author: ROBERT P. ANDERSON, Circuit Judge:

text:
    In the Matter of Henry A. KOKOSZKA et al., Bankrupts, Petitioners.
    No. 496, Docket 72-1972.
    United States Court of Appeals, Second Circuit.
    Argued Feb. 28, 1973.
    Decided May 18, 1973.

      See also 336 F.Supp. 1029.

      Stuart Bear, New Haven, Conn. (William H. Clendenen, Jr., David M. Lesser, Joanne Faulkner, and Frank Dineen, New Haven, Conn., on the brief), for appellants.
    Richard Belford, New Haven, Conn., on the brief, for appellee Trustee in Bankruptcy.
    Before KAUFMAN, ANDERSON and MANSFIELD, Circuit Judges.
   ROBERT P. ANDERSON, Circuit Judge:

The three appellants herein each filed separate individual voluntary petitions in bankruptcy, all of which raise the issue of whether or not, and to what extent, an income tax refund passes to the trustee in bankruptcy as property of the estate. In each case the petitioner had claimed the maximum number of deductions to which he was entitled on his tax withholding statement and in each case the refund was the only asset of the bankrupt estate.

Henry Kokoszka filed his petition and was adjudicated a bankrupt on January 5, 1972. On February 3, the referee ordered him to turn over the proceeds of his 1971 income tax refund to the trustee. After a motion to vacate the order was denied, Kokoszka petitioned for review in the District Court. In the meantime, he turned over the refund" amount of $250.90 to the trustee to hold pending the determination of this matter, and he was given his discharge in bankruptcy on August 24, 1972.

Herbert Sands was adjudicated a bankrupt on February 4, 1970, and was ordered to turn over his 1969 tax refund to the trustee. Instead, Sands spent his refund of $201.97, and the trustee moved on March 12, 1971, to deny the discharge for this reason. Subsequent to that, the petitioner moved to vacate the turn-over order, but the referee denied the motion and denied the discharge. Sands then petitioned the District Court for review.

Frank O’Brien was adjudicated a bankrupt on April 30, 1970, and was ordered to turn over his 1969 refund of $136.00 to the trustee. He, too, failed to obey the order and the trustee moved to deny the discharge on March 18, 1971. The referee has not yet ruled on the trustee’s motion, but he did deny O’Brien’s motion to vacate the original turn-over order, and the petitioner sought review of that denial.

After consolidating the three cases, the District Court held that the tax refunds were property that passed to the trustee under § 70(a)(5) of the Act, 11 U.S.C. § 110(a)(5), and that the Consumer Credit Protection Act, 15 U.S.C. § 1671 et seq., did not require that the trustee return 75% of the refund to the petitioners. On these issues we affirm; however, we do remand Sands’ case in order that the referee may exercise his discretion on whether or not to grant him a discharge in bankruptcy.

The primary point raised by this appeal is whether or not a tax refund is “property” which passes to the bankruptcy trustee under § 70(a)(5) of the Act. The Ninth Circuit recently held that such a tax refund is not § 70(a)(5) property, In Re Cedor, 470 F.2d 996 (9 Cir. 1972); aff’g on the opinion below, 337 F.Supp. 1103 (N.D.Cal.1972). In Re Jones, 337 F.Supp. 620 (D.Minn.) leave to appeal denied (8 Cir., May 14, 1971), cert. denied, 404 U.S. 1040, 92 S. Ct. 719, 30 L.Ed.2d 732 (1972), however, held that a refund does pass to the trustee and the same holding was implicit in In Re Wetterhoff, 453 F.2d 544 (8 Cir.), cert. denied, 409 U.S. 934, 93 S.Ct. 242, 34 L.Ed. 188 (1972), holding that, at the time of filing, the excess of accrued but unpaid wages over and above the portion exempt from attachment under state law, passed to the trustee.

The decision, in the present case is governed in large part by two Supreme Court cases, Segal v. Rochelle, 382 U.S. 375, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966), which held that a business generated loss-carryback tax refund, which did not accrue until after the filing of the bankruptcy petition, was § 70(a)(5) property, and Lines v. Frederick, 400 U. S. 18, 91 S.Ct. 113, 27 L.Ed.2d 124 (1970), which held that vacation pay, accrued but unpayable at the time of filing, did not pass to the trustee.

For the purpose of considering what treatment should be given to the tax refunds in question here, the term “property” in § 70(a)(5) must be defined in terms of the purposes of the Bankruptcy Act, rather than by more traditional concepts, Segal, supra, 382 U.S. at 379, 86 S.Ct. 511; In Re Spanish Language Television, 456 F.2d 159, 162 (9 Cir. 1972). Basically, the term “property” is given a generous construction in order to give creditors everything of value, including items where the enjoyment of value is postponed, Segal, supra, 382 U.S. at 379, 86 S.Ct. 511; In Re Robbins Converting Corp., 441 F. 2d 1096, 1098 (2 Cir. 1971). The definition of property is limited, however, where the debtors are wage earners “whose sole source of income, before and after bankruptcy, is their weekly earnings,” Lines, supra, 400 U.S. at p. 20, 91 S.Ct. at p. 114 and who, at the filing of their petitions in bankruptcy have wages, as such, or as vacation pay, accrued but not yet paid, and where “the minimal requirements for the economic survival of the debtor are at stake,” id., such wage payments are not “property” to be turned over to the trustee under § 70(a)(5). The purpose of this exception is to give the debtor a “new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt,” Lines, supra, at 1-20, 91 S.Ct. at 114; Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 78 L.Ed. 1230 (1934).

The test as to whether or nqt such items as accrued but unpaid wages are or are not “property” to be turned over to the trustee is whether the item is “sufficiently rooted in the pre-bank-ruptcy past and so little entangled with the bankrupts’ ability to make an unencumbered fresh start that it should be regarded as ‘property’ under § 70(a)(5),” Segal, supra, 382 U.S. at 380, 86 S.Ct. at 515.

There were two petitioners in Lines both of whom had accrued vacation pay at the time of the filing of the petition, but neither could receive it until he either went on vacation or his employment was terminated. The one petitioner, Frederick, worked for a manufacturing company which shut down for a week twice a year thereby forcing their employees to take a vacation. The other, "Harris, could choose his vacation period, if he desired to take one.

If the vacation pay was held to be property of the estate, it would appear at first glance that Harris was in a somewhat better position that Frederick, because Harris was not forced to take a vacation and go without basic support. Nevertheless, he also was in a difficult position. If he took a vacation, he would have no income for that period; yet, if he did not, and he was laid off, he would not have the use of the pay upon termination for basic support while seeking new work.

Realizing that “[t]he function of their accrued vacation pay is to support the basic requirements of life for them and their families during brief vacation periods or in the event of a layoff,” the Supreme Court held that this vacation pay was a specialized type of property that did not pass to the trustee because to hold otherwise would deny the debtor the new opportunity in life which the Bankruptcy Act intended to provide, Lines, supra, 400 U.S. at 20, 91 S.Ct. at 114.

What we have then in Lines is a very narrow exception to "the general proposition that everything of value passes to the trustee, i. e., vacation pay which will become essential for basic week to week support in the future does not pass. Because a tax refund is not the weekly or other periodic income required by a wage earner for his basic support, to deprive him of it will not hinder his ability to make a fresh start unhampered by the pressure of preexisting debt. Therefore, the tax refund is § 70(a)(5) property which passes to the trustee.

The petitioners have advanced several arguments, however, that bear some comment. First, they maintain that wages, as such, are a specialized type of property which does not pass to the trustee and that a tax refund is nothing more than a refund of over withheld wages. The problem with this argument is that when the Court in Lines, supra, at 20, 91 S.Ct. 113, or in other cases such as Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S.Ct. 1820, 23 L.Ed.2d 349 (1969), speaks of wages as a special type of property, it is referring to the periodic payments required to meet basic needs. Just because some property interest had its source in wages, however, does not give it special protection, for to do so would exempt from the bankrupt estate most of the property owned by many bankrupts, such as savings accounts and automobiles which had their origin in wages.

The petitioners also argue that as wage earners they have come to rely upon the tax refund as an expected annual event and that to take it from them would deny them a fresh start in life. It was this reasoning that convinced the court in In Re Cedor, supra, 470 F.2d at 1105, that tax refunds should not be § 70(a)(5) property, but we find it unpersuasive. Many people may come to rely upon such things as a Christmas Club account or year end dividends from stock ownership to give them a special source of income at certain times of the year, but this does not make such items immune from a turn-over order in bankruptcy. Permitting a bankrupt to retain his tax refund would not be giving him a “fresh start” to accumulate new wealth but a “head start” over others who had no such refund.

Finally, the petitioners argue that a tax refund should not be § 70(a)(5) property because such refunds will often be of no benefit to the creditors but will be used up in administration expenses.

We are concerned with the fact that, on the average, in all personal bankrup-cy cases 41% of the assets of the estates are paid out for trustees’ fees and other administration expenses, D. Stanley & M. Girth, Bankruptcy: Problem, Process, Reform 91 (Brookings Institution 1971). Furthermore, nearly one case in five is one of only nominal assets, that is, a case where all of the assets in the estate are consumed in administration expenses, leaving nothing for creditors, Stanley & Girth, supra, at 87-88, 175.

It is apparent why this happens in the small asset estates. Section 48(c)(1) of the Act, 11 U.S.C. § 76(c)(1), provides that a trustee can be compensated up to $150.00 plus expenses no matter how small the estate, and we have recently noted that in practice trustees are generally awarded the maximum fee, In Re Schautz, 390 F.2d 797, 800 (2 Cir. 1968); see also, Snedecor, Fees and Allowances in Straight Bankruptcy, 40 Ref.J. 26, 27 (1966). If that standard is applied to the eases currently before us, it can be seen that there will be nothing for creditors in the O’Brien estate and, at best, only a very small balance in the Kokoszka and Sands estates which might well be used up for other administration expenses, cf., Stanley & Girth, supra, at 92, 173-195.

Clearly the purpose of the Bankruptcy Act was to benefit creditors and debtors, not trustees, see, In Re Kingswood, 343 F.Supp. 498, 504-505 (C.D.Cal. 1972), rev’d on other grounds, 470 F.2d 996 (9 Cir. 1972); In Re McGrath Mfg. Co., 95 F.Supp. 825, 829 (D.Neb.1951). Therefore, there is no sense in taking a small sum from the bankrupt debtor, which he could well use to get started again, if there is to be no value to the creditors.

This does not mean, however, that all tax refunds should be held not to be § 70(a) (5) property, because a refund may be fairly large or only one asset among others. If a debtor is in a position where his non-exempt assets will be entirely eaten up by administration costs, leaving nothing for creditors, he can move the bankruptcy court for an order of abandonment, see In Re Mirsky, 124 F.2d 1017 (2 Cir. 1942), cert. denied, 317 U.S. 638, 63 S.Ct. 29, 87 L.Ed. 514 (1942); cf., In re Ira Haupt & Co., 398 F.2d 607, 612-613 (2 Cir. 1968). See Calverley, Income Tax Refunds Due Wage Earners, 39 Ref.J. 8, 10-11 (1965), for a general discussion of the various abandonment practices of California referees for tax refunds. In moving for an abandonment, the debtor can present what evidence and arguments he may have to support his contention that it would not work an injustice to creditors to abandon the assets and not appoint a trustee. Whether or not to grant such a motion rests in the sound discretion of the referee. He should grant the motion if it is reasonably clear that the assets, otherwise available for creditors, will be entirely consumed by trustee’s fees and other administration expenses, that no creditor has shown that there was a likely opportunity for a trustee to recover additional assets, and that the absence of a trustee will not, under the circumstances, cast a substantial additional burden on the Bankruptcy Court.

The petitioners further argue, however, that even if a tax refund is § 70(a)(5) property, the trustee can take only 25% of it because of the Consumer Credit Protection Act’s limitation on garnishment, 15 U.S.C. § 1671 et seq. That Act provides that no more than 25% of a person’s aggregate disposable earnings for any workweek or other pay period may be subject to garnishment, 15 U.S.C. § 1673(a). The definitions of the key terms “earnings”, “disposable earnings,” and “garnishment” are set forth in the margin.

The petitioners argue that a tax refund is “earnings” because it had its source in wages and that when it is returned to the taxpayer it is all “disposable earnings” because nothing is required by law to be withheld from the refund. Furthermore, they claim that the taking by the trustee is a “garnishment” because a bankruptcy proceeding is a legal or equitable procedure through which the earnings of an individual are withheld for payment of a debt.

Although this reasoning was adopted by the Ninth Circuit in In Re Cedor, supra, we do not follow it, but hold that a tax refund is not “earnings” for the purpose of § 1672 and, therefore, it is not protected by § 1673.

The intent of the Consumer Act was to make sure that wage earners were able to receive at least 75% of their take home pay in any one pay period so that they would have enough cash to meet basic needs. As a side effect, it was hoped that honest debtors, with this protection on their wages, would not be forced into bankruptcy, H.Rep. No. 1040, 90th Cong., 2d Sess., U. S.Code Cong. & Ad.News, 1962, pp. 1977-79 (1968). It is clear, then, both from the language of the statute, §§ 1672, 1673 and the legislative intent, that “earnings” means periodic payments of compensation and does not pertain to every asset that is traceable in some way to such compensation. See also, 29 C.F.R. § 870.10(b); In Re Kingswood, supra; cf. Lines, supra, 400 U.S. at 20, 91 S.Ct. 113.

Petitioner Sands also appeals from the failure of the referee to exercise his discretion on whether or not to grant him a discharge in bankruptcy, even though he failed to obey the order to turn over his tax refund. The referee refused to consider a discharge, holding that § 14(c)(6) of the Bankruptcy Act, 11 U. S.C. § 32(c)(6), mandated that he deny the discharge, if the bankrupt disobeyed a lawful order. The district court did not rule on the issue in this case, but in a similar case it remanded to the referee for him to exercise his discretion, In Re Boudreau, 350 F.Supp. 644 (D.Conn. 1972).

Section 14(c) of the Act requires that a discharge be granted unless a bankrupt has done one of eight things among which is failure “to obey any lawful order of . . . the court,” § 14(c)(6). The statute, however, does not state that a discharge must be denied for failing to obey an order, as the referee appears to have assumed.

As stated above, one of the primary purposes of the Bankruptcy Act is to give debtors a new chance in life and the various provisions of the Act must be read with this intent in mind, Local Loan Co., supra, 292 U.S. at 244-245, 54 S.Ct. 695; therefore Bankruptcy Courts must exercise their powers so that “substance will not give way to form” and “technical considerations will not prevent substantial justice from being done,” Pepper v. Litton, 308 U.S. 295, 305, 60 S.Ct. 238, 244, 84 L.Ed. 281 (1939). To this end, we have long held that the Act must be liberally applied toward the bankrupt applying for his discharge, In Re Reisler, 278 F. 618 (2 Cir. 1922); see also, In Re Tabibian, 289 F. 2d 793, 795 (2 Cir. 1961).

Therefore the referee must exercise his discretion whether or not to grant a discharge, even when an order has not been followed. This position has strong support in the case law, see, e.g. In Re Barbato, 421 F.2d 1324, 1327 (3 Cir. 1970); Jayne Meadows Travel Agency v. Dashiell, 416 F.2d 1253, 1254 (9 Cir. 1969); In Re Boudreau, supra; In Re Van Meter, 208 F.Supp. 835 (S. D.Cal.1962). The denial of a discharge can work a serious deprivation upon a debtor, and there are many circumstances where a bankrupt’s disobedience may have been inadvertent or otherwise excusable. Moreover the denial of a discharge is not the only weapon available to the referee in order to enforce his orders as a recalcitrant petitioner can also be held in contempt, 11 U.S.C. § 69; cf., In Re U. S. Hoffman Can Corp., 373 F. 2d 622, 626 (3 Cir. 1967). This is not to be read, however, as minimizing the seriousness of the debtor’s offense in disobeying a lawful order, nor do we suggest that a blatant violation should be condoned.

Therefore, before denying a discharge, the referee should weigh the detriment to the proceedings and the dignity of the court against the potential harm to the debtor if the discharge is denied. He should consider such factors as the intent behind the bankrupt’s acts — -were they wilful or was there a justifiable excuse; was there injury to the creditors; and is there some way that the bankrupt could make amends for his conduct. For example, in the present case, the referee might consider granting a discharge if the petitioner turns over to the trustee the amount of his refund check.

“ (c) The court shall grant the discharge unless satisfied that the bankrupt has (6) in the course of a proceeding under this title refused to obey any lawful order of, or to answer any material question approved by, the court;

The decision of the District Court holding that the entire amount of the tax refunds is property belonging to the trustee in bankruptcy is affirmed; the case of petitioner Sands is remanded to the District Court for further proceedings consistent with this opinion.

      . The pertinent parts of § 70(a) (5) of the Bankruptcy Act, 11 U.S.C. § 110(a)
      (5), read as follows :
      “ (a) The trustee of the estate of a bankrupt . . . [shall] be vested by operation of law with the title of the bankrupt as of the date of the filing of the petition initiating a proceeding under this title ... to all of the following kinds of property wherever located (5) property, including rights of action, which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him, or otherwise seized, impounded, or sequestered . . . . ”
      It is undisputed that the refunds could have been transferred under Connecticut law at the time of the filing of the petition, of., Segal v. Rochelle, 382 U.S. 375. 381-385, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966).

      . We are fully aware that the petitioners in this case either spent or would spend their refunds for such needed items as health care, furniture and rent, but we do not see how the use of the money for what is characterized as “necessities” makes it any less § 70(a) (5) property, cf., Fuentes v. Shevin, 407 U.S. 67, 90, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972).

      . A further benefit to a bankrupt debtor, if all assets are abandoned, is that a trustee need not be appointed which saves the petitioner $10 of the filing fee, United States v. Kras, 409 U.S. 434, 93 S.Ct. 631, 34 L.Ed.2d 626 (1973).

      . 15 U.S.C. § 1672 reads as follows :
      “For the purposes of this subehapter:
      (a) The term ‘earnings’ means compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program.
      (b) The term ‘disposable earnings’ means that part of the earnings of any individual remaining after the deduction from those earnings of any amounts required by law to be withheld.
      (c) The term ‘garnishment’ means any legal or equitable procedure through which the earnings of any individual are required to be withheld for payment of any debt.”

      . Section 14(c) (6) of the Bankruptcy Act, 11 U.S.C. § 32(c)(6) reads as follows:


source: Caselaw Access Project

author: JAMES M. CARTER, Circuit Judge:

license: Public Domain

text:
    R. H. COLVIN, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 71-1231.
    United States Court of Appeals, Ninth Circuit.
    Argued May 25, 1973.
    Decided June 8, 1973.
    N. Warner Lee, Asst. U. S. Atty. (argued), Richard K. Burke, U. S. Atty., Phoenix, Ariz., for defendant-appellant.

      James W. Stewart (argued), Collins, Hays, Stewart, Sanford, Berg & Pott, Inc., San Jose, Cal., J. R. Babbitt, Flagstaff, Ariz., for plaintiff-appellee.
    Before ELY, CARTER and TRASK, Circuit Judges.
   OPINION

JAMES M. CARTER, Circuit Judge:

Mary E. Colvin was killed in an auto accident in which the driver was a Government employee. Colvin, the appellee, commenced the action below under the Federal Tort Claims Act, claiming damages for wrongful death as the surviving spouse of Mary E. Colvin; and also brought the action on behalf of Mary Carol Davis, the daughter of Colvin and his wife, and Shirley Ann Eitrein, a daughter of Mrs. Colvin by a former marriage. He recovered a judgment for $50,000.00 against the United States, decreased by $12,000.00 received by Colvin from another tortfeasor, making a net judgment of $38,000.00.

The Issues

The Government makes various contentions. We consider specifically two of them:

1. Was it error to admit into evidence an accident report and a hearsay statement of an eyewitness contained therein ?

2. Was it error to admit testimony of the deceased’s earnings based on an unprodueed diary ? We reverse.

In view of our disposition of the case, we make no detailed statement of the facts.

The accident out of which the death of Mrs. Colvin resulted occurred on May 27, 1965, on Highway 66 each of Flagstaff, Arizona. The deceased was a passenger in a vehicle owned by the United States of America and operated by Frances Eleanor Fairchild, an employee of the United States acting within the scope of her employment.

A delivery truck driven by Cleveland Quain approached the Starvout Trading Post north of old Highway 66. For the purpose of making a delivery, Quain made a left-hand turn across the oncoming traffic lane in which the Government vehicle was traveling. The Government vehicle made 50 feet of skid marks and crashed into the right-hand side of the truck. The posted speed limit was 50 miles per hour.

I.

The Introduction of the Accident Report and the Hearsay Statement

At trial the plaintiff presented as a witness Edward Boggio, a criminal investigator for the Bureau of Indian Affairs. He was one of a committee who investigated the accident and made a report. He did not have the original of the report but produced a copy. The report consisted of a description of the scene as observed by the committee members, their meeting with the officials of the local sheriff’s office, photographs taken from the scene and of the two vehicles involved, together with a signed statement by Kent Tso taken in the presence of the witness. Mr. Tso did not speak English. His statement was therefore taken on tape, carried back to Tuba City and transcribed into English. The statement recited:

“I was standing in front of the Starv-out Trading Post on May 27, 1965 at about 12:05 P.M. I saw the big truck approaching from Old Highway 66. He had missed the driveway entrance located south of the store, had slowed down almost to a stop, made a left turn across the right lane into the left lane near the center between the north and south driveways. After he had turned and was almost to the west edge of the highway next to the store, I noticed a Government car coming from the north at a speed of between 50 and 55 miles per hour.” [Emphasis added]

The statement was marked as Exhibit 15. The Government objected to it on the ground that it was hearsay. The objection was overruled and the statement was admitted.

The Government contends that the statement was the sole evidence of negligence on the part of the driver of the Government car. Quain, the truck driver, testified that prior to his left-hand turn he looked ahead and saw no ears approaching. The only other possible eyewitness was Frances E. Fairchild, the Government employee who was driving the car in which Mrs. Colvin was riding. Her signed statement, offered by the appellee Colvin, said she had no recollection of the events at the immediate time of the accident.

The trial court found that the driver of the Government vehicle “was operating defendant’s vehicle in a careless and negligent manner in that said operator was traveling at an excessive rate of speed, and in that said operator failed to observe the truck executing a left-hand turn, which in the exercise of ordinary care she should have observed in ample time to avoid the collision.”

Rule 43, Federal Rules of Civil Procedure, lays down a three-fold test for admissibility of evidence in the federal courts. The test most favorable to the receipt of the evidence must be used. Thus, state rules cannot be used to exclude evidence if that evidence is admissible under federal law or federal statutes. 5 J. Moore, Federal Practice ¶ 43.04, at 1325-26, 1343 (2d ed. 1971). Cf. Potlach Oil & Ref’g Co. v. Ohio Oil Co. (9 Cir. 1952), 199 F.2d 766, 772, cert. denied, 345 U.S. 926, 73 S.Ct. 786, 97 L.Ed. 1357 (1953); Allen v. Matson Navigation Co. (9 Cir. 1958), 255 F.2d 273, 279. The Government cites Arizona case law in support of its contention that Tso’s statement was inadmissible. Since we find no Arizona eases favoring the admission of the hearsay statement, we look to 28 U.S.C. §§ 1732 (Business Records) and 1733 (Official Records), and federal case law.

The admissibility of an accident report, and particularly a hearsay statement of a bystander, has been a troublesome question for the courts.

The statement of Tso was hearsay. There is no showing in the record that he was anything but a bystander, nor that he had any relationship with either of the parties or was under any duty to report information to the Government investigating committee.

The proposed Rules of Evidence for the United States Courts and Magistrates (hereafter, Rules of Evidence) now pending before the Congress are not controlling. However, proposed Rule 803, §§ (6) and (8), and the commentary in the notes of the Advisory Committee are helpful.

There is an overlap in the matters discussed in the Note of the Advisory Committee to the proposed Rules of Evidence in its discussions of the exceptions in Rule 803 under (6), “Records of regularly conducted activity,” and (8), “Public records and reports.” Thus the note on Exception (8) refers to this as a recognized hearsay exception, an example of which is

“ . . .28 U.S.C. § 1733, the relative narrowness of which is illustrated by its nonapplicability to nonfederal public agencies, thus necessitating resort to the less appropriate business record exception to the hearsay rule. Kay v. United States, 255 F.2d 476 (4th Cir. 1958). The rule [803] makes no distinction between federal and non-federal offices and agencies.”

The Note of the Advisory Committee on Exception (6), “Records of regularly conducted activity,” specifically discussed a police report which, of course, would be a public record. In its discussion of Exception (8), “Public records

and reports” the Note states, “Hence the rule [803(8)] as in Exception (6), assumes admissibility in the first instance but with ample provision for escape if sufficient negative factors are present.” The ease law also contains this overlap between business and official records. The leading case in the Ninth Circuit on 28 U.S.C. § 1732 is Standard Oil Co. v. Moore (1957), 251 F.2d 188, 212-217, cert, denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958).

The court held that a writing will not qualify under 28 U.S.C. § 1732 unless the recitals are factual in nature. Id. at 213-214; accord, Panotex Pipe Line Co. v. Phillips Petroleum Co. (5 Cir. 1972), 457 F.2d 1279, 1284, cert, denied, 409 U.S. 845, 93 S.Ct. 48, 34 L.Ed.2d 86. The Standard Oil court noted that there are special circumstances in which an expert opinion is admissible, but held that expressions of opinions on matters which do not call for professional or scientific knowledge are not admissible. Id. 185 F.2d at 214. In our case the investigation report contains a statement by Mr. Tso about the speed of the car.

The case holds further:

“[w]here the entrant or maker records information supplied by others, it must appear that ‘it was part of their [the declarants’] regular course of business to report to him what the declarants themselves knew, as it was part of his business to record what they said,’ United States v. Grayson, 2 Cir., 166 F.2d 863, 869. [Footnote omitted.] Where the information comes to the entrant or maker from unauthorized persons, the memorandum or record is therefore inadmissible, not because it contains hearsay, but because it was not made in the regular course of business.” Id. 251 F.2d at 214.

For a document to be admissible under 28 U.S.C. § 1733 (Official Records) “the facts stated in the document must have been within the personal knowledge and observation of the recording official or his subordinates, and . . . reports based upon gen-

eral investigations and upon information gleaned second hand from random sources must be excluded.” (Citing cases.) Olender v. United States (9 Cir. 1954), 210 F.2d 795, 801; accord, Independent Iron Works, Inc. v. United States Steel Corp. (9 Cir. 1963) 322 F. 2d 656, 671-672, cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 165. Contra, McKee v. Jamestown Baking Co. (3 Cir. 1952), 198 F.2d 551, 556 (error not to admit police chief’s report which summarized witnesses’ statements, but not prejudicial because he testified in person), limited to its facts, Gordon v. Robinson (3 Cir. 1954), 210 F.2d 192, 197-198 n. 9 (reversible error in admitting officer’s oral opinions, based on report, on ultimate issues); Juaire v. Nardin (2 Cir. 1968), 395 F.2d 373, 379, cert. de nied sub nom. Juaire v. Walter Marshak, Inc., 393 U.S. 938, 89 S.Ct. 302, 21 L.Ed.2d 274 (declarants to reporting officer also testified; error, but not prejudicial, to admit report as stipulated in pretrial order).

When reports are not prepared in the regular course of business, they are not admissible under 28 U.S.C. § 1732. See Carroll v. United States (9 Cir. 1963), 326 F.2d 72, 79; Niederkrome v. Comm’r (9 Cir. 1958), 266 F.2d 238, 241-242, cert. denied sub nom., Royce v. Comm’r, 359 U.S. 945, 79 S.Ct. 725, 3 L.Ed.2d 678 (1959); Savannah Bank & Trust Co. v. Great American Indem. Co. (1 Cir. 1962), 303 F.2d 247, 250. But where prepared in the regular course of business by a subcontractor’s foreman and identified by its district manager, a report showing the date of completion of work was admissible. United States ex rel. “Automatic” Sprinkler Corp. of America v. Merritt-Chapman & Scott Corp. (3 Cir. 1962), 305 F. 2d 121, 123-124.

Hearsay contained in a police report is inadmissible under 28 U.S.C. § 1732. United States v. Burruss (4 Cir. 1969), 418 F.2d 677, 679; United States v. Graham (6 Cir. 1968), 391 F.2d 439, 447-448; United States v. Shiver (5 Cir. 1969), 414 F.2d 461, 462-463. Entries in a police report based on an officer’s observation and knowledge may be admitted, but statements attributed to other persons are clearly hearsay, and inadmissible under the common law exception to the hearsay rule or under 28 U.S.C. § 695 (now § 1732). Gencarella v. Fyfe (1 Cir. 1948), 171 F.2d 419, 421-422.

We hold that it was error to admit Tso’s statement into evidence, based on Standard Oil Co. v. Moore and other cases discussed, supra, and with strong reliance on the Advisory Committee Note to Rule 803, supra.

The Reliance on Mrs. Colvin’s Diary The trial court found:

“At the time of her death, the deceased, Mary E. Colvin was in good health, maintained and managed the family household, was exceptionally active in civic and charitable affairs, and had the capacity and disposition to earn an annual income of six thousand dollars.”

There was testimony that she had worked as a part-time Avon saleslady for approximately one and one-half years, from 1962 to 1964, but had not been employed in any gainful capacity from 1964 to the date of her death on May 27, 1965. A daughter testified Mrs. Colvin had not worked from 1958 until late 1962, when she commenced selling for Avon.

The trial was held in June 1970. Col-vin testified on voir dire that he had found his tax returns for the last five years but had not brought them with him. The five years he referred to were the years from 1965 to 1970. The accident occurred in 1965. He could not find any tax returns for the period from 1960 to 1965, stating he may have thrown them away; that he could find no records from any source whatsoever of the earnings of the deceased for the years 1960 to 1965.

He was asked: “Q. Any information that you have about your wife’s income comes from what source?” Answer: “She kept a daily diary, and in that she recorded the amount she earned each day and her total for each, what they called, campaign or Avon work.” He also made a reference to her bank book.

The Government objected for lack of foundation on the ground that the testimony supposedly came from a diary kept by the deceased. The objection was overruled and Colvin was permitted to testify that, based upon his recollection of having looked at a diary kept on a day-to-day basis by Mrs. Colvin, she had earned $800 in the first four to four and one-half months of 1964, approximately $2,000 in 1963, and somewhat less than $2,000 in the years preceding 1963. Neither the diary nor the bank deposit book was produced.

No attempt was made, other than the above, to qualify the diary or the bank book as a business record under 28 U.S. C. § 1732, nor to prove that the diary was lost, destroyed or could not be found. Colvin in his brief argues that the diary itself “could have been admitted” ; that although conceding there was no direct testimony concerning the whereabouts of the diary it was “most probable” that the diary had either been misplaced or discarded and that the testimony was admissible as secondary evidence of the contents of the diary.

We hold that it was error to admit testimony purportedly coming from the diary.

As to the Government’s contention that the court failed to make specific findings and/or conclusions for the basis of its award, we suggest that on retrial, the court should more specifically detail in its findings and conclusions the basis for any judgment.

Reversed and remanded.

      . Since the district court relied on two grounds, and since we conclude that the evidence of the speed of the Government car was improperly admitted, we do not consider the evidence concerning the second ground in the trial court’s finding. We seriously question whether the latter ground of negligence is sufficiently shown in the record. In any event, we are unable to determine what effect the evidence of excessive speed had on the court’s decision.

      . Rule 803 provides :
      “HEARSAY EXCEPTIONS: AVAIL-BILITY OF DECLARANT IMMATERIAL
      The following are not excluded by the hearsay rule, even though the declarant is available as a witness:
      (6) Records of regularly conducted activity. A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions or diagnoses, made at or near the time by, or from information transmitted by, a person with knowledge, all in the coarse of a regularly conducted activity, as shown by the testimony of the custodian or other qualified witness, unless the sources of information or other circumstances indicate lack of trustworthiness. (Emphasis added)
      (8) Public records and reports. Records, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth (A) the activities of the office or agency, or (B) matters observed pursuant to duty imposed by law, or (O) in civil cases and against the government in criminal cases, factual findings resulting from an investigation made pursuant to authority granted by law, unless the sources of information or other circumstances indicate lack of trustworthiness.’’ (Emphasis added)

      . Attached to the proposed Rules is the Advisory Committee’s Note. Under Exception (6) appears the following:
      “Amplification of the kinds of activities producing admissible records has given rise to problems which conventional business records by their nature avoid. They are problems of the source of the recorded information, of entries in opinion form, of motivation, and of involvement as participant in the matters recorded.
      Sources of information presented no substantial problem with ordinary business records. All participants, including the observer or participant furnishing the information to be recorded, were acting routinely, under a duty of accuracy, with employer reliance on the result, or in short ‘in the regular course of business.’ If, however, the supplier of the information does not act in the regular-course, an essential link is broken; the assurance of accuracy does not extend to the information itself, and the fact that it may be recorded with scrupulous accuracy is of no avail. An illustration is the police report incorporating information obtained from a bystander: the officer qualifies as acting in the regular course but the informant does not. The leading case, Johnson v. Lutz, 253 N.Y. 124, 170 N.E. 517 (1930), held that a report thus prepared was inadmissible. Most of the authorities have agreed with the decision. Gencarella v. Fyfe, 171 F.2d 419 (1st Cir. 1948); Gordon v. Robinson, 210 F.2d 192 (3d Cir. 1954); Standard Oil Co. of California v. Moore, 251 F.2d 188, 214 (9th Cir. 1957), cert. denied 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148; Yates v. Bair Transport, Inc., 249 F.Supp. 681 (S.D.N.Y.1965); Annot., 69 A.L.R.2d 1148. Cf. Hawkins v. Gorea Motor Express, Inc., 360 F.2d 933 (2d Cir. 1966). Contra, 5 Wigmore § 1530a, n. 1, pp. 391-392. The point is not dealt with specifically in the Commonwealth Fund Act, the Uniform Act, or Uniform Rule 63(13). However, Model Code Rule 514 contains the requirement ‘that it was the regular course of that business for one with personal knowledge ... to make such a memorandum or record or to transmit information thereof to be included in such a memorandum or record .’ The rule follows this lead in requiring an informant with knowledge acting in the course of the regularly conducted activity.” (Emphasis added)
      Under Exception (8) then appears:

      “Public records are a recognized hearsay exception at common law and have been the subject of statutes without number. McCormick § 291. See, for example, 28 U.S.C. § 1733, the relative narrowness of which is illustrated by its nonapplicability to nonfederal public agencies, thus necessitating resort to the less appropriate business record exception to the hearsay rule. Kay v. United States, 255 F.2d 476 (4th Cir. 1958). The rule makes no distinction between federal and nonfederal offices and agencies.
      Justification for the exception is the assumption that a public official will perform his duty properly and the unlikelihood that he will remember details independently of the record. Wong Wing Foo v. McGrath, 196 F.2d 120 (9th Cir. 1952), and see Chesapeake & Delaware Canal Co. v. United States, 250 U.S. 123, 39 S.Ct. 407, 63 L.Ed. 889 (1919). As to items (a) and (b), further support is found in the reliability factors underlying records of regularly conducted activities generally. See Exception (6), supra.
      (a) Cases illustrating the admissibility of records of the office’s or agency’s own activities are numerous.
      (b) Cases subtaining admissibility of records of matters observed are also numerous.
      (c) The more controversial area of public records is that of the so-called ‘evaluative’ report. The disagreement among the decisions has been due in part, no doubt, to the variety of situations encountered, as well as to differences in principle. Sustaining admissibility are such cases as United States v. Dumas, 149 U.S. 278, 13 S.Ct. 872, 37 L.Ed. 734 (1893), statement of account certified by Postmaster General in action against postmaster; McCarty v. United States, 185 F.2d 520 (5th Cir. 1950), reh. denied 187 F.2d 234, Certificate of Settlement of General Accounting Office showing indebtedness and letter from Army official stating Government had performed, in action on contract to purchase and remove waste food from Army camp; Moran v. Pittsburgh-Des Moines Steel Co., 183 F.2d 467 (3d Cir. 1950), report of Bureau of Mines as to cause of gas tank explosion ; Petition of W-, 164 F.Supp. 659 (E.D.Pa.1958), report by Immigration and Naturalization Service investigator that petitioner was known in community as wife of man to whom she was not married. To the opposite effect and denying admissibility are Franklin v. Skelly Oil Co., 141 F.2d 568 (10th Cir. 1944), State Fire Marshal’s report of cause of gas explosion; Lomax Transp. Co. v. United States, 183 F.2d 331 (9th Cir. 1950), Certificate of Settlement from General Accounting Office in action for naval supplies lost in warehouse fire; Yung Jin Teung v. Dulles, 229 F.2d 244 (2d Cir. 1956), ‘Status Reports’ offered to justify delay in processing passport applications. Police reports have generally been, excluded except to the extent to which they incorporate firsthand observations of the officer. Annot., 69 A.L.R.2d 1148. Various kinds of evaluative reports are admissible under federal statutes . While these statutory exceptions to the hearsay rule are left undisturbed, Rule 802, the willingness of Congress to recognize a substantial measure of admissibility for evaluative reports is a helpful guide.
      Factors which may be of assistance .in passing upon the admissibility of evaluative reports include: (1) the timeliness of the investigation, McCormick, Can the Courts Make Wider Use of Reports of Official Investigations? 42 Iowa L. Rev. 363 (1957); (2) the special skill or experience of the official, id., (3) whether a hearing was held and the level at which conducted, Franklin v. Skelly Oil Co., 141 F.2d 568 (10th Cir. 1944); (4) possible motivation problems suggested by Palmer v. Hoffman, 318 U.S. 109, 63 S.Ct. 477, 87 L.Ed. 645 (1943). Others no doubt could be added.
      The formulation of an approach which would give appropriate weight to all possible factors in every situation is an obvious impossibility. Hence the rule, as in Exception (6), assumes admissibility in the first instance but with ample provision for escape if sufficient negative factors are present. In one respect, however, the rule with respect to evaluative reports under item (c) is very specific: they are admissible only in civil cases and against the government in criminal cases in view of the almost certain collision with confrontation rights which would result from their use against the accused in a criminal ease.” (Emphasis added)

      . We expressly do not reach beyond the circumstances of this ease to imply any opinion concerning such related but distinct matters as:
      (1) Use of accident reports prepared by a business for litigation, Palmer v. Hoffman, 318 U.S. 109. 113-114, 63 S.Ct. 477, 87 L.Ed. 645 (1943); the use of such reports against the preparing business, Leon v. Penn Central Co. (7 Cir. 1970) 428 F.2d 528; Pekelis v. Transcontinental & Western Air, Inc. (2 Cir. 1951) 187 F.2d 122, 129-130, cert. denied, 341 U.S. 951, 71 S.Ct. 1020, 95 L.Ed. 1374, see Taylor v. Baltimore & O. R. Co. (2 Cir. 1965), 344 F.2d 281, 286, cert. denied, 382 U.S. 831, 86 S.Ct. 72, 15 L.Ed.2d 75; Anno., 10 A.L.R.Fed. 858 (1972).
      (2) Admissibility of third-party hearsay reports to postal authorities, United States v. Lange (9 Cir. 1972), 466 F.2d 1021, 1024-1025; or to investigating bodies of government, Vacoaro v. Alcoa S. S. Co. (2 Cir. 1968), 405 F.2d 1133, 1135-1137.
      (3) Matters contained in Selective Service files. La Porte v. United States (9 Cir. 1962), 300 F.2d 878, 880-881; United States v. Grans (9 Cir. 1972), 472 F.2d 597; United States v. Hudson (9 Cir., 1972), 479 F.2d 251.