author: MOORE, Circuit Judge

text:
    Joseph A. ROSIN, etc., Piaintiffs-Appellants, v. The NEW YORK STOCK EXCHANGE, INC., Defendant-Appellee. Joseph A. ROSIN, etc., Plaintiffs-Appellants, v. The AMERICAN STOCK EXCHANGE, INC., Defendant-Appellee. Victor H. GOULDING, etc., Plaintiffs-Appellants, v. The MIDWEST STOCK EXCHANGE, Defendant-Appellee.
    Nos. 72-1594, 72-1840, 72-1841.
    United States Court of Appeals, Seventh Circuit.
    Argued April 24, 1973.
    Decided Sept. 6, 1973.
    Rehearing Denied Nov. 2,1973.

      Harold Z. Kaplan, Chicago, 111., for plaintiffs-appellants.
    Richard M. Keck, Stewart S. Dixon, Chicago, 111., John J. Loflin, New York City, Milton H. Cohen, Chicago, 111., for defendants-appellees.
    Before SWYGERT, Chief Judge, and MOORE  and FAIRCHILD, Circuit Judges.

       Hon. Leonard P. Moore, Senior United States Circuit Judge, United States Court of Appeals for the Second Circuit, sitting by designation.

   MOORE, Circuit Judge

(sitting by designation):

Plaintiffs, in three cases, Rosin v. The New York Stock Exchange, Inc. (No. 72-1594), Rosin v. The American Stock Exchange, Inc. (No. 72-1840), and Goulding v. The Midwest Stock Exchange (No. 72-1841), (these cases having been consolidated for purposes of appeal), appeal from orders of the United States District Court for the Northern District of Illinois, William J. Bauer, Judge, granting motions for summary judgment in favor of the defendant stock exchanges and dismissing the separate actions against each exchange. (Mem. Opinion and Order, N.D.Ill., No. 71-C-2085, Apr. 17, 1972 [hereinafter, Mem. Op.]; Order, 71-C-3130, 72-C-17, June 26, 1972). Since the complaints in these cases raise similar issues, specific reference will be made only to the New York Stock Exchange (NYSE) action. This opinion, however, fully applies to the actions against the American Stock Exchange and Midwest Stock Exchange.

I.

The amended complaint against defendant NYSE alleges in substance that a charge of one five-hundredths of one percent on the aggregate dollar volume of securities transactions on that exchange, which charge is made by the broker-members of the exchanges against the individual customers on each separate sale transaction, is illegal. Plaintiff sues as an individual investor on behalf of himself and on behalf of the alleged Class of all investors who have paid this fee. (Rule 23, F.R.Civ. P.).

Plaintiff’s claim and argument are based primarily on Section 31 of the Securities Exchange Act of 1934 (the Act). (15 U.S.C. § 78ee). This section imposes upon every national securities exchange an annual registration fee payable to the Securities and Exchange Commission (the SEC) for the privilege of doing business as such exchange.

The Act provides:

Section 31. Every national securities exchange shall pay to the Commission on or before March 15 of each calendar year a registration fee for the privilege of doing business as a national securities exchange during the preceding calendar year or any part thereof. Such fee shall be in an amount equal to one five-hundredths of 1 per centum of the aggregate dollar amount of the sales of securities (other than securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States or such securities issued or guaranteed by corporations in which the United States has a direct or an indirect interest as shall be designated for exemption from the provisions of this section by the Secretary of the Treasury) transacted on such national securities exchange during the preceding calendar year and subsequent to its registration as a national securities exchange. 15 U.S.C. § 78ee.

The thrust of plaintiff’s argument is that the statute reads: “Every national securities exchange shall pay to the Commission * * * [a registration fee].” Therefore, argues plaintiff, the exchange itself must bear the expense of this fee which it cannot recoup through its broker-members and their customers.

Recoupment is presently accomplished on the NYSE through Exchange Rule 440 under which the Exchange has directed its members to report their sales volume monthly and to pay to the Exchange a sum equal to one cent for each $500 or fraction thereof of the total aggregate dollar sales.

Plaintiff also alleges that NYSE Rule 440 violates SEC Rule 10b-5 (17 C.F.R. 240.10b-5) in that this charge operates as a fraud on the customers.

Plaintiff seeks damages on behalf of himself and the Class and an injunction against the NYSE restraining it from continuing the practice of charging to brokers’ customers the SEC registration fee specified in Section 31.

II.

Defendant NYSE moved to dismiss the complaint for failure to state a claim (Rule 12(b)(6), F.R.Civ.P.) and for summary judgment on the ground that there is no genuine issue as to any material fact. (Rule 56, F.R.Civ.P.). The motion was supported by the affidavit of the Secretary of the NYSE with exhibits annexed. From this affidavit there appear the following facts as to which there is no dispute.

On September 11, 1934, the NYSE applied for registration as a national exchange pursuant to Section 6 of the Act. With its application the NYSE submitted copies of its Constitution and Rules.

Prior to this application, on September 6, 1934, the Governing Committee of the NYSE had adopted a resolution providing, upon registration with the SEC, for the payment of the Section 31 fee to the NYSE by the broker-members thereof and that such members “shall charge and collect from the person for whom he was acting in making such transaction the sum of one cent for each $500 or fraction thereof of the dollar amount involved in such transaction.” In other words, the charge was to be imposed upon the customer. This resolution was apparently not submitted to the SEC with the Exchange’s original application for registration as a national securities exchange. Thereafter, in response to an SEC inquiry as to how the NYSE contemplated “collecting the registration fee required by Section 31 of the Securities Exchange Act”, the NYSE replied and enclosed a copy of the September 6,1934 resolution.

Under date of September 28, 1934, the SEC registered the NYSE as a national securities exchange and reserved the privilege of revoking the registration if it should appear to the SEC that “the rules of said exchange in any aspect are not just and adequate to insure fair dealing and to protect investors * * *.”

III.

In ruling on the motion for summary judgment, the District Court first determined that “[t]he material facts presented are uneontroverted.” (Mem. Op. at 2). This conclusion is clearly correct; plaintiff bases his claim upon his conception of the legal consequences of Section 31, Rule 440, Section 10(b), and Rule 10b-5, and thus this case is one which may properly be decided by summary judgment.

The Court below then turned to the question of whether there is a private right of action under Section 31 of the Act, supra, which would enable this plaintiff on behalf of himself and/or the alleged Class of customers which has paid the aliquot portion of the registration fee assessed against them, to sue the Exchange for recoupment of this charge.

The Court observed that “[t]he language of Section 31 is nothing more than a revenue-raising device” (Mem. Op. at 5); that this section “does not provide for a private right of action” (Id. at 4); and that a situation in which such a right might be implied does not exist here. Therefore, the Court concluded, plaintiff has no private right of action for an alleged violation of Section 31.

We agree with this. decision of the District Court. There is nothing in Section 31 of the Act relating to broker-members or brokers’ customers. If an exchange should fail to pay the required registration fee, the SEC may take whatever action it deems necessary to enforce the statute. No private right of action under Section 31 is vested in any private citizen. Compare J. I. Case Co. v. Borak, 377 U.S. 426, 433, 84 S.Ct. 1555, 1560, 12 L.Ed.2d 423 (1964).

IV.

If plaintiff has any right at all to bring this action, that right must be based upon some allegedly unlawful imposition and collection of the registration fee from the customers. The District Court stated the question thus:

[T]he real question presented here is whether this charge lawfully may be passed on to the customers of members without express statutory authority. Mem. Op. at 5.

Concisely stated, plaintiff’s argument is that Section 31 assesses a registration fee against national stock exchanges “for the privilege of doing business.” Therefore, he says, “the duty to pay for that privilege is the duty of the NYSE, not the Class” (Complaint, jf 17), and the charge may not be passed on to that Class.

In a long and convoluted argument in which he chooses to term the “registration fee” a tax, plaintiff, upon this assumption, claims that, in effect, no power was given to the Exchange by Congress to “retax” the customers. To build a foundation for his argument plaintiff resorts to such expressions as “excise tax on the stock exchanges”, “excise license tax”, “privilege tax”, “excise privilege tax.” (Brief at 26, 30). But as plaintiff concedes (Brief at 29), “The statute [Section 31] is unambiguous.” The charge imposed is a registration fee, simpliciter; it is not a tax. Therefore, the voluminous quotations from both Senate and House debates which plaintiff sets forth serve only as an interesting reminder of the intersectional views expressed by our equally intersec-tional Congressional representatives made in the depths of the Depression (circa 1929-1939) in an effort by many to attribute our national misfortune to the financial community, principally stock exchanges. The reasons and motives of the individual members of Congress which induced them to vote for a registration fee to be imposed on stock exchanges were merged into the bill as enacted, which is, as plaintiff says, “unambiguous.” (Id.)

Equally irrelevant are plaintiff’s arguments and cases based upon his “re-tax” theory. There is no “tax” and there is, therefore, no attempt on the part of the NYSE to effect a “retax.”

It is unnecessary for our decision here that we accept the District Court’s conclusion' that this case presents “a classic example of an excise tax.” (Mem. Op. at 6). Nor is it necessary, in view of our conclusion that Section 31 imposes no tax, that we determine whether such a “tax may be passed on to customers in the absence of express statutory authority.” (Id. at 5). Finally, for the same reason, we need not consider whether this charge is authorized, as defendants urge, as included under “other charges” in Section 19(b)(9) of the Act. The District Court’s decision that regardless of whether Section 31 imposes “a tax or a fee,” it may be passed on indirectly or, as here, directly, is clearly correct. (Lash’s Prods. Co. v. United States, 278 U.S. 175, 176, 49 S.Ct. 100, 73 L.Ed. 251 (1929)).

V.

Plaintiff also argues that defendant’s rules violate SEC Rule 10b-5. This argument is based upon two theories: (1) that investors are given nothing in return for the registration fee charge; and (2) that the method of computing the charge, in effect, results in unjust enrichment of the broker-members. (Plaintiff alleges that because customers must pay on each sale of stock a fee of $0.01 for each $500 or fraction thereof, excess fees totaling $300,000 were collected between 1967 and 1970).

As the District Court noted: “[I]t would be virtually impossible to collect an amount identical to that of the Exchange’s registration fee * * * ” (Mem. Op. at 15), and that there is “no feasible alternative to the present procedure * * “Since all brokers’ billing is handled on a per-transaction basis, it would be economically impractical, if not virtually impossible, to aggregate a customer’s transactions over an extended period in order to lessen the amount of the over-collection by a few pennies per customer.” (Mem. Op. at 16).

The facts clearly rebut any cause of action under Section 10(b) or Rule 10b-5. There was no fraud or misrepresentation in connection with the sale of securities. To the contrary, the charges made on each transaction are itemized and openly disclosed on the customer’s confirmation slips.

To insure equal treatment of customers the NYSE imposes a uniform method of collecting the registration fee. Because the trading of customers varies from accounts having only a single isolated transaction to active trading accounts, the NYSE has enacted Rule 369 which prevents individual broker-members from giving preferential treatment to customers, either by the assumption of the registration fee charges or by resort to different methods of calculation.

The method of collecting the Section 31 registration fee adopted by the NYSE does not come within any proscription of the statute, the rules relating to fraud, or the intendment thereof. Plaintiff’s frequent interspersing of the word “fraudulent” does not obscure the language thereof.

VI.

Brief comment must be made regarding plaintiff’s attempt to seek discovery from the SEC, the American Stock Exchange, and the Midwest Stock Exchange. This discovery was sought after the District Court had entered its Memorandum Opinion and Order in the action against the NYSE and had indicated that it intended to dispose of the American and Midwest actions in similar fashion.

By such discovery plaintiff asserts that he had hoped to establish “material facts to dispute those invented by the Court in order to arm [himself] to defend against defendants’ motions for summary judgment.” (Brief at 73). In the first place, courts do not “invent” material facts: they pass upon such relevant and material facts as counsel properly present. Secondly, we are dealing not with “court-made facts”, “erroneous facts dehors the record” or the “court’s own invented ‘facts’ ” (Brief at 69, 73), but with statutes and rules and plaintiff-made distortion thereof.

No deposition of the SEC or of the defendants can alter the few material facts necessary to decision here. The Court did not invoke “judicial magic” (Brief at 77) to find no substance in plaintiff’s groundless, although ingenious, theories. Such alchemy as there may be results from plaintiff’s efforts to turn a registration fee into a tax.

The motions for summary judgment in favor of defendants were properly granted.

Orders affirmed.

      . New York Stock Exchange Rule 440 provides :
      Books and Records
      Every individual member and every member organization shall make and preserve for at least three years such books and records as the Exchange may prescribe.
      Pursuant to this Rule, the Exchange has issued the following directions:
      (1) Every member, or member organization engaged in clearing or settling transactions effected upon the Exchange shall maintain a daily record of the aggregate dollar amount of the sales of securities made upon the Exchange and cleared or settled by him or it. The amount of money shall be computed upon the actual sales price, disregarding commissions, taxes or accrued interest on bonds. Blotter dates shall be used throughout. All sales of securities on the Exchange shall be included, except securities which are direct obligations of or obligations guaranteed as to principal or interest by the United States, or such securities issued or guaranteed by corporations in which the United States has a direct or indirect interest as may be designated for exemption therefrom by the Secretary of the Treasury. Odd-lot dealers shall record both the full lots and the odd lots which they sell on the Exchange. If a member organization clears and settles a transaction for a member or member organization that in turn clears it for another principal, only the member organization settling the transactions shall include it in its record. Monthly reports (Form 120-A) of the daily totals above referred to shall be submitted to the Exchange in the manner described below.
      (2) At or before 10:30 a. m. on the 10th day of each month each member or member organization required to report shall submit to the Controller’s Department a report on Form 120-A showing: aggregate dollar sales volume; the Registration Fee due thereon; principal amount of bonds; number of shares of stock and number of rights to subscribe.
      (3) Every such reporting member or member organization shall pay to the Exchange a sum equal to one cent for each $500 or fraction thereof of the total aggregate dollar sales volume reported monthly. The total amount payable as shown on the reports on Form 120-A submitted during the quarter will appear on the next quarterly bill as rendered by the Exchange.
      (4) With respect to all transactions which are required by these directions to be included in the foregoing report, the member, firm or corporation responsible for reporting any transaction to the Exchange shall charge to the account, as billed, for which such transaction was made the sum of one cent for each $500 or fraction thereof represented by such transaction.
      Whenever the account against which such charge is made is that of a member, member firm or member corporation who is acting for a principal, such member, firm or corporation shall withhold from the sum credited to the account of such principal, as billed, an amount equal to one cent for each $500 or fraction thereof represented by the transaction made for such principal.
      (5) In rendering to customers confirmations of sales made on the Exchange for their account, the charge required by these directions .either shall be shown separately or be treated in the same manner as transfer taxes. In either case the confirmation shall contain an explanatory legend.
      (6) Members', firms or corporations that cease the clearing or settling of security transactions shall promptly render reports for any interim period resulting from such change, and shall pay promptly any sum due under the above directions.
      (7) When sales are made on the Exchange for a customer each item reported in writing to the customer must be separately used as the basis for computing the fee appertaining thereto. If the written report shows as a single item the sale of two or more lots of the same security at the same price on the same day, the fee may be computed upon the total of such lots as a unit; otherwise each sale, whether reported together with others or separately, must be independently made the basis for computing the fee relating thereto.
      (8) Members, firms or corporations who settle transactions for other members, firms or corporations and who consequently are required to report sales on the Exchange and pay a fee thereon pursuant to paragraphs 1 and 2 above must charge the account of the member, firm or corporation for whom they act on the same basis as is prescribed above with respect to transactions made for customers. This applies also to firms and corporations carrying accounts of floor traders, specialists, and non-clearing members, firms or corporations both in New York City and elsewhere.
      (9) The use of daily, weekly, or any similar totals of transactions made for a particular customer or for a particular account as a basis for computing the fee chargeable to such customer or account, whether member or non-member, is prohibited.
      (10) When differences in the computation of the fee arise in good faith, such as when a firm or corporation has rendered to a customer a single report covering two or more lots of the same security at the same price, and because of “give-ups” or otherwise, it is necessary to bill or record the transaction as two or more separate lots, or when similar differences arise between a main office and a branch office, such differences may be adjusted by those involved by mutual agreement.
      American Stock Exchange Rule 393 provides:
      There shall be paid to the Exchange by each member, member firm or member corporation in such manner and at such time as the Treasurer of the Exchange shall direct, the sum of one cent for each $500 or fraction thereof of the dollar volume of the sales upon the Exchange of securities (whether or not cleared by the American Stock Exchange Clearing Corporation) cleared by such member, member firm or member corporation, and any such member, member firm or member corporation required by this rule to pay any sum to the Exchange in respect to any sale upon the Exchange, shall charge and collect from the person for whom he was acting in making such transaction the sum of one cent for each $500 or fraction thereof of the dollar amount involved in such transaction. The monies so paid to the Exchange shall be paid to the Securities and Exchange Commission as the registration fee imposed upon the Exchange by the provisions of the Securities Exchange Act of 1934.
      Midwest Stock Exchange Rule 17 provides:
      Registration Pee Charged the Customer The registration fee under the Securities Exchange Act of 1934 shall be charged the customer.

      . NYSE resolution of September 6, 1934. (Appendix at 22).

      . A letter from the SEC to the President of the NYSE, dated September 15, 1934, requested a copy of any adopted Rule or an explanation of the procedure.

      . SEC Order, September 28, 1934.

      . New York Stock Exchange Rule 369 provides :
      Prohibited Arrangements, etc.
      While not in any way limiting the meaning or effect of Section 1, Article XV of the Constitution, prohibiting rebates of commission, a member, allied member or member organization may not make any of the following arrangements, agreements or payments :
      :|: * * * *
      (3) The assumption, by agreement or otherwise, of any part of
      (B) any charge upon the sale of securities upon the exchange because of the registration fee imposed upon national securities exchanges by the Securities Act of 1934;


source: Caselaw Access Project

author: JOHN W. PECK, Circuit Judge. McCREE, Circuit Judge

license: Public Domain

text:
    CLINTON STREET GREATER BETHLEHEM CHURCH, Intervenor-Plaintiff-Appellant, v. CITY OF DETROIT, Defendant-Appellee.
    No. 73-1083.
    United States Court of Appeals, Sixth Circuit.
    Argued June 6, 1973.
    Decided Aug. 28, 1973.

      Barton W. Morris, Detroit, Mich., for appellant.
    William J. Coughlin, Asst. Corp. Counsel, Detroit, Mich., for appellee; Michael M. Glusac, Corp. Counsel, Thomas J. O’Dowd, Asst. Corp. Counsel, Detroit, Mich., on brief.
    Before PECK and McCREE, Circuit Judges, and O’SULLIVAN, Senior Circuit Judge.
   JOHN W. PECK, Circuit Judge.

The history of this case stems back to a condemnation action begun by the City of Detroit in 1950. In that year, the City, preparatory to establishing a public housing project, filed a condemnation action in an area of the city designated “Mich. 1-11”; the appellant asked to be exempted from the condemnation proceedings. The city agreed upon the condition that the appellant purchase the remainder of the block upon which its church was situated, and the City agreed to give permission for the building of a new church building. Because of the exemption of this appellant from the condemnation proceedings, no notice of lis pendens was filed against the property, and the appellant was not required to and did not file a waiver of any requests for building permits. The appellant acquired the property, with the exception of two lots, and entered into a construction contract for a new church; construction on the new building began in 1958.

In 1960, the City discontinued the condemnation proceedings and in April of 1962 instituted a new condemnation suit for a federal urban renewal project. On November 22, 1961, a class action suit was brought by the affected residents against the City for losses sustained due to the way in which the area had been affected by the City’s action. The District Court dismissed the action, Foster v. Herley, 207 F.Supp. 71 (E.D. Mich.1962), and this Court reversed, holding that the plaintiff had stated a cause of action, Foster v. Herley, 330 F. 2d 87 (6th Cir. 1964). Subsequently, upon trial, the District Court found that damages had been sustained by the plaintiffs, and a Special Master was appointed to determine membership in the class and to determine the extent of damages, 254 F.Supp. 655 (E.D.Mich. 1967). This Court affirmed that decision, 405 F.2d 138 (6th Cir. 1968).

Pursuant to the decision of the District Court, this appellant filed a claim with the Master. The District Court affirmed the Master’s findings that the appellant was not a member of the class and that the claim for damages should be denied because a settlement had been reached between the appellant and the City in February, 1962, in the amount of $763,235.00. The appellant has perfected this appeal from that judgment.

As a preliminary matter, it must be determined whether this appellant is a member of the class as alleged in the original complaint. The class has been identified as “those property owners within the ‘Mich. 1-11’ area who have been subject to the dual condemnation actions here involved.” 405 F.2d at 146.

The reference to dual condemnation actions is to the 1950 public housing project and the 1961 federal urban renewal project. Foster, the nominal plaintiff in the class action, was included in the 1950 condemnation case and a notice of lis pendens was filed against his properties. In the beginning, he could not obtain a permit to make repairs. His tenants were advised to leave and his unprotected property was vandalized. He had to bear the cost of demolition when the City declared his structures dangerous. In order to get a building permit, he had to sign a “waiver of claim.” 254 F.Supp. at 662. In these respects, Foster is similar to Detroit v. Cassese, 376 Mich. 311, 136 N. W.2d 896 (1965), in which the Michigan Supreme Court relied upon similar affirmative acts by the City, including the filing of a notification of lis pendens, the sending of letters to tenants causing them to move, the making of intense building department inspections and citations against owners for any violations of the building code, the reduction of city services to the area, the razing of vacant and vandalized buildings, and the refusal to issue permits for substantial improvements, which were found to have constituted a “taking” of the property.

In this case, however, the appellant was exempted, at its own request, from the original 1950 condemnation action. There was no notice of lis pendens filed against its property, and the appellant had no trouble in obtaining building permits for the new church structure. And in spite of the fact that the area around was in a state of deterioration, the evidence indicated that the appellant’s income rose steadily during the same period when Foster’s property was being harmed (1958-60).

We are aware that an eminent domain taking can occur in the absence of formal procedures, such as the filing of a lis pendens and the formal notification of proposed condemnation actions, or without physical entry onto the land, Griggs v. Allegheny County, 369 U.S. 84, 90, 82 S.Ct. 531, 7 L.Ed.2d 585 (1962); United States v. Causby, 328 U.S. 256, 261, 106 Ct.Cl. 854, 66 S.Ct. 1062, 90 L.Ed. 1206 (1946); City of Cleveland v. Carcione, 118 Ohio App. 525, 190 N.E.2d 52, 57 (1963). In fact, it was the affirmative actions of the City in this regard which led this Court in the Foster decision to conclude that the point of the taking had occurred prior to the formal proceedings against Foster’s property had begun, a conclusion which has been characterized by some commentators as defining a “de facto” taking. E. g.: B. Adams, Eminent Domain, Police Power and Urban Renewal: Compensation for Interim Depreciation in Land Values, 7 Ga.L.Rev. 226, 234-36 (1973). And although it may be true that the actions taken by the City in regard to this appellant may have constituted a de facto taking, that is not the issue for our determination. In order to come within the ambit of this Court’s decision in Foster, the appellant must first establish his membership in the class represented by Mr. Foster. 405 F.2d at 142. The important distinction between the appellant’s alleged harm and the problems encountered by Mr. Foster is that all of Mr. Foster’s problems stemmed from his being subject to the 1950 condemnation action. See 330 F.2d at 88. The affirmative acts of the City which led the District Court to conclude that a taking had occurred prior to 1962 were all actions taken by the City in accordance with a condemnation action which it later abandoned, and including informing Mr. Foster that he would receive no compensation for improvements, advising him only to “keep the roof on and the water running”; requiring him to sign a waiver of claim for damages as a condition precedent to the issuance of a building permit (but waiving any claim to the increased value of the property as a result of the proposed improvements), completing the condemnation' and clearance of several blocks in the area, and keeping the notice of lis pendens in effect for five years after the issuance of the stop order on the project, while at the same time, telling those who inquired that the property would be condemned soon. 254 F.Supp. at 662.

None of these factors pertain to this appellant, since this appellant was not subject to the 1950 condemnation action. Accordingly, the District Court correctly concluded that, other alleged damage notwithstanding, the appellant was not a proper member of the class and was not entitled to have his claim considered by the Master under the 1969 order of this Court.

In the alternative, the District Court adopted the finding of the Master that the two parties, the appellant and the City, entered into a mutually binding settlement of their dispute with full and complete knowledge of all the facts and circumstances while each was represented by competent counsel. When the City instituted the urban renewal condemnation action in 1961, the appellant had no objection to being included in the project, and the contractors were directed to stop construction on the new building. The City appraised the property (twice) and offered the appellant $463,238, which the appellant turned down. The City informed the appellant that it could not go beyond its two appraisals, and suggested that the appellant engage an engineer to appraise all the costs which the appellant had incurred, and that the appellant could present this appraisal to a jury for a final determination.

Accordingly, the appellant hired an appraiser who placed a value of $1,-219,000 upon the appellant’s property. When this appraisal was submitted to the City for consideration, the appellant was told that if the land had been worth that much, the City would have deleted them from the program and would have left them there. The appellant has characterized this response as a threat by the City to either accept the City’s offer or face the threat of being dropped out of the condemnation action. The Master and the District Court found that there was no evidence to support this interpretation, and that finding is not clearly erroneous. Negotiations were entered into, and eventually the parties settled the dispute for the amount of $763,238, or about $300,000 more than the City’s original offer and about $400,000 less than the appellant’s demand.

The appellant’s contentions are that the City forced them into accepting this offer by threatening to delete them from the condemnation action, that the award is insufficient because it does not take into consideration certain expenditures made by the appellant and because the law of Michigan was subsequently changed concerning the time of valuation. We have already noted that the appellant’s charge of a threat by the City was not substantiated. Similarly, the appellant’s contention concerning the amount of the settlement is not well taken.

Although the District Court and the Master referred to this agreement as an “accord and satisfaction,” it is more precisely a compromise and settlement, Bizzell v. Bizzell, 247 N.C. 590, 101 S.E.2d 668, 676, cert, denied, 358 U. S. 888, 79 S.Ct. 129, 3 L.Ed. 115 (1958), a method of resolving disputes which the law favors over litigation. Williams v. First National Bank, 216 U. S. 582, 595, 30 S.Ct. 441, 54 L.Ed. 625 (1910); Miller v. McGinnis. 285 Mich. 28, 280 N.W. 96, 100 (1938). Such a settlement is as binding, conclusive and final as if it had been entered in a judgment, Beauchamp v. Clark, 250 N.C. 132, 108 S.E.2d 535, 539 (1959); Galusha v. Sherman, 105 Wis. 263, 81 N.W. 495, 497 (1900); Theis v. Theis, 271 Minn. 199, 135 N.W.2d 740, 744 (1965), and the actual merits of the antecedent claims will not afterward be inquired into and examined. United States v. Child, 79 U.S. (12 Wall) 232, 244, 20 L. Ed. 360 (1870); Aviation Corp. v. United States, 97 Ct.Cl. 550, 46 F.Supp. 491, 496 (1942), cert, denied, 318 U.S. 771, 63 S.Ct. 759, 87 L.Ed. 1141 (1943), Bohlman v. Big River Oil Co., 124 N.W.2d 835, 837 (N.D. 1963). The appellant has failed to establish the existence of any of the traditional grounds in Michigan for setting aside such a valid contractual arrangement: mistake, fraud or unconscionable advantage, Miller, swpra, 280 N.W. at 100.

The evidence showed that the appellant’s appraiser took into account most if not all of the damages resulting from the City’s improper use of eminent domain, including all construction costs for the new church, the judgment against the appellant by the contractor for breach of contract, the.acquisition of the 26 parcels of land and the demolition of the houses thereon, and the higher mortgage rates which the appellant incurred because its credit standing had been harmed by the threat of urban renewal. Although the appraiser arrived at the sum of $1,219,000, he has since admitted to several mistakes, one of which was the including of an amount of $400,000 for work that was not done. When the original estimate is decreased by these amounts, the result is very close to the amount of the settlement, supporting ap-pellee’s argument that all of the factors which the appellant contends should have been considered by the Master were in fact included in the settlement figure.

The judgment of the District Court is affirmed.

McCREE, Circuit Judge

(dissenting).

If anything is clear from a study of the voluminous record in this case, it is that the Clinton Street Greater Bethlehem Church has been pillaged and despoiled in the past two decades as thoroughly as any ancient city at the onslaught of raiding barbarians. The record reveals exorbitant payments by the Church to various persons for services ostensibly performed in connection with the securing of mortgages, building permits, construction contracts and the rendering of legal assistance sought in a futile effort to respond to defendants’ urban renewal program. Egregious among the expenditures is the payment of $13,120 apparently for only the notarizing of some papers. The Church claims that it did not receive just compensation when its property was taken in 1961, and we should hesitate before appearing to accord judicial sanction to the treatment received by the Church at the hands of the legal establishment— public and private — during the development of this case. In my opinion, the Church has not received the full consideration of its contentions to which it is entitled, and the consideration it has received has been in many respects erroneous.

Although the record is hardly a model of clarity, I believe it indicates sufficiently that the Church is a member of the affected class of property owners, is not foreclosed from presenting its contention by its acceptance of the negotiated amount in 1963, and did not receive in 1963 an amount representing compensation for the fair value of its property as of the dates of the two takings to which it .was subjected. Accordingly, I respectfully dissent from the affirmance of the district court.

With respect to the first determination of the majority opinion, that the district court properly “affirmed the Master’s findings that the appellant was not a member of the class” and therefore “was not entitled to have his [sic] claim considered by the Master under the 1969 order of this Court,” I observe initially that the Master did not find that appellant is not a member of the class; the Master’s opinion does not even indicate that he considered the question, although implicit in his determination that the Church had entered into a binding settlement is a recognition of the right of the Church to raise the issue of the adequacy of its award. Further, the Master considered hundreds of claims for additional compensation pursuant to the order of the district court, and there is no indication that he regarded the Church to be in a posture fundamentally different from that of the other claimants even though the Church had been exempted from the initial condemnation. Accordingly, to the extent that the Master made a finding in this respect, it is a finding that the Church is a member of the affected class, a finding that is entitled to great weight. See In re Plenz, 111 F.2d 860, 861 (7th Cir. 1940).

More important, the evidence clearly shows that the Church is a member of the class of “those property owners within the ‘Mich. 1-11’ area who have been subject to the dual condemnation actions here involved.” Foster v. City of Detroit, 254 F.Supp. 655, 667 (E.D. Mich.1966), aff’d, 405 F.2d 138, 146 (6th Cir. 1968). The Church, of course, was subject to the second condemnation in 1961 as were the other class members, and its property was within the Mich. 1-11 area. But because it was exempted from the first formal condemnation at its request, and because its income [from contributions?] supposedly rose during the late 1950’s, the majority opinion reasons that it was not subject to “dual condemnation.” I believe this conclusion is contrary to the undisputed evidence.

As will appear infra, it cannot fairly be said on this record that the Church’s income increased during the late 1950’s. And, even if this were the case, that by itself would not justify a determination that the Church is not in the class. Income in the form of voluntary offerings is not determinative of the value of real property occupied by the recipient church. But the majority opinion, although conceding that a “de facto taking” can occur “in the absence of formal procedures,” distinguishes the Church’s situation from that of the Fosters on the ground that the exemption of the Church resulted in the filing of no lis pendens against Church property, no hindrance to the Church’s obtaining building permits, and no attempt generally to effect a taking of the Church’s, property without formally condemning the property, as occurred with respect to the property of the Fosters.

The majority opinion thus does not require the district court to determine whether the actions and policies of the city in the renewal area surrounding the Church “took” the Church’s property in the same way that they took, de facto, the property of the Fosters and the other property owners. It also does not consider the fact that the city reneged on its promise to allow the Church to remain if it bought up the surrounding property and constructed a new facility. In my opinion, by condemning the Church in 1961, after the Church had spent substantial sums in acquiring the remainder of the property on its block (for which it was forced to pay the sellers’ prices) and in constructing the foundation of a new building, the city removed the basis of the bargain it had struck with the Church and should not now be permitted to rely on the exemption of the Church from the initial plan. Cf. Santobello v. New York, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971). The city’s “double-cross” (as appellant’s witness agreed was an accurate description) should be viewed as having placed the Church in the same position in which it would have been if no exemption agreement had been reached, and thus, at a minimum, the district court should be required to consider whether the Church was the victim of a de facto taking during the 1950’s as were the Fosters’ other neighbors in the Mich. 1-11 area. Even more appropriate, however, in view of the findings of the district court concerning the actions of the city in the area surrounding the Church, see 254 F.Supp. at 662, and the uncontroverted testimony of the negative effect of these actions on Church' attendance, see Appendix at 107, 125-28, would be a determination by this court that the Church is a member of the affected class because it was subject to a de facto taking in the 1950’s.

The majority opinion’s second ground for decision — that the Church is bound by its acceptance of the sum offered by the city in 1963 — is equally untenable. First, it should be pointed out that the majority opinion is not correct in stating that the Church had no objection to being taken in 1961. Walter Wade, the chairman of the Church’s board of trustees and director of its business affairs, testified that the Church members “wanted to develop that area and make that area an outstanding monument for our surroundings. We had no intention of surrendering it at all.” Appendix at 107. Mr. Wade testified that they “resented” the city’s action, Appendix at 86, but that when they received the notice of the city’s intention to condemn the Church in 1961, they thought that “we were through down there. The fact is that they would take us, but we would be made whole for what we were worth .” Appendix at 106. According to Mr. Wade, by the time that the Church officials realized that the city would not pay the true value of the Church property, it was too late to resume construction of the new building and to seek a further exemption from condemnation. And, the Church had gone to considerable trouble to obtain mortgages to purchase another building in which to relocate, besides having suffered a decrease in membership as a result of the city’s actions in the surrounding area.

For whatever reason, however, the Church did agree to accept a figure of $763,235 in 1963, and the majority opinion agrees with the district court and the Master that this constituted a binding compromise and settlement. If the Church had been the only resident within the plan area that had received a sum in final settlement of the city’s obligation and was merely attempting to reopen negotiations on the basis of a subsequent change in the law, then I would accept without question the majority’s view. But examination of the record reveals that every landowner in the Mich. 1-11 area who was determined by the Master and district court to be a member of the class represented by the Fosters and therefore entitled to make a claim for additional compensation had previously received payment from the city as compensation for the taking of his property. Indeed, although most of the awards were made in 1962 and 1963, after the city initiated the second condemnation phase in the area on November 11, 1961, see Foster v. City of Detroit, swpra, 254 F.Supp. at 659 n. 10, and after the Fosters had filed suit, see id. at 660 n. 12, there were at least five awards to property owners whose land was taken in the 1950’s and who received payment at the time of taking, long before the Fosters filed suit. I fail to see the difference between these settlements and the Church’s settlement in terms of binding effect. The Master appeared to place weight on whether the claimants had counsel when they settled, but the record reveals no claim on the part of uneounseled property owners that they were the victims of mistake, fraud, or unconscionable conduct, which the majority opinion observes to be the grounds in Michigan for rescinding contracts. If all the other Mich. 1-11 property owners were allowed to reopen their settlements, the ^Church should not be precluded from doing so.

Finally, the majority opinion appears to affirm the district court’s determination that the Church has not proved that it was entitled to any compensation in addition to what it received in 1963, even assuming that the Church, like the other Mich. 1-11 property owners, could benefit from the change in the law effected by the Foster ease and cases such as Detroit v. Cassese, 376 Mich. 311, 136 N.W.2d 896 (1965). In this appeal, the Church claims that it was not compensated for the following: 1) $190,900.20 for the acquisition and demolition of the 26 parcels on its block that it was forced to acquire in the 1950’s as a condition of being exempted from the first condemnation plan; 2) $331,069.06 for the cost of construction of the new Church structures; 3) $66,869.51 for costs incurred in settling the breach of contract suit initiated against the Church by the firms constructing the new church; 4) $118,275 for the costs of obtaining new mortgages after the city condemned the Church in 1961.

The Church contends that at most it was compensated in 1963 for the value of its existing completed facilities — presumably the value as of the time of the de facto taking by the city in the 1950’s —and that it did not receive payment for the value of the new improvements under construction in reliance on the city’s exemption agreement, for the additional property it was forced to acquire as a condition of being exempted, and for damages resulting from the city’s “abusive” use of its power of eminent domain. The city does not contend, and neither the district court nor the majority has determined, that these sums are not properly includible in a compensation award. To the contrary, they assert that the 1963 award — specifically, the $300,000 increase negotiated by the parties — reflected the damages that the Church is now attempting to recover. I cannot agree that this conclusion is justified.

First, it should be observed that the Master, who heard the testimony and conducted the lengthy hearings in this case, has never found that the 1963 award included compensation for the costs sought by the Church; the Master pretermitted consideration of this question by holding the Church bound by its settlement agreement, a holding which I have shown to be erroneous in the circumstances of this case. Accordingly, the trier of fact, who has heard hundreds of similar claims in the three years following our affirmance of the district court in 1968, has not been afforded the opportunity to make findings in the first instance about the actual value of the Church’s property as of the date of taking.

Second, the majority opinion agrees with the district court’s appraisal, based on a 1961 Dun & Bradstreet report, that the Church’s income rose during the period 1958-60 and therefore the Church could not have suffered any damage from a de facto taking. However, the report states on its face that part of this rise in income was attributable to room and board collected at the annexed girls’ home and dormitory, and the un-controverted testimony of Mr. Wade was that the rise in general donations was attributable to a building fund drive. Appendix at 167-68. More important, even if the Church’s income did rise, in the face of the loss of membership to which Mr. Wade testified, there is no consideration by the Master, district court, or the majority in this appeal whether the market value of the Church property declined because of the city’s actions. The income figure is merely an indicium of the Church’s over-all economic health and of the benevolence of its members. It not only may not reflect any of the actual losses suffered by the Church but it also is irrelevant to the Church’s contention in this appeal that it was not compensated for the costs specified above (e. g., the cost of the new foundation or of acquiring the rest of the block).

Third, the record, although difficult to follow, appears to support the Church’s contention that it was inadequately compensated for the properties considered. The Church’s own appraiser testified that he made two appraisals in 1962. The first was an appraisal of the Church property as of January 30, 1962, which came to $1,228,856.11. The second was an appraisal of the property as of 1958, which was a figure of $1,287,876. However, the appraiser admitted that this latter appraisal included the value of the foundation of the new church, which was not completed until 1960, and thus that the appraisal was too high by $421,280.35. The district court and the majority appear to rely on this error to justify a conclusion that the Church property was worth about what was paid for it by the city in 1963, but this ignores the fact that the important figure for our purposes is the 1962 appraisal, which includes the completed foundation of the new church. This appraisal has not been challenged in a significant way by the city and in fact it is consistent with the assessment of the city’s director of the municipal housing commission in 1962 that the Church had $1,172,643 in costs and liabilities that could have been “readily substantiated” to a condemnation jury. Defendants’ Exhibit 1J. Subtracting the sums sought in this appeal from the 1962 appraisal results in an approximation of the award received by the Church and therefore substantiates the Church’s claim in this appeal that it received over $450,000 less than it was entitled to. The 1958 appraisal, less the value of the foundation of the new structure, is consistent with the Church’s claim that in 1963 it was entitled to compensation for preexisting property worth over $800,000 in the late 1950’s plus a $400,000 improvement and other costs incurred as the result of the second condemnation. The 1958 figure is also consistent with the 1959 report of the Church on file with the Michigan Corporation and Securities Commission, a report on which the district court relied, which shows the value of the Church’s assets to be $725,488. Since that figure presumably does not reflect the addition of the foundation of the new church or the other costs incurred in 1961 by the Church, it lends further support to the Church’s claim that its property was worth over $1,200,000 by 1961. Finally, if the Church’s property was worth about $800,000 in 1958 and, as held by the district court and the majority, was worth about the same in 1961, even after the foundation and other costs were added in then it appears to me that the Church has substantiated its claim that the actions of the city in the 1950’s depreciated its property by over $400,000 and therefore resulted in a de facto taking of that amount.

I believe that we should remand this case to the district court with directions to resubmit it to the Master for findings concerning the value of the Church’s property as of the time of the two takings to which the Church was subjected. Only then will we be able to ascertain whether the Church has sufficiently established its claim. If we are to decide the claim on the basis of the record before us, however, I would hold that the district court’s conclusions are not supported by the evidence and that the Church is entitled to the additional compensation it seeks.

      . There is nothing in the record to indicate that any of these class members expressly reserved the right, pending disposition of the Foster case, to seek additional compensation, or that there was any understanding between them and the city that these were merely interim awards.

      . These awards are the following:
      1) The Broadnaxes suffered a taking of parcel No. 873, according to the Master, on January 1, 1956, and they received $1,200 from the city on that date “as a result of condemnation proceedings against said parcel.” On August 3, 1970, they were awarded an additional $6,890 by the Master, confirmed by the district court, to compensate them for what the Master found to be the true value of the property on the date on which the city de facto “took” it.
      2) Anthony Didek suffered a taking of parcels 180, 181, according to the Master, on December 1, 1960, and he received $7,900 on that date from the city. On March 20, 1972, he received from the Master an additional award of $3,650.34.
      3) The Holloways suffered a taking of parcel 360, according to the Master, on December 15, 1958, and they received $3,900 on that date from the city. On March 20, 1972, they received from the Master an additional award of $4,311.66.
      4) The Stegmans suffered a taking of parcel 724, according to the Master, on January 1, 1959, and they received $10,000 on that date from the city. On July 25, 1972, they received from the Master an additional award of $8,731.67.
      5) The Shaws suffered a taking of parcel 286, according to the Master, on August 20, 1955, and they received $6,000 on that date from the city. On August 1, 1972, they received from the Master an additional award of $3,700.

      . See Award to the Bookers, parcels 14, 15, 16, on December 19, 1969.


author: WELLFORD, District Judge.

text:
    Sylvia SILVERS et al., Appellants, v. TTC INDUSTRIES, INC., a New York corporation, et al., Appellees.
    No. 72-1291.
    United States Court of Appeals, Sixth Circuit.
    Argued Oct. 5, 1972.
    Decided Sept. 10, 1973.
    Rehearing Denied Oct. 30, 1973.

      John S. MeLellan, Kingsport, Tenn., for appellants; D. Bruce Shine, Ferguson & Shine, Kingsport, Tenn., on brief.
    Dick L. Johnson, Johnson City, Tenn., for appellees; Simmonds, Herndon, Johnson, Coleman, Brading & McKee, Johnson City, Tenn., on brief.
    Before EDWARDS and CELEBREZZE, Circuit Judges, and WELL-FORD, District Judge.

       Honorable Harry W. Wellford, United States District Court, Western District of Tennessee, sitting by designation.

   WELLFORD, District Judge.

Plaintiffs-appellants in this complex litigation filed suit on October 29, 1969, in the Chancery Court in Unicoi County, Tennessee, seeking rescission' of a reorganization plan which had become effective on January 14, 1969, respecting Armstrong Glass Co., Inc., (hereinafter referred to as Armstrong) a Tennessee corporation, then engaged in the manufacture of flat glass and glass specialty items at Erwin, Tennessee. The appellants, members of the Silvers family, and one Rapport owned stock in Armstrong and had agreed to exchange this stock on a ratable basis for one-half of the defendants TTC Industries, Inc., 3 a New York corporation’s class A and common stock. The Armstrong stockholders pursued the suit for rescission of the transaction and an injunction on the grounds of misrepresentation and fraud in the inducement by reason of concealment of material facts as to TTC’s financial condition and status by defendants-appellees Wilson and also Ellsworth and Norman Goldstein, major stockholders and officers in TTC, also a defendant-appellee. The reorganization involved formation of a successor wholly-owned subsidiary corporation to operate the Armstrong Tennessee glass facility with Jerome Silvers as Executive Vice-President (in effect, the principal operating officer as he had formerly been), Wilson as president and the Gold-steins Vice-Presidents; all of them, together with two TTC nominees serving on the Board of Directors with Rapport. Appellants claimed that prior to closing and effectuating the reorganization and merger of Armstrong into TTC that losses were incurred by TTC affecting its financial condition which were either concealed or not fully revealed after preliminary exchange of financial and operating information. They also contended that full disclosure of information concerning material of great adverse impact upon TTC came to them only after reorganization, and they sought and obtained an injunction in state court to prohibit appellees from interfering with Armstrong’s business operations and to permit Armstrong to operate independently by realizing upon proceeds from its sales and operations apart from TTC’s control, conditioned upon plaintiffs’ execution of an injunction bond of $5,000.00. Thereafter, appellees removed the cause to Federal District Court on grounds of diversity.

They sought to have the injunction dissolved, and after a hearing on November 18, 1969, the Court appointed Rex March as receiver to take charge of Armstrong assets and property and to continue business operations generally with an indemnity or security bond of $25,000.00 required of plaintiffs and bond in like amount to be posted by the receiver. After receiving the first report of the receiver, the Court noted judicially a judgment pending in that Court against Armstrong aggregating nearly $50,000.00 in favor of American St. Gobain Corporation and opined on December 9, 1969, that “only meticulous management of the affairs of this corporation by a receiver can result in its continued solvency.” In January of 1970, on motion of the receiver, the Court ordered TTC (or later its subsidiaries) to pay the receiver approximately $95,000.00 without prejudice to its or their continuing rights in the controversy.

The receiver in connection with ongoing business engaged Jerome Silvers, one of the original plaintiffs, as general manager of Armstrong, and Charles Silvers, another plaintiff in Miami, as a salesman. In March, the receiver also reported that $80,000 to $100,000 would be needed to rebuild a furnace if Armstrong were to continue operating, and that it was in “very, very critical” financial position, whereupon the Court dissolved the injunction on the basis of changed circumstances and awarded some $13,000 in receiver and attorney fees.

Appellees thereafter amended their answer denying liability or alleged misconduct and asserting a $100,000 counterclaim against appellants as cross-defendants for alleged breach of warranties under the same reorganization agreement. Prior to a hearing, TTC filed voluntary proceedings in 1970, in New York for bankruptcy.

Armstrong began operations with assistance of a bond issue by the City of Erwin during 1967, and produced rolled flat glass which before that time was largely imported from eastern Europe. In 1968, TTC, then in the process of becoming publicly owned, contacted Armstrong (and appellants) with respect to serving as sales agent, negotiations culminating in a letter of intent as to merger and a sales agency arrangement in late 1968. Both companies, Armstrong and TTC, purported to have net worths in the range or neighborhood of $200,000. Appellants and their counsel, however, were made aware in November of 1968, of the fact that large prospective orders of products by Sears, Roebuck & Company, Montgomery Ward, and others were actually fictitious and had been fraudulently created by one of TTC’s (or its subsidiary’s) salesmen, and that this fraud would result in the loss of a great deal of contemplated profit by TTC (and would involve some loss on materials involved). Plaintiffs contended that the actual losses attendant to the fraud practiced upon TTC were substantial enough to wipe out its net worth and that this situation was not discovered until mid-1969.

Appellees’ defense and counterclaim denied any misrepresentation on their part and asserted that appellants not only knew about this situation but also failed to disclose Armstrong’s $50,000 judgment liability to American St. Go-bain, and that this conduct violated their express warranties to appellees as to Armstrong’s net worth. Charles Silvers admitted that he knew about the fraud perpetrated on TTC in November 1968, and that at least $120,000 would be lost in anticipated profit on fake orders of equipment. He took the further position that appellees knew before reorganization about the patent violation situation and consent judgment (concerning American St. Gobain).

The District Court after consideration of the proof and record held that plaintiffs under the circumstances were not entitled to a rescission of the reorganization plan and agreement upon the grounds (1) that not all the indispensable parties to that agreement were before the court, (2) that both parties had actual knowledge of the matters purportedly misrepresented for a considerable period of time prior to conclusion of the transaction, and (3) that plaintiffs did not exercise reasonable diligence to learn the facts and consequences of the TTC fictitious order situation about which they were advised prior to closing.

Appellees, upon their motion, were thereupon awarded a $30,000 judgment against appellants and their surety although the court recognized that actual damages for wrongful suing out of the injunction “greatly exceeded the aggregate of $30,000”. The court further held that appellees had been damaged by appellants’ breach of warranty with respect to the $50,000 American St. Go-bain judgment and made a further award in their favor in this amount.

Appellants assert they were denied a full, fair and meaningful hearing in these proceedings. There were, in fact, a number of hearings in the process of consideration of injunctive relief, motions, reports of the receiver, pre-trial matters and the merits of the controversy. Much proof was introduced by affidavits in support of the appellees’ motion for summary judgment. The principal complaint was the court’s exclusion of tendered proof by plaintiff with respect to the merger's impact upon Armstrong and the Silvers family and the extent of the TTC loss discovered during 1969, on the fraudulent scheme practiced upon it by its salesmen. Considering all of the proof offered by appellants, including that tendered and excluded by the trial judge as to fraud in the inducement, we are not persuaded that judgment against appellants on the rescission issue was clearly erroneous or that the court’s holding is not supported by substantial evidence. Appellants concede that they were made aware of the fraud at or about the time TTC and the other appellees learned of it either in October or November of 1968. The full extent of the consequential loss may not have been revealed, but appellants have failed to demonstrate that appellees themselves even knew about the enormity of the affair before January 14,1969.

“In order that there be actionable fraud, the representation must relate . . . ordinarily . . . to a past or existing fact, . . . and not to the future, or future events or occurrences. . . . ” See 37 C.J.S., Fraud § 6, pp. 222, 223. CIA Estrella Blanca LTDA. v. S.S. Nictric, 247 F.Supp. 161 (D.Ore.1965) aff’d 368 F.2d 575 (9th Cir. 1966); Proie Bros. v. Proie, 301 F. Supp. 680, 683 (W.D.Pa.1968) aff’d 414 F.2d 1365 (3rd Cir. 1969). Fraud is not, again, ordinarily based upon erroneous conjectures as to future events even though a party acted in reliance thereon. Cumberland Portland Cement Co. v. R.F.C., 140 F.Supp. 739, 750 (E. D.Tenn.1953) aff’d 232 F.2d 930 (6th Cir. 1956), 37 C.J.S. Fraud § 11, p. 233. Appellants, their counsel and their auditor were all given access to TTC’s, and subsidiaries’, financial data for the two month period after knowledge of the fraud was known before the reorganization took place. Nothing was demonstrated by appellants to indicate that ap-pellees averted inquiry or attempted to conceal books, records, or data pertaining to the prospective impact of the abortive sales transactions. The parties dealt at arm’s length and the facts pertaining to the transaction were within the means of knowledge of appellants. That appellants may have acted under misapprehension of fact at the time of the reorganization occurred is not sufficient to sustain alleged fraudulent inducement under all the apparent circumstances. See the opinion of Chief Judge Murrah in Woodmont, Inc. v. Daniels, 274 F.2d 132 (10th Cir. 1959); Dozier v. Hawthorne Development Co., 37 Tenn.App. 279, 262 S.W.2d 705 (1953). See also Hannah v. Belger, 436 F.2d 96 (5th Cir. 1971). The truth or falsity of a purported misrepresentation should be determined as of the time they were relied on and acted on. “As a general rule, where the parties deal on equal terms, one who has failed to avail himself of means of knowledge readily within his reach cannot complain of the other party’s representations.” 37 C.J.S. Fraud § 34, p. 278. Texas Tunneling Co. v. City of Chattanooga, 329 F.2d 402 (6th Cir. 1964); Classic Bowl, Inc. v. AMF, 403 F.2d 463 (7th Cir. 1968).

The Court acted within its bounds of discretion in allowing appellees to amend their answer and to assert a counterclaim “when justice requires.” F.R.Civ.P., Rule 13(b), (f). Generally, courts have been liberal in granting such assertions of counterclaims under this rule. Wright & Miller, Federal Practice & Procedure, Vol. 6, Sec. 1430. Since appellants failed to establish a right of rescission and therefore improperly asserted rights for injunctive relief bringing about appointment of a receiver (who relied in considerable measure on appellants in operating Armstrong free of TTC’s control), they were liable on their bonds for resulting and consequential damage. There was credible evidence to support a showing of substantial damage to Armstrong and therefore to appellees by reason of appellants’ actions in bringing about an injunction and the eventual appointment by the court of a receiver for Armstrong. The record indicates that the court’s order further provided, “upon the filing of the bond in the increased amount, the present bond of the plaintiffs (appellants) shall become further ineffectual.” (Emphasis ours.) Subsequently, the district court noted “to clarify any misunderstanding, this court required an increase to $25,-000 of the security for the payment of such costs and damages . . . ” (Emphasis ours.) The court had previously found the $5,000 bond required of appellants by the State Chancellor to be insufficient, when he ordered a security bond “for the payment of such costs and damages as may be incurred or suffered by any party who is found to have been wrongfully enjoined herein”.

This court cannot in the face of these orders affirm an award of $5,000 against the original surety on the $5,000 bond, and appellants’ contentions in this respect are sustained.

Appellants contend also that the judgment of $50,000 rendered against it for breach of warranty on the counterclaim was clearly erroneous. On October 9, 1968, American St. Gobain Corporation and Armstrong Glass consented to the entry of a judgment restraining it from infringing a certain patent owned by American St. Gobain. Such consent judgment purported to terminate the controversy between Armstrong and American St. Gobain. The specific warranty alleged to have been breached is in the following terms:

“There are no actions, suits, or proceedings pending or, to the knowledge of Armstrong or transferors threatened, against Armstrong in any court . . . which, if successful, would give rise to a liability of Armstrong . Armstrong is not in default with respect to any order, writ, • injunction or decree of any such court, agency or tribunal.”

On February 7, 1969, American St. Go-bain moved to have Armstrong adjudged in violation of the consent restraining order heretofore referred to. Armstrong was found by the court upon subsequent motion of American St. Gobain to have violated the terms of the consent judgment and this occurred while appellants were in control of Armstrong prior to the reorganization involving TTC on January 14, 1969. There was a factual controversy between the parties as to whether or not appellees knew about this litigation and the judgment against Armstrong and whether appel-lees knew or were advised of Armstrong’s continuing violations. The existence of this situation placed a stain on appellants hand in seeking the extraordinary relief in equity denied them. There was evidence in the record in ap-pellee Goldstein’s affidavit and in appel-lees’ original answer making an issue of this asserted breach of warranty on appellants’ part. The findings of the court concerning breach of warranty and damages in the amount of $50,000 are not clearly erroneous and the judgment of $50,000 in favor of appellees is sustained.

The court below concluded that other damages to appellee “greatly exceeded” the aggregate sum of $30,000 which he considered to be the total of the two bonds then still in force. We have already concluded, however, that the $5,000 bond had been effectually discharged or released. Since there have been no findings of fact in the court’s opinion delineating with clarity the basis, nor the extent, of damages actually suffered by appellee by reason of the wrongful suing out of the injunction by appellants, the cause is remanded to the court below for appropriate determination and findings on the issue of damages and liability therefor. Costs shall be assessed against plaintiffs-appellants.

      . Sylvia Silvers and Rapport, principal shareholders, owned, respectively, 660 shares and 450 shares of 1,450 issued and outstanding Armstrong shares. Rapport subsequently disclaimed any interest in the suit and was subsequently dismissed as plaintiff.

      . Herein referred to as TTC, a holding company having five subsidiaries including Armstrong.

      . The subject of later controversy as hereinafter explained.

      . American St. Gobain Corp. v. Armstrong Glass Co., 300 F.Supp. 416 (E.D.Tenn. 1969), 418 F.2d 571 (6th Cir. 1969), 434 F.2d 1216 (6th Cir. 1970).

      . $74,559.55 was alleged due from Top Trading Corporation and $20,544.00 from Ellsworth Goldstein, Inc., subsidiaries of TTC.

      . Charles Silvers is the husband of Sylvia and father of Jerome.

      . Gabriel S. Kaye, assignee for benefit of creditors of TTO, was substituted for TTC thereafter, in Chapter XI bankruptcy proceedings in New York subsequently transferred to the Tennessee District Court.

      . Armstrong’s purported net worth dropped to approximately $29,500 without reflecting the American St. Gobain judgment prior to reorganization, after losses experienced in 1967 and 1968.

      . He and other plaintiffs took the position that actual losses were represented to be no more than $20,000 during 1968, instead of the $200,000 actually ultimately sustained.

      . Significant losses were sustained by Armstrong during the four months period of receivership beyond its condition of lack of capital, a factor aggravated by appellees’ failure to pay to Armstrong $95,000 assert-edly due on account.

      . Memorandum Opinion and Order filed November 18, 1969, Joint Appendix, p. 62.

      . Memorandum Opinion and Order filed December 9, 1969.


author: TRASK, Circuit Judge:

text:
    Stanley JOHNSON, Plaintiff-Appellant, v. The LOWER ELWHA TRIBAL COMMUNITY OF the LOWER ELWHA INDIAN RESERVATION, WASHINGTON, Defendant-Appellee.
    No. 73-1200.
    United States Court of Appeals, Ninth Circuit.
    Sept. 4, 1973.
    Michael Taylor, Washington, D. C. (argued), Legal Services Center, Seattle, Wash., for plaintiff-appellant.
    Neil T. Proto, Seattle, Wash, (argued), Kent Frizzell, Wallace H. Johnson, Asst. Attys. Gen., Dept, of Justice, Washington, D. C., Stan Pitkin, U. S. Atty., Stuart Pierson, Thomas P. Giere, Asst. U. S. Attys., Seattle, Wash., Carl Strass, Dept, of Justice, Washington, D. C., for defendant-appellee.
    Before HAMLIN and TRASK, Circuit Judges, and BELLONI, District Judge.

       Honorable Robert C. Belloni, United States District Judge for the District of Oregon, sitting by designation.

   TRASK, Circuit Judge:

This is an appeal from an order of the District Court for the Western District of Washington granting defendant-ap-pellee’s motion to dismiss for lack of jurisdiction. The court concluded that “the matters alleged in the complaint relate to a strictly intra-tribal matter.”

The appellant, Stanley Johnson, is an enrolled member of the Lower Elwha Tribal Community, an Indian tribe organized under the Indian Reorganization Act of 1934, 25 U.S.C. § 476, (Wheeler-Howard Act) and located on land purchased by the United States in 1936 and 1937. This land was proclaimed to be the Lower Elwha Reservation in 1968.

25 U.S.C. § 465 provides that:

“Title to any lands or rights acquired pursuant to sections [of this Act] shall be taken in the name of the United States in trust for the Indian tribe or individual Indian for which the land is acquired, . . . ”

A constitution and by-laws were adopted by the Lower Elwha tribe on April 6, 1968, and were approved by the Secretary of the Interior on April 29, 1968. Under article I of their constitution the territory of the tribe includes all lands within the boundaries of the reservation purchased under the authority of the Indian Reorganization Act of June 18, 1934, 25 U.S.C. § 476. Under article III of that constitution, the Lower Elwha Tribal Community Council was designated as the governing body of the tribe, and under article IV the Council was authorized

“To encumber, lease, permit, sell, assign, manage or provide for the management of community lands, interests in such lands . . . and to regulate the use and disposition of community property of all kinds, subject to the approval of the Secretary of the Interior . . . . ”

Thus it appears that the corporation, as recipient of the beneficial interest in the lands held in trust, vested the authority to assign the use and possession of community lands in the Tribal Community Council. Under a document labeled an “ordinance,” (Standard Assignment Ordinance adopted by the Council in 1970, pursuant to the tribal constitution) these assignments were to be “made only to individuals who meet .the requirements for membership.” There is no dispute that appellant was a member of the community.

No tribal court or justice system was provided for, nor does any presently exist. Neither the constitution nor the by-laws adopted by the tribe give express consent for the tribe or its members to sue and be sued in any court system.

In August of 1970, appellant was assigned a ten-acre tract of land within the reservation for life, and in September he and his family moved onto that tract, improved it with a home and some fencing, and maintained a garden, an orchard and a herd of cattle.

In December of 1971, after a consultation with the then Chairman of the Lower Elwha Community Council during which the appellant allegedly was advised that he could move from his tract without risking cancellation of his assignment, appellant moved his family to a house nearby the reservation. He leased the house on the reservation tract to Marvin Williams, another member of the Lower Elwha Community, and appellant periodically returned to tend the garden and orchard and herd his cattle.

On April 10, 1972, appellant was notified by letter that the Community Council had decided to instruct the tenant (Williams) not to pay rent to appellant, and that appellant could no longer have the use of the tract and improvements because in its opinion he had abandoned it. Appellant requested a hearing pursuant to the Standard Assignment Ordinance § 2, which requires that an “as-signee” shall be given notice and an opportunity to be heard before his assignment may be cancelled. It was not until April 24, 1972 at 3:30 p.m. that appellant was informed his hearing would be held the next evening, April 25 at 7:00 p.m. Appellant objected to the insufficient time, and did not appear the next evening so as not to acquiesce in what he deemed irregular procedure. It is not clear whether appellant ever requested another hearing, but no other hearing was set. The Tribal Community Council then cancelled appellant’s assignment and ordered him not to enter upon that tract.

Appellant argues that the district court had jurisdiction over this action which he alleged to be a denial of due process and equal protection under the Fourteenth Amendment to the United States Constitution; under the Indian Civil Rights Act of 1968, 25 U.S.C. § 1302; under the constitution and bylaws of the Lower Elwha Tribal Community; and under the Standard Assignment Ordinance of the Community. Appellant alleges jurisdiction under 25 U. S.C. § 1302, constitutional rights of Indians; 25 U.S.C. § 476, organization of Indian tribes; and 28 U.S.C. § 1331, federal question jurisdiction.

We hold that the district court could have assumed jurisdiction under 25 U.S.C. § 1302(8) and 28 U.S.C. § 1343(4), and remand for further proceedings on the merits of the alleged denial of due process.

We are persuaded that the Indian Civil Rights Act provides a jurisdictional basis for the federal district court because the Act evidences a Congressional exception to the general policy of immunity of Indian tribes from suit. Appellee contends that the Act by itself does not provide a sufficient statutory basis for federal jurisdiction, and that appellant’s allegations of fact are insufficient to meet the requirements of a well-pleaded complaint. Appellee also urges that Johnson’s present residence off the reservation precludes him from claiming the protections of the Act.

The passage of the Indian Civil Rights Act of 1968

“appears to have been tailored by Congress to the purpose of enhancing the civil liberties of individual Indians without unduly undermining Indian self-government and cultural autonomy.” McCurdy v. Steele, 353 F.Supp. 629, 632 (D.Utah 1973).

Under 25 U.S.C. § 1302:

“No Indian tribe in exercising powers of self-government shall—
* * * -X* *X* -X-
“(8) deny to any person within its jurisdiction the equal protection of its laws or deprive any person of liberty or property without due process of law; . ."

The alleged conduct of the tribe in depriving appellant of his assignment and of his tenant without a meaningful opportunity to be heard falls within § 1302(8). See, e.g., Armstrong v. Manzo, 380 U.S. 545, 85 S.Ct. 1187, 14 L.Ed.2d 62 (1965) (right to notice and opportunity to be heard must be granted at a meaningful time and in a meaningful manner).

Appellee contends that the Act by itself is not jurisdictional. However, the pre-existing grant of jurisdiction under 28 U.S.C. § 1343(4) serves as a basis upon which to enforce alleged violations of provisions of the Indian Civil Rights Act which would, if appellee’s argument were accepted, be unenforceable and thus almost meaningless. McCurdy v. Steele, 353 F.Supp. 629, 635 (D. Utah 1973); Seneca Constitutional Rights Organization v. George, 348 F. Supp. 48, 50 (W.D.N.Y.1972); Solomon v. LaRose, 335 F.Supp. 715, 721 (D. Neb.1971); Spotted Eagle v. Blackfeet Tribe, 301 F.Supp. 85, 89 (D.Mont. 1969); Dodge v. Nakai, 298 F.Supp. 17, 25 (D.Ariz.1968); Note, 82 Harv.L.Rev. supra, n. 3 at 1371-73 ; The rationale behind these cases, with which we agree, is that the Indian Civil Rights Act cre-

ates a substantive body of rights, patterned in part on the Bill of Rights, to “extricate the individual Indian” from decisions holding that a controversy between an Indian and his trial government was an internal controversy. See Solomon v. LaRose, supra, 335 F.Supp. at 718 n.3. This legislation at least by implication has waived whatever immunity Indian tribes had in this area prior to its enactment.

Appellee contends that appellant did not have a vested property right that could be affected by tribal Council action, and thus failed to furnish a well-pleaded complaint. We find no basis for extending the well-pleaded complaint rules developed under 28 U.S.C. § 1331 to another jurisdictional section, but regardless, we note that appellees agree that Johnson has at least been deprived of the interest in continued possession and use of his assignment, an interest which has been found to be significant and thus to come within the protection of the due process protection of the Fourteenth Amendment. Fuentes v. Shevin, 407 U.S. 67, 86, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972); Boddie v. Connecticut, 401 U.S. 371, 379, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971).

Appellee’s argument relating to Johnson’s residence off the reservation goes to the abandonment issue, rather than to jurisdiction.

Having found jurisdiction under 25 U.S.C. § 1302(8) and 28 U.S.C. § 1343(4), we do not decide whether the district court also had jurisdiction under 28 U.S.C. § 1331 (see Dodge v. Nakai, 298 F.Supp. 17, 25 (D.Ariz.1968)) or whether, because of the plenary authority of Congress over Indian tribes and the lack of any system of justice on the Lower Elwha Reservation, the federal courts would have jurisdiction under 25 U.S.C. § 476 until tribal courts were established. See Colliflower v. Garland, 342 F.2d 369 (9th Cir. 1965); 25 C.F.R. § 11.1(d); cf. Settler v. Yakima Tribal Court, 419 F.2d 486 (9th Cir. 1969), cert, denied, 398 U.S. 903, 90 S.Ct. 1690, 26 L.Ed.2d 61 (1970); Littell v. Nakai, 344 F.2d 486 (9th Cir. 1965), cert, denied, 382 U.S. 986, 86 S.Ct. 531, 15 L.Ed.2d 474 (1966).

Reversed and remanded for further proceedings in light of this opinion.

      . The case came before the trial court on a complaint to which a motion to dismiss was addressed. In such posture the allegations of the complaint which are well pleaded are to be taken as true. Potrero Hill Community Action Committee v. Housing Authority, 410 F.2d 974 (9th Cir. 1969) ; Doff v. Brunswick Corp., 372 F.2d 801 (9th Cir. 1966), cert, denied, 389 U.S. 820, 88 S.Ct. 39, 19 L.Ed.2d 71 (1967).

      . 28 U,S.C. § 1343 provides in pertinent part:
      “The district courts shall have original jurisdiction of any civil action authorized by law to be commenced by any person:
      * * ill :|: *
      “(4) To recover damages or to secure equitable or other relief under any Act of Congress providing for the protection of civil rights, . . . ”

      . See generally Note, The Indian Bill of Rights and the Constitutional Status of Tribal Governments, 82 Harv.L.Rev. 1343, 1359-60 (1960).

      . During oral argument, counsel for appellee urged that due process within the meaning of 25 U.S.C. § 1302 did not have the same meaning as traditional notions of due process under the Fourteenth Amendment.
      There may be some provisions of the Indian Civil Rights Act that under some circumstances may have a modified meaning because of the special historical nature of particular tribal customs or organization. However, this is not one of them. The Hearings on H.R. 15419 and Related Bills Before the Subcomm. on Indian Affairs of the Comm, on Interior and Insular Affairs, 90th Cong., 2d Sess.: “Rights of Members of Indian Tribes,” at 17 (1968), in discussing title I (now 25 U.S.C. § 1302) dealing with the denial of rights by tribal governments state that:
      “ . any Indian tribe in exercising its powers of local self-government shall, with certain exceptions, be subject to the same limitations and restraints as those which are imposed on the Government of the United States by the Constitution.”
      It thus appears when the bill which was later enacted as 25 U.S.C. § 1302 was before the House Subcommittee, it was the clear intention of that body that the due process restrictions of the bill should be interpreted in the same way when applied to a tribe as when applied to the United States or to the states.
      The legislative history states:
      “By a unanimous vote, the subcommittee sought to extend constitutional rights to the American Indians, . . .
      “ . . . the substitute bill would grant to the American Indians enumerated constitutional rights and protection from arbitrary action in their relationship with tribal governments, . . . ” 2 U.S. Code Cong. & Admin.News at p. 1864 (1968).
      Additionally, the constitution adopted by the Lower Elwha Community provides in part:
      “No member shall be denied any of the rights or guarantees enjoyed by citizens under the constitution of the United States, including . . . due process of law.” Article VII, Bill of Rights.

      . The Supreme Court in situations similar to this has implied an appropriate remedy (usually a private cause of action) to carry out Congressional purposes. See, e. g., Jones v. Alfred H. Mayer Co., 392 U.S. 409, 414 n. 13, 88 S.Ct. 2186, 20 L.Ed.2d 1189 (1968) (violation of 42 U.S.C. § 1982, racial discrimination in the sale or rental of property) ; Wyandotte Transportation Co. v. United States, 389 U.S. 191, 88 S.Ct. 379, 19 L.Ed.2d 407 (1967) (violation of section 15 of the Rivers and Harbors Act of 1899) ; J. I. Case Co. v. Borah, 377 U.S. 426, 431-435, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1954) (violation of section 14(a) of the Securities Exchange Act of 1934).

      . Accord, Seneca Constitutional Rights Organization v. George, 348 F.Supp. 48, 50 (W.D.N.Y.1972) ; Loncassion v. Leekity, 334 F.Supp. 370, 373 (D.N.M.1971).


author: THOMSEN, District Judge: HENRY J. FRIENDLY, Circuit Judge LUMBARD, Circuit Judge

text:
    Edward W. BLAKE, Plaintiff-Appellee, v. DELAWARE AND HUDSON RAILWAY COMPANY, Defendant-Appellant.
    No. 658, Docket 72-2220.
    United States Court of Appeals, Second Circuit.
    Argued March 29, 1973.
    Decided July 5, 1973.
    Rehearing Denied Oct. 23, 1973.
    Homer E. Peters, Albany, N.Y. (Mc-Clung, Peters & Simon, Albany, N.Y., on the brief), for plaintiff-appellee.
    Augustus C. Nimphius, Albany, N.Y. (John H. English, Albany, N.Y., on the brief), for defendant-appellant.
    Before FRIENDLY and LUMBARD, Circuit Judges, and THOMSEN, District Judge.

       Of the District of Maryland, sitting by designation.

   THOMSEN, District Judge:

Defendant’s appeal from a $25,000 judgment against it in an FELA case raises three questions with respect to damages.

1. Defendant argues that the jury should not have been permitted to consider as an element of damages $1,477.86 paid by defendant on account of plaintiff’s medical expenses, but repaid to defendant by Travelers Insurance Company under Group Policy GA 23,000. That policy, issued and maintained pursuant to an agreement between many railroads including defendant, and the collective bargaining representatives of their employees, covers hospital and medical expenses of the insured employees, including plaintiff, and of their dependents.

Premiums on the policy are paid by the several railroads, but coverage is not limited to injuries for which the railroad would be liable under FELA; it extends to all charges for health care incurred by or for an insured employee. Article VII of the policy contains the following provision:

“All benefits provided under this Article are payable to or on behalf of the Employee, provided that benefits based on expenses paid by an Employer or other person or organization (or which an Employer shall be obligated to pay) may be paid by the Insurer to such Employer or other person or organization.”

In this case defendant railroad was not obligated to pay plaintiff’s hospital and medical bills; it voluntarily elected to pay $1,592.08 thereof, but received $1,477.86 by way of reimbursement from the insurer under the group policy. It now claims, as it did in the district court, that the collateral source rule was not applicable to permit plaintiff to include the $1,477.86 in his claim for damages.

Issues relating to the measure of damages in FELA actions are governed by federal law, as are cases under the Jones Act, which adopted certain sections of FELA, including § 5, 45 U.S.C. § 55, which reads:

“§ 55. Contract, rule, regulation, or device exempting from liability; set-off
“Any contract, rule, regulation, or device whatsoever, the purpose or intent of which shall be to enable any common carrier to exempt itself from any liability created by this chapter, shall to that extent be void: Provided, That in any action brought against any such common carrier under or by virtue of any of the provisions of this chapter, such common carrier may set off therein any sum it has contributed or paid to any insurance, relief benefit, or indemnity that may have been paid to the injured employee or the person entitled thereto on account of the injury or death for which said action was brought.”

In Bangor & Aroostook R. Co. v. Jones, 36 F.2d 886 (1 Cir. 1929), defendant asked that the jury be directed to deduct $2,000 of insurance from any damages that the plaintiff might be found to be entitled to recover, citing § 5 of the FELA. The court said:

“There is no evidence in the case that the defendant contributed money toward the procurement of the insurance. If it had contributed money, it could have shown the fact and had the sum deducted, but it was not entitled to have the amount of the insurance deducted. * * * ” 36 F.2d at 891.

In the case at bar, defendant did not prove the portion of the premium it paid which was applicable to plaintiff, and does not seek a credit based on any premium paid.

A number of more recent decisions have considered whether the collateral source rule should be applied in FELA and Jones Act cases, and in other cases governed by federal law. See, e. g., Eichel v. New York Central R.R. Co., 375 U.S. 253, 84 S.Ct. 316, 11 L.Ed.2d 307 (1963); Hartnett v. Reiss Steamship Co., 421 F.2d 1011, 1016, n. 3 (2 Cir. 1970); Haughton v. Blackships, Inc., 462 F.2d 788 (5 Cir. 1972); Gypsum Carrier, Inc. v. Handelsman, 307 F.2d 525 (9 Cir. 1962); Hall v. Minnesota Transfer Railway Co., 322 F.Supp. 92 (D.Minn.1971). Other federal decisions have discussed the rule in cases governed by state law, including actions under the Federal Tort Claims Act and maritime death cases. Klein v. United States, 339 F.2d 512 (2 Cir. 1964); Cunningham v. Rederiet Vindeggen A/S, 333 F.2d 308 (2 Cir. 1964); United States v. Price, 288 F.2d 448 (4 Cir. 1961). Both groups of cases generally apply the rule to deny credit for payments made by a defendant in circumstances analogous to those in the case at bar. Cf. Thomas v. Humble Oil & Refining Co., 420 F.2d 793 (4 Cir. 1970). See also Restatement of the Law Second —Torts-—-Tentative Draft No. 19, March 30, 1973, § 920A and Comment, p. 167 et seq.

In the recent case of Haughton v. Blackships, Inc., supra, the court said (462 F.2d at 790):

“ * * * In considering the applicability of the collateral source rule, the basic principle to be applied is that the employer-tortfeasor is not entitled to mitigate damages by setting off compensation received by the employee from an independent source. However, it is also true that the source of the funds may be determined to be collateral or independent, even though the employer-tortfeasor supplies such funds, United States v. Price, 288 F.2d 448 (4th Cir. 1961). See also Annot., 75 A.L.R.2d 886 (1961).
“Application of the collateral source rule depends less upon the source of funds than upon the character of the benefits received, Gypsum Carrier, Inc. v. Handelsman, 307 F.2d 525, 534-535 (9th Cir. 1962). The mere fact that the employer-tortfeasor has contributed money (by payment of premiums, contributions, etc.) to the fund from which the benefits derive does not establish that such fund may not be a collateral source, Hall v. Minnesota Transfer Ry. Co., 322 F.Supp. 92, 95 (D.Minn.1971), and cases cited therein.”

Hall was an FELA case, in which the collateral source was the same group policy GA 23,000 involved in the instant case. Relying on United States v. Price, supra, Judge Neville reasoned as follows, in two passages quoted in Haughton:

* * * The collective bargaining contract between that employee group and the defendant Railroad includes, as an economic term, a requirement that the employer pay premiums directly to the insurer, much as an employer might at the direction of his employee deduct money from wages and forward them directly to that employee’s creditor or bank savings plan. This policy is, in short, a fringe benefit given in part consideration for the employee’s services. It is in no sense a mere gratuity nor an arrangement by which the company has undertaken voluntarily to indemnify itself against possible liabilities to injured employees under the FELA.
“ * * *
“On the basis of the foregoing, the court concludes that where the insurance policy is one of general hospital and medical coverage upon which the insured may make claim without regard to liability on the part of the employer, such a policy is a fringe benefit maintained by the employer and is in effect part of the employee’s income for services rendered, and the collateral source rule prohibits set-off of premiums paid or benefits received thereunder by the employee. * * * ” 322 F.Supp. at 96, 97, quoted in 462 F.2d at 790, 791.

In Haughton the Fifth Circuit added:

“The policy considerations for the collateral source are apparent. On the one hand, an employer-tortfeasor who voluntarily undertakes to indemnify itself against liability by payment into a fund for that purpose, should not be penalized by permitting the plaintiff a double recovery of his benefits under the fund as well as his full measure of damages. On the other hand, where the employer-tortfeasor makes payment directly or indirectly into a fund established for an independent reason, or where such payment by the employer should be considered in the nature of fringe benefit or deferred compensation, the employer should not be entitled to benefit by setting off such income in mitigation of his responsibility as a tortfeasor.” 462 F.2d at 791.

In both cases, Hall and Haughton, the railroad was denied the claimed credit. Those decisions are in accord with the opinions of this Court cited above.

The district judge properly allowed the jury to consider the $1,477.86 item.

2. Defendant objects because an attending physician was allowed to use his notes and records during the course of his testimony, without laying a proper foundation therefor, and claims that his cross-examination was thwarted thereby. We find no reversible error in any of the rulings.

3. Defendant’s final objection is that the district judge refused to charge the jury that any award to the plaintiff would be free of income tax. The judge was not required to give such a charge in this case. McWeeney v. New York, N.H. & Hart. R. Co., 282 F. 2d 34, 35-39 (2 Cir. 1960), cert, den., 364 U.S. 870, 81 S.Ct. 115, 5 L.Ed.2d 93 (1960); Petition of Marina Mercante Nicaraguense, S. A., 364 F.2d 118 (2 Cir. 1966).

The judgment appealed from is

Affirmed.

HENRY J. FRIENDLY, Circuit Judge

(concurring):

Permitting Blake to recover from the railroad the bulk of his hospital bills, which were paid by the railroad and not by him, seems to me shockingly unjust. The collateral source rule, which has come under increasing criticism, see Restatement of Torts 2d § 920A at 169 (Tent. Draft No. 19, March 30, 1973), does not apply to “payments made under an insurance policy which is maintained by the defendant, whether made under a liability provision or without regard to liability, as under a medical-payments clause.” Id. at 167. None of the cases cited is truly in point except Hall v. Minnesota Transfer Railway Co., 322 F. Supp. 92 (D.Minn.1971); that decision does not bind us, and I find its reasoning unpersuasive.

What constrains me nevertheless to concur is that here we are governed not by federal common law but by statute. Under 45 U.S.C. § 55 the railroad is entitled to set off only the premiums, not what the premiums bought. This was recognized as long ago as Bangor & Aroostook R. Co. v. Jones, 36 F.2d 886 (1 Cir. 1929). If the railroads wish to avoid the harsh result reached by the district court, they can accomplish this by specific provision in the collective bargaining agreement. See Thomas v. Humble Oil & Refining Co., 420 F.2d 793 (4 Cir. 1970). Short of this the remedy is for Congress — which would do still better to repeal the outmoded FELA and substitute a liberal plan of workmen’s compensation, as it did in 1927 for longshoremen and harbor workers, 33 U.S.C. §§ 901-50. See Friendly, Federal Jurisdiction: A General View 129-30 (1973).

LUMBARD, Circuit Judge

(dissenting) :

I agree with Judge Friendly that Blake’s recovery of hospital bills which had been paid in the first instance by the railroad and not by Blake is shockingly unjust. I cannot agree, however, that Blake is nevertheless entitled to recover these amounts. Section 5 of the F.E.L.A., 45 U.S.C. § 55 was never intended to apply to situations such as the present one, see Hall v. Minnesota Transfer Railway Co., 322 F.Supp. 92 (D.Minn.1971), and the collateral source rule should not be interpreted to bar a set off by the railroad of the hospital bills paid by it. To permit recovery of these amounts would be to allow plaintiff double recovery and, to that extent, provide encouragement to an employee to incur needless hospital bills in order to gain a windfall. Such a result seems to me to be clearly contrary to public policy. We should not permit a judgment of a federal court to be the means of accomplishing such an injustice.

I also object to the district court’s refusal to charge, at defense counsel’s request, that any award that the jury might make would not be subject to income taxes. It is becoming increasingly apparent to those who try jury cases, as I do from time to time, that the question of whether any judgment will be diminished by taxes is a matter which is frequently given great weight in jury deliberations. Since it does affect the verdict, it is a matter regarding which the jury should be informed. It seems quite probable, for example, that in this case the judgment of $25,000 — which seems overly generous in the light of plaintiff’s injuries and only five months loss of earnings — was very likely due to one or more of the jurors feeling, erroneously, that any judgment would be considerably diminished by taxes. It is time for this court to re-examine its holding in McWeeney v. New York, N.H. & H. R.R. Co., 282 F.2d 34 (2d Cir.), cert, denied, 364 U.S. 870, 81 S.Ct. 115, 5 L.Ed.2d 93 (1960), and require that the jury be instructed about the tax incidents of a judgment when request is made of the trial judge to do so. The Third Circuit has recently required the giving of an instruction of this nature, upon request, in Domeracki v. Humble Oil & Refining Co., 443 F.2d 1245 (3rd Cir), cert, denied, 404 U.S. 883, 92 S.Ct. 212, 30 L. Ed.2d 165 (1971). This is one way in which our courts can properly do something to curb escalating verdicts without subtracting one iota from a fair and just recovery of damages suffered.

For these reasons I would reverse the judgment and order a new trial.

      . In recent years the subject has been discussed in a number of opinions, with divergent conclusions, and in a number of law review articles and notes, with various recommendations. In addition to the cases cited in the text of this opinion, see Cox v. Northwest Airlines, Inc., 379 F.2d 893 (7 Cir. 1967) ; United States v. Sommers, 351 F.2d 354 (10 Cir. 1965) ; O’Connor v. United States, 269 F.2d 578, 579 (2 Cir. 1959) ; Floyd v. Fruit Industries, 144 Conn. 659, 136 A. 2d 918 (1957) ; Plant v. Simmons Company, 321 F.Supp. 735 (D.Md.1970) ; Note, Income-Taxes and the Computation of Lost Future Earnings in Wrongful Death and Personal Injury Cases, 29 Md.L.Rev. 177.