author: STEPHENSON, Circuit-Judge.

text:
    Wesley McINDOO, Appellant, v. Harold BURNETT, Appellee.
    No. 73-1875.
    United States Court of Appeals, Eighth Circuit.
    Submitted April 16, 1974.
    Decided April 18, 1974.

      Lonnie J. Shalton, Kansas City, Mo., filed brief for appellant.
    Sylvester Powell, Jr., Heilbron & Powell, Kansas City, Mo., filed brief for ap-pellee.
    Before HEANEY and STEPHENSON, Circuit Judges, and TALBOT SMITH, Senior District Judge.

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

   STEPHENSON, Circuit-Judge.

The issue for decision in this appeal is whether the Illinois two-year statute of limitations or the Missouri four-year statute of limitations should be applied. Honorable John W. Oliver, United States District Court for the Western District of Missouri, held that the Illinois statute was applicable and granted summary judgment for defendant-appellee, Harold Burnett. Plaintiff, Wesley Mclndoo, appeals. We affirm.

The facts are not in dispute. Mc-lndoo and Burnett, Missouri residents, agreed to travel together in Burnett’s ear to a bowling tournament in Illinois. Burnett, who held a Missouri drivers license and whose car was licensed in Missouri, drove his car and Mclndoo rode in the front passenger seat. On Highway 44 in the State of Illinois Burnett’s car left the road and collided with a utility po.le and tree. Mclndoo was injured.

This action was filed by Mclndoo on May 25, 1973, over three years after the accident. By way of amended answer Burnett raised the Illinois statute of limitations and the Missouri “borrowing statute,” V.A.M.S. § 516.190 (Supp. 1973), which states:

Whenever a cause of action has been fully barred by the laws of the state, territory or country in which it originated, said bar shall be a complete defense to any action thereon, brought in any of the courts of this state.

Appellant contends, first, that the court erred in allowing defendant to amend his answer to plead the “borrowing statute.” The argument is that since defendant did not raise the affirmative defense in his answer or his motion for summary judgment the defense is waived. Burnett’s answer before amendment and motion for summary judgment merely relied upon the Illinois two-year statute, Ill.Rev.Stats., Ch. 83, § 15 (1966), without citing the Missouri borrowing legislation, Y.A.M.S. § 516.-190 (Supp.1973).

The trial court recognized that the Rules of Civil Procedure require that amendments be freely granted. Fed.R.Civ.P. 15(a). We agree. Pleadings are merely to facilitate a proper decision on the merits. Technicalities cannot be allowed to control the law suit. Foman v. Davis, 371 U.S. 178, 181-182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Wilburn v. Pepsi-Cola Bottling Co., 492 F.2d 1288 (C.A.8 1974). The trial court was correct in allowing defendant to amend his answer.

We note also that “[t]he law of any state of the Union, whether depending upon statutes or upon judicial opinions, is a matter of which the courts of the United States are bound to take judicial notice, without plea or proof.” Lamar v. Micou, 114 U.S. 218, 223, 5 S. Ct. 857, 859, 29 L.Ed. 94 (1885); Old Hickory Products Co., Ltd. v. Hickory Specialties, Inc., 366 F.Supp. 913, 916 (D.Ga.1973). This rule is of primary significance here since we are dealing with the federal district court of Missouri and that court’s special knowledge of Missouri law.

Appellant’s second and final contention is that since Missouri has now adopted the ‘“significant contacts” approach to conflict of laws problems, Kennedy v. Dixon, 439 S.W.2d 173 (Mo. 1969), the proper approach in this case would be to apply the Missouri statute of limitations. The trial court disagreed. We agree with the trial court. We find the following language from a recent Missouri case to be persuasive. The case involves a conflict between the Missouri and California statutes of limitations. The tort, slander, took place in California. The Missouri Court of Appeals explained:

The Missouri statute (§ 516.190) makes the California statute our own as to the cause of action arising in California. Jenkins v. Thompson, 251 S.W.2d 325 (Mo.1952), and no conflict of law question remains. Girth v. Beaty Grocery Co., 407 S.W.2d 881 (Mo.1966), Bowling v. S. S. Kresge Company, 431 S.W.2d 191 (Mo.1968).
-x- * * * *
Plaintiff’s alternative contention that the Restatements of conflicts (Second), Sections 585 and 584, require a determination by the court as to whether the statute of limitations is procedural or substantive need not be considered since, under the plain terms and provisions of Section 516.190, there is no conflict requiring consideration of the nature of the limitations statutes involved and for the same reason discussion of Kennedy v. Dixon, 439 S.W.2d 173 (Mo. en banc 1969), and related eases, is unnecessary since those cases apply only when a conflict of laws question is involved. Gates v. Trans World Airlines, 493 S.W.2d 668, 669-670 (Mo.App.1973).

See also Lindsey v. Colgate-Palmolive Company, 491 S.W.2d 269 (Mo.1973). These recent cases support the conclusion and citations given by the trial court and we, of course, give great weight to the district court’s determination of local law. Luke v. American Family Mutual Insurance Company, 476 F.2d 1015, 1019 & n.6 (CA 8 1972), aff’d, en bane, 476 F.2d 1023. The plain meaning of the statute in question is that where the tort takes place in a foreign jurisdiction Missouri will adopt the statute of limitations of that jurisdiction barring the cause of action. As the Restatement of Conflicts (Second) points out, had the Missouri legislature wished to exempt citizens of the forum state, such as Mclndoo here, from the application of § 516.190, it could have done so. Restatement, Conflict of Laws 2nd § 142 Comment (f).

We are satisfied that the trial court has made a correct determination of Missouri law. See also Jordon v. Chicago, Rock Island & Pacific R. R. Co., 293 F.Supp. 29 (W.D.Mo.1968).

Affirmed.

      . When this suit was ultimately brought, defendant was a resident of Louisville, Kentucky.


source: Caselaw Access Project

author: MOORE, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Respondent-Appellee, v. Estyne WEST, Petitioner-Appellant.
    No. 880, Docket 74-1045.
    United States Court of Appeals, Second Circuit.
    Argued March 8, 1974.
    Decided April 11, 1974.
    Paul P. Rao, Jr., New York City, for petitioner-appellant.
    Lawrence S. Feld, Asst. U. S. Atty., New York City (Paul J. Curran, U. S. Atty. for the Southern District of New York, New York City, John D. Gordan, III, Asst. U. S. Atty., of counsel), for respondent-appellee.
    Before MOORE, MANSFIELD and OAKES, Circuit Judges.
   MOORE, Circuit Judge:

Appellant, Estyne West, was convicted of possession with intent to distribute 11.9 grams of cocaine — a violation of 21 U.S.C. §§ 812, 841(a)(1), and § 841(b)(1)(A). She was sentenced to one year’s imprisonment and three years’ special parole. Upon appeal, her conviction was affirmed from the bench, 480 F.2d 916 (2d Cir. 1972) and certio-rari was denied. 414 U.S. 974, 94 S.Ct. 287, 38 L.Ed.2d 218 (1973). Appellant then moved pursuant to 28 U.S.C. § 2255 to vacate the judgment of conviction and set aside her sentence. This motion was denied, and the present appeal was taken from that denial.

Appellant was apprehended when, in the early morning hours of March 7, 1972, narcotics agents, having entered her apartment on the authority of a search warrant by means of a ladder, observed her throwing what later was discovered to be cocaine through her window. The agents had arrived at the apartment at approximately 8:00 P.M. the evening before but, hearing voices inside, decided to wait in the hallway in an attempt to avoid a forcible entry. The agents then waited outside appel-1-ant’s apartment for five hours. During this time one agent, who put his ear to the door, overheard fragments of the conversation going on inside. Although he was not able to follow the gist of the conversation, he heard appellant use the word “cocaine” several times, and he testified to this fact at the trial. Defense counsel made no objection to this testimony.

For the first time, on petition for cer-tiorari, appellant raised the argument that the agent’s testimony in regard to the overheard words was improper as illegal eavesdropping and that its admission was violative of her Fourth Amendment rights. The petition to the Supreme Court being denied, this argument was reiterated in the § 2255 petition to the court below.

Appellant contends that the case of Kaufman v. United States, 394 U.S. 217, 89 S.Ct. 1068, 22 L.Ed.2d 227 (1969), provided a basis for the lower court to consider her claims of tainted evidence and thus the dismissal of her petition was error. In Kaufman a defendant, whose defense at trial had been insanity, was permitted to attack on a § 2255 motion some of the evidence introduced to prove his sanity on the grounds that it had been illegally obtained.

Assuming that § 2255 may be made the vehicle for bringing the matter (the introduction of the eavesdropping testimony) to this Court, a brief review of the testimony of the agents may be helpful. The testimony of Agent Hall that he had heard the word “cocaine” through the door assumed a minor role in contrast to the testimony of Agent Korniloff who, upon entering the apartment via a ladder, actually saw appellant throw the object containing the cocaine out the window. When Agent Hall testified as to hearing the word “cocaine” as previously mentioned, no objection was taken. Had the point been raised, as now argued, the trial judge might have stricken the testimony or since the questions gave ample warning of the circumstances under which he was listening, sustained an objection to any answer. Cases in this Circuit could have supplied counsel with a clue as to the permitted range of eavesdropping. See United States v. Ortega, 471 F.2d 1350, 1361 (1972); Williams v. United States, 463 F.2d 1183, 1184 (1972); United States v. Llanes, 398 F.2d 880 (1968).

Trial strategy of counsel is not to be ignored. Thus, there is no need to pass upon the merits of admissibility if we find, as we do, that there was a “deliberate by-passing” of the Fourth Amendment issue at the trial. Defense counsel was alerted to the facts relating to Hall’s listening. It was for him to decide whether to object.

As said in Kaufman, 394 U.S. at p. 227, footnote 8, 89 S.Ct. at 1075.

Furthermore, the § 2255 court may in a proper case deny relief to a federal prisoner who has deliberately bypassed the orderly federal procedures provided at or before trial and by way of appeal * * *.

As to inadequacy of counsel, successor counsel, so frequently believing that they have discovered a hitherto unargued point, unhesitatingly level this charge at their brethren of the Bar. In this case, appellant was at various stages represented by three experienced counsel. Each could have raised this argument; only the third did so and he did not do so at his first opportunity. The absence of any complaint on this matter either on the motion for a new trial or on direct appeal convinces us that counsel on both these levels as well as at trial determined, in their discretion, that there was scant purpose to raise objection and thus bypassed the various review procedures provided.

The decision of the court below is therefore affirmed.


author: DANAHER, Senior Circuit Judge:

text:
    UNITED STATES of America, Appellee, v. Eduardo ARROYO et al., Appellants.
    Nos. 498, 499, 503, 524 and 673, Dockets 73-2193, 73-2332, 73-2339, 73-2511 and 73-2311.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 9,, 1974.
    Decided March 22, 1974.

      Franklin B. Velie, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., S. D. N. Y. and John J. Kenney and S. Andrew Schaffer, Asst. U. S. Attys. of counsel), for appellee.
    Albert J. Krieger, New York City, (Alan F. Scribner, New York City, of counsel), for appellant Arroyo.
    Jay Goldberg, New York City, for appellant Perez.
    Alvin K. Hellerstein, New York City (Paul S. Levy, Stroock & Stroock & La-van, New York City, of counsel), for appellant Sanchez.
    Stanley M. Meyer, Brooklyn, N. Y. (Preminger, Meyer & Light, Brooklyn, N. Y., of counsel), for appellant, Gonzalez.
    Julio R. Ferrer, pro se.
    Before DANAHER, LUMBARD and TIMBERS, Circuit Judges.

       Senior Circuit Judge for the District of Columbia Circuit, sitting by designation pursuant to 28 Ü.S.C. § 294(d) (1970).

   DANAHER, Senior Circuit Judge:

The massive conspiracy here involved all five appellants, convicted after a jury trial, following the importation, possession and distribution of heroin, and their joining in an effort to bring about the escape of a federal prisoner. The jury additionally found that Arroyo, Gonzalez and Perez were guilty of possessing heroin with the intent to distribute. Perhaps most important of the various claims of error is that advanced by Arroyo and Gonzalez that a Govérnment informant, after the indictment had been returned, improperly had attended meetings of these two accused and their lawyers, thus violating their Sixth Amendment right to a confidential attorney-client relationship. This aspect of the case will hereinafter be discussed, but otherwise we have no difficulty in concluding that the appellants were in no way deprived of a fair trial. The judgments of conviction are affirmed.

I.

We need only generalize to provide the background for the prosecution and the trial, for it is clear enough that each participant must have known that he was involved in one of the largest heroin importation conspiracies of recent years. We view the facts, as we should, most favorably to the position of the Government, Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942), United States v. McCarthy, 473 F.2d 300, 302 (2 Cir. 1972), United States v. Tropiano, 418 F.2d 1069, 1074-1075 (2 Cir. 1969), cert. denied 397 U.S. 1021, 90 S.Ct. 1262, 25 L.Ed.2d 530 (1970). One Alfredo Mazza, a salesman for European heroin sources, arranged with one Alfredo Aviles, agent for American buyers, for the importation in July, 1971, of some 80 kilograms of uncut, European heroin, concealed in various parts of a Volvo automobile. The car was dismantled in a Manhattan garage pursuant to arrangements by the appellant Perez. Some 64 kilograms of heroin, the subject of the substantive count, were delivered from the garage to the Aviles apartment. There, appellants Arroyo and Gonzalez met with Aviles. Gonzalez tested a portion of the heroin, indeed he carried away a sample for further testing, and thereafter Gonzalez and Arroyo took delivery of some 49 kilograms of heroin and made payment of more than a half million dollars.

Next followed in January, 1972, a second shipment of some 176 kilograms of heroin which, however, was seized in Florida — and so were Mazza, Aviles and Arroyo. Mazza was unable to post bail but Aviles did so for himself and then undertook arrangements for a further consignment of heroin expecting to use a portion of the proceeds of its sale in posting bail for Mazza. While cooperating with Alfredo Mazza’s brother Carlos and with Mazza’s lawyer, the appellant Ferrer and their European heroin supplier, one Condemine, Aviles found himself named in another narcotics indictment. Aviles presently agreed to introduce an undercover agent, Sergeant Valentine, into the continuing conspiracy. With the plan to free the jailed Mazza still having high priority, Aviles met with Arroyo and one Fragliossi, who agreed to purchase heroin upon the arrival of the expected shipment.

Meanwhile, appellant Ferrer asked for and received a flexible saw to be smuggled to and used by Alfredo Mazza to facilitate his escape if the conspirators should fail to secure his release. At trial, appellant Ferrer, the only one of the accused to testify, admitted receiving the saw but testified that he had never delivered it to the federal prisoner.

In August, 1972 Aviles talked with Gonzalez who expressed interest in obtaining heroin from the expected shipment, and also with the appellant Sanchez. Thereafter, during the course of a taped conversation with Sergeant Valentine alias Guillermo, Sanchez was assured that the shipment of heroin expected from overseas sources was of high purity, and Sanchez agreed to take 30 kilograms of that heroin at a price of $18,000 per kilogram.

II.

The foregoing outline of the Government’s case against those on trial is deemed adequate to depict the far-reaching and on-going nature of the crimes charged and of the participation of each of the accused in effectuating its objects. Repeatedly Judge Bauman most carefully instructed the jury that evidence as to each of the charges was to be considered separately in the determination of the guilt or innocence of each participant. He required the jury to indicate by special verdict the degree of involvement, if any, by each of the accused and of the association by each with the objects of the conspiracy if the jury were to find one to exist. The understanding and the discernment of the jury are entirely apparent from the verdicts as rendered.

It has been asserted, not by Arroyo, but by Perez, Ferrer, Gonzalez and Sanchez that the evidence against each of them was not sufficient to justify submitting their cases to the jury. We reject out of hand any such claim. Compare the facts as narrated in United States v. Barrera, 486 F.2d 333 (2 Cir. 1973). It has become clear beyond peradventure that

we are not dealing with minor league addicted street pushers but with well-financed brazen professionals engaged in a large-scale criminal undertaking. . . . United States v. By-num, 485 F.2d 490, 499 (2 Cir. 1973).

It has been urged upon us that there was error in the refusal of the trial judge to instruct the jury as to the possibility of multiple conspiracies. Such a claim has received consideration in this court before now, and it has often been recognized especially where heroin is involved, that it would be unrealistic to assume that major producers, importers, wholesalers or retailers do not know that their actions are inextricably linked to a large on-going plan or conspiracy. Only one conspiracy was alleged and proved. United States v. Barrera, supra; United States v. Bynum, supra, 485 F.2d at 495-496; United States v. Cirillo, 468 F.2d 1233, 1238-1240 (2 Cir. 1972), cert, denied, 410 U. S. 989, 93 S.Ct. 1501, 36 L.Ed.2d 188 (1973); United States v. Calabro, 449 F.2d 885, 891-893 (2 Cir. 1971), cert, denied, 405 U.S. 928, 92 S.Ct. 978, 30 L.Ed.2d 801 (1972); United States v. Nuccio, 373 F.2d 168, 174 n. 4 (2 Cir.) cert, denied, 387 U.S. 906, 87 S.Ct. 1688, 18 L.Ed.2d 623, rehearing denied, 389 U.S. 889, 88 S.Ct. 16, 19 L.Ed.2d 199 (1967). There was no error on this aspect.

We reject, without enumeration, assorted claims of error as to various other rulings running through some two weeks of a well-conducted trial. See, generally, our treatment in United States v. Barrera, supra, United States v. Bynum, supra, United States v. Cala-bro, supra, and United States v. Agueci, 310 F.2d 817 (2 Cir. 1962), cert, denied, 372 U.S. 959, 83 S.Ct. 1016, 10 L.Ed.2d 12 (1963).

III.

Before the severance from the case of co-conspirator Rodriguez, his counsel in the course of preparation had interviewed Aviles’ wife. The conversation was taped. What she then said Aviles had earlier told her became in part the subject of cross-examination of Aviles by respective counsel for Arroyo and Gonzalez. With the trial about to terminate, whether the woman should be brought from Puerto Rico came under discussion.

Arroyo has briefed extensively a claim that what the woman had told Rodriguez’s counsel should have been received to demonstrate Aviles’ bias and interest. Counsel argued that

the jury would have regarded Aviles in a wholly different light if presented with testimony that he actually engaged in lawless and illegal conduct directly relating to the case being tried in order to insure favorable treatment by the government. (Brief for Arroyo).

We now explore the pertinent background.

After Aviles in 1972 undertook cooperation with Sergeant Valentine, he dealt with various of the parties on trial and with others of the originally indicted defendants. Among the latter were Aviles himself and Ralph Torres and Benjamin Rodriguez as to whom on April 25, 1973, Judge Bauman granted a motion to sever.

Pressed to disclose what promises had been made by the Government in return for his collaboration, Aviles testified there had been no assurances of leniency or of special treatment, and that all he hoped for was that cases outstanding against him would be brought on all at one time and before the same judge. Arroyo’s counsel on a different tack presently asked if Aviles in January, 1973 was locked up in Puerto Rico for beating his wife and received a negative reply. Arroyo’s counsel put the question “Would you frame someone?”, with Av-iles answering “Why should I do that?” Counsel replied. “To get yourself out from under. That’s why.”

Counsel for Gonzalez took up cross-examination, particularly with reference to the interview with Aviles’ wife taped by counsel for Rodriguez. It was thereupon developed that Aviles knew Torres, Rodriguez and one Alberto Esqui Jaros-so. Allowing great latitude, Judge Bau-man permitted counsel for Gonzalez to have access to the grand jury testimony of Aviles’ wife when the Government investigated possible obstruction of justice. Cross-examination thereafter resulted in testimony by Aviles that he never told the woman that he had framed Rodriguez and Torres, and that he had never told her that he had arranged for Esqui Jarosso to pretend he was Torres and thus to telephone Sergeant Valentine to discuss narcotics with him. When Aviles was asked whether he had while in Puerto Rico struck or harmed his wife in any way, the prosecutor objected and was sustained.

The foregoing background has been supplied in some detail for an understanding of developments after the Government rested its case. Some six weeks after all concerned knew of the taped interview of Aviles’ wife, counsel for Gonzalez brought up the possibility of bringing the Aviles woman from Puerto Rico to New York. Extended discussion by the court and counsel concerning a time schedule resulted in a general agreement that the defense would make an effort to ascertain whether or not the Aviles woman would testify that Aviles had tried to frame one of the defendants on trial. As guidance to counsel Judge Bauman commented:

Now, I want to make this clear to you. If all this woman is going to testify to is about Torres, Rodriquez and Esqui Jarosso, save yourself the money because you have now made an offer of proof and I tell you that I don’t regard that as admissible evidence. (Transcript, 1214).

The following morning the judge asked: “What have you got to report?” Counsel for Gonzalez informed the judge that the lady was interviewed “last night”; she will not testify that Aviles framed either Gonzalez or Arroyo or any other defendant on trial, and “there would be no point in producing her, as Your Honor indicated yesterday”. (Transcript, 1217).

No exception was noted by Arroyo respecting Judge Bauman’s handling of the matter. Gonzalez on brief to this court has not even mentioned the incident. We would have taken no notice of the point had not Judge Bauman, perhaps in an excess of caution, given consideration to the belated claim advanced only on the last day of the trial.

Moreover the trial judge in great detail instructed the jury that in evaluating the testimony of any witness, the jury was to weigh his possible interest and to consider bias or prejudice including all varieties of hostility. Should it be found that a witness had testified falsely, the jury was free to reject all of his testimony or to accept such part of it as might be found to be reliable. Specifically,

It is for you to decide whether a participant in the crime, such as Aviles or Mazza, is telling the truth or perjuring himself in the hope of obtaining some concession from the government or the court. (Transcript, 1417).

We are entirely satisfied that no error has been made to appear. Cf. United States v. Blackwood, 456 F.2d 526, 529, 530 (2 Cir. 1972).

IV.

We now turn to what seemed at first blush to have been a point of significant proportions, indeed Judge Bauman felt impelled to conduct in the absence of the jury a series of hearings to ascertain the exact facts. Arroyo and Gonzalez had claimed that the fairness of their trial had been so tainted as to require a dismissal of the indictment on the ground that the Government had initiated an unlawful intrusion upon the confidential relationships between these accused and their counsel. They have here asserted their right to a per se rule which would require a reversal of the judgments of conviction without any showing of prejudice on their part.

It turned out that Louis Fragliossi on occasion had served as an informant for Leonard Vecchione who was a group supervisor for the Bureau of Narcotics and Dangerous Drugs. Vecchione had had nothing to do with the development of the instant case which had been worked up under the aegis of Sergeant Valentine of the New York Task Force. Like Gonzalez and Sanchez, Fragliossi had agreed to purchase heroin upon the expected arrival of the heroin, the proceeds of the sale of which were to be used in securing the release on bail of Mazza, in prison in Florida. So it was that the indictment, in part involving that third shipment, named Fragliossi as one of the original defendants. On the face of it, Fragliossi had shared a common interest with Arroyo and Gonzalez.

Fragliossi, called as a witness by counsel for Arroyo, testified that he had been indicted with the others in December, 1972. Arroyo’s counsel brought out that Fragliossi had indeed attended with Arroyo and Gonzalez defense strategy discussions. Methods of attacking the credibility of Aviles were planned and a program for conducting investigations of Aviles was under consideration. Fragliossi rejected defense counsel’s suggestion that his attorney attend the meetings.

Instead, Fragliossi’s attorney disclosed to Assistant United States Attorney Ve-lie that

his client had been indicted for a crime he did not commit, and explained that Mr. Fragliossi had been an informant during the entire thing and had been indicted by mistake by this other agency. He explained that Mr. Fragliossi had been an informant for the BNDD but had gotten indicted in a Task Force case for acts which he had been carrying out with relation to the BNDD.

Checking with Supervisor Vecchione, Velie learned

that Vecchione had been working Fragliossi as an informant and had directed certain of his activities, and Mr. Vecchione felt Mr. Fragliossi had been indicted in somebody else’s case for the actions he, Vecchione, had authorized.

Mr. Velie further checked with other Assistant United States Attorneys and various Task Force agents who were the “case agents” and in charge of the file and familiar with the facts underlying the instant investigation. Finally satisfied that Fragliossi had been mistakenly named as a defendant in the indictment because of acts which Vec-chione had authorized, Mr. Velie nolled the case as to Fragliossi.

Under cross-examination by government counsel it was developed that Fragliossi was nevertheless concerned as the record reveals.

Q. You repeatedly spoke, did you not, with Mr. Vecchione asking him how come you have been indicted?
A. Yes.
* * * * # •*
Q. Do you recall being instructed by Mr. Vecchione not to reveal at any time anything some defendant may have told you about this case?
A. That is the time when he threw his hands up and said: I don’t want to hear nothing more about this.
* * * * -X- *
Q. You also knew, did you not, that since you had been indicted it might be necessary for the Government to reveal the fact that you had been in contact with an agent ?
A. Yes.
Q. You were very upset about that; were you not ?
A. Yes.
Q. You pleaded with various government officers numerous times not to reveal that ?
A. Yes.
-X- X- -X- * * -X-
Q. Did Mr. Vecchione tell you not to tell him what, if anything, was going on on the defense side ?
A. Could I say it in my own words ?
The Court: Yes.
A. After we discussed it a few times, then he says to me — that is what he said to me: I don’t want to hear any more about it, and he threw his hands up.

The foregoing random excerpts from the cross-examination by government counsel culminated in Fragliossi’s testimony that he had not discussed any of the matters under inquiry with any other government officer.

Judge Bauman was fully aware of the nature of the problem unfolding before him. Only a month earlier he had been confronted with the claim that any intrusion by the Government into defense strategy, ipso facto, “taints the entire prosecution”, as he noted in United States v. Cohen, 358 F.Supp. 112, 129 (S.D.N.Y.1973). He there had observed that the Second Circuit does not follow cases which apply a per se rule, citing United States v. Mosca, 475 F.2d 1052, 1060-1061 (2 Cir.), cert, denied, 412 U. S. 948, 93 S.Ct. 3003, 37 L.Ed.2d 1001 (1973).

Further details were developed in testimony by Vecchione and by Assistant United States Attorney Velie. The defense motion to dismiss was denied. As the record shows, Judge Bauman ruled:

Now it’s denied because I haven’t seen the slightest- — slightest evidence that would tend to support any poison reaching into the levels of Government at which this prosecution would have resulted in a deprivation of the defendant’s [sic] right to counsel.

The judge accepted the word of Group Supervisor Leonard Vecchione,

that he was not told what Fragliossi heard in the meeting, and certainly therefore, that since he hadn’t heard he couldn’t have passed it on to anybody important in the prosecution team.

The judge continued:

I find Mr. Vecchione credible on this subject and I prefer his testimony to that of Mr. Fragliossi as I think almost anyone listening to them would be inclined to do.

After further observations, Judge Bauman specifically took the position:

At any rate, my conclusion is even assuming all that, there is nothing sufficient in this case to have poisoned the prosecution, and as I have previously indicated, I find as a fact none of it passed on to any member of the prosecution team.

We are satisfied that once the mistaken indictment of Fragliossi was discovered, the Government’s representatives took entirely proper steps to insure that the defense would not be compromised. We join Judge Bauman in his conclusion that there was no violation of the appellants’ Sixth Amendment rights.

Such other miscellaneous claims as have been urged are lacking in merit and require no discussion. We are completely persuaded that the trial was fairly and properly conducted.

The judgments of conviction are in all respects

Affirmed.

      . And others who were foreign nationals or in fugitive status or were severed from trial.

      . One Louis Fragliossi in other unrelated narcotics violation situations had acted on occasion as an informant for a BNDD group Supervisor, Leonard Vecchione. Originally named as a defendant in the pending indictment, Fragliossi was severed one week prior to the trial.

      . The three shipments of heroin hereinafter to be mentioned totaled approximately 300 kilograms which over the period here involved had a “street” value of more than $68,000,000. See New York State Commission of Investigation, Narcotics Law Enforcement in New York City, 36 (1972). After the trial during a pre-sentence colloquy, Judge Bauman observed that Arroyo had been dealing in heroin at a million dollars a transaction. He continued :
      In my extensive experience this is the largest single transaction with which I have ever been confronted.

      . Working thereafter with Aviles was an operative of the Joint Task Force, William Valentine, who posed as one “Guillermo”.

      . Sanchez has argued that he could not be convicted of conspiracy with the other code-fendants since his arrangements for participation had been made with Aviles and Valentine who, it developed at trial, were acting as agents of the Government. As to that point Judge Bauman instructed the jury:
      However, if you find that these agents acted as connecting links between Sanchez and the Belgian and Argentinian co-conspirators you may find that Sanchez was a member of the conspiracy charged in the indictment * * * I instruct you that Mr. Sanchez can be found guilty of the conspiracy only if he knew and intended to join those who intended to import and sell heroin as I have charged you.

      . That particular lot of heroin, consisting of 60 kilograms, secreted in bales of sheepskins consigned to a New York City furrier was seized aboard a steamer in Brazilian waters. Government agents there took samples of the heroin which pursuant to stipulation of all counsel, were received in evidence, having been tested by a government chemist and having been found to be 78 per cent pure heroin.

      . Those objects were, as listed in the instructions :
      1. To import heroin ;
      2. To distribute heroin;
      3. To assist Alfredo Mazza to escape from prison.

      . The docket entries show the jury’s responses to the special verdict requirement concerning individual participation in achieving the conspiratorial objects outlined above, note 7:
      As to Arroyo, Nos. 1 and 2 existed; as to Ferrer, objects Nos. 1, 2 and 3 were established ; as to Gonzalez, objects Nos. 1 and 2 were proved; as to Perez, only object No. 1 existed; as to Sanchez, the jury found involvement as to objects Nos. 1 and 2. (And see Transcript, 1474, 1475, 1476)

      . She previously had been married to Rodriguez.

      . It seems clear enough that Mr. Velie was anxious to avoid even a suspicion that Frag-liossi could be deemed a “sham” defendant. Undoubtedly he was not unaware of what had been said in United States v. Lusterino, 450 F.2d 572 (2 Cir. 1971) where one Grillo, as a sham defendant, on the stand had confessed to joint guilt with Lusterino. At page 575, id., Judge Smith, writing for the court in reversing the conviction, said
      When the prosecution participates in allowing a false picture to be painted, it bears a heavy burden of showing that it could not have affected the verdict. It has not shown that here.

      . That Fragliossi had deemed himself suspect for apparent doubledealing seems clear enough; and if indeed he was “upset”, it was not without reason, for shortly after the trial Fragliossi was murdered.

      . The trial judge asked whether or not after some five or six meetings at the defense lawyer’s office Fragliossi had told Mr. Vec-chione what had happened. The witness answered :
      Yes, I discussed them, you know, what happened. I discussed my case. I discussed what was going on.
      The inquiry continued:
      The Court: Did you tell Mr. Vecchione what was being planned between defendants in those five or six meetings?
      The Witness: I think I did.
      The Court: After about the fifth or sixth meeting Mr. Vecchione said: I don’t want to hear anything more about that; is that right?
      The Witness: He threw his hands up. He says: I don’t want to hear anything more about this.
      The Court: Did you, after that occasion,' ever discuss with him any other meetings of counsel and defendants?
      The Witness: No, I don’t remember. I’m not sure, I just asked him about my case, you know.

      . And see United States v. Rosner, 485 F.2d 1213, 1224 (2 Cir. 1973) :
      We conclude, however, that a finding of unlawful intrusion must precede the determination of its consequences. We can make no such finding here. Judge Bauman, after hearing the witnesses, found to the contrary .... [W]e are convinced, on our own review of the evidence, that the Government has sustained its contention beyond a reasonable doubt.

      . For example, Vecchione directed Fraglios-si to keep away from meetings with Arroyo and Gonzalez and their counsel. Government counsel Velie warned Vecchione that if Fragliossi should blurt out anything he might have learned, Vecchione was not to pass along such information to the prosecution. It appears that there was no unlawful intrusion by the Government into defense counsels’ conferences, indeed the defense has not alleged prejudice. Moreover, Judge Bau-man found that no prejudice had appeared, and we agree. Of. n. 13, supra,.

      . Judge Bauman’s finding is conclusive. Had privileged information acquired by Fragliossi while a codefendant — or even after the severance — been passed along to the prosecution, a very different problem would have been presented. Cf. Giglio v. United States, 405 U.S. 150, 154, 92 S.Ct. 763, 31 L.Ed.2d 104 (1972) ; Santobello v. New York, 404 U.S. 257, 262, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971).


author: BIGGS, Circuit Judge.

text:
    Charles H. CHAUDOIN, Appellant, v. Clarence E. ATKINSON, Jr.
    No. 73-1303.

    United States Court of Appeals, Third Circuit.
    Argued Oct. 23, 1973.
    Final brief submitted Feb. 5, 1974.
    Decided April 10, 1974.

      Sheldon N. Sandler, Bader, Dorsey & Kreshtool, Wilmington, Del., for appellant.
    Bruce L. Thall, Asst. U. S. Atty., Wilmington, Del., for appellee.
    Before BIGGS, GIBBONS and RO-SENN, Circuit Judges.
   OPINION OF THE COURT

BIGGS, Circuit Judge.

The plaintiff-appellant Chaudoin was employed by the Delaware National Guard as a civilian administrative supply technician. The employment of civilian technicians was authorized by the National Guard Technicians Act of 1968, 32 U.S.C. § 709. He was dismissed from his position by Adjutant General Atkinson, effective February 22, 1971. He sought review of this dismissal in the United States District Court for the District of Delaware. A motion for summary judgment was filed by General Atkinson and the district court granted it.

The facts are somewhat complicated but are not in dispute. Chaudoin’s duties are set out in a detailed job description, a copy of which is attached hereto as an appendix. He was also a member of the Delaware National Guard. On the afternoon of January 19, 1971, Captain Miklasiewicz, who was Chaudoin’s immediate supervisor, was directed to assign a detail of three men to participate in a firing squad for a military funeral on Thursday, January 21, 1971. At about 9:00 A.M. on January 20th, Captain Miklasiewicz called Chaudoin and ordered him to participate in the detail. Chaudoin replied that he would go, but about 12:45 P.M. on January 20th, Chaudoin called Captain Miklasiewicz and left a message saying, in substance, that he had reconsidered and would not serve on the burial detail because military funeral duty was unrelated to his job and not contained in his job description. At 3:30 P.M. on that same day, Captain Miklasiewicz called Chaudoin back and Chaudoin told him he had examined his job description and felt firing squad duty was well beyond its scope and therefore he would not have to participate as a member of the firing squad. Captain Miklasiewicz had not before ordered anyone to a firing squad and he testified that he regarded this order as “not a normal duty”.

After talking to Chaudoin, Captain Miklasiewicz called his supervisor, Colonel Johnson, who requested him to replace Chaudoin in the detail. Chau-doin’s replacement, Evans, had also refused at first to perform the firing squad duty for the same reason given by Chaudoin, but apparently changed his mind when Captain Miklasiewicz indicated he might be dismissed if he did not perform the duty.

Chaudoin, however, reported for duty on the morning of January 21. He was in uniform and ready to perform his duties as a member of the firing squad. At that time, Captain Miklasiewicz had a meeting with the group of men comprising the firing squad, including Chaudoin. Chaudoin advised Captain Miklasiewicz that he had decided to file a grievance rather than refuse to perform the firing squad duty if the order were put in writing so there would be written documentation upon which to base a grievance. Captain Miklasiewicz was willing to put the order in writing and indicated he would speak with Colonel Johnson. When he did so, Colonel Johnson instructed him that Chaudoin had been replaced and should not be permitted to participate in the detail. After this incident, Captain Miklasiewicz wrote a report to the Adjutant General and recommended that Chaudoin be given an official written reprimand and be placed on three days’ leave without pay for insubordination. Colonel Johnson acquiesced in the recommendation, differing only in that he felt the punishment should be designated a “minimum” rather than a “maximum.” Nonetheless on January 22, 1971, Adjutant General Atkinson notified Chaudoin that his employment was being terminated as a result of his “failure to obey a lawful order to report for duty as a member of a Firing Squad at a military funeral.”

It was suggested that Chaudoin talk to Adjutant General Atkinson in person and he did so, hand-carrying a two and one-half page explanation of the incident. At the meeting, General Atkinson, according to Chaudoin’s testimony, told Chaudoin that he did not need people like him in the National Guard and that he was a disgrace to the Army. Subsequently Atkinson confirmed Chau-doin’s dismissal and Chaudoin requested a hearing as provided by the National Guard Regulations. A Technician Hearing Committee was convened and made its recommendation to Adjutant General Atkinson. The committee found the General’s order was lawful but also agreed that the penalty of dismissal was excessive and ignored “the principle of like penalties for like offenses”. See If 7-37 of National Guard Regulation No. 51, “Like penalties for like offenses.” The committee decided that Chaudoin “was treated with undue severity” and recommended that he be restored to the position he held prior to the action of the Adjutant General and “receive retroactive status and other accumulated credits to the effective date of his removal; except that the retroactive pay and credits would not include the pay for three days as recommended by his immediate supervisor.”

Following this extensive hearing, General Atkinson ignored the recommendation of the committee and without specifying any reason affirmed his original decision to terminate Chaudoin’s employment. The complaint requests that the court order Chaudoin’s reinstatement, and that he be awarded compensation and damages in the amount of $25,000, attorney fees, interest and costs.

I.

JURISDICTION

A. Chaudoin asserts that jurisdiction is conferred upon the district court by 28 U.S.C. § 1331, 5 U.S.C. § 702 et seq., and 28 U.S.C. § 1361. We consider these assertions seriatim.

As we have said, 32 U.S.C. § 709 is statutory authority for the hiring of civilian technicians such as Chaudoin for the National Guard. See note 1, supra. Under this provision a technician is deemed to be a federal employee and the adjutant general is charged with employing and administering the technicians authorized by the Act.

Chaudoin’s employment was pursuant to this statute and he asserts his employment was terminated in violation of due process; therefore, if the jurisdictional amount is present as required by 28 U.S.C. § 1331(b), the district court had jurisdiction of the subject matter of the suit under that section.

Chaudoin’s discharge was effective February 22, 1971, and his suit was filed August 3, 1971. He cannot claim $10,000 worth of damage for his salary for that period, but it is obvious that the extent of damages resulting from his discharge from his secured position with status as a qualified civilian national guard technician and the gain over the years which he might anticipate from continued employment at an annual salary paid by the United States in the amount of $7985, despite his receipt of an annual salary in his new position of approximately $4000 a year, might well exceed $10,000 exclusive of interest and costs.

It is clear, as the learned district judge points out in his opinion: “A fair reading of the complaint indicates that the plaintiff claims at least three matters were at issue on that date: (1) the plaintiff’s right to compensatory damage for the economic injury which had theretofore accrued as a result of the discharge, (2) plaintiff’s right to employment as a technician in the future, (3) plaintiff’s right to punitive damages.” Item (3) is not supported by the formal pleadings, but nonetheless was clearly before the court and was referred to in the briefs of the parties and in the opinion of the district court. The amount of the ad damnum sought was $25,000. The actions of General Atkinson were such as possibly might bring him within the ambit of punitive or exemplary damages. Certainly the record here does not negative such a possibility, but as to this issue we presently express no opinion. See Rule 54(c), Fed.R.Civ. P.

General Atkinson, misunderstands Chaudoin’s status. Chaudoin had attained permanent tenured status and pension rights at the time he was dismissed. He could only be discharged “for cause” and he was not employed on a year-to-year contract basis. General Atkinson seems to insist that the only damage suffered by Chaudoin was the loss of one year’s salary, but this is an erroneous conception. See, e. g., Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). We hold that the court has jurisdiction under 28 U.S.C. § 1331.

B. (1) Chaudoin alleges inter alia that jurisdiction to review General Atkinson’s order rests in Section 10 of the Administrative Procedure Act, 5 U. S.C. § 702 et seq. This issue need not detain us long since it is disposed of by the decision of this court in Zimmerman v. United States Government, 422 F.2d 326, 330-332 (3 Cir.), cert, denied 399 U.S. 911, 90 S.Ct. 2200, 26 L.Ed.2d 565 (1970). Cf. Charlton v. United States, 412 F.2d 390 (3 Cir. 1969) and concurring opinion of Judge Stahl at 395, et seq. Despite appellant’s contention that subsequent Supreme Court decisions have undermined Zimmerman, it appears that the Court has not yet settled the issue of whether the APA provides an independent basis of jurisdiction. See, e. g., Aguago v. Richardson, 473 F.2d 1090 (2d Cir. 1973). Jurisdiction cannot be sustained under the Administrative Procedure Act.

(2) Jurisdiction under 28 U.S.C. § 1361 to require his reinstatement is available. 28 U.S.C. § 1361 provides: “Action to compel an officer of the United States to perform his duty — The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.” We are of the view that General Atkinson, since he has not been called into active service, cannot properly be described as an officer of the United States. See Washington State Nat. G. v. Washington State Per. Bd., (court en banc), 61 Wash.2d 708, 379 P.2d 1002 (1963); United States v. Holly, 192 F. 2d 221 (10 Cir. 1951); and Williams v. United States, 189 F.2d 607 (10 Cir. 1951). Cf. O’Toole v. United States, 206 F.2d 912 (3 Cir. 1953). However, 32 U. S.C. § 709 charges the adjutant generals with employment and administration of the civilian technicians who are federal employees.

In view of the foregoing there can be no doubt that the Adjutant General of Delaware is an agency or an agent of the United States and therefore within the purview of § 1361. The question remains, however, do the courts of the United States have the power to grant to Chaudoin the mandatory relief that he seeks? The answer is “yes.”

Judge VanDusen in his opinion in Davis v. Shultz, 453 F.2d 497, 502 (3 Cir. 1972), stated the following: “Plaintiff’s claim of jurisdiction based upon 28 U.S.C. § 1361 to consider the claim for mandamus relief was properly dismissed by the district court. Section 1361 grants original jurisdiction to district courts to consider ‘actions in the nature of mandamus’ directed against officers and employees of the Federal Government. The question of the proper scope of an ‘action in the nature of mandamus’ under § 1361 has been the subject of varying interpretations. The majority of the Circuit Courts of Appeals which have considered this question have adopted the position of former Chief Judge Hastie of this Circuit, speaking for the First Circuit, in Ashe v. McNamara, 355 F.2d 277 (1st Cir. 1965). This position is that § 1361 and its accompanying venue amendments were designed to eliminate obstacles to bringing mandamus actions outside of the District of Columbia and were not meant to alter the traditionally limited nature of the writ. Under this view, mandamus will lie only to compel the performance of a plain duty and will not lie to compel the discharge of an action committed to discretion. In the instant action, plaintiff seeks to compel Secretary Shultz to perform an act which has been committed to his discretion, i. e., the naming of a prime sponsor. Under the majority view, mandamus will not lie.

“The majority view is that in certain limited cases a § 1361 action may be used to compel the performance of an act committed to discretion. As the District of Columbia Circuit stated in Peoples v. United States Department of Agriculture, 138 U.S.App.D.C. 291, 427 F.2d 561 (1970), jurisdiction can be' based on § 1361 to ‘ . . . issue appropriate corrective orders where Federal officials are not acting within the zone of their permissible discretion but are abusing their discretion or otherwise acting contrary to law. . .

The Second Circuit Court of Appeals has applied the same doctrine in Leonhard v. Mitchell, 473 F.2d 709, 712 (1973), stating: “Our sole task on this appeal is to gauge the scope of authority granted to district courts under 28 U.S. C. § 1361. This section, enacted in 1962, provides that ‘The district courts shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the United States or any agency thereof to perform a duty owed to the plaintiff.’ Traditional teaching views a writ of mandamus as appropriate solely ‘to compel officials to comply with the law when no judgment [or discretion] is involved in that compliance.’ Note, Developments in the Law: Remedies Against the United States and its Officials, 70 Harv.L.Rev. 827, 849 (1957). Thus, a writ of mandamus properly is issued when a government official fails to comply with a specific statutory or regulatory direction. See, e. g., Feliciano v. Laird, 426 F.2d 424 (2d Cir. 1970) (Army failed to process application for hardship discharge in accordance with regulations). Additionally, decisions construing § 1361 have held that ‘official conduct may have gone so far beyond ány rational exercise of discretion as to call for mandamus even when the action is within the letter of the authority granted.’ United States ex rel. Schonbrun v. Commanding Officer, Armed Forces, 403 F.2d 371, 374 (2d Cir. 1968), cert, denied, 394 U.S. 929, 89 S.Ct. 1195, 22 L.Ed.2d 460 (1969). See Casarino v. United States, 431 F.2d 775 (2d Cir. 1970); Safir v. Gibson, 417 F.2d 972 (2d Cir. 1969), cert, denied, 400 U.S. 850, 91 S.Ct. 57, 27 L.Ed.2d 88 (1970); Ashe v. McNamara, 355 F.2d 277 (1st Cir. 1965). Accordingly, a request for relief under § 1361 requires ‘the court [to] utilize all relevant legislative and other materials to determine the scope of discretion or power delegated to the officer.’ ” See also Nat’l R.R. Passenger Corp. v. Nat’l Ass’n of R.R. Passengers, 414 U.S. 453, 465, 94 S.Ct. 690, 38 L.Ed.2d 646 (1974) (Mr. Justice Brennan, concurring); Carey v. Local Board No. 2, Hartford, Connecticut, 297 F.Supp. 252 (D.C.1969).

We conclude, therefore, that if Chaudoin has made a case for mandatory relief it can be granted him under 28 U.S.C. § 1361.

II.

ADDITIONAL RELEVANT FACTS AND CONCLUSIONS

(A) We will first consider General Atkinson’s dismissal of Chaudoin as an abuse of discretion.

32 U.S.C. § 709(e)(3) provides “a technician may, at any time, be separated from his technician employment for cause by the adjutant general of the jurisdiction concerned. . . . ” Section

7-39 (d) of National Guard Regulation 51 defines “cause” as follows: “A

‘cause’ for an adverse action is a recognizable offense against the employer-employee relationship. What constitutes a proper cause, therefore, may run the entire gamut of such offenses, including inadequate performance of duties and improper conduct on or off the job. In addition, every adverse action must be for such cause ‘as will promote the efficiency of the service’.”

The district court examined these provisions and stated that it could not conclude “that a reasonable employer could not determine that the employee’s refusal was an ‘offense against the employee-employer relationship’ and that ‘adverse action’ would ‘promote the efficiency of the service.’ ” We disagree.

Paragraph 7-36 of National Guard Regulation 51 provides: “Reasonableness: In determining the action to be proposed or taken, it should be established whether the technician knew or could reasonably be expected to know what standards of conduct were expected of him.” Paragraph 7-37. “Like Penalties for Like Offenses,” states: “The State adjutant general should establish tables of penalties for delinquency or misconduct which should be used as a guide in imposing disciplinary action to assure like penalties.” At the end of Sheet 7.7 of these regulations the following appears: “The following table of penalties for delinquency or misconduct will be used as a general guide in imposing disciplinary action to assure like penalties for like offenses. The list of offenses and suggested penalties set forth below may not successfully meet the demands of all situations and therefore is to be considered as suggestive only. Final decision as to the action to be taken will rest with the State adjutant general. When imposing progressive penalties for a second or third offense, consideration should be given to whether a reasonable period has elapsed since the prior offense.” The table of offenses states: “Offense. 1. Insubordination (refusal to obey orders, impertinence, like offense). Penalties. First offense. Official written reprimand or 1-day suspension. Second offense. 2- to 5-day suspension. Third offense. 6- to 10-day suspension, or removal.”

Insofar as the record shows, Chaudoin had a spotless record, and did in fact change his mind and appear for the funeral, properly dressed and equipped and offered to participate. As we have said, his supervisor, Captain Miklasiewicz wrote a report to the Adjutant General and recommended that Chaudoin be given an official written reprimand and three days leave without pay for insubordination. Colonel Johnson, Captain Miklasiewicz’s superior, acquiesced in this recommendation, only differing in that the punishment should be designated as a “minimum” rather than as a “maximum”.

There seems to be no reasonableness to General Atkinson’s action. It would appear that General Atkinson had his standards mixed for in this instance he was to judge Chaudoin as a technician and not as a member of the National Guard.

We conclude, therefore, in view of the foregoing, that General Atkinson has abused his discretion in discharging Chaudoin. He disregarded the penalty guidelines suggested by the regulations, the opinions of Chaudoin’s immediate, supervisors, and the findings of the Technician Hearing Committee without any statement of his reasons for doing so.

(B) The lawfulness of General Atkinson’s order should next be considered. Before 1968, the 1956 statute, 70A Stat. 615 (32 U.S.C. § 709) provided for the hiring of civilian “competent persons to care for material, armament, and equipment of the Army National Guard. ... A caretaker employed under this subsection may also perform clerical duties incidental to his employment and other duties that do not interfere with the performance of his duties as caretaker.” (Emphasis added). The statute as amended in 1968 replaced the italicized language with the following: “[Pjersons may be employed as technicians ... in the maintenance and repair of supplies issued to the National Guard or the armed forces.” 32 U.S.C. § 709(a)(2). Prior to the 1968 amendment the National Guard technicians were not in too favorable a position and apparently they agitated for improvement of their status. It would appear that one of the issues that the technicians were complaining about was extra duties imposed on them from time to time such as funeral details or other duties unrelated to their primary duties.

The job description in effect as of the date of Chaudoin’s alleged offense, viz., January 20, 1971, still contained the provision under “C. Principal Duties” that the technician “Performs other duties as assigned.” The language omitted from the statute in the 1968 amendment may or may not require revision of the job description quoted above, but it is clear that a, technician is not required to perform duties unrelated to his primary employment since the explicit authorization of such unrelated duties was eliminated. There is no way, therefore, that General Atkinson’s order can be considered a “lawful” order.

Our position in this respect is fortified by the fact that although the Job Description contains the statement that the technician “Performs other duties as assigned”, the regulations refer to “Excused Absences”. Paragraph 6-48 of National Guard Regulation 51 states in part: “Absences from duty administratively authorized which do not result in a charge to any kind of leave or in loss of salary are excused absences. * * * d. For up to 4 hours in any one day to participate as active pall bearers or as members of firing squads in funeral ceremonies for members of the Armed Forces.” There would be no need for any excused absences provisions if funeral detail duty was included in the job description. The language of the “Excused Absences” clause indicates that a technician could volunteer for an otherwise off-duty activity without a loss in pay. It is clear, of course, that the 1965 Regulations were issued under the old unamended version of § 709 which had clearly allowed such unrelated activities.

We conclude that on the grounds stated General Atkinson’s order was not a lawful order. It was therefore null and void, ab initio and without legal effect, and General Atkinson can base no defense upon it.

III.

DISPOSITION.

The judgment will be reversed and the cause remanded with directions to the district court to enter a judgment against General Atkinson, to grant the injunctive and mandatory relief sought by Chaudoin, and to award him damages in such amount or amounts as justice may require.

APPENDIX.

DEPARTMENTS OF THE ARMY AND THE AIR FORCE NATIONAL GUARD BUREAU

TECHNICIAN POSITION DESCRIPTION

1. Date 1 Nov 67

2. Component ARNG

3. Job Number 216 71 03

4. Appointment Requirements X Excepted Service

□ Off X Wo X Enl □ Competitive Service (non-Guard)

5. Number of Jobs Covered by Position Description

6. Official Title

ADMINISTRATIVE-SUPPLY

TECHNICIAN

7. Pay Plan GS

8. OCC Code 0301

9. Grade 06

10. Working Title

ADMINISTRATIVE-SUPPLY

TECHNICIAN

I. Occupational Requirements: Incumbent is Subject to Uncommon Tours of Duty, Rotational Shift Assignments and Overtime Duty, for Which Compensatory time Off will be Granted. May Be Required to Fly in Military or Commercial Aircraft for TDY Purposes.

II. The Following Duties, Responsibilities, and Qualification Requirements Constitute Minimum Requirements for Support of This Job:

A. WORK RELATIONSHIPS:

1. Works under the general supervision of the Unit Commander who designates areas of responsibility and establishes policies and procedures for the unit. Staff supervision is exercised by Staff Administrative Assistant who provides instruction on command policies and procedures, interpretation of regulations; checks work for adequacy and compliance with regulations through periodic visits and inspections; and reviews completed work (correspondence, reports, etc.) routed through headquarters. Accomplishes day-to-day assignments independently in accordance with established policies and procedures.

2. When a lower grade Administrative-Supply Technician is assigned to the unit, incumbent assigns and checks his work and determines proper work methods and procedures to be employed.

B. SCOPE:

Is responsible to the Unit Commander for carrying out the Commander’s plans for the accomplishment of administrative, clerical and supply functions of the unit. Performs unit functions which cannot be accomplished by assigned unit personnel during regularly scheduled training periods. Instructs unit personnel in administrative and supply procedures.

C. PRINCIPAL DUTIES:

1. Assists Unit Commander and his staff in planning and directing the overall administrative, clerical, and supply functions of the unit. Assures that administrative plans, policies and procedures established by commander and higher authority are carried out. Makes recommendations on administrative, clerical, and supply functions. Contacts higher headquarters to secure interpretation of regulations or policies pertinent to unusual or controversial actions. Reviews work completed by unit personnel to assure compliance with regulations and approved policies and procedures; brings deficiencies to attention of responsible personnel and instructs in correct procedures.

2. Instructs and assists unit personnel in performance of administrative, clerical and supply functions to include preparation and processing of personnel actions, maintenance of personnel records and files; preparation and processing of supply actions and maintenance of related files and records; preparation of training schedules; compilation of recurring and one-time reports related to functions of unit. Reviews work in process and upon completion for compliance with regulations, policies, and procedures. Identifies and interprets regulations; prepares and furnishes sample forms; gives on-the-job instruction.

3. Completes work not accomplished during unit training assemblies and which cannot be held for the next assembly. This includes preparation editing, and typing of personnel actions; supply requisitions or turn-ins; payrolls; attendance reports; training schedules, requisitioning training aids; posting actions to personnel records and supply records; filing; compilation of recurring and one-time reports related to administrative, personnel, or supply functions.

4. Reviews incoming correspondence, determines required action and makes distribution to personnel or sections concerned. Composes and types replies to inquiries pertaining to assigned functions. Follows up on suspense correspondence to insure compliance with suspense dates. Answers a variety of telephone, correspondence, or personal inquiries pertaining to the ARNG program. Interviews persons interested in assignment, appointment, or transfer to unit; advises on ARNG programs, obligations, advantages, unit vacancies, MOS requirements, etc. Advises on procedures for enlistment or transfer to unit; assists on completing forms, arranges for interview with unit commander or appropriate member of his staff, administers tests, makes arrangements for physical examinations, etc. Answers questions on MOS requirements; eligibility for promotion, transfer, discharge, etc.

5. Receives, inspects, signs for, and warehouses incoming supplies. Inspects material to be turned in; secures technical inspections as appropriate; prepares or edits turn-in slips; determines need for and prepares or reviews Reports of Survey. Assists in or takes periodic inventories. Drives unit vehicles to pick-up or deliver supplies as required.

6. Maintains unit library. Reads incoming publications, briefs Unit Commander on important changes, routes to personnel concerned for information and/or action. Initiates requisitions for publications and blank forms.

Performs other duties as assigned.

D. QUALIFICATIONS REQUIRED:

Normally at least eighteen months of progressively responsible experience which demonstrates ability to perform administrative and supply work, and ability to operate all types of military vehicles are required.

E. MILITARY ASSIGNMENT AND TRAINING:

1. Area of Assignment: Incumbent must occupy a TOE position comparable to his technician assignment.

2. Qualification: Incumbent is required to qualify as Unit Personnel Technician, MOS Code 711A, and/or Unit Supply Technician, MOS Code 761A, or as Personnel Specialist, MOS Code 71H, Administrative Specialist, MOS Code 71L, and/or Armorer/Unit Supply Specialist, MOS Code 76Y.

3. Required Training: Incumbent is required to attend as appropriate MOS course or complete equivalent Army extension courses.

      . § 709. Technicians: employment, use, status — (a) Under regulations prescribed by the Secretary of the Army or the Secretary of the Air Force, as the case may be, and subject to subsection (b) of this section persons may be employed as technicians in—
      (1) the administration and training of the National Guard ; and
      (2) the maintenance and repair of supplies issued to the National Guard or the armed forces.
      (b) Except as prescribed by the Secretary concerned, a technician employed under subsection (a) shall, while so employed, be a member of the National Guard and hold the military grade specified by the Secretary concerned for that position.
      (c) Tiie Secretary concerned shall designate the adjutants general referred to in section 314 of this title, to employ and administer the technicians authorized by this section.
      (d) A technician employed under subsection (a) is an employee of the Department of the Army or the Department of the Air Force, as the case may be, and an employee of the United States. However, a position authorized by this section is outside the competitive service if the technician employed therein is required under subsection (b) to be a member of the National Guard.
      (e) Notwithstanding any other provision of law and under regulations prescribed by the Secretary concerned—
      (1) a technician who is employed in a position in which National Guard membership is required as a condition of employment and who is separated from the National Guard or ceases to hold the military grade specified for his position by the Secretary concerned shall be promptly separated from his technician employment by the adjutant general of the jurisdiction concerned ;
      (2) a technician who is employed in a position in which National Guard membership is required as a condition of employment and who fails to meet the military security standards established by the Secretary concerned for a member of a reserve component of the armed force under his jurisdiction may be separated from his employment as a technician and concurrently discharged from the National Guard by the adjutant general of the jurisdiction concerned ;
      (3) a technician may, at any time, be separated from his technician employment for cause by the adjutant general of the jurisdiction concerned;
      (4) a reduction in force, removal, or an adverse action involving discharge from technician employment, suspension, furlough without pay, or reduction in rank or compensation shall be accomplished by the adjutant general of the jurisdiction concerned;
      (5) a right of appeal which may exist with respect to clause (1), (2), (3), or (4) shall not extend beyond the adjutant general of the jurisdiction concerned; and
      (6) a technician shall be notified in writing of tiie termination of his employment as a technician and such notification shall be given at least thirty days prior to the termination date of such employment.
      (f) Sections 2108, 3502, 7511, and 7512 of title 5, United States Code, do not apply to any person employed under this section.
      (g) (1) Notwithstanding sections 5544(a) and 6102 of title 5, United States Code, or any other provision of law, the Secretary concerned may, in the case of technicians assigned to perform operational duties at air defense sites—
      (A) prescribe the hours of duties;
      (B) fix the rates of basic compensation; and
      (C) fix the rates of additional compensation ;
      to reflect unusual tours of duty, irregular additional duty, and work on days that are ordinarily nonworkdays. Additional compensation under this subsection may be fixed on an annual basis and is determined as an appropriate percentage, not in excess of 12 percent, of such part of the rate of basic pay for the position as does not exceed the minimum rate of basic pay for GS-10 of tlie General Schedule under section 5332 of title 5, United States Code.
      (2) Notwithstanding sections 5544(a) and 6102 of title 5, United States Code, or any other provision of law, the Secretary concerned may, for technicians other than those described in clause (1) of this subsection, prescribe the hours of duty for technicians. Notwithstanding sections 5542 and 5543 of title 5, United States Code, or any other provision of law, such technicians shall be granted an amount of compensatory time off from their scheduled tour of duty equal to the amount of any time spent by them in irregular or overtime work, and shall not be entitled to compensation for such work.
      * * :|: :!: *
      As amended Sept. 13, 1961, Pub.L. 87-224, § 2, 75 Stat. 496; Aug. 13, 1968, Pub.L. 90-4S6, § 2(1), 82 Stat. 755; Aug. 13, 1971, Pub.L. 92-119, § 2, 85 Stat. 340.

      . It was stipulated at the trial that the case should be treated as if a motion for summary judgment had also been filed by Chaudoin. See stipulation of January 9, 1974 in this court.

      . All oral evidence in the case is contained in the transcript of “The Technician Hearing, Delaware Armory, National Guard, compiled by the Technician Hearing Committee,” Item Docket No. 15. This consists of 286 pages of transcript and some pages of printed and typewritten exhibits. These exhibits, cer-tified in the supplementary record from the district court to the Clerk of this court were in effect on January 20, 1971, and differ in no very material respect from those which were before the learned district judge. All other-evidence is documentary.

      . The Hearing Committee did not consist of technicians or those in like position to Chau-doin, but consisted of the following: Colonel Donald S. Robinson, Chairman; Captain William F. Rhoads, Member; Master Sergeant Robert H. Field, Member; Lieutenant Colonel John F. Shearer, Jr., Observer for Management; and Major Donald L. Emerson, Administrative Assistant to the Committee.

      . The court sua sponte requested counsel to brief the question not raised in the District Court, as to whether 32 U.S.C. § 709, providing in pertinent part “(e) Notwithstanding any other provision of law . . . (5) a right of appeal which may exist with respect to clause (1), (2), (3), or (4) shall not extend beyond the adjutant general of the jurisdiction concerned; . . . ” prohibits judicial review. (Emphasis added.) Both parties filed extensive briefs. General Atkinson relies on Yakus v. United States, 321 U.S. 414, 64 S.Ct. 660, 88 L.Ed. 834 (1944), a decision we deem inapplicable here. An examination of legislative history and of similar statutes and of the case law convinces us that the phrase italicized above was intended by Congress to limit the extent of administrative appeals but was not designed to prevent granting to a person in the position of Chau-doin judicial relief.

      . See our decision in Davis v. Romney, 490 E.2d 1360, filed January 14, 1974: “Rule 54 of the Federal Rules of Civil Procedure states that, except in the case of default judgments, ‘every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.’ * * * The provision of Rule 54 is applicable to summary, as well as other, judgments. J. Moore, 6 Moore’s Federal Practice 54.62 (1969).”

      . 5 U.S.C. § 702 provides as follows: “Right of Review — A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action- within the meaning of a relevant statute, is entitled to judicial review thereof. Pub.L. 89-554, Sept. 6, 1966, 80 Stat. 392.” (Carried over without significant change from 60 Stat. 243, June 11, 1946).

      The footnotes are as follows:
      “20. Section 1361 was part of a 1962 amendment.to Title 28 which enlarged the jurisdiction of the district courts and liberalized the venue requirements. Prior to these amendments, it was impossible to bring a mandamus action against a federal official in any district other than the District of Columbia. See generally Byse & Fi-occa. Section 1361 of the Mandamus and Venue Act of 1962 and ‘Nonstat-utory’ Judicial Review of Federal Administrative Action, 81 Harv.L.Rev. 808 (1967).

      “21. Jarrett v. Resor, 426 F.2d 213 (9th Cir. 1970); Carter v. Seamens, 411 F.2d 767 (5th Cir. 1969); Rural Electrification Admin. v. Northern States Power Co., 373 F.2d 686 (8th Cir. 1967); Prairie Band of Pottawatomie Tribe of Indians v. Udall, 355 F. 2d 364 (10th Cir. 1966).

      “22. Ashe v. McNamara, 355 F.2d 277, 282 (1st Cir. 1965).”

      . See 1968 U.S.Code, Cong, and Admin.News, p. 3318.

      . This was conceded at argument before this court by counsel for General Atkinson. See also 1968 U.S.Code, Cong, and Admin.News, supra.

      . See Lasher v. Shafer, 460 F.2d 343, 347, et seq. (3d Cir. 1972), citing Maryland for use of Levin v. United States, 381 U.S. 41, 85 S.Ct 1293, 14 L.Ed.2d 205 (1965).


author: HAYS, Circuit Judge:

text:
    John R. FREEMAN, Appellant, v. MARINE MIDLAND BANK-NEW YORK, Appellee.
    No. 228, Docket 73-1557.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 26, 1973.
    Decided March 25, 1974.

      Jay J. Gurfein, P. C., New York City, for appellant.
    Barrington D. Parker, Jr., New York City (Sullivan & Cromwell, New York City, on the brief, John W. Dickey, New York City, of counsel), for appellee.
    Before MOORE, HAYS and TIMBERS, Circuit Judges.
   HAYS, Circuit Judge:

In January, 1971, appellant John R. Freeman filed a complaint seeking a judgment declaring his various obligations to the Community Bank of Lyn-brook, Long Island, void as extensions of credit in violation of Regulation U of the Board of Governors of the Federal Reserve System. He claimed that the bank lent him the full purchase price of stocks listed on national securities exchanges for the purpose of purchasing and carrying such stocks, and that his indebtedness was evidenced by “written negotiable instruments,” in the hands of the bank or its assigns, the cancellation and return of which he prayed. He did not allege that the credit was secured, either directly or indirectly, by stocks.

The Community Bank merged with the appellee Marine Midland Bank-New York on September 30, 1970. The successor bank denied having extended credit to Freeman, denied having advanced funds for the purpose of carrying or purchasing securities, and set up three “affirmative defenses”: failure to state a claim upon which relief can be granted, lack of subject matter jurisdiction, and the plaintiff’s unclean hands in procuring the funds. Alleging that Freeman and a faithless bank employee conspired to defraud the bank, it counterclaimed in fraud for $88,843.77.

Subject matter jurisdiction was properly based on section 27 of the Securities Exchange Act of 1934. 15 U.S.C. § 78aa (1970).

Freeman resisted Marine Midland’s motion under Rule 12(b)(6) with his own and his attorney’s affidavits, which were answered by an affidavit of the bank’s attorney.

The affidavits show an extended course of dealing between Freeman and the bank, a course characterized as ■ an “illegal extension of credit” by Freeman, and characterized as a “check kiting scheme” by the bank. At various times, commencing in 1965, Community Bank paid directly to broker-dealers the full purchase price of stocks purchased for Freeman’s account. When the securities were delivered to the bank, it in turn delivered them to Freeman (it is the latter delivery that the bank insists was fraudulently procured by Freeman). In exchange for the stock certificates, Freeman gave the bank his personal checks for the purchase price drawn on New York City banks. At first, sufficient funds were available to cover these checks, but as the course of dealing progressed, Freeman drew them against insufficient funds. In the case of such transactions, Freeman asked that the checks be held by Community Bank until funds were deposited in and collected by the drawee bank.

Freeman, in his affidavit, described his agreement with Community Bank as follows:

“The securities were delivered to me upon the express understanding that I would use them only to sell them promptly and deposit the proceeds in my New York bank to allow [the Community Bank] to present for payment the checks tendered to [the Community Bank] in exchange for the securities.”

Early in 1968, the bank paid for shares of a speculative stock listed on the American Stock Exchange, and delivered them to Freeman against his post-dated checks for $365,943.77. Before Freeman could sell the stock and cover the overdrafts, the Securities and Exchange Commission stopped trading in the issue. The scheme collapsed on April 16, 1968, when Freeman informed the bank that he would not be able to make the checks good.

Marine Midland took the position in the district court that Freeman did not make out a claim because he did not allege that the credit was “secured” by a stock, as that term is used in Regulation U of the Board of Governors of the Federal Reserve System. 12 C.F.R. § 221.-1(a) (1973). Freeman offered to cure his pleading by amending it to state the conclusion of violations of sections 7(a) and (d) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78g(a) & (d) (1970), arguing that it is not necessary to allege a security arrangement to make out a violation of the Exchange Act. The district court granted the 12(b) (6) motion, dismissing the complaint with prejudice, and denied Freeman’s motion for leave to amend. Freeman appeals from the dismissal of his complaint.

On the basis of the scant record before ús, we reverse and remand. We agree with the district court’s conclusion that a complaint based on the margin requirements must allege that the indebtedness is secured directly or indirectly by stock, but we find that the affidavits disclose a triable issue of fact as to whether the obligations in question were indirectly secured.

I.

Freeman’s first contention on this appeal is that the district court erred in holding that the complaint must allege that Freeman’s loan from the bank was “secured” by a stock. His position, that he need only allege that credit was extended “for the purpose of purchasing or carrying a security,” is based on the portion of section 7 which reads as follows:

“It shall be unlawful for any person . to extend or maintain credit . for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Board of Governors of the Federal Reserve System shall prescribe . . . ” Securities Exchange Act of 1934 § 7(d), 18 U.S.C. § 78g(d) (1970).

Freeman’s interpretation of the statute focuses on the language “for the purpose of purchasing or carrying any security,” while it ignores the obviously limiting language “in contravention of such rules and regulations as the Board of Governors . . . shall prescribe.” A loan does not offend against section 7(d) unless it violates the margin regulations promulgated under section 7 by the Federal Reserve Board.

To violate Regulation U, it is not sufficient that a bank extend “purpose” credit; it must also take stock as security for such credit. The regulation states that:

“no bank shall extend any credit secured directly or indirectly by any stock for the purpose of purchasing or carrying any margin stock in an amount exceeding the maximum loan value of the collateral. . . .”12 C.F.R. § 221.1(a) (1973) (emphasis added).

To be subject to Regulation U, a loan must be for the purpose of purchasing or carrying securities, and it must be collateralized, either directly or indirectly; by stock. Solomon & Hart, Recent Developments in the Regulation of Securities Credit, 20 J. of Public L. 167, 174 (1971). The purpose requirement is statutory, deriving from section 7(d). The security requirement is from Regulation U, and embodies the Board’s determination that banks should not be saddled with the burden of determining whether the purpose of each unsecured loan is to purchase or carry securities. Id. Were we to hold that Freeman’s complaint is sufficient on its face, we would impose that burden on the Community Bank.

Freeman’s complaint was defective in failing to allege that the obligation was directly or indirectly secured. Because the facts alleged were not sufficient to make out a violation of Regulation U, they do not make out a violation of section 7. Thus section 29, 15 U.S.C. § 78ce (1970), which voids contracts made in violation of the Exchange Act, does not avail Freeman. Because the profféred amendment to Freeman’s pleadings did not contain sufficient additional facts to make out a violation of section 7, the district court acted within its discretion in refusing leave to amend the complaint to state the conclusion of a section 7 violation.

II.

Despite the fact that Freeman’s pleading was defective, the district court erred in dismissing the complaint. The Federal Rules of Civil Procedure provide that when matters outside the pleadings are considered on a Rule 12(b)(6) motion, the motion is to be treated as a motion for summary judgment under Rule 56, F.R.Civ.Proc. 12(b). 6 J. Moore, Federal Practice fí 56.02 [3] (1972); Pirone v. Flemming, 278 F.2d 508 (2d Cir. 1960), aff’g, 183 F.Supp. 739 (S.D. N.Y.1959). The plaintiff’s affidavit opposing the bank’s motion to dismiss should have been considered in testing the sufficiency of his pleadings, as well as in testing whether a triable issue of fact exists on the question of whether the arrangement with the bank was an indirectly secured loan.

The gist of Freeman’s statement as to the nature of his deal with the bank is that he was to sell the securities turned over to him by Community Bank, using the proceeds to cover the overdrafts on his. New York bank. The arrangement, if proved at trial, may come within the scope of the words “indirectly secured.”

Regulation U defines “indirectly secured” as follows:

“The term ‘indirectly secured’ includes any arrangement with the customer under which the customer’s right or ability to sell, pledge, or otherwise dispose of stock owned by the customer is in any way restricted so long as the credit remains outstanding . ...” 12 C.F.R. § 221.3(c) (1973).

The regulation does not require that a lender take any of the steps usually necessary to create a legally enforceable security interest. Rather it focuses on whether the arrangement impinges on the ability of the borrower to dispose of his securities. Regulation U is drafted in terms broad enough to' combat any sharp practice developed by a lender to avoid the effect of the margin requirements and yet put himself in a better position than a general creditor. It is significant that Freeman’s obligations to the bank were payable on demand, rather than at fixed maturities, and that the record does not disclose that the advances were supported- by the type of current financial data usually required to justify the extension of personal credit. Both of these factors support an inference that the bank was primarily relying on the stock for repayment.

One of the examples illustrating the meaning of “indirect security” in the Board of Governors interpretations accompanying Regulation U is similar to the arrangement disclosed by Freeman’s affidavit:

“A borrower may not deposit his stock with the bank, but agree not to pledge or encumber his assets elsewhere while the loan is outstanding.
“Such an agreement may be difficult to police, yet it serves to some extent to protect the interest of the bank if only because the future credit standing and business reputation of the borrower will depend upon his keeping his word. If the assets covered by such an agreement include stock, then . . . the stock is ‘indirect security’ for the loan within the meaning of this part.” 12 C.F.R. § 221.113(f)(2) (1973).

The central issues of fact in this case remain unresolved, but it appears that plaintiff states a claim for relief. The district court’s decision granting the defendant’s 12(b)(6) motion is reversed, and the cause is remanded for appropriate further proceedings.

      . Freeman’s complaint reads in pertinent part as follows:
      “FOURTH: At various times in the
      past defendant extended credit to plaintiff.
      “FIFTH: Defendant extended credit to
      plaintiff for the purpose of purchasing and carrying stocks registered and listed on national securities exchanges, and defendant knew that the loans were made to plaintiff for such purpose.
      “SIXTH: Loans were made by defend-
      ant to plaintiff for the full purchase price of the stocks, in violation of Regulation “U” promulgated by the Board of Governors of the Federal Reserve System pursuant to the Securities and Exchange Act of 1934.
      “SEVENTH: Plaintiff is presently in-
      debted to defendant as a result of the aforementioned loans made for the purpose of purchasing and carrying stocks registered on national securities exchanges.
      “EIGHTH: As evidence of plaintiff’s indebtedness to defendant for the aforementioned loans, plaintiff issued to defendant written negotiable instruments.
      “NINTH: Such written instruments are
      contracts made in violation of the Securities and Exchange Act of 1934 and of Regulation “U” of the Board of Governors of the Federal Reserve System promulgated thereunder.
      “TENTH: Such contracts are void pursuant to Section 29(b) of the Securities and Exchange Act of 1934, 15 U.S.G. 78cc(b).
      “ELEVENTH: Upon information and belief, some of the written instruments issued by plaintiff may have been assigned to other party or parties.
      “WHEREFORE, plaintiff demands judgment declaring void the debt owed to defendant as resulting from loans made in violation of the Statute and ordering defendant or defendant’s assigns to surrender any written instruments evidencing such debt to this Court to be cancelled and for such other and further relief as this Court deems proper, together with the costs and disbursements of this action.”

      . The counterclaim represents the uninsured portion of the bank’s loss.

      . The Marine Midland side of the story is summarized in its affidavit supporting the motion to dismiss:
      “(a) commencing in or about August, 1965, Freeman together with an officer of the Bank engaged in a scheme to defraud the Bank pursuant to which Freeman purchased securities from or through various securities brokerage concerns and ordered the securities delivered to the Bank for delivery against payment.
      “(b) after securities were delivered to the Bank, plaintiff Freeman fraudulently procured the delivery of the securities to himself by delivering to his co-conspirator within the Bank a cheek or checks drawn against insufficient funds in his personal checking account at another bank, which plaintiff and confederate knew did not contain sufficient funds.
      “(c) upon information and belief plaintiff Freeman immediately thereafter would sell the securities which he had fraudulently obtained from the Bank and deposit the receipts in his personal checking account at the other bank in an attempt to cover the check or checks which he had previously delivered to his co-conspirator at the Bank.
      “(d) As part of this fraudulent scheme Freeman’s co-conspirator would hold such check or checks in his personal possession until informed by Freeman that the securities had been sold and sufficient funds had been deposited in plaintiff’s personal checking account to cover the check which he had previously delivered to his co-conspirator at the Bank.
      “(e) On or about April 16, 1968, the scheme collapsed when Freeman was unable to sell the securities which he had fraudulently obtained from the bank for an amount sufficient to cover the checks which he had previously delivered -to his co-conspirator at the Bank.”

      . All of the events giving rise to this action took place prior to the effective date of section 7(f) of the Securities Exchange Act of 1934, as amended by section 301 of the Bank Records and Foreign Transactions Act, Pub.L.No. 91-508, 84 Stat. 1114 (1970), and prior to the promulgation of Regulation X of the Board of Governors of the Federal Reserve System. 12 C.F.R. § 224 (1973). We therefore need not determine the effect of Regulation X, which makes the knowing borrower particeps criminis with the lender in a Regulation U violation, on our holding in Pearlstein v. Scudder & German, 429 F.2d 1136 (2d Cir. 1970), cert, denied, 401 U.S. 1013, 91 S.Ct. 1250, 28 L.Ed.2d 550 (1971), the basis for this action. Pearlstein held that a borrower may maintain an action against a lender for margin violations despite the fact that he participated in the margin violation. See R. Jennings & H. Marsh, Securities Regulation 1404 (3d ed. 1972) ; Note, Regulation X and Investor-Lender Margin Violation Disputes, 57 Minn. L.Rev. 208 (1972).

      . Tie Board of Governors has taken the position that these two factors are significant in determining whether a stock is security:
      “some indication that the bank had not relied upon stock as collateral would seem to be afforded by such circumstances as the fact that (1) the bank had obtained a reasonably current financial statement of the borrower and this statement could
      reasonably support the loan, and (2) the loan was not payable on demand or because of fluctuations in market value of the stock, but instead was payable on one or more fixed maturities . . . 54 Fed.Res.Bul. 439, 440 (1968), as quoted in 5 L. Loss, Securities Regulation 3276 (1969).