However, interest on an additional assessment which is offset against an overpayment runs from the due date of the return until the credit is scheduled, which may be long after the date the interest on the overpayment is cut off by the assessment of the additional amount. In such cases, although the underpayment and overpayment offset each other, the Internal Revenue Service collects more interest than it pays. On the other hand, where a taxpayer agrees to a determination and signs a waiver of the restrictions on an assessment, interest on an overpayment may run during the period between the 30th day after the waiver and the issuance of notice and demand while interest on an offsetting deficiency may be suspended. In such a case it is the taxpayer who is entitled to more interest than he owes even though the overpayment and underpayment offset each other.
The House bill eliminates these erratic differences of present law by terminating the interest both as to the overpayment and underpayment during any period of time to the extent they offset each other * * *. [Emphasis added.] [1958-3 Cum. Bull. 922, 1020-1021.] [S.Rep.No. 1983, 85th Cong., 2d Sess., pp. 97-100 (1958), U.S.Code Cong. & Admin. News 1958, pp. 4791, 4888.]

The technical explanation in the Senate Report further explains the purpose of the Act:

* * * Interest on a credited overpayment would in either case now run only from the date of the overpayment to the original due date of the amount against which it is credited. Thus, if it is credited against an underpayment antedating the overpayment, no interest would run on the overpayment at all. Since interest would otherwise run on the overpayment from the date of overpayment to the date of refund, interest on the underpayment will stop running as of the date of the overpayment; that is, when the mutuality of indebtedness arises. Similarly, in the case of an overpayment which antedates the due date of an underpayment, interest will run on the overpayment only until such due date, that is, when the mutuality of indebtedness arises. [1958-3 Cum.Bull. 922, 1156.] [Emphasis added.] [S.Rep. No.1983, 85th Cong., 2d Sess., pp. 234-235 (1958), U.S.Code Cong. & Admin.News 1958, pp. 4791, 5023.]

From the foregoing, it seems clear that the real purpose of Section 87 of the Technical Amendments Act of 1958 was to eliminate the running of interest during the time there is a mutuality of indebtedness — a deficiency which is offset by an overpayment in the same amount. -In this case, there was no liability for the interest on the potential deficiency and consequently no mutuality of indebtedness until that interest was assessed. The date of the overassessment (overpayment) was September 1, 1963. It antedated the due date of the deficiency interest, which was February 14, 1969, and therefore plaintiffs are entitled to interest on the overpayment until the latter date.

We recognize that a different result was reached in Citadel Industries, Inc. v. United States, 314 F.Supp. 245 (S.D.N.Y.1970), a case relied upon by defendant. However, that case was decided under the provisions of the 1939 Internal Revenue Code, and there was no regulation under the 1939 Code fixing the due date of assessed interest against which an overpayment is credited. The existence of such a regulation and its application to these cases distinguishes that case from our holding today. For that reason, we do not regard the Citadel case as being in conflict with this decision.

II

Plaintiff Fruehauf Corporation in Count II of its petition raises a second issue based on the same facts as its Count I claim. The Count II cause of action is peculiar to the specific facts of Fruehauf’s refund claim and accordingly has no bearing on the claim of plaintiff Metro-Goldwyn-Mayer, Inc. The detailed facts underlying both counts of the Fruehauf petition are set forth in Appendix A, infra.

Briefly stated, the facts relevant to Fruehauf’s Count II are as follows. After the Internal Revenue Service asserted deficiencies against Fruehauf with respect to its corporate income taxes for the years 1954, 1955, and 1956, the Tax Court determined that Fruehauf had underpaid its taxes for 1954 and 1956, but because of a net operating loss carryback from 1958 (in the amount of $4,270,636.94) Fruehauf had overpaid its taxes for 1955 in the amount of $1,711,087.39. That net amount of overpayment was determined by applying the total amount of the carryback from 1958 against Fruehauf’s potential deficiency for 1955 in the amount of $2,559,549.55. After the judgment of the Tax Court became final, the IRS, on December 9, 1966, assessed deficiency interest against Fruehauf for its 1954 and 1956 underpayments, and for its potential deficiency for the year 1955. The deficiency interest for 1955, totaling $389,591.01, was mainly computed from the due date of Fruehauf's 1955 return until the last day of the 1958 loss year. Thereafter, the IRS applied Fruehauf’s overpayment for 1955 as determined by the Tax Court ($1,711,087.39), first against its deficiency interest for 1955 ($389,591.01), and the remainder against Fruehauf’s underpayment for 1954.

The essence of Fruehauf’s Count II argument is that the IRS unlawfully collected $389,591.01 in excess of Fruehauf’s net tax liabilities for the years 1954, 1955, and 1956. This occurred, in Fruehauf’s view, when the IRS applied $389,591.01 of the $1,711,087.39 overpayment for 1955 determined by the Tax Court against the $389,591.01 of deficiency interest assessed for 1955, prior to crediting the balance of the overpayment against Fruehauf’s deficiencies for 1954 and 1956. Fruehauf contends that under Section 6215(a) of the 1954 Code the defendant is precluded from assessing or collecting any part of a tax deficiency disallowed by the final decision of the Tax Court; the taxpayer also says that under Section 6402(a) of the Code, the defendant is authorized to credit any overpayment of tax against any tax liability of the same taxpayer. Fruehauf points out that under the final decision of the Tax Court, Fruehauf had made an overpayment for 1955 in the amount of $1,711,087.39, and underpayments for 1954 and 1956 in the amounts of $1,651,654.58 and $3,176,489.25, respectively. Consequently, Fruehauf argues that under the pertinent Code provisions, the defendant could have and should have applied the entire overpayment determined by the Tax Court for 1955 against the underpayments, also determined by the Tax Court for 1954 and 1956, without attempting to reduce the amount of overpayment in the amount of any other purported liabilities of Fruehauf for 1955. In effect, Fruehauf is contending that the net overpayment determined by the Tax Court for 1955 is the final balance of Fruehauf’s liabilities for that year, and the defendant is bound by the Tax Court’s decision. Thus, Fruehauf argues that the Government disregarded the pertinent Code provisions as well as the decision of the Tax Court and unlawfully collected from Fruehauf $389,591.01 in excess of Fruehauf’s true tax liabilities for 1954, 1955, and 1956. Whereas in Count I Fruehauf is seeking to recover the interest ($185,568.07) that the $389,591.01 of overpayment would have earned between January 1, 1959 and December 9, 1966, Fruehauf in Count II seeks to recover the principal amount of $389,591.-01 which it claims the IRS illegally credited against the net 1955 overpayment determined by the Tax Court.

It is the contention of the Government that notwithstanding the merits of Fruehauf’s Count II claim (which the defendant disputes), Fruehauf’s recovery is precluded because that portion of its claim was never presented to the Internal Revenue Service in any formal or informal claim for refund prior to the commencement of the suit in this court. Thus, the defendant has timely raised as an affirmative defense to Fruehauf’s Count II claim the so-called substantial variance rule. We have concluded, after a careful examination of Fruehauf’s refund claims filed with the Service for the years 1954, 1955, and 1956, that the Government’s contention is correct and that the arguments Fruehauf now makes with respect to Count II were never even suggested in any of its refund claim documents.

Fruehauf filed with the IRS timely claims for refund for each of the years ending December 31, 1954, 1955, and 1956. Each of the claims presented in detail the common set of facts that form the basis of the claims presented in Counts I and II of the petition herein. Each of the claims also stated at considerable length the legal basis for recovery presented by Count I of the petition. The amount of the refund requested in each of the claims was $185,278.92 (“Plus interest and such greater amount as is refundable by law”) which is very close to the $185,568.07 sued for in Count I. As previously stated, however, the argument presented here with respect to Count II, as outlined above, was never presented or suggested in any of the claim documents. Therefore, it must be concluded that the Internal Revenue Service had no notice of the contentions raised in Count II until Fruehauf’s petition was filed in this court on March 12, 1970.

We have frequently held that a ground for refund may not be asserted in a tax refund suit in this court that is at variance with the grounds for refund presented to the IRS. Commercial Solvents Corp. v. United States, 427 F.2d 749, 753-754, 192 Ct.Cl. 339, 347, cert. denied, 400 U.S. 943, 91 S.Ct. 242, 27 L.Ed.2d 247 (1970); Union Pac. R.R. v. United States, 389 F.2d 437, 442, 182 Ct.Cl. 103, 108-109 1968) and cases cited therein. The scope of the variance rule and the reasons underlying it have been set forth at considerable length in the cases cited and need not be reiterated here. It is sufficient to say that the rule is designed to prevent surprise, to give the Internal Revenue Service notice of the claim so as to permit an administrative investigation thereof, and to allow the Service the opportunity to correct errors and limit the scope of ensuing litigation. Those objectives would be frustrated were we to allow Fruehauf to proceed on the merits of its Count II contentions.

Fruehauf’s Count II claim is not aided by a showing that all the facts material thereto were made available to the Internal Revenue Service in the several refund claims. The same facts underlie Count I, and the Service does not have the burden of divining all possible grounds for refund a taxpayer might assert on a given set of facts. Union Pac. R.R., supra, 389 F.2d at 445, 182 Ct.Cl. at 113.

The amount of the refund requested in Count II, $389,591.01 plus interest, is, as previously noted, substantially in excess of the amount requested in the refund claim documents. The notation in the claims “Plus * * * such greater amount as is refundable by law” adds nothing to indicate the grounds on which the claim is made.

In all essential respects, Fruehauf’s claim for refund with respect to Count II is as fatally deficient as the second and third counts of the taxpayer’s amended petition in Commercial Solvents Corp., supra. Fruehauf did not provide the Internal Revenue Service with timely notice of the ground for refund now asserted in Count II, and its petition must be dismissed with respect to Count II. In view of this disposition of that portion of Fruehauf’s claim, it is unnecessary to reach the merits thereof.

III

For the reasons stated in the foregoing opinion, Fruehauf’s motion for summary judgment on the claim asserted in Count I of its petition in Docket No. 91-70 and Metro-Goldwyn-Mayer’s motion for summary judgment on its claim in Docket No. 191-71 are granted, and defendant’s cross motions for summary judgment are denied. The cases are remanded to the trial commissioner for determination of the amount of recovery pursuant to Rule 131(c).

Fruehauf’s motion for summary judgment on the claim asserted in Count II of its petition in Docket No. 91-70 is denied ; defendant’s cross motion on Count II of the petition in that case is granted, and Count II of the petition is dismissed.

DAVIS, Judge

(concurring):

In joining the court’s opinion, I wish to stress — on the question dealt with in Part I — -that the problem arises solely because of the Treasury’s decided lack of clarity in drafting Treas.Reg. § 301.-6611-1. If subsection (b) stood without (h)(2)(v), I would have little doubt, because of the explicit parenthesis in (b), that defendant is correct in its argument here. But (h) (2) (v) is also very explicit, and at the same time is the more specific of the two. All that defendant can do with it is to say that— despite its unqualified language and general context — it has no application to the same tax for the same year. This pushes too far to be an acceptable rationalization of the self-created disharmony in § 301.6611-1. Where the Treasury itself puts contradictions into the same section of a regulation, and it is nearly impossible or at least very hard for a court to read the conflicting provisions together without great strain, I would let the Government bear the brunt of its error until the regulation is altered. For that reason I accept the court’s reconciliation of (b) and (h)(2)(v), even though it is not free from difficulties of its own.

APPENDIX A

The Facts Material to the Tax Refund Claim of FRUEHAUF CORPORATION V. UNITED STATES (No. 91-70)

The following is a summary of the material, actual facts underlying the tax refund claim of Fruehauf Corporation (No. 91-70), as agreed upon by the plaintiff and defendant in their Stipulation of Facts filed on December 6, 1971, and in their Supplemental Stipulation of Facts filed on May 31,1972.

Plaintiff Fruehauf Corporation, a Michigan corporation, uses the calendar year as a reporting period for its Federal corporate income taxes.

In 1960, Fruehauf received notice from the Commissioner of Internal Revenue of deficiencies in its corporate income taxes for the years 1954, 1955, and 1956, based upon a change in Fruehauf’s method of accounting for used trailer inventories (which had been initiated by the Internal Revenue Service (IRS)).

Fruehauf contested the asserted deficiencies before the Tax Court of the United States. On July 24, 1964, the Tax Court entered its judgment that Fruehauf had underpaid its taxes for the years 1954 and 1956 in the amounts of - $1,651,654.58 and $3,176,489.25, respectively. The Tax Court further determined, however, that Fruehauf had overpaid its taxes for the year 1955 in the amount of $1,711,087.39. The decision of the Tax Court was affirmed by the United States Court of Appeals for the Sixth Circuit, and on October 10, 1966, the Supreme Court denied Fruehauf’s petition for a writ of certiorari.

The 1955 overpayment of $1,711,087.-39 determined by the Tax Court arose because of the carryback of a 1958 net operating loss to 1955, reduced by an excessive tentative net operating loss carryback from 1957 to 1955 previously taken by Fruehauf. Prior to taking into account the 1957 and 1958 carry-back factors, a tentative deficiency existed for 1955 in the amount of $2,193,095.27. That tentative deficiency was increased in the amount of $366,454.28 by reason of an excessive 1955 refund in that amount arising from the excessive 1957 tentative net operating loss carryback. The total tentative deficiency for 1955 of $2,559,549.55 ($2,193,095.27 plus $366,454.28) was eliminated by $4,270,636.94 of 1955 tax attributable to the 1958 net operating loss carryback.

On December 9, 1966, the Detroit District Director of Internal Revenue assessed Fruehauf for the years 1954,

1955, and 1956 in the following amounts:

1954
Tax ------------- $1,651,654.58
.Interest --------- 532,985.39
Total--------$2,184,639.97
1955
Interest --------- $389,591.01
1956
Tax ------------- $3,176,489.25
Interest ---------- 1,852,284.85
Total--------$5,028,774.10

Of the $389,591.01 of interest assessed for 1955, $367,628.86 represents interest computed from the due date of the 1955 return to the last day of the 1958 loss year on the tentative 1955 deficiency of $2,193,095.27. The remaining portion ($21,962.15) of the $389,591.01 interest assessed for 1955 represents interest computed from January 1, 1958 to December 31, 1958, on the excessive 1955 refund of $366,454.28 attributable to the excessive tentative net operating loss carryback from 1957.

On or about December 13, 1966, a Form 17-A Statement of Tax Due was issued, setting forth for 1954 and 1956 the amounts of tax and interest due as assessed on December 9, 1966, and balances due of $2,184,639.97 and $5,028,-774.10, respectively. Also, on or about December 13, 1966, Fruehauf received a Form 1331 Notice of Adjustment detailing the application made by the IRS of the $1,711,087.39 overpayment determined by the Tax Court for 1955. That form reflects that $389,591.01 of the $1,711,087.39 overpayment was credited against the $389,591.01 of deficiency interest assessed against Fruehauf for 1955, and that $1,321,496.38 of the overpayment (i. e., the remainder thereof) was credited against the $1,651,654.58 of tax assessed against Fruehauf for 1954. Thereafter, a Form 17 Corrected Bill was issued for 1954 showing that the $2,184,639.97 of tax and interest previously assessed as due for 1954 had been reduced by $1,321,496.38 by reason of the crediting of a portion of the 1955 overpayment.

Of the $1,711,087.39 of 1955 overpayment determined by the Tax Court, $389,591.01 ($1,711,087.39 less the $1,321,496.38 credited against the 1954 deficiency) was credited against the $389,591.01 of deficiency interest assessed for 1955. No interest was received by Fruehauf on the $389,591.01 portion of the 1955 overpayment so credited against the same amount of 1955 deficiency interest.

On December 23, 1966, Fruehauf paid the following amounts to the IRS:

Year Tax Interest Total

1954 —. $330,158.20 $532,985.39 $863,143.59

1956 —. 3,176,489.25 1,852,284.85 5,028,774.10

Total $3,506,647.45 $2,385,270.24 $5,891,917.69

Fruehauf filed timely refund claims with the IRS for the years 1954, 1955, and 1956 on March 6, 1968. Fruehauf’s refund claims were disallowed in full for 1955 on October 17, 1968, and for 1954 and 1956 on October 22,1968.

The $389,591.01 portion of-the 1955 overpayment determined by the Tax Court that was credited against the $389,591.01 of deficiency interest for 1955 would have earned $185,568.07 of interest between January 1, 1959 and December 9, 1966 (the date of the assessment of the 1955 deficiency interest) had the IRS recognized Fruehauf’s entitlement to interest on that portion of the overpayment over that period of time.

APPENDIX B

The Facts Material to the Tax Refund Claim of METRO-GOLDWYN-MAYER, INC. V. UNITED STATES (No. 191-71)

The following is a summary of the material, actual facts underlying the tax refund claim of Metro-Goldwyn-Mayer, Inc. (No. 191-71), as agreed upon by the plaintiff and defendant in their Stipulation of Material Facts filed on March 30, 1972.

Plaintiff Metro-Goldwyn-Mayer, Inc. (MGM), which brings this suit on its own behalf and on behalf of its consolidated subsidiaries, filed consolidated Federal income tax returns for the fiscal years ended August 31, 1959 and 1960, and paid the tax liabilities shown thereon.

Thereafter, the Internal Revenue Service (IRS) initiated an audit of MGM’s returns for the fiscal years ended August 31, 1959, 1960, 1961, 1962, 1963, and 1964. By reason of that audit, it was determined that there were potential deficiencies of tax for fiscal years 1959 and 1960, in the amounts of $1,010,729.37 and $1,287,642.52, respectively. The audit also determined that there were net operating losses for MGM’s fiscal years ending August 31, 1961, 1962, and 1963. The audit further determined that by reason of the carry-back of the net operating losses from fiscal years 1961, 1962, and 1963, and the application of those losses to the potential deficiencies for fiscal years 1959 and 1960, there was a net overassessment of tax in the amount of $114,430.-10 for the fiscal year ending August 31, 1959, and a net overassessment in the amount of $521,816.63 for the fiscal year ending August 31,1960.

The District Director (for Manhattan, New York City, where the returns were filed) computed deficiency interest in the amount of $223,092.36 on the potential deficiency for fiscal year 1959 from the due date of the return to the last day of the applicable loss year or years in accordance with Section 6601(e)(1) of the Internal Revenue Code of 1954. The District Director likewise computed interest in the amount of $215,847.69 on the potential deficiency for fiscal year 1960. The interest on the potential deficiencies for fiscal years 1959 and 1960 was assessed by the District Director on February 14, 1969.

Also on February 14, 1969, the District Director determined the application of the overassessments for fiscal years 1959 and 1960 as part of the final satisfaction of MGM’s tax liabilities. The net overassessment for the year ending August 31, 1959 in the amount of $114,430.10 was applied to the interest computed on the potential deficiency for the same fiscal year in the amount of $223,092.36. This left a remaining balance of the fiscal year 1959 deficiency interest of $108,662.26.

The net overassessment of $521,816.63 for fiscal year 1960 was applied first against the interest ($215,847.69) computed on the fiscal year 1960 potential deficiency. $108,662.26 of the fiscal year 1960 overassessment was then credited against the remaining balance ($108,662.26) of the deficiency interest computed on the potential deficiency for fiscal year 1959. An additional $80,394.34 of the 1960 overassessment was applied against interest computed on a potential deficiency of MGM for fiscal year 1961; and another $80,279.49 of the fiscal year 1960 overassessment was applied against a tax deficiency for the year ending August 31, 1964. The remainder of the 1960 overassessment ($36,632.85) was refunded.

The IRS allowed MGM interest on the portions of the 1960 fiscal year overassessment credited against a part of the deficiency interest for fiscal year 1959, and against the deficiency interest for fiscal year 1961, computed from the last day of the applicable loss year (September 1, 1963) to the date of assessment of the deficiency interest for 1959 and 1961 (February 14, 1969). MGM was likewise allowed interest on the portion of the fiscal year 1960 overassessment that was refunded computed from September 1, 1963 to February 14, 1969. MGM was allowed interest on the portion of the 1960 overassessment credited against the 1964 deficiency computed from September 1, 1963 to November 15, 1964.

However, the IRS did not allow MGM any interest on the overassessment for the year ending August 31, 1959, that was entirely offset by the interest computed on the potential deficiency for fiscal year 1959. Similarly, MGM was not allowed any interest on the portion of the overassessment for the year ending August 31, 1960, that was credited against the interest computed on the potential deficiency for fiscal year 1960.

On August 7, 1969, MGM filed timely claims for refund with the IRS to recover interest, computed from September 1, 1963 to February 14, 1969, on the overassessment for fiscal year 1959, and for the portion of the fiscal year 1960 overassessment credited against the deficiency interest for 1960. More than 6 months elapsed, prior to the filing of MGM’s petition in this court, during which MGM received no statutory notice of disallowance.

Plaintiff seeks interest in the amount of $37,453.13 (computed from September 1, 1963 to -February 14, 1969) on the 1959 fiscal year overassessment, and interest in the amount of $70,647.24 (also computed from September 1, 1963 to February 14, 1969) on that portion of the fiscal year 1960 overassessment credited against the interest computed on the fiscal year 1960 potential deficiency.

      . The actual facts pertaining to each plaintiff are set out in the appendices.

      . Regulation § 301.6611 is based on Section 6611 of the Internal Revenue Code of 1954, which states in pertinent part:
      “§ 6611. Interest on overpayments

      “(a) Rate. — Interest shall be allowed and paid upon any overpayment in respeet of any internal revenue tax at the rate of 6 percent per annum.
      “(b) Period.- — Such interest shall be allowed and paid as follows :
      “(1) Credits. — In the case of a credit, from the date of the overpayment to the due date of the amount against which the credit is taken.”

        Prior to the Technical Amendments Act of 1958 (P.L. 85-866, 72 Stat. 1606, § 83) § 6611(b)(1) read as follows :
      “(1) Credits. — In the case of a credit, from the date of the overpayment to the due date of the amount against which the credit is taken, hut if the amount against which the credit is taken is an additional assessment, then to the date of the assessment of that amount.” [Deleted portion italicized.]

      . Defendant’s brief in No. 191-71 at 12; the quotation is from a table appearing in § 4(3)(b) of the Rec.Proc., 1960-2 Cum. Bull. 942, 957.

      . 1960-2 Cum.Bull. 942, 951.

      . As in the present case, the resolution of the contradiction can be made very difficult by the opacity of the general Congressional purpose with respect to the particular subject matter and the lack of helpful legislative or administrative background. Defendant emphasizes the Technical Amendments Act of 1958, 72 Stat. 1606, as showing the general Congressional purpose. It is agreed, however, that that statute does not apply of its own terms to the precise issue here, and as the court points out the aim of the provision was to eliminate the running of interest during a period of mutuality of indebtedness. The question then becomes when did such mutuality arise, and we are brought directly back to the contradiction in § 301.6611-1.


source: Caselaw Access Project

author: RICH, Judge.

license: Public Domain

text:
    60 CCPA
    The UNITED STATES, Appellant, v. The SERVCO COMPANY, Appellee.
    Customs Appeal No. 5509.
    United States Court of Customs and Patent Appeals.
    May 10, 1973.

      Harlington Wood, Jr., Asst. Atty. Gen., Andrew P. Vance, Chief, Customs Section, Frederick L. Ikenson, New York City, for the U. S.
    Robert Glenn White, Los Angeles, Cal. (Glad & Tuttle, Los Angeles, Cal.), attorneys of record, for appellee.
    Before MARKEY, Chief Judge, and RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge.
   RICH, Judge.

This appeal is from the decision and judgment of the United States Customs Court, Third Division, 68 Cust.Ct. -, C.D. 4341 (1972), sustaining appellee’s protest against the classification of certain steel products imported from Austria under TSUS 610.52, as modified by T.D. 68-9, as other tubes, not welded, jointed, or seamed, not conforming to the API specifications for oil well casing, not suitable for use in the manufacture of ball or roller bearings, and of alloy iron or steel. The Customs Court held the merchandise classifiable as parts of boring and extracting machinery for earth, minerals, or ores under TSUS 664.05. We affirm.

The merchandise consists of tubular steel products, 30 feet long, 213/16 inches in inside diameter, and either 61/4. or 8 inches in outside diameter, described on the commercial invoices as “AM Non-Magnetic semi-finished austenitic stainless survey Drill Collar without Threading and without welded steel subs aec. to specifications * * * .”

The argument of appellant, the United States, revolves primarily about the application of General Interpretative Rule 10(h), which states:

[Ujnless the context requires otherwise, a tariff description for an article covers such article, whether assembled or not assembled, and whether finished or not finished * * * .

Appellant’s brief notes that the Customs Court, in deciding between the two provisions, stated that the tube provision, TSUS 610.52, “is not a specific provision for pipes and tubes which are identifiable parts of articles,” relying on Schedule 6, Part 2, Headnote l(iv), which states that Part 2 of Schedule 6 does not include articles specially provided for elsewhere in the Tariff Schedules, or parts of articles. Appellant says that the Customs Court “apparently considered the claimed provision for boring machinery and parts (in conjunction with General Interpretative Rule 10(h) to remove the merchandise from Part 2 * * * ."

Appellant here takes issue with that finding, asserting error in the Customs Court having “concluded that the subject tubes were excluded from the tube provision by virtue of Schedule 6, Part 2, Headnote l(iv), and embraced by the boring machinery parts provision, by virtue of General Interpretative Rule 10(h).”

Appellant’s brief tells us why this exclusion and resultant classification is believed to be improper (footnotes omitted) :

Schedule 6, Part 2, Headnote 1(iv) excludes from said Part 2 (which part includes the subject tube provision) “other articles specially provided for elsewhere in the tariff schedules, or parts of articles.” The imported tubes are neither such “articles [n]or parts of articles.” They are, by the Customs Court’s own understanding, “unfinished” parts (R. 56-57) — but that does not qualify them as falling within the headnote. General Interpretative Rule 10(h) applies the “unfinished” rule only to tariff descriptions of articles, which Headnote l(iv) is not, and even then, only if the context does not require ■otherwise. Part 2 of Schedule 6 covers basic shapes and forms of metal, including tubes. It would be a severe dilution of Part 2, if basic shapes and forms are excluded therefrom because they are to be finished into articles or parts of articles. Cf. United States v. J. Gerber & Co., 58 CCPA 110, C.A.D. 1013, 436 F.2d 1390 (1971).
In Gerber, this Court was asked to decide whether forgings, which were dedicated to be finished into pipe or tube fittings, were properly classifiable under the provision for forgings or under the provision for pipe and tube fittings (by virtue of General Interpretative Rule 10(h)). Holding that “Rule 10(h) does not require classification of these articles as unfinished pipe or tube fittings when they are also forgings . . . ” ([436 F.2d at 1392] 58 CCPA at 112), this Court observed (id. [436 F.2d at 1393, 58 CCPA] at 113-114):
The existing schedules and their predecessors all reflect a Congressional disposition to deal with the characteristic products of the steel industry by their names as known in transactions between that industry and its customers, rather than as unfinished parts of end products: thus, there are always tariff items for forgings, plates, sheets, etc.
* * * * * *

The Court concluded (id. [436 F.2d at 1394/58 CCPA] at 115):

We agree with the trial court that the phrase in General Interpretative Rule 10(h) “unless the context requires otherwise” is meant to withdraw the Rule from operation wherever classification of an unfinished article under the provision for the completed article would come into conflict with any express declarations of Congress elsewhere set forth, that require otherwise. Thus the rule might be effective to save an unfinished article from being classified under a mere basket item written from a horror of leaving any import unprovided for, but it is ineffective by its own terms against a specific provision that implements a policy of Congress, consciously arrived at and clearly stated. Congress has historically wanted forgings to be classed and dealt with as forgings, and has put into the new schedules nothing to state a contrary intention now.

Appellant’s position here is also that the merchandise is a basic shape — a tube —which is a designation of a characteristic product of the steel industry within the meaning of the above quotation from Gerber, and that, like the forgings there, the tubes here ought to be classified according to the industry designation. Finally, appellant maintains that the contrary result of the court below would, at the very least, remove from the tube provision of Schedule 6, Part 2, the substantial class of mechanical tubes which are finished into other articles or parts.

OPINION

We state at the outset that we do not agree with appellant’s position that affirming the Customs Court decision in this case would have the effect of removing the provision for that class of tubes in Schedule 6, Part 2. The case here is limited to its own facts, which the Customs Court described in detail, relating specifically to the survey drill collars here involved. Appellant even assumes, for the purpose of this appeal, the correctness of the findings of the Customs Court that the imported articles had no other use but to be finished into drill collars, and that drill collars were used solely as parts of boring machinery.

Appellant’s main argument, summarized in the above quotation from its brief, seems to be that the Customs Court — in “apparently” considering General Interpretative Rule 10(h) to remove the imported tubes from the application of Schedule 6, Part 2, Headnote l(iv), which headnote excludes “other articles specifically provided for elsewhere in the tariff schedules, or parts of articles” (emphasis supplied) — erroneously applied the General Interpretative Rule because (1) the Rule only “applies * * * to tariff descriptions of articles, which Headnote l(iv) is not, and” (2) “even then, [if it applies, it does so] only if the context does not require oth erwise” (which appellant maintains is the case here), and (3) the J. Gerber case, interpreting Rule 10(h) says the Rule does not apply by its own terms where it would operate to prevent classification of an article under a specific provision implementing a policy of Congress such as the congressional disposition to deal with characteristic products of the steel industry according to their industrial designations.

We cannot agree with appellant’s basic assumption that the Customs Court considered General Interpretative Rule 10(h) to apply to the language of Headnote 1(iv). Perhaps appellant’s reason (1) explains why the Customs Court did not rely upon the Rule; we do not know. At any rate, since we do not find that Rule 10(h) was relied upon below for not classifying the drill collars in Part 2, we do not find it necessary to consider appellant’s arguments that Rule 10(h) was erroneously relied on in this manner.

To the extent that appellant relies upon the language of J. Gerber for the general proposition that there is a congressional disposition in the tariff schedules to deal with the characteristic products of the steel industry by their industry names, we note that the case involved the forgings designation with respect to which there may indeed have been a strong disposition in Congress to classify forgings as forgings, rather than as unfinished parts of end products. See John v. Carr & Son, Inc. v. United States, 66 Cust.Ct. 316, C.D. 4209 (1971). We do not find any such comparable congressional disposition here that all “tubes” be classed aild dealt with as tubes. Cf. Carr, supra.

Accordingly, having fully considered the record and appellant’s argument, we affirm the judgment of the Customs Court.

Affirmed.

       The Customs Court did consider the application of General Interpretative Rule 10 (h) to the parts of boring machinery provision, item 664.05, finding “the unfinished drill collars classifiable as finished parts for boring machinery.” [Emphasis supplied.]


author: LANE, Judge.

text:
    Application of Richard EPPLE and Reinhold Kaiser.
    Patent Appeal No. 8895.
    United States Court of Customs and Patent Appeals.
    May 17, 1973.
    Harvey Kaye, George H. Spencer, and Daniel Sullivan, Jr., Washington, D. C., attorneys of record, for appellant.
    S. Wm. Cochran, Washington, D. C., for the Commissioner of Patents; R. V. Lupo, Washington, D. C., of counsel.
    Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation.
   LANE, Judge.

This is an appeal from the decision of the Board of Appeals holding claims 1-7 of appellants’ application, serial No. 614,117, filed February 6, 1967, entitled “Low Capacitance Semiconductor Mounting” to be unpatentable under 35 U.S.C. § 103 in view of certain prior art. We reverse.

THE INVENTION

The claims are drawn to a semiconductor device, such as a transistor, diode, or solid-state circuit, which contains grooves in the semiconductor body filled with insulator material to separate the semiconductor body from passive elements, such as resistors and conductor oaths, located on the surface of the semiconductor device. The presence of an insulating barrier reduces the capacitance which develops between the passive elements and the semiconductor body. The claimed device is said to avoid the disadvantages of prior semiconductor devices in which passive elements were screened from the semiconductor body by layers of insulation placed on the surface of the body.

Figures 1 and 2 of the application illustrate the semiconductor devices here involved.

The specification describes the transistor depicted in the drawings as consisting of a “semiconductor body 1 which has the conductivity type of the collector region, and into which the base region 2 and the emitter region 3 are introduced * * Conventional insulating layer 4 is provided. Contact to the base and emitter regions is made by conducting paths 5 and 6, the larger areas of which are 11 and 12, respectively, seen clearly in the perspective plan of fig. 1. The semiconductor material is separated from areas 11 and 12 by grooves 7 and 8 filled with insulating material as shown at 9 and 10. The filled grooves are flush with the surface of insulating layer 4.

Claim 1 is representative of the appealed claims and reads as follows:

1. A semiconductor device comprising a semiconductor body and passive elements arranged on the surface of the semiconductor body, wherein at least portions of the said passive elements are separated from the semiconductor body by insulating material arranged in grooves in the semiconductor body.

Claims 2-4 and 7 also refer to “insulating material” while claims 5 and 6 define said material as silicon dioxide and silicon nitride.

THE PRIOR ART AND THE REJECTION

The board listed the prior art as follows:

References relied upon by the Examiner:

Pomerantz 3,271,201 Sept. 6, 1966

Helman 3,283,221 Nov. 1, 1966

Youmans 3,381,255 April 30, 1968 [application filed April 12, 19653

References added by the Board of Appeals:

Welker 2,798,989 July 9, 1957

Folberth 2,858,275 Oct. 28, 1958

An introduction to Semiconductor Electronics by R. P. Nanavati, published 1963 McGraw-Hill Book Company, New York, New York pp. 39-40, 52-55.

Pomerantz, the principal reference, discloses semiconductor devices designed to overcome the same problem faced by appellants — capacitance buildup between passive elements on the semiconductor surface and the semiconductor material. One solution taught by Pomerantz is explained as follows:

In general, the present invention consists in the provision of an auxiliary layer, preferably diffused, about the base of a planar transistor or about one of the elements of a diode. The layer may be made of intrinsic material, which is, of course, of very high resistivity.

Figure 1 illustrates the Pomerantz structure:

The device has die 12, base 14, emitter 16, conventional insulating layer 18, and conducting paths 22 and 24 separated from the die 12 by regions 20. As an alternative to intrinsic material “i,” the regions 20 can be of the P-type base material. It is the use of the intrinsic material that is of relevance to the subject matter of the appealed claims because Pomerantz states the following:

In the situation where the layer 20 is of intrinsic material, it is obvious that the thickness of dielectric material between [sic: beneath?] the metallized layer 22 or 24 is extended. The resistivity of the intrinsic material is so high that it is to all intents and purposes an insulator serving as dielectric material in addition to the masking layer between the N-type material of the die and the metal of the layers 22 and 24 which contact the emitter and base, respectively.

Pomerantz teaches that “to form a layer 20 of intrinsic material, it is necessary to diffuse an intrinsifying agent such as gold into the die [12] * * *."

Youmans discloses, inter alia, the suitability of silicon dioxide as an insulator. Heiman discloses a field-effect transistor which includes “a high resistivity base * * * [which] may be * * * of any semiconductor or it may be an insulator material.” Heiman was relied upon as demonstrating equivalence between insulating material and semiconductor material for use as high resistivity material in semiconductor devices.

With reference to the Nanavati article, the board noted that “the term insulator is not an absolute term but is relative in nature,” and that an insulator under normal conditions can become a conductor under extreme conditions.

Appellants treat the intrinsified semiconducting material of Pomerantz as semiconducting material of high resistivity. The Patent Office does not appear to challenge appellants’ assertion that the intrinsic material is semiconducting. However, the solicitor does argue that the intrinsic semiconducting material disclosed by Pomerantz is within the ambit of the phrase “insulating material” as used in claims 1-4 and 7. The solicitor alternatively contends that the board’s decision may be sustained on the ground that the substitution of insulating material, including the silicon compounds of claims 5 and 6, for the Pomerantz intrinsic material would have been obvious to one of ordinary skill in the art.

OPINION

Although the board has attempted to establish that the terms “insulator” and “semiconductor” are of such a relative nature that one blends into the other, the record convinces us that those of ordinary skill in the art recognize a distinction between insulating and semiconducting. The Nanavati reference treats insulating, semiconducting and conducting as effects of distinguishable identification. The board may be correct in viewing the terms as “relative,” but on the record before us, we conclude that insulating material would not mean high resistivity semiconducting, i. e. intrinsic, material to one of ordinary skill in the art. We accordingly do not agree that the phrase “insulating material” as used by appellants in claims 1-4 and 7 encompasses the Pomerantz intrinsic material.

The asserted obviousness of substituting insulating material for the intrinsic material used by Pomerantz is predicated primarily on the Pomerantz disclosure that the intrinsic material has such a high resistivity that it is “to all intents and purposes” an insulator which shields passive elements from the semiconductor material thereby reducing undesired capacitance, and on the Heiman disclosure that in certain types of transistors both semiconducting and insulating material will serve the function of high resistivity material.

Appellants concede that Pomerantz provides a solution to the same problem, but urge that the removal of semiconductor material and its replacement with insulating material is a procedure too remote from the intrinsification technique of Pomerantz to have been appreciated by one of ordinary skill in the art. The Heiman disclosure is not regarded by appellants as a teaching of general equivalence between semiconducting and insulating materials, but merely an indication of alternatives suitable for use in constructing the Heiman transistors.

We are in agreement with the position advanced by appellants in this case. We too think that one possessed of ordinary skill in the art would not have envisioned the claimed structure from Pomerantz and Heiman especially in light of the technique of manufacture disclosed by Pomerantz which differs completely from the method of making the claimed device. The ' solicitor urges that the method of manufacture is irrelevant to the patentability of claims drawn to articles. However, we are of the view that the determination of obviousness or non-obviousness of the claimed subject matter as a whole from the Pomerantz disclosure as a whole, along with the other prior art relied upon, includes weighing the respective method considerations since they would contribute to the perception of the prior art disclosures, especially that of Pomerantz, that one of ordinary skill in the art would acquire. Cf. In re Langer, 465 F.2d 896, 899, 59 CCPA-,-(1972).

We agree with appellants that the claimed structure, in which semiconducting material is replaced, should properly be viewed as a substantial departure from the Pomerantz construction in which portions of semiconducting material are intrinsified to effect greater resistivity. So viewed, the claimed subject matter would not have been obvious to one of ordinary skill in the art from the references relied upon.

The decision of the Board of Appeals is reversed.

Reversed.


author: MARKEY, Chief Judge.

text:
    GRANDPA PIDGEON’S OF MISSOURI, INC., Appellant, v. Robert J. BORGSMILLER, d.b.a. Grandpa John’s Store, Appellee.
    Patent Appeal No. 8939.
    United States Court of Customs and Patent Appeals.
    May 3, 1973.
    John D. Pope, III, St. Louis, Mo., attorney of record, for appellant.
    Paul M. Denk, St. Louis, Mo., attorney of record, for appellee.

      Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and ALMOND, Senior Judge.
   MARKEY, Chief Judge.

This is an appeal from the decision of the Trademark Trial and Appeal Board dismissing appellant’s opposition to registration of appellee’s mark comprising the figure of an elderly. man. We reverse.

Appellant’s earlier use of its marks and the identity of the parties’ retail store services are undisputed. The sole issue is whether appellee’s mark so resembles a mark of appellant as to be likely to cause confusion or mistake or to deceive.

Appellant relies on two earlier registrations and its prior use of various non-registered marks, all of which include the figure of an elderly man and the words “Grandpa Pidgeon.” Particular reliance is placed on prior and continued use of a sign (Ex. 3) displaying appellant’s figure posed differently from that in its registrations and with the words of its registered mark displayed in different form below the figure. Appellant also asserts prior use of the words “Grandpa” and “Grandpa Pidgeon” without a figure. The president and sole witness of appellant testitified that two customers had asked whether appellant owned appellee’s store but nothing in the record indicates any causal relationship between the question and appellee’s use of its mark.

Appellee cites its use of differing elderly man figures as well as a number of third party registrations of such figures and of “Grandpa.”

Appellant’s registered mark and appellee’s mark appear as follows:

Appellant points to the similarities of the figures, particularly as between its Exhibit 3 and appellee’s mark. Appellee points to their dissimilarities.

Side-by-side comparison is not the test. Johann Maria Farina Gegenuber Dem Juliehs-Platz v. Chesebrough-Pond, Inc., 470 F.2d 1385 (CCPA 1972). Both parties employ an elderly man figure in connection with identical services. The figures create a similar commercial impression, likely to be remembered by purchasers. Each is that of an aged man in overalls with cane and pipe, i. e. a “grandpa.” We recognize, as the board implied, that the use by both parties of the word “grandpa,” rather than the figures per se, may have been responsible for the limited instances of alleged actual confusion and therefore ascribe no value to that testimony in arriving at our decision.

That one figure is upright and apparently spry while the other is slightly stooped is, we believe, a difference not likely to be recalled by purchasers seeing the marks at spaced intervals. Purchasers of retail services do not engage in trademark dissection. Legal surgery, in which trademarks have parts enhanced or discarded, is of little aid in determining the effect of design marks on purchasers who merely recollect. The scalpel is employed by lawyers, not purchasers.

We think that the overall commercial impression created by appellee’s mark is sufficiently similar to that created by appellant’s mark (Ex. 3) as to be likely to cause confusion, mistake or deception. Accordingly, we reverse.

Reversed.

      . Reg.No. 825,465, issued March 7, 1967. Reg.No. 812,359, issued Aug. 9, 1966.


text:
    Gordon G. KNAPP and Norman A. Lebel, Appellants, v. Robert G. ANDERSON and Lewis R. Honnen, Appellees.
    Patent Appeal No. 8854.
    United States Court of Customs and Patent Appeals.
    May 17, 1973.
    Joseph D. Odenweller, Ferndale, Mich., attorney of record, for appellants. John F. Sieberth, Baton Rouge, La., of counsel.
    C. J. Tonkin, San Francisco, Cal., attorney of record, for appellees.
    Before MARKEY, Chief Judge, RICH, BALDWIN and LANE, Judges, and WATSON, Judge, United States Customs Court, sitting by designation.
   MARKEY, Chief Judge.

This appeal is from the decision of the Board of Patent Interferences awarding priority of invention of the subject matter of counts 1, 3, 4 and 6 to Anderson et al. (Anderson), the senior party. A similar award of counts 2 and 5 has not been appealed.

Anderson is involved on application serial No. 647,632, filed June 21, 1967 which was accorded the benefit of application serial No. 481,916, filed August 23, 1965. Knapp et al. (Knapp) are involved on application serial No. 523,886, filed February 1, 1966. The board found the bench test relied upon by Knapp to demonstrate utility of their compositions inadequate to establish an actual reduction to practice. We affirm,

The Subject Matter

The invention involved in this interference relates to certain high molecular weight hydrocarbon-substituted amines and lubricating oil compositions containing the same. The primary function of the amine as a lubricant additive is to prevent the deposition of sludge by keeping it dispersed in the lubricating oil. Counts 1 and 4 are representative:

1. A compound of the formula

where R is a hydrocarbon radical having a molecular weight of from about 425 to about 3000 and Ri and R2 are selected from the group consisting of hydrocarbon and hydroxy-hydrocarbon radicals having from 1 to about 10 carbon atoms and hydrogen.
4. A lubricant composition comprising a major amount of a lubricating oil and a minor amount of a compound of the formula

where R is a hydrocarbon radical having a molecular weight from about 425 to about 3000 and Rx and R2 are selected from the group consisting of hydrocarbon and hydroxy-hydrocarbon radicals having from 1 to about 10 carbon atoms and hydrogen.

Count 3 is directed to the morpholine species of generic count 1 and count 6 to the corresponding lubricant composition.

The Record

Both parties took testimony. Knapp attempted to establish actual reduction to practice of the subject matter of the counts on appeal prior to August 23, 1965, the filing date of the earlier Anderson application. Anderson, having elected to rely on that filing date, introduced only rebuttal testimony.

The Board Decision

Priority of conception and preparation of the amines and lubricant compositions containing the same was accorded to Knapp, the board stating:

We are of the opinion that Knapp et al. have established by a preponderance of the evidence now before us that a composition containing a hydrocarbon substituted amine as defined by counts 1, 3, 4 and 6 was prepared by or on behalf of them prior to the record date of Anderson et al.

The chief inadequacy of the Knapp evidence, in the board’s opinion, rested in the sludge dispersancy test, a laboratory test performed to evaluate the usefulness of the amines as dispersants in lubricant compositions. The board found that test not

* * * sufficient to simulate actual service conditions to such an extent so [sic] as to warrant its acceptance by the industry as a standard and acceptable means of evaluation * * *.

It was also pointed out that there was no evidence of record which might indicate contemporaneous evaluation or reliance upon the test results. Hence the board concluded:

* * * we are of the opinion that the record does not establish any conviction or appreciation on behalf of Knapp et al. that their compositions would operate successfully for their intended or any other purpose.

OPINION

It is well settled that if the counts do not specify any particular use, evidence proving substantial utility for any purpose is sufficient to establish an actual reduction to practice. Blicke v. Treves, 241 F.2d 718, 44 CCPA 753 (1957). Here counts 1 and 3 are directed to the amines per se with no limitation as to use. Although counts 4 and 6 are drawn to lubricant compositions containing the amine additives, any use applicable to a lubricant composition would suffice.

On this record, we find that the only utility contemplated for the amines is as ashless dispersants in lubricant compositions. The compositions are clearly intended to be used in internal combustion engines. We cannot accept appellants’ argument that sufficient utility is demonstrated if the amines are useful for “dispersing sludge” and the compositions are useful for “maintaining sludge in suspension,” regardless of the setting or the type of sludge suspended. The record makes it clear that such was not an objective of the Knapp research. On the other hand, advancement to the stage of commercial acceptability is not necessary to establish an actual reduction to practice, so long as the compositions are capable of fulfilling the function for which they were designed. Land v. Regan, 342 F.2d 92, 52 CCPA 1048 (1965).

It was with the aforesaid contemplated utility in mind, i. e. “ashless dispersants * * * for keeping an engine clear and sludge free during operation,” that the board approached the sludge dispersancy test used by Knapp. The lack of correlation between that bench test and actual service conditions in a combustion engine, gasoline or diesel, led the board to reject the test as an acceptable standard for evaluating detergent lubricating oils. Instead, the test was described as being “preliminary in nature, serving only to screen out the most unlikely candidates and thereby limiting the need for the more expensive but reliable engine tests.”

We find no error in the board’s conclusion. Laboratory testing can be an acceptable means of proving a reduction to practice, but only when a relationship is established between the test conditions and the intended functional setting of the invention. Paivinen v. Sands, 339 F.2d 217, 226-227, 52 CCPA 906, 918 (1964); White v. Lemmerman, 341 F.2d 110, 113, 52 CCPA 968, 972 (1965). The test results must prove that the invention will perform satisfactorily in that intended setting. Knowles v. Tibbetts, 347 F.2d 591, 594, 52 CCPA 1800, 1804 (1965); Koval v. Bodenschatz, 463 F.2d 442, 447, 59 CCPA(1972). Here the tests would have had to establish that the lubricant compositions containing the amine sludge dispersants would function as designed during the operation of a combustion engine. From the evidence of record, we are convinced only that the sludge dispersancy' bench test demonstrates a limited dispersant characteristic of the amine-containing lubricating oils. This property cannot be equated to and has not been adequately correlated with the contemplated useful function of the compositions.

As pointed out by the board, the testimony of Knapp himself and of O’Neill, the technician who performed some of the sludge bench tests, points the way to a conclusion of inadequate correlation. It clearly does not refute the testimony of witnesses Parker and Fontana of Chevron that there are problems of correlation. Knapp admitted that there were inconsistencies between the bench test and actual service conditions, stating:

There were some materials that looked good in the bench test that weren’t good in the engine, but we don’t have any of the reverse, where material looked good in the engine and didn’t look good in the bench test. The bench test doesn’t really have all of the ramifications that an engine test does; it’s not as severe, and some of the conditions did not exist in the bench test.

He described the test as “preliminary” to eliminate those materials not worth submitting to an engine test. The engine test itself was acknowledged to be “still one removed from a field test.” O’Neill agreed that the effectiveness of the dispersant in a combustion engine could not be predicted from the bench test. The test results simply indicated that a “candidate” had been found which was “worthy of testing in an engine test.” The Knapp application sets forth later performed engine tests to demonstrate utility.

The board found no evidence of record indicating any conviction of success at the time Knapp’s bench tests were conducted. Nor do we. Such an absence of any contemporaneous evaluation or decision to continue work toward a commercially acceptable product can hardly be reconciled with the establishment of utility.

Appellants have introduced into evidence several U. S. patents which set forth various bench tests employed in the industry to demonstrate dispersant utility. None of these tests are identical to the sludge test under consideration. Most employ carbon black rather than a synthetic sludge. None provide any support for the alleged correlation of the Knapp bench test with actual service conditions. On the matter of the tests establishing utility per se, the board correctly pointed out that:

* * * the disclosure necessary to support the patentability of an invention in an application is not necessarily relevant to the degree of proof required to support an actual reduction to practice in an interference proceeding.

Appellants argue that the intention to do further testing to determine commercial feasibility of the products should not negate the reduction to practice as of the time of the bench tests, citing Rimbach v. Wanmaker, 362 F.2d 561, 53 CCPA 1552 (1966). Here, contrary to the situation in Rimbach, the invention had not been tested under laboratory test conditions to the extent that utility would be known to those of ordinary skill in the art. Only a potential utility had been established. It was not merely a question of commercial development.

The circumstances of this case are also distinguishable from those in the recent case of Campbell v. Wettstein, 476 F.2d 642 (Cust. & Pat.App.1973). In Campbell the record failed to support the board’s conclusion that the particular tests there conducted were insufficient to establish anti-fertility activity. Those laboratory tests actually demonstrated in test animals the pharmacologacal activity being relied upon for utility and did not merely narrow the field to candidates worthy of further testing.

In conclusion, we find that appellants have failed to establish actual reduction to practice of the subject matter of the counts by a preponderance of the evidence. The decision of the board is affirmed.

Affirmed.

      . The Anderson applications are assigned to Chevron Research Company and the Knapp application to Ethyl Corporation.

      . In this test a synthetic sludge formed from oxidized lubricating oil and sludge is suspended in lubricating oil containing a minor amount of the test additive and the suspension is then centrifuged. The degree of settling, indicative of nondispersancy, is measured by determining the light transmittance of the upper layer using a photoelectric cell. Samples containing no additive and a commercially successful dispersant are run as standards.


author: SOBELOFF, Senior Circuit Judge:

text:
    James Lewis JOHNSON et al., Appellants, v. CAPITOL CITY LODGE NO. 74, FRATERNAL ORDER OF POLICE, an unincorporated association, by its President, Raymond W. Spradling, Appellee.
    No. 72-2452.
    United States Court of Appeals, Fourth Circuit.
    Argued April 2, 1973.
    Decided May 1, 1973.
    Timothy N. Barber, Charleston, W. Va., for appellants.
    Before SOBELOFF, Senior Circuit Judge, and FIELD and WIDENER, Circuit Judges.
   SOBELOFF, Senior Circuit Judge:

The appellants are five black members of the police force of Charleston, West Virginia. They brought this class action, pursuant to 42 U.S.C. § 1983, alleging that the Capitol City Lodge No. 74, Fraternal Order of Police, discriminated against blacks in its membership selection process. By stipulation of the parties, the transcript of evidence taken in an administrative hearing before the West Virginia Human Rights Commission was adopted as the evidentiary record and the case was submitted to Judge Knapp of the Southern District of West Virginia for decision. The District Court made both findings of fact and conclusions of law. The appellants now appeal only those aspects of the District Court’s decision that relate to remedy.

In order to place this case in perspective, it is first necessary to review briefly some of the unchallenged findings of the lower court. The Lodge in question, ostensibly a private fraternal organization, provides a variety of social and recreational activities for its members. But the Lodge also has several visible public functions. By statute the organization appoints one member of the City of Charleston’s three-member police civil service commission. See W.Va. Code Ann. §§ 8-14-7, 8-14-10 thru 14 (1969). This commission promulgates the regulations that govern entrance into and advancement within the Charleston police department. This commission also may conduct investigations of the police department and to this end may subpoena witnesses. Additionally, the Lodge appoints three members of the five-member commission which supervises the operation of police department sick-leave policy and investigates individual sick-leave applications. The sick-leave committee may select doctors to examine police department members and take appropriate action regarding abuse of sick-leave policy by police officers.

The Supreme Court has said that the presence of two elements is necessary in order to maintain successfully a section 1983 action. First, the plaintiff must have suffered deprivation of a right secured by the Constitution and laws of the United States; and second, this deprivation must be the result of action taken by the defendant “under col- or of law.” See Adickes v. S. H. Kress & Co., 398 U.S. 144, 150, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970).

In the instant case, the District Court found that the Lodge had deprived appellants and others of their class of membership solely on the basis of race. The system of exclusion was institutionalized in a rule which permitted five members to veto the application of any prospective member. The District Court also found that the defendant Lodge was operating under “color of law.” We agree both that the Lodge has pursued a discriminatory membership policy and that the Lodge and police department are so closely entwined as to fulfill the state action requirement of Adickes. The record indicates that the Capitol City Lodge functions as an integral part of the over-all operation of the Charleston police department, exercising supervisory authority and quasi-judicial power over essential aspects of the careers of all Charleston policemen.

Despite the District Court’s finding of both racial discrimination and state action, affirmative relief was refused. The court merely ordered the Lodge to cease its discriminatory membership policy, while at the same time leaving the five-man-veto provision intact. This action is reminiscent of the mother who gave her daughter permission to go swimming but in the same breath admonished her not to go near the water.

To refuse affirmative relief on a record such as this would not only result in a miscarriage of justice but would also invite further litigation. Courts have the power and duty to fashion affirmative relief so as to provide an effective federal remedy where federal law is violated. The Supreme Court said in Louisiana v. United States, 380 U.S. 145, 154, 85 S.Ct. 817, 822, 13 L.Ed.2d 709 (1965): “We bear in mind that the court has not merely the power but the duty to render a decree which will so far as possible eliminate the discriminatory effects of the past as well as bar like discrimination in the future.”

The Court has since followed this rationale in upholding judicially ordered assignment of students on a racial basis in order to eradicate the vestiges of previous discrimination. See Swann v. Charlotte-Mecklenburg Bd. of Educ., 402 U.S. 1, 28, 91 S.Ct. 1267, 28 L.Ed.2d 554 (1971).

Only affirmative relief can insure with certainty that the effects of the Lodge’s past discrimination will be eliminated. Until there are a significant number of blacks who are members of the Lodge, there can be no guarantee that the five-man-veto rule will not continue to function as a convenient cover for discrimination. We agree with the action of the Fifth Circuit which in Adams v. Miami Police Benevolent Assoc., Inc., 454 F.2d 1315 (5 Cir.), cert. den., 409 U.S. 843, 93 S.Ct. 42, 34 L.Ed.2d 82 (1972), approved affirmative relief under similar circumstances. The District Court here should have ordered the Lodge to abandon its five-man-veto rule entirely and to accept forthwith as members all police officers currently in good standing on the Charleston police force.

Accordingly, we remand so that the District Court may grant appellants affirmative relief consistent with this opinion.

Remanded with instructions.

      . Mother, may I go out to swim?
      Yes, my darling daughter;
      Hang your clothes on a hickory limb
      And don’t go near the water.
      Anonymous, Familiar Quotations by John
      Bartlett (14th ed.), 1103a.

      . There are currently 141 white police officers on the force, all of whom are members, and 11 black policemen of which only three are Lodge members.


author: JAMES HUNTER, III, Circuit Judge.

text:
    GOVERNMENT OF the VIRGIN ISLANDS, Appellee, v. Ralph LANCLOS, Appellant.
    No. 72-1266.
    United States Court of Appeals, Third Circuit.
    Argued Feb. 2, 1973.
    Decided March 27, 1973.

      Thomas D. Ireland, Ireland & Finucan, Charlotte Amalie, St. Thomas, V. I., for appellant.
    Joel D. Sacks, U. S. Atty., Frederick G. Watts, Asst. U. S. Atty., Charlotte Amalie, St. Thomas, V. I., for appellee.
    Before VAN DUSEN, ROSENN and HUNTER, Circuit Judges.
   OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge.

The defendant Ralph Landos appeals from his conviction in the district court of the Virgin Islands of murder in the first degree. By information, the government charged that the defendant, on April 30, 1971, in violation of 14 V.I.C. § 922(a)(1), with malice aforethought, did willfully, deliberately and with' premeditation kill one Keith Stevens by shooting him with a pistol, thereby inflicting mortal wounds from which he died. The defendant entered a plea of not guilty, and his case was tried before a jury which found him guilty of murder in the first degree. At the close of the government’s case, the defendant moved for a dismissal of the information on the ground that the government had not proved beyond a reasonable doubt that the defendant had killed Stevens with deliberation and premeditation. The government opposed this motion, and it was denied by the district court after a brief oral argument. After the jury found defendant guilty of first degree murder, he moved for a judgment of acquittal or, in the alternative, for a new trial. The district court denied this motion, and defendant was sentenced to a mandatory life term. 14 V.I.C. § 923(a). This appeal followed.

A brief summary of the evidence presented in this case is appropriate:

At about 4:30 a.m. on April 30, 1971, the defendant shot and killed Keith Stevens outside of the Lindberg Bay Beach Club (“Beach Club”) on St. Thomas. The defendant testified at trial that he shot Stevens, but he claimed that he did so in self-defense because he was being “nicked” or “cut.” The homicide took place during “carnival” festivities, and the defendant apparently had not slept for nearly twenty-four hours and had consumed several drinks during the evening. Nevertheless, it does not appear that he was intoxicated. At the time of the shooting, the defendant, a Marine veteran, was employed as a police officer by the government of the Virgin Islands. He was not on duty when the homicide occurred nor was he in any way acting in his capacity as a policeman.

The defendant testified that he did not know Stevens, and that they bumped into each other as the defendant was entering the Beach Club through what is primarily an exit while Stevens was coming out. The defendant stated that he tried to apologize, but that Stevens insulted him with foul language. The defendant then said that he attempted to identify himself as a policeman, whereupon Stevens attacked him with a sharp object and the defendant protected himself by shooting Stevens. The defendant testified that he could not remember any details of the shooting except that he believed his life was in danger. After the shooting, the defendant placed the gun by the body, handcuffed himself and asked to be taken to the Fort. He was driven there by two friends named Watkins and Callender, but he entered the Fort alone. When he presented himself at the front desk, he told Lieutenant Norman that a man had tried to cut him and that he, the defendant, shot him. Lieutenant Norman testified that certain parts of the defendant’s tee shirt were torn and that he had scratches on his shoulder and chest. The defendant was then taken to a local hospital where he was treated for “multiple superficial abrasions and lacerations of the left shoulder, chest and back.”

While the defendant’s story might be persuasive standing alone, the prosecution in this ease presented a very different view of the facts surrounding the homicide.

One government witness, Louis Morales, testified that just prior to the shooting the defendant was “sitting on the left front fender” of Morales’ Volkswagen which was parked in front of a door at the Beach Club. Morales was standing just to the left of his Volkswagen. Morales stated that he observed the defendant draw a pistol and shoot Keith Stevens, whom Morales knew, as Stevens was emerging from the Beach Club eating a chicken leg. Morales testified that the defendant fired two shots into Stevens, that Stevens leaned up against a pole, that the defendant shot Stevens again, that Stevens fell to the ground, that the defendant shot him twice more, paused, and then shot him again.

A second government witness, Yvonne Warner, was sitting in the front seat of Morales’ Volkswagen when the shooting took place. She testified that she heard two or three firecracker-like noises, and that she then saw the defendant with a gun firing at Stevens who was on the ground. Miss Warner said that she saw the defendant sitting on the front fender of the Volkswagen, but it is unclear from her testimony whether this observation was made before or during the shooting. Miss Warner also stated that she did not see the defendant and Stevens engage in any conversation prior to the shooting.

A third person who witnessed the homicide was Michael Springer, a line dispatcher for the local Power Authority, who was attending a dance at the Beach Club. Springer testified that he was standing outside the Beach Club when he heard a shot, saw Stevens fall to the ground, and then saw the defendant fire two or three more shots at Stevens. Springer also said that the defendant fired at least one shot while sitting or leaning on the fender of a car.

The only witness who observed any contact between the defendant and Stevens was a Mrs. Eleanor Wallace. She testified that as she was leaving the Beach Club around 4:30 a.m., she saw the two men standing in the doorway, and she overheard one of them say, “I said you brushed on me,” or something to that effect. She walked on toward a parking lot, and about two minutes later heard what she thought was a shot.

Although the defendant claims that he was cut and that his shirt was torn by Stevens, nobody noticed this until the defendant presented himself to Lieutenant Norman at the Fort. Instead, several witnesses described his physical appearance after the shooting, and all denied seeing any torn shirt or injuries to the body. Even the two men who drove the defendant to the Fort, but who dropped him off at the front gate and let him enter by himself, stated that they had not seen any blood or other sign of injury. In addition, another witness, Enard F. Frett, testified that after the shooting he heard the defendant ask a police officer named “Cornel” if he had “anything sharp.” Cornel allegedly replied that the only sharp thing which he had was his sunglasses. Based upon all this evidence, the government contended that the defendant was not cut by Stevens but rather that the defendant inflicted his own wounds before turning himself in.

Title 14 V.I.C. §§ 921 and 922 defines the crime of murder as follows:

“§ 921. Murder defined.
“Murder is the unlawful killing of a human being with malice aforethought.
“ § 922. First and second degree murder defined.
“(a) All murder which—
(1) is perpetrated by means of poison, lying in wait, torture or by any other kind of willful, deliberate and premeditated killing; or
(2) is committed in the perpetration or attempt to perpetrate arson, burglary, kidnapping, rape, robbery or mayhem—
is murder in the first degree.
“(b) All other kinds of murder are murder in the second degree.”

On this appeal, the defendant contends that the evidence is insufficient to sustain a verdict of first degree murder and that the trial court erred in denying his motion for a judgment of acquittal on this charge. Specifically, the defendant argues that the government did not prove that the killing was willful, deliberate and premeditated. He also claims that § 922(a)(1) requires, “as an essential element of first degree murder, substantially more reflection, that is, more understanding and comprehension of the character of the act, than the mere amount of thought necessary to form an intention to kill.” We cannot agree with any of these statements.

The pertinent principles of Virgin Island law with respect to the elements of willfulness, deliberation and premeditation were recently set forth by Judge Maris in Government of Virgin Islands v. Lake, 362 F.2d 770, 776 (3d Cir. 1966), as follows:

“To premeditate a killing is to conceive the design or plan to kill. State v. Anderson, 1961, 35 N.J. 472, 173 A.2d 377, 389-390. A deliberate killing is one which has been planned and reflected upon by the accused and is committed in a cool state of the blood, not in sudden passion engendered by just cause of provocation. State v. Roedl, 1945, 107 Utah 538, 155 P.2d 741, 749. It is not required, however, that the accused shall have brooded over his plan to kill or entertained it for any considerable period of time. Although the mental processes involved must take place prior to the killing, a brief moment of thought may be sufficient to form a fixed, deliberate design to kill. State v. Hammonds, 1939, 216 N.C. 67, 3 S.E.2d 439, 445; Keenan v. Commonwealth, 1863, 44 Pa. 55, 56-57. See, also, Bullock v. United States, 1941, 74 App.D.C. 220, 122 F.2d 213, 214; 1 Wharton’s Criminal Law and Procedure (1957) §§ 267, 268; 40 C.J.S. Homicide § 33.
“The defendant argues that the record is barren of any affirmative proof of premeditation on his part. It is true that there is no direct proof of the defendant’s mental processes in this regard. But since these are wholly subjective it is seldom possible to prove them directly. If premeditation is found it must ordinarily be inferred from the objective facts. Every sane man is presumed to intend all the natural and probable consequences flowing from his deliberate acts. Allen v. United States, 1896, 164 U.S. 492, 17 S.Ct. 154, 41 L.Ed. 528. Accordingly, if one voluntarily does an act, the direct and natural tendency of which is to destroy another’s life, it may fairly be inferred, in the absence of evidence to the contrary, that the destruction of that other’s life was intended.” (emphasis added).

Considering .this inference in the light of the evidence presented by both sides, we believe that the district court correctly denied defendant’s motion for a judgment of acquittal on the first degree murder charge. The defendant argues that the record contains no proof of premeditation and deliberation on his part, and that his testimony and injuries successfully rebut any inference against him. We do not think so. The defendant’s testimony that he was cut by Stevens stands alone and uncorroborated. Similarly, the defendant produced no witnesses to testify that his shirt was torn or that he was cut and bleeding prior to the time that he gave himself up.at the Fort. On the other hand, the government produced an eyewitness, Louis Morales, who said that he saw the defendant, who was sitting on the front of Morales’ car, draw his pistol and shoot Stevens six times as he came out the door of the Beach Club. In addition, several witnesses described the defendant’s physical appearance after the shooting, and all denied seeing any torn shirt or bodily injuries. With this background, and in view of Énard Frett’s testimony that he overheard the defendant ask a police officer named “Cornel” if he had anything sharp, we think that the jury could easily have concluded that the defendant’s wounds were self-inflicted to make it appear that he acted in self-defense. Finally, with respect to the defendant’s contention that the shooting occurred during the course of an argument, the only witness who observed any contact between the defendant and the deceased was Mrs. Wallace, but she stated that this was about two minutes before she heard any shots. Consequently, we believe that the jury could have found that the defendant and Stevens had had a quarrel and that the defendant was waiting to shoot Stevens when he emerged from the Beach Club. This would be consistent with the testimony that nobody saw a dispute between the defendant and the deceased immediately before the murder. In the absence of any significant evidence to support the defendant’s story, and taking all the evidence into consideration, we cannot say that it does not support the jury’s finding that the defendant was guilty of willful, deliberate and premeditated murder.

The other contention raised by the defendant on this appeal is that the district court abused its discretion in not permitting him to conduct an in-court demonstration with handcuffs. The purpose of this proposed experiment was to show to the jury that the defendant could not reach the area of his wounds with his hands while handcuffed. The trial judge refused to allow the demonstration on the ground that there would be no way to determine objectively whether or not the defendant was making a good faith effort to reach as far back as he could. The trial judge has considerable discretion in deciding whether or not to permit an experiment in the presence of the jury, and we find no abuse of discretion here. The jury saw the defendant and the location of his wounds, and from that they could reasonably determine whether or not they were self-inflicted.

For the reasons stated, the judgment of the district court of the Virgin Islands will be affirmed.

      . The Fort is the name of the local prison.

      . Brief for defendant-appellant at 13-14.

      . In reviewing whether or not the evidence is sufficient to support a conviction, it is fundamental that we must view the evidence in the light most favorable to the government. E. g., United States v. Miles, 468 F.2d 482 (3d Cir. 1972); United States v. Hamilton, 457 F.2d 95 (3d Cir. 1972); United States v. De Cavalcante, 440 F.2d 1264 (3d Cir. 1971).

      . In deciding this question against the defendant, we have considered and reject his contention based upon § 201 of the 1937 Penal Code of Puerto Rico and these cases: People v. Perez, 84 P.R.R. 173 (1961); People v. Blanco, 77 P.R.R. 726 (1954); People v. Lassalle, 18 P.R.R. 410 (1912). We have also considered and reject his contention based on People v. Martinez, 38 Cal.2d 556, 241 P.2d 224 (1952), and People v. Holt, 25 Cal.2d 59, 153 P.2d 21 (1944), which were cited in oral argument, and People v. Howard, 211 Cal. 322, 295 P. 333, 336 (1930), which was cited in his brief.

      . It should be noted that the trial judge had previously refused to permit the prosecution to conduct a similar experiment with Lieutenant Norman which was designed to show that the defendant could reach the injured areas of his body while handcuffed.