author: BRIGHT, Circuit Judge. STUART, District Judge

text:
    LEISURE DYNAMICS, INC., (Formerly Lakeside Industries, Inc.), Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
    No. 73-1437.
    United States Court of Appeals, Eighth Circuit.
    Submitted Dec. 11, 1973.
    Decided April 2, 1974.
    Stuart, District Judge, dissented and filed opinion.
    Richard N. Flint, Minneapolis, Minn., for appellant.
    James H. Bozarth, Atty., Tax Div., Dept, of Justice, Washington, D. C., for appellee.

      Before BRIGHT and STEPHENSON, Circuit Judges, and STUART, District Judge.

       WILLIAM C. STUART, District Judge, Southern District of Iowa, sitting by designation.

   BRIGHT, Circuit Judge.

In 1965, taxpayer-appellant, Leisure Dynamics, Inc. (formerly Lakeside Industries, Inc.), a toy manufacturer, paid $102,676.45, for the right to manufacture dolls in the likeness of animated doll characters known as “Gumby” and “Gumby’s Pal, Pokey” (a horse) that have appeared on television cartoon series entitled “The Adventures of Gum-by.” Taxpayer considered this sum of money a royalty payment and therefore deductible from gross income. The Commissioner denied this deduction, asserting that the payment represented a capital investment, i. e., an installment paid toward the purchase of rights to manufacture the doll. Taxpayer unsuccessfully contested the Commissioner’s ruling in the tax court and now appeals. We reverse.

This case raises a not unfamiliar problem which has plagued the Commissioner, the tax court, and federal courts —the proper tax treatment to be afforded parties to a contract effecting a transfer of franchises, trademarks, or trade names.

The facts here as stipulated and as developed through testimony and exhibits show that in the mid-1950’s Arthur and Ruth Clokey developed the animated cartoons starring “Gumby” and “Gumby’s Pal, Pokey” by photographing the dolls against a three-dimensional background and moving them a fraction of an inch in each frame of film. With the assistance of E. Roger Muir, a National Broadcasting Company television executive, the cartoon was telecast nationally on network television. Later, on December 7, 1957, the Clokeys and Muir joined together to form Clokey Productions, Inc. (hereinafter Productions). Productions edited the films into five-minute strips and attempted to syndicate them with individual television stations in the United States. Although some stations purchased the Gumby episodes, most stations were unwilling to pay cash for the cartoons. Instead, they gave Productions free advertising on television or what is known as barter time in exchange for the use of the cartoons.

Initially, the Clokeys refused offers of barter time because they had no products to sell; however, in early 1964, the Clokeys decided to try to use the barter time to sell Gumby dolls which had been manufactured by others. The response to a single commercial run in Los Ange-les in March of 1964, was so extraordinary that the Clokeys decided that expert help was needed to produce and promote the dolls.

This success induced the Clokeys and ^Wallace J. Seidler, an advertising agent experienced in the toy field, his wife, Edward S. Kellogg, Seidler’s associate in the advertising business, and Mrs. Kellogg to incorporate Gumby Toy Company, Inc. (hereinafter Toy) on June 4, 1964. They planned to distribute Gum-by dolls on a royalty-free license from Productions which was the owner of the rights to the characters in the Gumby cartoon. However, neither Productions nor Toy actually manufactured or packaged the Gumby toys; these functions were performed by unrelated companies.

In early 1965, the taxpayer (then Lakeside) learned of the marketing success of the Gumby doll in Los Angeles. Taxpayer became interested in marketing the dolls and first negotiated with the owners of Toy to purchase the capital stock of the corporation for $500,000, plus royalty payments for sales in excess of $7,500,000 during seven years. Concomitantly, taxpayer and Productions also negotiated for an agreement to insure that Gumby would receive continuous television exposure. The former negotiations for stock purchase broke down when taxpayer learned that Gumby might not be protected by copyrights. Nonetheless, taxpayer continued its interest in acquiring rights to manufacture and market Gumby.

The parties continued negotiations and ultimately agreed on a contract, the terms of which underpin the present dispute. This contract, dated February 24, 1965, was labeled “Purchase Agreement & Security,” and in substance, transferred from Toy as Seller to taxpayer as Buyer, the trademark and trade names “Gumby,” “Gumby’s Pal, Pokey,” other trademarks and trade names identifying characters from the television series “The Adventures of Gumby,” and granted the Buyer the right to manufacture and sell products based on such characters. By this contract Toy also transferred its tools and dies to taxpayer.

The agreement called for payment of $50,000 cash, plus delivery by taxpayer of 20,000 shares of its stock to Toy. The contract also provided for additional payments said to be “On account of the purchase price” based upon 6.6 percent of taxpayer’s net paid sales (cash received by Lakeside from sales to its customers excluding rebates, returns and allowances) of the products covered by the contract, but during the first year, no additional payment was required unless such sales of any of the Toy products exceeded $750,000. Additionally, taxpayer guaranteed that it would sell 3,600,000 units the first year or pay the Seller 6.6 percent of the “arbitrary sales price” of 45 cents per unit on this minimum number of units. A lesser number of units was guaranteed for subsequent 12-month periods until March 31, 1970. The taxpayer also agreed to pay Toy 50 percent of its gross receipts derived from any sublicense agreements.

The contract also contained provisions for an accounting between the parties, for cooperation in trademark infringement suits and for Seller to terminate the agreement and retake possession of assets upon Buyer’s default. Seller agreed to take reasonable steps to ensure that Productions would continue to exhibit “The Adventures of Gumby” on television stations throughout the world.

The board of directors of Toy agreed to dissolve the corporation on February 23, 1965, the day before the execution of this contract. By an agreement entered into a month later, the proceeds of the Gumby contract were divided between the parties involved in Productions or Toy as follows:

The contract was amended in January of 1966, to reduce the percentage payment to 3.3 percent on some of the doll products other than “Gumby and Gum-by’s Pal, Pokey.” In August of 1966, the successors to Toy and taxpayer modified the contract to grant taxpayer the right to enter into sublicenses, joint ventures, and agreements with independent agents without requiring prior approval from the successors to Toy.

The trial testimony disclosed that the sales of Gumby toys rested upon promotion of the toys in connection with children’s television programs showing the syndicated Gumby cartoons. Sales were excellent during 1965, 1966, 1967, and 1968, but thereafter declined. The taxpayer found that the Gumby cartoon could not be re-syndicated in some markets where sales of Gumby toys had been successful on prior occasions, and that in other markets the Gumby promotions did not produce an adequate return on the advertising investment. The taxpayer then terminated its promotions.

We are concerned here with payments made by the transferee for the rights to manufacture “Gumby” based on transferee’s sales of dolls. It is easy to state but difficult to apply the rule of law which determines whether such payments by the transferee constitute part of a sale, to be treated as nondeductible from gross income by the transferee and accounted for by the transferor as capital gains income, or a license, entitling the transferee to deduct payments as a cost of doing business and requiring the transferor to account for such receipts as ordinary income.

For a transaction to receive capital gains treatment, property which is transferred must generally constitute a capital asset and must be sold or exchanged. It has been fre-
quently necessary for the courts to determine whether a variety of conditions included in the agreement between the transferor and the transferee .transform a purported sale into a license, thus requiring the gains from the transaction to be taxed as ordinary income.
This question has resulted in a division of authority among the courts, some finding a sale and others a license. In either case, the decisions generally have been based on varying conditions in the transfer agreement and, when the agreement has been interpreted as reserving significant powers, rights, or continuing interests to the transferor, then it lias been held that such reservations preclude a finding of a sale. [1969 U.S.Code Cong, and Admin.News 2241-2242, S.Rep.No. 91-552, 91st Cong., 1st Sess. (1969) (emphasis added).]

As recognized by the tax court in this case and as is conceded by the appellant, the general rule to be followed in determining whether the transaction should be treated as a license rather than a sale rests on whether the seller, Toy, and its successors “retained and exercised an active and continuing operational interest in the Gumby trademarks and in taxpayer’s business.” The tax court recited the rule as follows:

Although the courts have struggled to define the amount of control necessary to turn an apparent sale into a license, retention by the transferor of a substantial right in the transferred property or the continued participation of the transferor in the transferee’s business is the touchstone of a license. See Dairy Queen of Oklahoma v. Commissioner, 250 F.2d 503 (C.A.10, 1957); Gowdey’s Estate v. Commissioner, [307 F.2d 816 (4th Cir. 1962)]; Schmitt v. Commissioner, 271 F.2d 301 (C.A. 9, 1959); United States v. Wernentin, [354 F.2d 757 (8th Cir. 1965)].

This circuit through an opinion authored by Judge (now Justice) Black-mun summed up the problem facing the courts in cases of this kind in this way:

One could say that in these cases the courts appear to be struggling to accommodate, on the one hand, the continuing interest of transferors whose compensation is largely dependent on future profitable use of the transferred rights with, on the other hand, the traditional notion that a seller divests himself of substantially all control over property sold. The difficulty lies in finding a legitimate place to draw the line between the reservation of sufficient rights and restrictions to protect one’s continuing financial interest and the reservation of rights to continuing participation in the business on such a scale that it cannot properly be said that there was a sale. [United States v. Wernentin, 354 F.2d 757, 766 (8th Cir. 1965).] .

In the present action the tax court determined that taxpayer failed to establish the requisite control necessary to transform the agreement from a sale to a license because neither “Toy or its successors exercised any significant control over Lakeside’s manufacture and sale of Gumby toys.” The court explained this conclusion by stating:

Although the demand for Gumby toys was largely created by the showing of the cartoons, Lakeside would have continued to have the right to promote and sell Gumby toys even if Productions refused to exhibit the films. More importantly, as between Lakeside and Productions Lakeside was clearly the dominant party because both legally and practically Lakeside could control the exhibition of the films.

This conclusion disregards the actual facts that in a commercial sense the showing of the film strips and the sale of the Gumby dolls were inseparable. Only the existence of Gumby film strips and the likelihood of their exhibition on television made the Gumby dolls a desirable product. The record shows Gumby as a toy could not be marketed successfully apart from the exhibition of the films. The film cartoons and their syndication were of no real value, apart from their exhibition as an adjunct to the sales of merchandise. By retaining ownership of the cartoon strips in Productions, the stockholders of Toy, most of whom held substantial interests in Productions, were assured of retaining substantial control over the marketing of the Gumby dolls. Additionally, the contract provisions recognized the interrelationship between television showing of the Gumby film strips and marketing of Gumby products by Lakeside, the transferee. Paragraph 3 of the agreement reads:

Seller agrees that it will take all reasonable actions and proceedings and do all things reasonably requested by Lakeside to cause such actions and proceedings to be taken by Clokey Productions, Inc., in order to ensure that the cartoon series entitled “The Adventures of Gumby” is and will continue to be exhibited on television stations throughout the world and will make reasonable efforts to ensure the exhibition of said series on television stations designated by Lakeside.

Following execution of the contract, Productions may have cooperated with taxpayer in arranging for television exhibition of the film strips, but Productions never ceded control over the films to taxpayer.

We recognize that Productions retained ownership of the film strips, not Toy, the party contracting with the taxpayer. Yet the interrelationship between Toy and Productions requires that we consider Productions with Toy as the transferor in this case. Control of both corporations rested with the Clokeys. Toy served only as the vehicle to distribute Gumby dolls on a royalty-free license from Productions prior to the execution of the contract with taxpayer. Further, almost contemporaneous with the transfer of the rights to the Gumby trademarks, Toy dissolved and its stockholders agreed to share the income generated from the Toy-Lakeside contract among all the shareholders of Productions and Toy. Hence, we deem it appropriate to disregard the separateness of the corporations Toy and Productions and to treat them collectively as one owner holding all rights to effectively market Gumby dolls until these rights were partially transferred to taxpayer. For tax purposes, we must concern ourselves with actualities rather than the refinements of title; our concern is with the substance, not form. Commissioner v. Court Holding Co., 324 U.S. 331, 65 S.Ct. 707, 89 L.Ed. 981 (1945); Griffiths v. Commissioner, 308 U.S. 355, 60 S.Ct. 277, 84 L.Ed. 319 (1939); Coca-Cola Co. v. Commissioner, 369 F.2d 913 (8th Cir. 1966); Haag v. Commissioner, 334 F,2d 351 (8th Cir. 1964). We note, too, that the tax court in its analysis of the transaction considered Productions in a transferor posture.

We believe the opinion of Judge Blackmun v. United States v. Wernentin, supra, to be instructive. There we considered whether the transfer of Dairy Queen franchises which, among other things, called for the transferee to pay a specified lump sum fee upon the opening of Dairy Queen outlets in the “franchised” territory plus a gallonage charge, constituted a sale entitling transferor to capital gains treatment of the proceeds or a license requiring tax treatment of these proceeds as ordinary income. Noting the disagreements among the circuits in deciding similar cases, the Wementin court found in accord with the Ninth Circuit, contrary to the Fourth, Fifth, and Tenth Circuits, that the lump sum payments did not qualify for capital gains treatment. With regard to the gallonage payments, we held these payments constituted ordinary income consistent with the tax treatment afforded payments under somewhat similar agreements considered by the Fourth and Ninth Circuits.

In Wementin, Judge Blackmun deemed it proper to take into consideration the actual relationship of the parties as well as the language of the parties:

We repeat what is already evident from what we have said above, that we do not decide the present case solely on the contracts. We have taken into consideration the activities of [the parties] * * *. We need not speculate as to what our decision might be if the record before us contained only the cold contracts. Our record contains more than those agreements. It contains the warmth, the enthusiasm and the revealing activity of business enterprise and the continuous application in the market place of the parties’ contractual arrangements. * * * We think that the present record presents, in actuality, under both the 1949 and 1951 contracts, something less than a sale. [354 F.2d at 766.]

Judge Blackmun also noted that the Ninth Circuit in its Dairy Queen case ruling, Moberg v. Commissioner, 310 F. 2d 782 (9th Cir. 1962), had relied on its earlier decision in Schmitt v. Commissioner, 271 F.2d 301 (9th Cir. 1959). Appellant-taxpayer cites the Schmitt case as authority for its claim that the contract and the relationship between the transferor and transferee should be considered as one of license. We deem Schmitt apposite though it related to the transfer of a patent rather than a trademark right.

Taxpayer in Schmitt had developed and patented an automatic mechanical process for accounting statements in which single-entry information was converted into double-entry records and accounting. During 1949, 1950, and 1951, Schmitt entered into 11 substantially similar agreements transferring to assignees certain rights in certain specified territorial areas for which he received certain lump sum payments. However, he retained the title to an indispensable adjunct to the accounting system — a certain wiring unit made by Remington-Rand to taxpayer’s order. The Ninth Circuit held:

We concede the question may be close, but a careful examination of the evidence convinces us the Tax Court clearly had before it sufficient evidence of the retention of rights in the patented and copyrighted system, and of limitations imposed on the transferees, sufficient to establish that less than “all substantial rights” had been transferred. [271 F.2d at 307-308.]

The tax court found Schmitt inapplicable. We disagree.

We think the tax court gave inadequate consideration to the crucial elements of retention of title and actual control of the cartoon film strips in Productions. As we have already noted, were it not for the use of these cartoons, the rights to manufacture the Gumby dolls would be relatively worthless. Indeed, the two were inextricably bound— for Gumby the doll was unmarketable without Gumby the cartoon strip being aired on television. Moreover, the record demonstrates that the payment of unit fees on sales of Gumby dolls represented a price actually paid to the owners of the films for their active commercial participation in the operations relating to the marketing of the Gumby dolls.

Under the rationale of Wernentin and Schmitt, we must conclude from the record before us that continuing payments made by the “purchaser”-taxpayer based on sales of the various Gumby dolls represented a payment for an interest retained by the seller in the earnings of the Gumby dolls, through retain-age of actual ownership of the film strips, rather than as part payment for rights transferred. See also Moberg v. Commissioner, 365 F.2d 337, 340 (5th Cir. 1966). Thus the taxpayer was entitled to deduct the payments made during the tax years 1965 and 1968 (see n. 1, supra) as license fees for the right to manufacture and sell Gumby dolls.

Parenthetically, in denying taxpayer relief the tax court emphasized what it termed the unambiguous terms of the contract expressive of a sale rather than a license. The court noted in particular that the phrase “The Seller hereby sells, assigns and transfers to Lakeside [taxpayer’s prior name] * * * ” was inserted in the written agreement to satisfy the desires of the sellers who would not have signed the instrument without such language. True, if a taxpayer enters a written agreement fully appraised of its meaning and the tax consequences bargained for by the parties to the agreement, the taxpayer should not be relieved of the adverse tax consequences of his bargain. See Coca-Cola Co. v. Commissioner, supra; Annabelle Candy Co. v. Commissioner, 314 F.2d 1 (9th Cir. 1962).

However, this rule does not apply here for two reasons. First, the record, as we read it, does not establish that taxpayers ever agreed upon the tax treatment to be afforded either party to annual payments called for by the contract. The transferor insisted that the term “sale” be included in the contract but the parties agreed that each might report Gumby “royalties” as each saw fit. Second, in cases of this kind the nomenclature used becomes relatively unimportant because we must examine the contract as well as the entire relationship of the parties. Watson v. United States, 222 F.2d 689 (10th Cir. 1955); Schmitt, supra 271 F.2d at 305; Wernentin, supra 354 F.2d at 763. As we said in Wemen-tin, “nomenclature is not conclusive,” and the case cannot be decided “solely on the contracts.” 354 F.2d at 763, 766.

We hold that the transaction here examined in all its details constitutes a license to market the Gumby dolls, not a sale, although some words of sale may be found in the language of the contract. Accordingly, we reverse and remand this ease to the tax court for further proceedings consistent with this opinion.

„ . , , Reversed and remanded.

STUART, District Judge

(dissenting).

I must respectfully dissent from the majority opinion. In my opinion the question here is basically one of fact and consequently appellate review must be quite restricted. The Tax Court’s findings must stand unless clearly erroneous. Commissioner v. Duberstein (1960), 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218.

In this case the Tax Court found:

Both the representatives of Lakeside and those of Productions and Toy were aware of the difference in tax consequences between a sale of Toy’s assets and a license to use them. The Clokeys were adamant that the Toy assets be sold so they could report their profit as long-term capital gain and would have refused to sign the agreement if they believed it to be a license. Lakeside’s attorneys were primarily responsible for drafting the document which, after some revisions, became the final agreement between the parties. Toy’s attorney, Harry L. Nelson, Jr., was in on reviewing and revising the drafts of the agreement, but was not experienced in tax matters. In the early stages of drafting the Lakeside attorney used a licensing agreement which Lakeside and another party had negotiated as a model for the agreement with Toy; however, in preparing the final draft Lakeside’s attorneys included the language in paragraph 1, supra, ‘The Seller, hereby sells, assigns and transfers to Lakeside,’ as an accomodation [sic] to the desires of the Clokeys. Despite the accomodating [sic] language the Lakeside attorneys hoped that the final agreement embodied a license although they knew that the sellers held the opposite view. Appendix pp. 81-82.

In my opinion, these fact findings are not clearly erroneous.

It is, of course, the general rule that in the field of taxation the substance of the transaction as revealed by the evidence as a whole controls over the form employed. Haag v. Commissioner of Internal Revenue, 334 F.2d 351, 355 (8th Cir., 1964).

Coca-Cola Company v. Commissioner (8th Cir., 1966), 369 F.2d 913, 917.

The Commissioner should not be bound by the form of the contract when the evidence discloses the transaction to be something other than that indicated by the contract language. However, I do not believe a party to a contract should be permitted to insert sales language in a contract, knowing the other party is insisting on a sale for tax purposes, and hope that the final agreement is actually a license, even though parties did not specifically agree how the transaction was to be treated for tax purposes.

Such concept places the Commissioner in a most difficult and impractical position. He would not be able to accept the express language of any contract but would in each instance be required to look behind the contract to determine its exact nature to prevent each party to the contract from treating it in the manner most favorable to it for tax purposes. I believe there is a sound distinction between a situation in which one of the parties to a contract seeks to establish a tax advantage by attempting to prove his contract is something other than it says it is and one in which the Commissioner seeks to go behind the wording of a contract to show what the transaction actually was. Parties should not be able to insulate themselves from just tax consequences by the form of the agreement. On the other hand the Commissioner should be able to rely on the form as expressing the true intent of the parties, and the parties should be es-topped from contending otherwise. I do not believe the Commissioner should have the burden of looking behind every agreement to determine the just tax consequences.

In my opinion Coca-Cola Company v. Commissioner (8th Cir., 1966), 369 F.2d 913 indicates the proper decision here. In that case the taxpayer agreed to purchase certain stockholdings for $350,000 from Scull, who also agreed to release his employer from the terms of an employment contract. On settlement date a second instrument was executed cancel-ling the employment contract. Neither instrument mentioned any monetary consideration for termination of the employment contract. For tax purposes, the taxpayer attempted to accrue as an expense $109,352.02 for the purchase of the employment contract. This court said:

Barbieri and his tax advisors immediately realized the tax implications of the agreement, but purposely avoided making any changes in the contract, apparently fearful that any change might cause the Scull group to back down from their previous agreement. 369 F.2d p. 915.
•x- * -x- There is solid support for the inference drawn by the Tax Court that Barbieri and Johnson believed that if they amended the agreement to alter its tax consequences Scull might refuse to go through with the sale. It is plainly evident, as the Tax Court concluded, that Barbieri and Johnson, by failing to voice any objections, acquiesced in the obvious tax implications of the agreement and thus adopted, as their own, Eskin’s intent in drafting the agreement. In other words, as the Tax Court stated, “the contemplated tax results were part of the bargain.”
As thus posited, we are not favorably impressed with the plea that a court should rewrite the contract and relieve the taxpayer of the plight, tax-wise, in which it finds itself, a dilemma which in our view is the creation of its own deliberate judgment. 369 F.2d p. 917.
* * * Certainly the courts are at liberty to pierce the form of a particular transaction to arrive at the just tax liability. This Court, however, is not prone to encourage a taxpayer who enters into a written contract fully apprised of its meaning and effect from a tax standpoint to seek escape therefrom on the theory that it does not represent the actual agreement. 369 F.2d p. 918.

The Tax Court there, as here, went on to find the contract stated the actual agreement. Although I feel this should not be necessary under these circumstances because of the deliberate use of sales language and the limited scope of review, I also agree that this transaction constituted a sale rather than a license.

The Tax Court determined the taxpayer failed to establish the requisite control necessary to transform the agreement from a sale to a license. The contractual provisions are as consistent with preservation of security interests (as they were denominated in the contract) as with licensing controls.

The majority believes that retention of ownership of the cartoon strips in Productions assured Toy of substantial control over the marketing of Gumby dolls. I do not believe this is a realistic evaluation of the situation. True, the successful promotion of Gumby toys was tied to the showing of the cartoons, but Lakeside was the only customer for the cartoons. Productions could profit from the cartoons only if Lakeside were willing to purchase the barter time Produc-

tion received as payment from television stations. An express provision in the contract required Productions to make reasonable efforts to ensure the exhibition of Gumby cartoons on television stations designated by Lakeside. Cooperation was necessary for either to profit. Productions could gain nothing by refusing to show cartoons over stations Lakeside designated. I believe Lakeside rather than Productions had the practical domination over the situation.

In the cases cited by the majority for the general proposition that we must concern ourselves with substance not form, Commissioner v. Court Holding Co. (1945), 324 U.S. 331, 65 S.Ct. 707, 89 L.Ed. 981; Griffiths v. Commissioner (1939), 308 U.S. 355, 60 S.Ct. 277, 84 L.Ed. 319; and Haag v. Commissioner (8th Cir., 1964), 334 F.2d 351, were situations where the Commissioner was attacking the form and seeking to get to the substance. In Coca-Cola v. Commissioner (8th Cir., 1966), 369 F.2d 913, this court frowned upon the attempt of the taxpayer to urge the agreement was other than stated and held the form! stated the actual agreement.

Under my view of the case, it becomes necessary to decide the question of depreciation. In my opinion there was no evidence to support the Tax Court’s determination that the taxpayer failed to show a reasonable approximation of the useful life of the Gumby doll. The result which would then follow does not vary substantially from that reached by the majority opinion.

      . Unofficially reported at 32 T.O.M. 159; T.C. Memo. 1973-36 (Feb. 14, 1973). It should be noted that the Commissioner originally assessed a deficiency of $148,229.83, in the income tax of appellant for the taxable year ending December 31, 1965. Included in this 1965 determination was a disallowance of a tentative net operating loss carryback from the taxable year ending December 31, 1968, attributable to a similar “royalty” payment in 1968. Prior to trial the parties entered into a stipulation for taxes owed on the disallowance of the deduction.

      . Our jurisdiction arises under 26 U.S.C. § 7482.

      . The transaction here in question predates Congress’ recent consideration of the problem in its enactment of § 516(c) of the Tax Reform Act of 1969, now 26 U.S.C. § 1253. While this section is therefore inapplicable to this case, the Senate Report on the proposed measure noted the then-confused status of the law which we must consider:
      It is difficult to resolve under present law whether the transfer of a franchise, trademark, or trade name is to be treated as a sale or as a license, and whether the transferors are selling franchises, trademarks, and trade names in the ordinary course of business. Depending upon how these questions are resolved, the transferor will receive ordinary income .or capital gains treatment on the gain he realizes on the transfer. At present, these problems must be resolved under general tax principles, and this has produced difft-'.g results in the courts, despite factual similarities in the interest of the franchises, trade marks, or trade names transferred. (1969 U.S.Oode Cong, and Admin. News p. 2241, S.Rep.No.91-552, 91st Cong., 1st Sess. (1969).]
      The enactment of § 1253 brings greater certainty to this area of tax law.

      . In its explanation of the provisions of § 516 (c) of the Tax Reform Act of 1969 concerning the tax treatment of transfers of franchises, trademarks, and trade names, the Senate Committee on Finance aptly summarized the then existing law as follows :

      . Moberg v. Comm’r, 310 F.2d 782 (9th Cir. 1962) (finding a license).

      . Gowdey’s Estate v. Comm’r, 307 F.2d 816 (4th Cir. 1962) ; Moberg v. Comm’r, 305 F.2d 800 (5th Cir. 1962) ; Dairy Queen of Oklahoma v. Comm’r, 250 F.2d 503 (10th Cir. 1957) (all finding a sale).

      . Gowdey’s Estate v. Comm’r, supra; Moberg v. Comm’r, supra n. 5. Subsequent to our opinion in United States v. Wementin, 354 F.2d 757 (8th Cir. 1965), the Fifth Circuit similarly found in another Dairy Queen case that gallonage payments comprised ordinary income. Moberg v. Comm’r, 365 F.2d 337 (5th Cir. 1966). For a discussion of the Dairy Queen cases see The “Dairy Queen” Cases: A Suggested Approach to the Taxation of Franchise Sales, 34 U.Chi.L.Rev. 884 (1967) ; Comment, Federal Taxation of Franchise Sales, 44 Wash.L.Rev. 617 (1969).

      . Congress has now provided for special consideration to transfers of patent rights, 26 U.S.C. § 1235. For a background explanation, see 1954 U.S.Code Cong, and Admin.News 5081-5084, S.Rep.No.1622, 83rd Cong., 2d Sess. (1954) ; 3B Merton’s Law of Federal Taxation §§ 22.133, 22.134. The provisions liberalize the requirements for capital gains treatment of transfers of patents but do not apply to transfers of other types of property interests. Wernentin, supra 354 F.2d at 762. 26 U.S.C. § 1235 applied retroactively to Schmitt v. Commissioner, 271 F.2d 301, 303 nn. 4 & 5 (9th Cir. 1959) ; 26 U.S.C. § 117(q) (I.R.C.1939, as amended).


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    Henry HERNANDEZ et al., Appellants, v. VETERANS’ ADMINISTRATION et al., Appellees. Peter MILLER and Gary Lehn, Appellants, v. VETERANS’ ADMINISTRATION OF the UNITED STATES of America et al., Appellees.
    Nos. 72-1655, 72-1760.
    United States Court of Appeals, Ninth Circuit.
    April 22, 1974.
    Jack R. Petranker (argued), Paul N. Halvonik, Charles C. Marson, of American Civil Liberties Union of Northern Cal., San Francisco, Cal., for appellants Henry Hernandez et al.
    Lawrence L. Curtice, San Francisco, Cal. (argued), San Francisco Neighborhood Legal Assistance Foundation, for appellants Peter Miller and Gary Lehn.
    William G. Kanter (argued), Morton Hollander, Civil Div., Dept, of Justice, Washington, D. C., James Browning, Jr., U. S. Atty., Harlington Wood, Jr., Acting Asst. Atty. Gen., San Francisco, Cal., for appellees.
    Before GOODWIN, Circuit Judge, and CRARY, District Judge.

      . Oliver D. Hamlin, Jr., United States Circuit Judge, sat with the original panel hearing this case. He died December 28, 1973. Because the remand requires of this court a ministerial act only, the surviving members of the panal have disposed of the case.

      . The Honorable E. Avery Crary, United States District Judge for the Central District of California, sitting by designation.

   PER CURIAM:

On remand from the Supreme Court, 415 U.S. 391, 94 S.Ct. 1177, 39 L.Ed.2d 412 (1974), the judgment below is affirmed for the reasons stated in Johnson v. Robison, 415 U.S. 361, 94 S.Ct. 1160, 39 L.Ed.2d 389 (1974). Hernandez v. Veterans’ Administration, 467 F.2d 479 (9th Cir. 1972), insofar as it reads 38 U.S.C. § 211(a) as precluding judicial review when sought on constitutional grounds, is overruled.


author: PER CURIAM.

text:
    Robert W. McLEMORE and Lucile McLemore, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
    No. 73-1907.
    United States Court of Appeals, Sixth Circuit.
    Argued Feb. 5, 1974.
    Decided May 3, 1974.
    Louis E. Ackerson, Louisville, Ky., for appellants; Robert L. Ackerson, William J. Cooper, Jr., Louisville, Ky., on brief.
    Murray S. Horwitz, Atty., Tax Div., Dept, of Justice, Washington, D. C., for appellee; Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Leonard J. Henzke, Jr., Attys., Dept, of Justice, Washington, D. C., on brief.
    Before PHILLIPS, Chief Judge, LIVELY, Circuit Judge, and Mc-ALLISTER, Senior Circuit Judge.
   PER CURIAM.

An income tax deficiency was assessed by the Commissioner against petitioners for the year 1965. Robert W. Mc-Lemore was the sole shareholder of two corporations. Lucile McLemore is a party solely because she filed a joint return with her husband. The deficiency arose from a series of financial transactions by Mr. McLemore and the two corporations which are described fully in the memorandum and opinion of Judge Fay of the Tax Court upholding the deficiency assessment. T.C.Memo 1973-59.

We have carefully considered the briefs and oral arguments of counsel for petitioners. We conclude that the Tax Court correctly decided the issues in this case and affirm its judgment for the reasons set forth in its opinion.

So ordered.


text:
    Dean K. BUCKLEY, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent, Ashland Oil Company of California, Intervenor.
    No. 73-1188.
    United States Court of Appeals, Ninth Circuit.
    April 24, 1974.
    Dean K. Buckley, in pro. per.
    Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Elliott Moore, Acting Asst. Gen. Counsel, Washington, D. C., Roy O. Hoffman, Director, N. L. R. B., San Francisco, Cal., for respondent.
    Ted R. Frame, of Frame & Courtney, Coalinga, Cal., for intervenor.
    Before CHAMBERS, KOELSCH and DUNIWAY, Circuit Judges.
   MEMORANDUM

Petition to review an order of the National Labor Relations Board, reported at 201 NLRB No. 78.

Resolution of the issue in dispute before the Board required credibility choices. The record as a whole supports the choice made.

The petition for review is denied.


text:
    J. Ralph ERWIN, Plaintiff-Appellee, v. William L. NEAL et al., Defendants-Appellants.
    Nos. 73-2001 and 74-1002.
    United States Court of Appeals, Sixth Circuit.
    Argued April 5, 1974.
    Decided May 10, 1974.
    Howard E. Wilson, Frank B. Dodson, Kingsport, Tenn., on brief, for defendants-appellants.
    Joel D. Gerwirtz, National Education Association, Washington, D. C., for plaintif f-appellee; Jerry D. Anker, Lawrence J. Sherman, Lichtman, Abeles & Anker, Washington, D. C., D. Bruce Shine, Ferguson & Shine, Kingsport, Tenn., on brief.
    Before WEICK, EDWARDS and MILLER, Circuit Judges.
   PER CURIAM.

Plaintiff, a non-tenured school teacher of the Kingsport, Tennessee School System, whose contract was not renewed for the school year 1969-1970, filed suit for mandatory order of reinstatement and for $150,000 damages claiming that his civil and constitutional rights had been violated. 28 U.S.C. § 1343; 42 U.S.C. §§ 1983 and 1985; First and Fourteenth Amendments to the Constitution.

In the second defense of their answer the defendants pleaded the one-year Tennessee Statute of Limitations in bar to the action. T.C.A. § 28-304 provides in relevant part:

Actions . . . for injuries to the person . . . [and] civil actions for compensatory or punitive damages, or both, brought under the federal civil rights statutes, shall be commenced within one (1) year after cause of action accrued.

The District Court ruled that the action under the civil rights statutes (42 U. S.C. §§ 1983 and 1985) was barred by the Tennessee statute of limitations, but that the action under 28 U.S.C. § 1343 was not so barred. The theory of the Court was that the claim under Section 1343 was for constitutional violations, whereas the Tennessee statute of limitations refers only to civil rights statutes. These civil rights statutes, however, authorize suits for constitutional violation.

But the Tennessee statute of limitations expressly applies “for injuries to person”. In our opinion plaintiff has pleaded an injury to his person.

We so held in Madison v. Wood, 410 F.2d 564 (6th Cir. 1969), where we construed the Michigan three-year statute of limitations which applied to “actions to recover damages for injuries to person- or property . . . ” We held that this statute barred recovery under 42 U.S.C. § 1985.

This is also the law of Tennessee, where the Supreme Court held that the phrase “personal injuries” was not limited to physical injuries to members of the body. Emerson v. Machamer, 221 Tenn. 739, 431 S.W.2d 283 (1968); Brown v. Dunstan, 219 Tenn. 291, 409 S.W.2d 365 (1966).

In our opinion plaintiff could have asserted his cause of action on May 28, 1969. Hodge v. Service Machine Co., 438 F.2d 347 (6th Cir. 1971). Plaintiff did not file the present suit until June 16, 1970.

The judgment of the District Court is reversed and the cause is remanded with instructions to dismiss the complaint.


text:
    Charles W. FROUST, Plaintiff, v. COATING SPECIALISTS, INC., et al., Defendants-Appellees. STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION, LIMITED, Defendant-Appellant, v. WESTCHESTER FIRE INSURANCE COMPANY et al., Defendants-Appellees.
    No. 73-2781.
    United States Court of Appeals, Fifth Circuit.
    June 6, 1974.
    Rehearing and Rehearing En Banc Denied July 25, 1974.
    John A. Bolles, New Orleans, La., for defendant-appellant.
    Christopher Tompkins, New Orleans, La., for Ins. Co. of No. America.
    Robert B. Deane, New Orleans, La., for Underwriters at Lloyds of London.
    Edward P. Lobman, Felicien P. Lozes, New Orleans, La., for Westchester Fire Ins. and Employers Liability.
    Rudolph R. Schoemann, New Orleans, La., for Coating Spec.
    Before DYER and MORGAN, Circuit Judges, and KRAFT, District Judge.
   PER CURIAM:

The district court’s findings of fact stand undisputed. We affirm the judgment of the district court for the reasons set forth in its adjudication, 364 F.Supp. 1154.

Affirmed.


author: FORMAN, Circuit Judge.

text:
    INTERNATIONAL ASSOCIATION OF HEAT AND FROST INSULATORS AND ASBESTOS WORKERS etc., et al., Appellants, v. UNITED CONTRACTORS ASSOCIATION, INC., OF PITTSBURGH, PENNSYLVANIA, a corporation, and Associated Trades and Crafts Union.
    No. 71-1947.
    United States Court of Appeals, Third Circuit.
    April 10, 1974.
    Stanford A. Segal, Daniel W. Cooper, Gatz, Cohen & O’Brien, Pittsburgh, Pa., for appellants.
    Timothy P. O’Reilly, Bridgeville, Pa., for appellee, United Contractors Assn., Inc., of Pittsburgh, Pa., a corporation.
    Burton C. Duerring, Pittsburgh, Pa., for appellee, Associated Trades and Crafts Union.
    Before SEITZ, Chief Judge, and FOR-MAN and HUNTER, Circuit Judges.
    SUPPLEMENTAL OPINION OF THE COURT amending 3d Cir., 483 F.2d 384, which vacated order W.D.Pa. 331 F.Supp. 1298
   FORMAN, Circuit Judge.

On July 17, 1973 an opinion was filed in the above-named case upon which a judgment and mandate issued on August 8, 1973. The decision of the court remanded the case to the United States District Court for the Western District of Pennsylvania with, among other things, a direction to certify pertinent labor issues to the National Labor Relations Board. In compliance, on September 21, 1973, the District Court issued an order certifying the issue to the Board.

On September 28, 1973 the Board, pursuant to the Federal Rules of Appellate Procedure, moved for leave to file as amicus curiae a brief out of time, in order to present its views as to the appropriateness of the certification of issues contemplated by the court’s decision, and represented that counsel for the appellants and appellees had advised counsel for the Board that they had no objection to the granting of the motion. On October 4, 1973 the Board filed a motion to reopen the case and recall the court’s mandate of August 8,1973.

On October 28, 1973 the court granted the motion to reopen and to recall the mandate for the purpose of considering the Board’s motion for leave to become an amicus curiae in the proceeding. An order was also filed March 28, 1974 granting the Board leave to become an amicus curiae in this appeal. No briefs were filed by the parties in response to the Board’s brief.

We are now informed on examination of the Board’s brief that the labor issues contemplated in the original opinion of this court as being appropriate for disposition by it were, in fact, considered in its case No. 6-CA-5384 entitled Union Contractors Associates, Inc. and Building and Construction Trades Council of Pittsburgh and Vicinity AFL-CIO and Associated and Construction Trades Council and Crafts International Construction Union, the identical parties in this case. The proceeding before the Board was initiated by the filing of a charge on February 16, 1971 by Building and Construction Trades Council of Pittsburgh and Vicinity AFL-CIO (the appellants here). The General Counsel issued a complaint thereon on December 28, 1971, which was heard by a Trial Examiner and decided on August 31, 1972. His recommendations were adverse to the contention of the Building and Construction Trades Council and were affirmed and adopted by the Board.

The instant case was instituted in the District Court on December 1, 1970 and was decided there on August 9, 1971. It was heard before this court on October 5, 1972. The Board was not made a party to the court action and the knowledge that the matter was proceeding before the Board contemporaneously with the court case did not come to the attention of this court until the brief of the Board as amicus curiae was filed herein.

We agree with the argument made by the Board that our directive to the District Court to certify all labor issues to the Board for the purpose of having the Board return its findings of fact as to the referred acts and its conclusions of ■law as to the labor issues to the District Court for whatever effect the resolution of such issues might have in evaluating antitrust problems, was inappropriate under the circumstances that the Board had already considered the identical issues involving the very parties in this case. Nevertheless, as the Board concedes in its brief (p. 10), its determination of the issues raised before it in the labor proceedings are not conclusive of the antitrust issues considered in the District Court and reviewed here on appeal. Meat Cutters v. Jewel Tea Co., 381 U.S. 676, 85 S.Ct. 1596, 14 L.Ed.2d 640 (1965). It appears therefore that we need not reach the issue of whether the doctrine of primary jurisdiction is applicable here but that the opinion of July 17, 1973 should be amended by deleting

(a) the designation “I” on page 7 and

(b) that portion of the opinion beginning with the designation “II” on page 23 to the end of the next to the last paragraph on page 33.

ORDER

Hence it is

Ordered that the opinion in this case filed on July 17, 1973 be amended by deleting therefrom (a) the designation “I” on page 7 and (b) that portion of the opinion beginning with the designation “II” on page 23 to the end of the next to the last paragraph on page 33.

      . International Ass’n, etc. v. United Contractors, etc., 433 F.2d 384 (3d Cir. 1973).

      . In its brief (p. 10) the Board considerately offered to make the decisions and record in the unfair labor practice proceeding available for whatever purpose the court may deem appropriate.

      . International Ass'n, etc. v. United Contractors, etc., 483 F.2d at 389 (3d Cir. 1973).

      . Id. at 399.


author: BY THE COURT:

text:
    Mrs. Millie HUESCHEN, wife of/and James W. Lawrence, Plaintiffs-Ap-pellees-Cross Appellants, v. FLUOR OCEAN SERVICES, INC., Defendant-Appellant-Cross Appellee.
    No. 73-1917.
    United States Court of Appeals, Fifth Circuit.
    May 3, 1974.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.
   BY THE COURT:

It is ordered that the joint motion of the parties to withdraw the opinion, 483 F.2d 1396, previously delivered by this Court on September 6, 1973, to vacate the judgment entered pursuant thereto and to remand this case to the district court for settlement is granted.


author: PER CURIAM: SCHWARTZ, Trial Judge:’

text:
    COLONIAL METALS COMPANY v. The UNITED STATES.
    No. 387-72.
    United States Court of Claims.
    April 17, 1974.

      Samuel F. Schwag, Philadelphia, Pa., attorney of record, for plaintiff.
    Rose E. Adewale-Mendes, Washington, D. C. with whom was Acting Asst. Atty. Gen. Irving Jaffe, for defendant.
    Before DAVIS, NICHOLS, and BENNETT, Judges.
   OPINION

PER CURIAM:

This case comes before the court on defendant’s motion, filed January 22, 1974, requesting that the court adopt the recommended decision of Trial Judge David Schwartz, filed November 23, 1973, pursuant to Rule 166(c), on plaintiff’s motion and defendant’s cross-motion for summary judgment, as the basis for its judgment in this case since plaintiff has failed to file a request for review by the court of the said decision in accordance with the Rules of the court. Upon consideration thereof, without oral argument since the court agrees with the decision, as hereinafter set forth, it hereby affirms and adopts the same as the basis for its judgment in this case. Therefore, defendant’s motion of January 22, 1974, is granted, plaintiff’s motion for summary judgment is denied, defendant’s cross-motion for summary judgment is granted and plaintiff’s petition is dismissed.

OPINION OF TRIAL JUDGE

SCHWARTZ, Trial Judge:’

This is a suit to review a decision of the Armed Services Board of Contract Appeals awarding $250 on plaintiff’s claim for $123,059 as the allowable costs on the Government’s termination for convenience of a contract to sell copper ingot to the Navy. A second count raises the claim, dismissed by the Board as beyond its jurisdiction, that the termination-for-convenience clause was invoked for an improper purpose and therefore constituted a breach of contract.

The parties have made cross-motions for summary judgment on both counts, thereby presenting the entire ease for final disposition. Both counts are to be disposed of on the record made in the administrative proceeding; United States v. Carlo Bianchi & Co., 373 U.S. 709, 714, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963), so holds for the count to review the Board action and an agreement of the parties so provides for the count for breach of contract. The review of the Board’s decision takes place in accordance with the standards of the Wunder-lich Act, 41 U.S.C. §§ 321-322, by which the Board’s findings of fact are final if supported by substantial evidence and its decisions of law are open to fresh consideration.

The Navy’s invitation to bid, issued in late 1969, asked for the supply of 479,607 lbs. of copper ingot in May 1970. Plaintiff, a secondary dealer in copper, was the only bidder, and on December 24, 1969 was awarded the contract, at the bid price of $.7838 per lb.

The invitation had also sought bids on-a further 440,000 lbs., set aside under Armed Services Procurement Regulation l-804.2(b), 32 CFR § 1.804-2(b) (1970), for supply by concerns in labor surplus areas. Plaintiff was qualified as such a concern. Immediately following the award, a Navy procurement officer and an officer of the plaintiff had a telephone conversation in which the plaintiff claims the parties concluded an oral contract for the additional, set-aside quantity; the Board held to the contrary.

A week later, on December 31, 1969, plaintiff ordered 960,000 lbs. of May 1970 copper from Aaron Ferer & Sons Co. for $.7225 per lb., to fulfill the basic contract and the claimed contract for the additional, set-aside quantity.

On January 20, 1970 the Government terminated the basic contract for its convenience, under the contract clause on that subject, and thereafter it denied the making of a contract for the set-aside quantity. Between January 27 and March 12 the Government bought the copper it needed from primary sources —leading copper mining companies — at between $.55 and $.56 per lb. The purpose of the termination was to obtain the prices, much lower than the contract price, at which copper is sold by the primary sources. Their prices are common knowledge, regularly published. The purpose and circumstances of the termination are the basis of plaintiff’s claim of breach of contract.

Immediately upon the termination, plaintiff cancelled its purchase order with the Ferer firm for purposes of the Government contract, simultaneously replaced the order for its own account, and thereafter, in April 1970, sold the copper for more than it had paid for it but less than the price in the contract with the Navy. In a termination costs proceeding, the Board allowed neither profit on the contract with the Government nor loss on the contract with Ferer.

The questions presented are whether the parties made a contract for the additional set-aside quantity; whether the termination for convenience was a breach of contract; and whether the Board wrongly failed to award, in the termination settlement proceeding, profit on the Government contract and losses on the Ferer contract. All these questions are herein answered in the negative, against the plaintiff.

The Alleged Contract for the Set-Aside Quantity

The threshold issue is the scope of the contract to be considered — whether it included the additional 440,000 lbs. of ingot set aside for specially qualified bidders, of whom plaintiff was one.

When the notice of award for the basic non-set-aside quantity had been mailed to plaintiff, a Mr. Hoover, a Navy procurement officer, called Mr. Mann, plaintiff’s executive vice president, told him of the award, and inquired whether plaintiff would be interested in an award of the set-aside quantity. On the basis of what then was said over the telephone, plaintiff maintains that an oral contract was concluded or “implied in fact.” Alternatively, it is contended that the Government is equitably estopped to deny the existence of a contract, because in reliance on the representations made by Mr. Hoover, an agent clothed with apparent authority, plaintiff on December 31, 1969 bought 960,000 lbs. of copper ingot, to make delivery of both the basic and the set-aside quantities.

The Board accepted none of these arguments. Mr. Hoover did not, the Board found, purport to make an award of contract for the set-aside quantity; at most he assured Mr. Mann that plaintiff would receive an award subject to prior approval at a higher level. The Board further found that Mr. Hoover did not have and did not expressly or by implication represent that he had authority to award a contract.

Depositions by both participants to the telephone conversation were made a part of the record. Mr. Hoover testified that he called Mr. Mann, asked whether plaintiff would be interested in the set-aside quantity; that Mr. Mann said plaintiff would be interested; that they then had a little bit of discussion as to “whether a new contract would be issued, or whether the existing contract would be modified. And I indicated to him that it would be handled by a modification, but it would take several days to get it out because of necessary internal approvals.” Mr. Hoover added that “We had every intention at that time to award the set-aside portion to plaintiff.”

Mr. Mann’s version was that when he told Mr. Hoover that plaintiff was interested, “He said, okay, that we have the contract and the set-aside, but it would take a couple of days to get the papers out.”

Mr. Hoover was not a contracting officer with authority to contract but a lesser officer called a procurement officer, subordinate to the contracting officer. In talking to Mr. Mann he did not identify himself other than, Mr. Mann said, to say he was calling from the Government procurement office “with regard to that particular contract.” He was authorized, the Board found, only to inquire as to plaintiff’s interest in the set-aside quantity, and he did not pretend to any higher status or authority.

The evidence amply supports the finding and conclusion that no contract was made.

The finding that Mr. Hoover referred to a necessary prior approval at a higher level is supported by the testimony quoted above. Such words, in a discussion of an agreement, are reasonably to be understood as stating a condition that further action by others is necessary before an agreement may be regarded as reached. Cutler-Hammer, Inc. v. United States, 441 F.2d 1179, 1182-1183, 194 Ct.Cl. 788, 794-795 (1971); .1 Corbin on Contracts § 11 at 25 (1963). Thus no contract was concluded.

The findings negate all the theories advanced by plaintiff. Express contract is directly contradicted by the findings. Contract implied in fact is a doctrine applicable to a meeting of the minds, inferred without explicit words from the conduct of the parties as showing their tacit understanding. Balt. & Ohio R. R. v. United States, 261 U.S. 592, 597, 43 S.Ct. 425, 67 L.Ed.2d 816 (1923). It can have no application where the explicit words actually used express the thought that agreement is conditional. And any notion of contract by estoppel is dispelled by the absence, here, of the representation and reasonable reliance indispensable for the application of an estoppel. Manloading & Management Associates, Inc. v. United States, 461 F.2d 1299, 198 Ct.Cl. 628 (1972); Emeco Industries, Inc. v. United States, 202 Ct.Cl. 1006, 1013-1015, 485 F.2d 652, 657-659 (1973).

A final theory of the plaintiff is that in a set-aside contract the Government is not, as in ordinary contracts, the offeree of an offer contained in a bid, but rather an offeror (a theory for which plaintiff cites 41 Comp.Gen. 230, 234 (1961)), and that here, in the telephone conversation, the Government made an offer and the plaintiff accepted it. Assuming that the theory is sound, and the Government in such contracts is the offeror, Mr. Hoover’s explicit reference to the need for further approvals prevented what he said from being understood as an offer which could on acceptance create a binding agreement. “So long as it is reasonably apparent that some further act of the offeror is necessary, the offeree has no power to create contractual relations by an act of his own, and there is as yet no operative offer.” 1 Corbin on Contracts, supra § 11 at 25.

The disposition on the facts of the claim of oral contract makes it unnecessary to consider either the force of the statement, on the face page of the invitation, in a blank box headed “Award,” that “Award will be made on this form, or on Standard Form 26, or by other official written notice,” or the provisions of statute and regulation that a contract award is to be made in writing. 10 U.S.C. § 2305(c)(1970); 41 U.S.C. § 253 (1970); ASPR 2-407.1, 32 CFR § 2.-407-1 (1970) ; see G. C. Casebolt Co. v. United States, 421 F.2d 710, 714, 190 Ct.Cl. 783, 789-790 (1970) (concurring op.).

The issue of the scope of the contract is decided against plaintiff. The only contract between the parties was one for the non-set-aside quantity, purported to be terminated by the Government for its convenience on January 20,1970.

Validity of the Termination for Convenience

The termination for convenience is said to have been an act of bad faith and thus a breach entitling plaintiff to common law breach damages, because the Government acted in order to obtain elsewhere a better price known at the time of the award to be available.

Such a motive for a termination for convenience is not improper, and the termination is held not to be a breach. This conclusion makes it unnecessary to consider the Government’s contention, perhaps analytically antecedent to the question decided, that even if there were a breach, it would have been “subsumed” or transformed into a convenience-termination under such cases as Nolan Bros., Inc. v. United States, 405 F.2d 1250, 186 Ct.Cl. 602 (1969); G. C. Casebolt Co. v. United States, supra; and Nesbitt v. United States, 345 F.2d 583, 170 Ct.Cl. 666 (1965), cert, denied, 383 U.S. 926, 86 S.Ct. 931,15 L.Ed.2d 846 (1966).

The contract was awarded on December 24, 1969, to plaintiff, the sole bidder, at the bid price of $.7838 per lb. It was terminated within the month, on January 20, 1970, in order, the Board found, that the Government might procure the copper from primary sources at lower prices — -as low as $.55 per lb. Soon after the contract was terminated, the contracting officer entered into “rated” contracts with three primary sources, sales companies for leading copper mining concerns, for copper at between $.55 and $.56 per lb. The reasons why such primary sources did not bid do not appear. It is also not explained in the record why the contracting officer did not withhold the award to plaintiff and do immediately what he eventually did — negotiate rated contracts with the primary sources, at their prevailing low prices. Quotations of the price of copper from primary sources, to be found in the Wall Street Journal and trade papers, are common knowledge. It may be that the contracting officer did not share in the common knowledge of the price of copper futures. The Government urges that common knowledge cannot be imputed to it, and suggests that the officer may not have been aware, at the time of the award, of rated orders as a method of procurement from sources which do not bid on a published invitation. The only fact we can be sure of is that, as the Board found, the Government terminated to get a better price from another source, a price which the Government throughout knew or ought to have known was readily available.

The convenience-termination clause provides for termination “whenever the contracting officer shall determine that such termination is in the best interest of the Government.” It is designed to provide a mechanism whereby the Government may end its obligation on a contract and yet limit its liability to the contractor’s costs and profits on the preparations made and work done. G. L. Christian & Associates v. United States, 312 F.2d 418, 423, 426-427, 160 Ct.Cl. 1, 11, 15-17, rehearing denied, 320 F.2d 345, 160 Ct.Cl. 58, cert, denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314 (1963). It may well be, as plaintiff argues, that the Government does not promote confidence in its procurement process when it terminates a contract and deprives the contractor of the profits of the bargain, for reasons which were known at the time of the award. But the determination of the interest and convenience of the Government is by the contract clause left to the discretion of the contracting officer.

The language of the clause gives the contracting officer the “fullest of discretion to end the work” in the interest of the Government. Nolan Bros., Inc. v. United States, supra, 405 F.2d at 1253, 186 Ct.Cl. at 606; Schlesinger v. United States, 390 F.2d 702, 707, 182 Ct.Cl. 571, 581 (1968). The discretion may be exercised in a “host of variable and unspecified situations.” (John Reiner & Co. v. United States, 325 F.2d 438, 442, 163 Ct.Cl. 381, 390 (1963), cert, denied, 377 U.S. 931, 84 S.Ct. 1332, 12 L.Ed.2d 295 (1964) (termination to avoid a conflict with the Comptroller General); cf. Schlesinger v. United States, supra (to avoid a dispute with Congress). Particularly comparable to the instant case are the judicially approved terminations where the Government’s purpose was to end a dispute in which the contractor maintained that he has been damaged by faulty plans (Nolan Bros., Inc. v. United States, supra) or to employ a rival contractor with greater production facilities (Nesbitt v. United States, supra).

Monetary profit or other benefit to the Government is the common theme of all these terminations. “The defendant could properly wish to cut unnecessary losses as early as possible and to consider what drastic changes might be needed in its plans.” Nolan Bros., Inc. v. United States, supra, 405 F.2d at 1253, 186 Ct. Cl. at 606.

Termination to buy elsewhere at a cheaper price is essentially such a termination as has repeatedly been approved. The added element that the contracting officer knew of the better price elsewhere when he awarded the contract to plaintiff — in the absence of some proof of malice or conspiracy against the plaintiff (cf. Librach v. United States, 147 Ct.Cl. 605, 612-614 (1959)) — means only that the contract was awarded improvidently and does not narrow the right to terminate. The clause is not designed to perpetuate error, but to permit its rectification.

Termination for convenience is as available for contracts improvident in their origin as for contracts which supervening events show to be onerous or unprofitable for the Government. Absent bad faith, therefore, or some other wrong to the plaintiff or illegal conduct such as does not here appear, the Government alone is the judge of its best interest in terminating a contract for convenience, pursuant to the discretionary power reserved by the clause to the Government’s contracting officer. Accordingly, no breach took place by the termination, and the plaintiff became entitled only to the costs and profits allowed on a termination for convenience.

The Claims for Termination Costs

To fulfill its contract for the sale of copper to the Government at $.7838 per lb., plaintiff on December 31, 1969 placed an order with Aaron Ferer & Sons Co., a copper firm in Nebraska, for copper ingot at $.7225 per lb. On January 20, 1970, when the contract was terminated, plaintiff in a letter to Ferer cancelled the order for purposes of the terminated contract and in the same letter reordered the copper for its own account. The stipulated market price of copper was then $.6590 per lb., a sum less than the contract price. The following April 30 plaintiff sold the copper for $.7585, more than it had paid for it, but still less than the contract price.

Before the Board, plaintiff claimed, as its lost profit on the contract with the Government, the difference between the contract price of $.7838 and its purchase price of $.7225, or $.0613 per lb. times the contract quantity, and as its costs or loss on the settlement of the Ferer contract, an additional $.0635 per lb., the difference between its purchase price from Ferer of $.7225 and $.6590, the market price of copper on the day of the cancellation and reorder.

The Board disallowed both items of damages. It held that the copper had been retained for plaintiff’s own account; that there was no evidence of a loss or of a settlement of a subcontractor’s claim allowable in a termination settlement; and, generally, that plaintiff had failed to meet its burden of proof of any costs beyond the $250 allowed by the termination contracting officer. These rulings were correct and are adopted.

The regulation incorporated into the contract clause on convenience-termination provides that anticipatory profits shall not be allowed in the settlement of termination costs. ASPR 8-303(a), 32 CFR § 8.303(a)(1970). Plaintiff would avoid the regulation by a contention that its lost profits were not anticipatory but rather fixed and certain. Once it had the award of the contract to sell copper to the Government for $.7838 and had placed the order with Ferer to buy at $.7225, plaintiff says, the profits were fixed and certain — “only the date of payment was anticipatory.”

The contention is without substance. The profit was “anticipatory” because it was unearned, unrealized and contingent on the completion of the transaction. The avoidance of Government liability for the profit from the transaction were it to be completed — the profit which is awarded as damages in an action for breach of contract — was almost the whole purpose of the convenience-termination clause. G. L. Christian & Associates v. United States, supra; Nolan Bros., Inc. v. United States, supra, 405 F.2d at 1254, 186 Ct.Cl. at 608. The profit contended for is thus the very anticipatory profit whose payment in a convenience-termination settlement is forbidden by the cited regulation. William Green Constr. Co. v. United States, 477 F.2d 930, 936-937, 201 Ct.Cl. 616, 626-627 (1973).

As for the Ferer contract, there was neither loss nor payment on its settlement recognizable in a convenience-termination proceeding. The purported termination by plaintiff of its contract to buy copper from Ferer was a termination in form only. Plaintiff’s letter of termination cancelled its purchase order insofar as the Government contract was concerned, and retained the purchase order in effect for plaintiff’s own account. The copper was, as the Board held, retained for plaintiff’s own account.

The regulations provide that the cost of items reasonably usable in the contractor’s other work is not allowed, and that contemporary purchases of common items by the contractor is evidence that such items are reasonably usable by the contractor. ASPR 15-205.42 (a), 32 CFR § 15.205-42(a) (1970). The retention of the copper for plaintiff’s own account was of course a demonstration that the copper was usable by the plaintiff in its other work. Plaintiff maintains that copper ingot plays no part in its regular work; but it made dealing in copper ingot part of its work when it reordered for its own account.

Moreover, when plaintiff can-celled the order of purchase from Ferer and simultaneously reordered for its own account, at the same price, it recouped the entire cost of the materials acquired for the contract with the Government, leaving it with no loss attributable to the Ferer transaction or “settlement.”

Substantial evidence supports the Board’s decision disallowing both the claimed profit and loss. No error appears in the award.

      . Rated orders and contracts are a method, associated with the Defense Materials System and the Business and Defense Services Administration, by which purchase orders for defense supplies may be placed on selected suppliers. See ASPR 1-307, 32 OFR § 1.307 (1970).

      . An explanatory “statement of facts” by the contracting officer, not a part of the record, is attached to the Government’s brief. Having agreed to the decision of the breach claim on the record before the Board, the Government may not sui>plement the record with any data, much less an unsworn statement by a new witness who had not been cross-examined. The “statement of facts” will not be considered. Northbridge Electronics, Inc. v. United States, 444 F.2d 1124, 1130, 195 Ct.Cl. 453, 463 (1971) ; Rice v. United States, 428 F.2d 1311, 1315, 192 Ct. Cl. 903, 910 (1970).

      . The Board’s findings are adopted as correct in their entirety. There is no need, therefore, to consider whether the findings relevant to the claim of breach are entitled to finality as relevantly made in the decision of a dispute properly before the Board (United States v. Utah Constr. & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966)) or not so made and therefore having no finality (e. g., National Steel & Shipbuilding Co. v. United States, 419 F.2d 863, 872, 190 Ct.Cl. 247, 261-262 (1969)).

      . The clause in the contract is incorporated by reference to ASPR 7-103.21 (c) (April 1966), 32^ CFR §§ 7.103-21 (c), 8.701(a) (1970) (Termination for Convenience of the Government, April 1966). It provides in part as follows:
      “(a) The performance of work under this contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interest of the Government. * * * ”