author: OAKES, Circuit Judge:

text:
    In re LAW RESEARCH SERVICE, INC., Appellant, v. GENERAL AUTOMATION, INC., Appellee.
    No. 380, Docket 73-2115.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 23, 1974.
    Decided March 14, 1974.

      Jane Compton, New York City, for appellant.
    Michael Wexelbaum, New York City (Sherman & Citron; Howard Karasik, New York City, of counsel), for appellee.
    Before HAYS, MANSFIELD and OAKES, Circuit Judges.
   OAKES, Circuit Judge:

This appeal is by a Chapter XI debt- or, Law Research Service, Inc. (“Law Research”), an erstwhile supplier of computer services to legal researchers, from an order of the district court affirming the referee’s order allowing in full the claim of a creditor, General Automation, Inc. (“General”), for computer hardware and software sold and delivered. Law Research claimed below (1) that it owed nothing because General had not delivered the entire “software package” essential to operation of its service which had been contracted for and (2) that at least it did not owe the $14,000 contract price for that software. The debtor also claimed that the controlling measure of its indebtedness, if any, was by way of a December 31, 1970, invoice for $103,485 (less concededly inapplicable quantity discounts) rather than a subsequently rendered “corrected invoice” dated back to the same date for $115,635 (less an inapplicable quantity discount). We agree with the court below and the referee on the software claim, but remand for further findings in respect to the proper amount of the invoice.

As stated, the debtor-appellant’s business was supplying computerized legal research to lawyers; this was being done through a controlled subsidiary corporation in Pennsylvania, by way of a central computer, duly programmed with ease materials, which processed questions from lawyers or law libraries through the use of remote computer terminals (teletypewriters) in their offices. In an agreement dated June 19, 1970, and signed by the parties on June 25, 1970, debtor agreed to buy and General to sell up to 50 computer systems and components, but if only a few were purchased the purchase price was subject essentially to disallowance of the quantity discount in whole or in part and was also subject to payment of $14,000 for the “special software package and documentation” which was to be delivered with the first computer system. The contract incorporated (1) General’s standard “terms and conditions” which inter alia provided that “All clerical errors are subject to corrections”; (2) a June 18, 1970, letter relating to a firm, noncancellable order for one prototype system in consideration of which General agreed to “provide the initial software to enable you to operate your prototype system”; and (3) the letter in turn incorporated a quotation for the overall system which was made by General to debtor on June 10,1970.

Only one system was ever ordered or delivered. That one worked up until the time the hardware was removed by General, apparently for nonpayment. The hardware was returned to the debtor, pursuant to a turnover order by the referee, dated July 22, 1971, but the system was subsequently not put back into operation for reasons that do not clearly appear. The creditor, General, seeks allowance of its claim on the basis of its “corrected invoice” and as we have said, prevailed below.

The appellant’s first contention on this appeal is that the entire software package that was called for in the contract and duly ordered was not delivered. This claim is that insufficient “system documentation” was delivered to permit the debtor to operate the computer independently of General. There was evidence before the referee, however, that the system was at all times operating properly and that the alleged missing documentation was a manual which, according to the testimony of General, credited by the referee, is not delivered with special application software such as was specifically developed here for the buyer’s specific needs. Operator’s manuals and programmer’s manuals were given as a part of the overall software package delivered; these relate to the hardware itself and explain how to operate it. But nothing was furnished to explain and instruct the customer how the software itself operated, although a description of the software system in summary form was attached to the original contract, or rather the letter of June 18, 1970, incorporated therein. The complaint of the appellant’s president in testimony before the referee related to a lack of “documentation” but there was no evidence to show that in this type of special application, software material, in addition to that actually supplied, is required to be furnished, either by the custom of the trade or under the terms of the contract or its supporting documents. The contract itself called only for providing “the initial software to enable you to operate your prototype system.” The referee’s finding that the contracted for software was delivered is not “clearly erroneous,” which under General Order No. 47 (28 U.S.C.) is our guideline for review.

The invoice question is more difficult, partly because the record is insufficient and partly because the appendix presented to us is both somewhat jumbled and incomplete. No more jumbled, however, than General’s billing system; for a company in the business of selling computer systems, General’s billing of appellant contained more errors, clerical or otherwise, than pocket computers have keys. One would hope that the legal research system General furnished was more error free, or Marbury v. Madison would have been programmed as a heroin conspiracy case.

We must bear in mind that there were three different lists of items to be purchased, with prices extended. The first is the June 10, 1970, quotation attached to the original contract. The second is the December 31, 1970, invoice. The third is what we have called the “corrected invoice” which was also dated December 31, 1970, but which was delivered on an unknown date. Each of these three documents contained a list of items different from the other two, although many of the listed items were the same. The June 10 quotation and the “corrected invoice” contain some of the same prices for items which are apparently the same, although in some cases their descriptions differ slightly. The uncorrected December 31, 1970, invoice contains seven items which carry a lower price than those on the “corrected invoice” and the latter contains one item which is not on the December 31 invoice. Appellant argues that the original December 31, 1970, invoice is controlling, and its argument is supported by the fact that a statement was rendered to it by General on January 31, 1971, referring back to the figure set forth in that invoice.

Appellee argues that the referee’s conclusion that the corrected invoice was mailed on the same date as the incorrect one should not be disturbed under General Order No. 47, supra. But, as the General brief admits, the referee’s conclusion of mailing on the same date is based on the fact that the invoices “both had the same date, were part of Claimant’s business records and were in fact delivered to Debtor.” The mailing of the January 31 statement, however, raises a serious question as to the accuracy of this conclusion. In any event there is no evidence in the record to support the finding that the corrected invoice was mailed on December 31,1970.

But, General argues, the general terms and conditions of its contract authorized it to correct “clerical errors.” The contract provided no time limit for such correction, which presumably should be permitted only during a reasonable time. Cf. New York Uniform Commercial Code § 2-321 (requiring settlements on certain contracts to be made with “commercial promptness”). What that time is we will leave to the referee and the district court to say, in the light of such evidence as may be offered on remand.

An additional question arises, however, this time on the suggestion of appellant, that the December 31 invoice did represent the correct billing and that the corrective invoice did not. But in any event the record is deficient. While the “corrected invoice,” in reference to items such as the SPC-16 Controller or the 4K Memory [drums], does reflect the prices contained in the June 10, 1970, quotation, and the December 31 invoice does not reflect them, the contract clearly called for payment of “the GA list price at the time of the purchase release” (Par. 2.1), i. e., at the time Law Research Service, Inc., “released” any given system for delivery or ordered it pursuant to the overall arrangement. Presumably the time of the purchase release for this first system which is at issue is June 25, 1970, the date of Law Research Service’s Purchase Order No. 824. While General’s evidence indicated that the prices on the corrected invoice were list prices, there is no evidence that they were the June 25, 1970, list prices. A remand will determine that also.

The decision of the referee, as affirmed by the district court, is affirmed in part, reversed in part and remanded for proceedings consistent with this opinion.

      . It is difficult to see that this claim was made to the referee; rather, it appears that only the $14,000 price for the software package was contested since there was an admission that General was entitled to $75,625 (A108). On a basis unknown to us, the debtor claimed it was entitled to a quantity discount although it purchased only one system, a claim abandoned here.

      . A subsequent agreement dated July 1, 1970, was signed by General on July 23 and the debtor on August 18, 1970. It incorporates in typewriting a number of written insertions in the June 19 agreement and its only change of substance — not material here — relates to the percentage of discount allowable on quantities between 50 and 99 of systems delivered.'

      . Software was defined as “the instructions that you give a computer that tells the computer what it is supposed to do when you want it to do it.” It includes memory tapes, punch cards and paper tapes programmed to instruct the computer what to do.

      .

      . An FGBG option at $500. The shipping and handling charges on the two invoices were the same, but the discounts were different. Thus the total of the differences between the invoices of the items in footnote 4 and $500, i.e., $12,150, is the amount involved in this dispute.

      . After testifying that the equipment actually shipped to debtor was that equipment listed on the “revised” invoice (A116), Mr. Ducey testified that he was “familiar” with the list prices of the items listed on that invoice. Mr. Ducey was then permitted to draw the conclusion, over the objection of debtor’s counsel, “That [the total price reflected on the revised invoice] is the correct amount owing.” (A117.) It would seem logical to expect that the best evidence of the list prices of the various equipment listed on the revised invoice — assuming that those were the items shipped — would be either a published price list effective as of June 25, 1970, or business records of General that serve the same purpose. Even the “certainty” with which Mr. Ducey assured the referee of his personal knowledge as to what equipment was actually shipped is called into question by the fact that the equipment listed on the revised invoice does not even correspond to that listed in the letter of April 20, 1971, supra.


source: Caselaw Access Project

author: HASTINGS, Senior Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Richard G. WOOLEY, Defendant-Appellant.
    No. 73-1244.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 7, 1974.
    Decided March 25, 1974.
    Elmo E. Koos, Peoria, 111., for defendant-appellant.
    Scott P. Crampton, Asst. Atty. Gen., Robert E. Lindsay, Atty., Tax Div., U. S. Dept, of Justice, Washington, D. C., Donald B. Mackay, U. S. Atty., Springfield, 111., for plaintiff-appellee.
    Before HASTINGS, Senior Circuit Judge, and STEVENS and SPRECHER, Circuit Judges.
   HASTINGS, Senior Circuit Judge.

A federal grand jury returned an indictment on April 7, 1971, charging in three counts that Richard G. Wooley had willfully and knowingly attempted to evade income taxes owed by him and his wife for the taxable years 1964, 1965 and 1966, respectively, by filing false and fraudulent joint income tax returns for each of said taxable years in violation of Section 7201 of the Internal Revenue Code of 1954, Title 26, U.S.C. § 7201. The respective counts stated the taxable income and'tax reported for each year, in comparison with the chargeable correct income and tax, as set out in the margin below.

Following a jury trial beginning February 3, 1972, the jury returned a verdict on February 14, 1972, finding defendant guilty on all three counts. On August 14, 1972, a judgment of conviction was entered. The district court gave defendant a suspended sentence, with concurrent three-year terms of probation, and fines of $350 each on Counts I and II and $300 on Count III, for a total of $1,000, to be paid within one year. A special condition of probation was that defendant make settlement in full with the Internal Revenue Service within two years. Defendant appeals from his judgment of conviction and sentence. We affirm.

On appeal, defendant raises only two issues as grounds for reversal, viz.: (1) whether the trial court prejudicially erred in improperly restricting the cross-examination of Robert L. Rollins, the Government’s principal witness; and (2) whether the trial court erred in admitting into evidence the Government’s summary exhibit, as well as the testimony in support thereof.

For some years prior to and during the indictment years, defendant was plant manager of the Granite City Division of Ferro Processing Corporation (Ferro) in Granite City, Illinois. Ferro was based in Tonawanda, New York. Its Granite City Division was engaged in processing slag from the Granite City Steel Mills situated across the street.

Robert L. Rollins lived in Granite City and during the indictment years worked for the local Ford automobile dealer. Rollins also owned and operated on the side Rollins Parts and Service in Granite City. For many years Rollins had acted in this business as a jobber in the sale and distribution of machinery parts, materials and supplies of various types. Rollins had been supplying materials and parts to Ferro for its machinery locally since about 1951. His business with Ferro had become quite substantial and he was anxious to retain it. Rollins first met defendant about 1959 and was assured by him that he could expect to continue to receive his share of this business. Rollins would send his bills for supplies to Ferro’s main office in Tonawanda, New York. After checking the bill against the receiving ticket forwarded from its Granite City Division, the Tonawanda office would pay the bill. Defendant was one of those authorized to verify receiving tickets at the Granite City plant.

For the purposes of this decision it is sufficient to say that, at the suggestion of defendant, Rollins entered into a dishonest plan with defendant to defraud Ferro. At defendant’s direction, during the years 1964, 1965 and 1966, Rollins furnished defendant with a substantial amount of building materials for a new home defendant was constructing; provided him with marine supplies for his boat; and made payments on a mobile home and a home improvement loan at a bank. Defendant paid for none of these items. The supplies and materials were billed to Rollins who paid for them. At defendant’s direction, Rollins then made out fictitious bills for parts and materials furnished locally to Ferro to cover Rollins’ various expenditures for defendant. After approval of the bills in due course by defendant, Ferro paid these fictitious claims to Rollins.

This scheme subsequently came to light as a result of an Internal Revenue Service audit of Rollins’ income tax returns. Rollins had written off the items he had paid for on behalf of defendant as materials and supplies expenses. As a result, Rollins was assessed an additional $5,872.89 for 1964 and an additional $10,094.99 in 1965 by the Internal Revenue Service. Rollins admitted in his testimony his full participation in this dishonest transaction. He stated that he had not been indicted.

IRS Agents Wehrheim and Kombrink testified concerning their interviews with defendant. Revenue Agent John Davis summarized the Government’s contentions as to defendant’s correct taxable income in Government Exhibit 26, hereinafter referred to. Various suppliers testified concerning materials which they had billed to Rollins and were directed to deliver to defendant. We need not further detail these various transactions.

Defendant testified in his own defense. He denied any arrangement with •Rollins concerning the billings to Ferro. He denied receiving some of the items shown on the invoices. As to other items, he stated he paid Rollins for some of them in cash; he claimed others were gifts from Rollins; and as to substantial amounts, totaling about $14,000, which he admitted owing, defendant claimed that Rollins had agreed to lend this to him until he could get a mortgage loan on his new home after it was constructed. Defendant’s home was substantially completed in 1966, but he did not attempt to obtain a mortgage loan, purportedly to repay Rollins, until January 1972, about three weeks prior to trial. Defendant gave various reasons for the delay. Two other witnesses testified for defendant concerning certain items they had purchased from Rollins for which they paid him, because Rollins could get them cheaper. Another witness testified that he heard defendant ask Rollins on two occasions in 1966 how much he owed Rollins for materials he had purchased for his home.

In view of its guilty verdict, it is obvious that the jury credited the Government witnesses and discredited defendant. It was well within the province of the jury to do so.

I.

The trial court, upon defendant’s objection, restricted the Government in its direct examination of Rollins to his dealings with defendant during the three indictment years. On cross-examination, defendant’s counsel sought to inquire into Rollins’ business dealings with persons other than defendant during the same years. Since Rollins’ testimony on direct examination was concerned solely with his dealings with defendant, the court held this attempted cross-examination to be beyond the scope of the direct examination. As a general rule, such restriction has long been accepted and adhered to and lies within the sound discretion of the trial court. United States v. Lawinski, 7 Cir., 195 F.2d 1, 7 (1952); United States v. Spa-tuzza, 7 Cir., 331 F.2d 214, 217, cert, denied, 379 U.S. 829, 85 S.Ct. 58, 13 L.Ed. 2d 38 (1964).

Defendant contends that his cross-examination was for the purpose of testing the credibility of Rollins, and, within the discretion of the trial court, this may be an allowable exception to the general rule. United States v. Lawinski, supra. However, the record here shows that the trial court permitted limited questioning of Rollins concerning his business activities with others and that the questions were answered. Rollins testified that he could not recall obtaining certain articles for other individuals not in business. He denied receiving payments from a Mr. Bumpers and a Mr. Thompson, and others, for materials and various items and then listing them on his own business records as materials and supplies. Furthermore, defendant brought out the information he sought to elicit through the restricted cross-examination by the contrary testimony of both Bumpers and Thompson.

We need not further extend this discussion since the record obviously shows that the trial court did not abuse its discretion in limiting the cross-examination, and, in any event, there was no showing of actual prejudice to defendant. To have further permitted the excursion into collateral matters to an unlimited extent would have served only to unnecessarily confuse the jury. United States v. Bender, 7 Cir., 218 F.2d 869, 873, cert, denied, 349 U.S. 920, 75 S.Ct. 660, 99 L.Ed. 1253 (1955).

In sum, we hold that the trial court did not abuse its discretion in limiting the cross-examination of Rollins. United States v. Spatuzza, supra; United States v. Bender, supra; and United States v. Lawinski, supra.

II.

Defendant’s contention that the trial court erred in admitting into evidence the Government’s summary exhibit, as well as the testimony in support thereof, may be somewhat summarily disposed of.

The summary exhibit was prepared by Internal Revenue Service Agent John J. Davis, Jr. The Government qualified him as an expert in the computation of income tax returns. He was present throughout the trial and heard the Government witnesses testify. He had examined all documents that had been introduced into evidence. Based on such evidence and documents Agent Davis prepared the summary exhibit in question. Agent Davis testified in detail, over objection, concerning the manner in which he prepared his computations and results in arriving at each entry in the exhibit. He was thoroughly and extensively cross-examined on all matters by defense counsel. It was clearly established that defendant owed the tax set out in the summary exhibit only if he received all the items listed on the invoices. It was conceded that the trial court correctly instructed the jury on the proper use of the summary exhibit in the manner set out in the margin.

On appeal, defendant does not argue that such exhibits and supporting testimony are inadmissible as a matter of law. He agrees that they are “useful to the jury in cases involving numerous and complex or confusing transactions.” However, in substance, defendant again urges that the trial court prejudicially erred in restricting the cross-examination of Rollins. Defendant states “[t]he question is whether the basis for the summary, Rollins’ testimony, was not so poisoned by error as to render admission of all ‘summary’ evidence error upon error.” Since we have hereinabove held that no error was committed in restricting the cross-examination of Rollins, a fortiori, such rulings are not grounds for excluding either the summary exhibit or the testimony in support thereof.

In United States v. Dana, 7 Cir., 457 F.2d 205, 207-208 (1972), in a well considered opinion by Judge Kiley, we approved the use of summaries such as those prepared and testified to by Agent Davis and held that the trial court’s ruling thereon could be reviewed “only upon a clear showing of abuse and resulting prejudice” to the defendant. We held in Dana, as is the ease here, that such summaries are of material aid to the jury and that no prejudice was shown as to the defendant. In Dana, as here, the summaries were tested by the court’s clear instruction against their prejudicial use.

In light of our holding concerning the cross-examination of Rollins; the trial court’s correct instruction to the jury on the proper use of the summary exhibit; the extensive cross-examination of Agent Davis; the lack of showing of prejudice to the defendant; the consideration of the record as a whole, including the determinations of credibility; and in accord with the decision in Dana, supra, we hold that the trial court did not abuse its discretion in admitting into evidence the summary exhibit prepared by Agent Davis or the testimony in support thereof.

For the foregoing reasons, the judgment of the district court is affirmed.

Affirmed.

      . § 7201. Attempt to evade or defeat tax
      Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.

      . Reported Corrected

      . This summary exhibit was introduced and admitted into evidence as Government Exhibit No. 26. The exhibit consisted of two pages and reads as follows:

      . The court’s instruction to the jury concerning the summary exhibit stated :
      There have been admitted in evidence certain exhibits variously referred to as summaries. Strictly speaking, these exhibits are not actual evidence, but they were admitted as summaries of other evidence in the case and they are admitted only for your assistance and convenience in considering, the other evidence which they purport to summarize. Exhibits of this nature are permitted where they are based upon voluminous books, records or documents already in evidence, in order to assist you in determining the ultimate facts or results shown by such books, records or documents. But you are reminded that it is the books, records and documents which are the evidence, and the summaries are admitted only to assist you in considering that evidence. For that purpose, you are entitled to consider them.