author: GEWIN, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Howard Nicholas JOHNSON, Defendant-Appellant.
    No. 73-3519.
    United States Court of Appeals, Fifth Circuit.
    June 28, 1974.
    Rehearing and Rehearing En Banc Denied Oct. 3, 1974.

      Charles O. Baird, Jr., Atlanta, Ga., Stuart R. Carter, Jr., Washington, D. C., Daniel J. Markey, Jr., New Orleans, La., for defendant-appellant.
    John W. Stokes, Jr., E. Ray Taylor, U. S. Attys., Atlanta, Ga., David Ferber, Sol., Office of Gen. Counsel, Robert G. Ryan, S.E.C., Washington, D. C., for plaintiff-appellee.
    Before GEWIN, THORNBERRY and SIMPSON, Circuit Judges.
   GEWIN, Circuit Judge:

Appellant Howard N. Johnson appeals from the judgment of conviction entered by the district court following his bench trial. On January 24, 1973, a nine-count indictment was returned charging appellant with various violations of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a) (1970), Section'5(a) of the Securities Act of 1933, 15 U.S.C. § 77e(a) (1970), and 18 U.S.C.A. § 1341 (Supp.1974) (mail fraud). Following his trial conducted from August 27th through August 31, 1973, the district judge found appellant guilty of seven counts of the nine-count indictment. Appellant was sentenced to concurrent three-year sentences on each of the seven counts.

On this appeal, Johnson specifies four main contentions which he asserts require reversal of his conviction. First, he alleges that the Government did not introduce sufficient evidence to warrant his conviction. Second, he contends that the Government’s preindictment delay impermissibly prejudiced his ability to present an adequate defense to the charges. Third, he alleges that the trial court improperly interfered with his ability to present a complete defense to the charges. Finally, he asseverates that he did not intelligently and voluntarily waive his right to specific findings of fact by the trial judge. After a careful review of the evidence introduced and the applicable and controlling legal principles governing the issues presented by appellant, we are firm in the belief that no prejudicial error was committed below and thus affirm.

I

Since appellant was sentenced to concurrent three-year sentences on each of the seven counts under which the district court found him guilty, if there was sufficient evidence under any count, his conviction should be affirmed. Furthermore on appeal, our standard for reversing on the ground that there was insufficient evidence to warrant an appellant’s conviction is circumscribed. Viewing the evidence in the light most favorable to the Government, if the record demonstrates that sufficient evidence was introduced from which a reasonably minded trier of fact could conclude that appellant was guilty beyond a reasonable doubt, the judgment must be affirmed.

In Counts 1 and 2, appellant was charged and convicted of violating Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(a) (1970). That Section provides in relevant part:

It shall be unlawful for any person in the offer or sale of any securities
(1) to employ any device, scheme, or artifice to defraud, or
(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.

The Government introduced evidence which fully placed appellant’s acts within the prohibitions delineated above.

In early 1969, James Owens and Robert Doty decided that it would be a wise business venture to operate a television production business in Atlanta, Georgia. They envisioned that their business venture would produce television commercials and other special features for the local television stations. However, one essential ingredient was missing from their business dream. They needed a large amount of capital. Accordingly, Owens and Doty began to investigate possible sources of funds to complement their production skills gained from long experience in the television industry.

Owens and Doty were introduced to a local Atlanta realtor, Oliver Coleman. Coleman informed the two entrepreneurs that he knew a man, Howard Nicholas Johnson, a Florida resident, who might be interested in investing in their new enterprise. Accordingly Johnson was contacted by Coleman and came to Atlanta where he reviewed the tentative plans for the new business. He readily agreed that Atlanta would be a good market for such an undertaking and agreed to finance it. On April 30, 1969, these proposals were formalized into a newly incorporated Georgia corporation by Owens and Doty. Johnson was named the president of the new corporation, Television Productions, Incorporated.

On May 15, 1969, Owens, Doty and Johnson entered into a formal agreement. Johnson agreed to guarantee the purchase of television equipment from the Ampex Corporation of California. Furthermore, he agreed to open a line of credit for the new corporation at the Fulton National Bank in Atlanta in the amount of $100,000. In return, Johnson was conveyed 50% of the stock in Television Productions, Inc. Additionally, he was given the right to vote the retained shares of Doty and Owens in the event that the new corporation should fall in arrears on its debts for a period of three months.

Thus the traditional capitalistic mixture of expertise and finances was joined in hopes of producing profits. However, the events that developed subsequently demonstrated that appellant intended the new corporation for uses other than purely television production. On June 17, 1969, without the knowledge of Owens and Doty, appellant merged Television Productions, Incorporated with Sand and Seas Industries, Inc., a Florida corporate shell. This merger was consummated by the use of the forged signatures of Doty and Owens on the merger plan. The plan stated that all the directors of Television Productions, Inc., had approved the merger at a board of directors meeting on June 6, 1969. Doty and Owens, both directors, testified that they were unaware of any such meeting and had never approved the merger. The newly merged Florida corporation was named Television Productions International Corporation (TPIC).

Johnson and an associate, J. Francke Fox, Jr., attempted to interest prospective investors in what was termed “Johnson’s Georgia television company.” These potential investors were taken on a tour of the Atlanta premises. Many sales of stock were culminated as a re-suit of these visits and other contacts. As a further inducement for the sale of the stock, Johnson promised the investors that he would repurchase the stock within a certain length of time at a substantial profit to the purchaser.

Furthermore, Johnson wrote the investors on stationery which listed the name of the corporation as “Television Productions International, Incorporated.” At the time that Johnson wrote these letters, Television Productions International, Incorporated was not in existence. The investors easily confused the names of the existing Florida corporation, Television Productions International Corporation and Television Productions International, Incorporated. Additionally, Johnson signed these letters as president of the then non-existent corporation. Thus, the investors were led to believe that they were buying stock in the Television Productions International, Incorporated, a non-existent corporation, when in fact they were buying stock in the Florida corporation.

From their testimony, it is evident that the potential and actual investors were not experienced in trading in stock. They were not familiar with the television production business and had no prior experience with Television Productions, Incorporated, Television Production International Corporation or Television Productions International, Incorporated. They were never furnished a prospectus of Television Productions International Corporation by Johnson. Prior to their purchase of stock, they were not informed that the stock was “restricted.” Furthermore, it was apparent that the investors did not understand the consequences of buying restricted stock.

On December 11, 1969, appellant opened a special bank account at the Halifax National Bank of Port Orange, Florida in the name of Television Productions International, Incorporated. The only authorized signatures for this account were shown as Howard.N. and Margaret Mary Johnson. In fact, Television Productions International, Incorporated was not in existence at this time and neither Johnson nor his wife was ever legally connected with the corporation. A fraudulent corporate resolution was presented to the bank to permit Johnson to open the account. Doty, Owens and the other Television Productions International Corporation stockholders were never informed of the Florida bank account even though $19,000 of the proceeds of the sale of TPIC stock were placed in the account which could be withdrawn personally by appellant and his wife.

When the time arrived for honoring Johnson’s previous promises to the investors in TPIC to repurchase the stock, he refused. Thus not only did the investors buy stock in a corporation which they did not know existed but when the time ripened for honoring a primary impetus for their investment, Johnson refused to honor his previous commitments.

We think the previously recited events amply demonstrate a violation of Section 17(a). “. . . [I] t is not necessary that the government prove that anyone was actually defrauded in order to show a violation of the statutes under which defendant was indicted.” Estep v. United States, 223 F.2d 19, 22 (5th Cir. 1955). The evidence establishes that appellant “obtain [ed] money . by means of . untrue statements] of . . . material fact[s] . . . [and] . . . omission [s] . . . of material fact[s] . . .”15 U.S.C. § 77q(a) (2).

The appellant misled the, investors by failing to completely inform them of the nature of the corporations involved. He failed to inform the investors that Television Productions, Incorporated and Sand and Seas Industries, Inc. had been fraudulently merged without the knowledge or consent of the other directors of Television' Productions, Incorporated. He misled the investors into believing that they were purchasing stock in Television Productions International, Incorporated, a then non-existent corporation, when in fact they were purchasing stock in Television Productions International Corporation. Additionally, appellant did not disclose to the investors that the proceeds from the sales of TPIC stock would be deposited in a bank account over which he would have personal control without any benefit accruing to the corporation involved. Thus material facts were misstated and withheld from the potential and active investors which may have affected their decision to invest or not to invest. See S.E.C. v. Texas Gulf Sulphur Co., 401 F.2d 833, 849 (2d Cir. 1968).

Appellant’s next two contentions are also without merit. First, he contends that the preindictment delay unduly prejudiced his defense of the charges made. This issue was never raised below until after appellant had presented his defense. Appellant has not asserted any grounds which substantiate his claim of prejudice resulting from the Government’s delay. Accordingly his claim is without merit. See United States v. Marion, 404 U.S. 307, 321-325, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971).

Second, appellant contends that the trial court impermissibly limited his liability to present an adequate and full defense by urging him to proceed with the presentation of his case. Our reading of the record shows that the district court was concerned with the cumulative nature of the evidence offered by appellant and therefore directed him to proceed with new matters. A trial court has the right to control the orderly introduction of evidence and certainly may prevent the needless repetition of evidence which is merely cumulative and does not shed light on new facts not previously disclosed. See United States v. Caracci, 446 F.2d 173, 177 (5th Cir. 1971). The record here demonstrates that the trial court was properly exercising its broad discretion. We find no abuse of that discretion.

Finally, Johnson contends that the district court impermissibly conditioned his request for a non-jury trial on the waiver of special finding of facts by the court. Rule 23 of the Federal Rules of Criminal Procedure reads in relevant part:

(a) Trial by Jury. Cases required to be tried by jury shall be so tried unless the defendant waives a jury trial in writing with the approval of the court and the consent of the government.
-x * * * * *
(c) Trial Without a Jury. In a case tried without a jury the court shall make a general finding and shall in addition on request find the facts specially. If an opinion or memorandum of decision is filed, it will be sufficient if the findings of fact appear therein.

It is basic textbook law that one does not have a right to a non-jury trial unless the trial court so consents. Singer v. United States, 380 U.S. 24, 85 S.Ct. 783, 13 L.Ed.2d 630 (1965). When the defendant requests a bench trial, may the district court condition the request of the waiver of specific findings of fact by that court as provided by Rule 23(c) ? A reading of the record in this case establishes that following appellant’s trial the district court issues sufficient oral findings of fact to cure whatever error might have arguably resulted from its refusal to make special findings pursuant to Rule 23(c). Thus we pretermit the basic issue here presented for a later case demonstrating actual prejudice.

At the commencement of appellant’s trial, the district judge addressed appellant and his counsel. The following discussion was held:

THE COURT: You have the right, if you so desire, to waive a jury trial, that is, by your own agreement not to have a jury trial. Do you understand that?
MR. JOHNSON: Yes, sir.
THE COURT: I am also required under the law in a non-jury trial to make findings of fact and conclusions of law, written findings of fact and conclusions of law. However, I have already advised your lawyer that in the event you would not waive that right that I would proceed to try it by jury, because I just don’t have the time in which to review it later on and make findings of fact and conclusions of law.
You have the right to waive the Judge’s written findings of fact and conclusions of law and have him pronounce judgment at the conclusion of the trial—
MR. JOHNSON: Yes, sir.
THE COURT: —on the various counts. Now, do you understand that?
MR. JOHNSON: Yes, sir.
THE COURT: And do you waive your right to have the Judge make findings of fact and conclusions of law in this case ?
MR. JOHNSON: Yes, sir, I do.

Thus the record demonstrates that the district court specifically conditioned the right to a non-jury trial on the waiver of findings of fact.

The precise issue which is urged by appellant today has only been resolved by two other circuit court opinions. In Howard v. United States, 423 F.2d 1102 (9th Cir. 1970), the appellant made a specific request for findings of fact. The trial court, however, refused to permit a bench trial until the appellant executed a waiver of his earlier request of special findings. The Ninth Circuit, in strong language, rejected the trial court’s conditions for a non-jury trial, stating:

We cannot condone an avoidance of Rule 23(c) by the expedient of conditioning a jury waiver on a waiver of special findings. The defendant’s right to such findings is not trivial, and his exercise of that right is not to be impaired by the exertion of pressure from the court.

423 F.2d at 1104. First, it should be noted that the Howard case is somewhat distinguishable from the present fact situation. Unlike appellant Howard, Johnson never requested specific fact findings. Second, at no time during the trial or following trial, did Johnson request special findings. In Howard the court gave emphasis to a timely request for findings in the following statement:

Under Rule 23(c) of the Federal Rules of Criminal Procedure the defendant was entitled to those findings, and it would have been reversible error to have refused his timely request for them, (emphasis added)

423 F.2d at 1104. Finally, while the trial court in Howard did not make any special findings, the trial court in the instant case at the time it rendered its verdict and at the sentencing hearing, did make comments from the bench which cured its initial refusal to make specific findings of facts. These comments will be discussed below.

The Howard opinion was adopted as the guiding rule of law by the Third Circuit sitting en banc in United States v. Livingston, 459 F.2d 797 (3d Cir. 1972). The Third Circuit posed the issue presented as “. . . whether it was permissible for the district judge to condition his grant of defendant’s request for a non-jury trial on defendant’s waiver of findings of fact and conclusions of law.” 459 F.2d at 797. Importantly, Livingston differed from Howard in that appellant Livingston never requested findings of fact. Livingston like the instant case involved the issue of whether the district court may condition a non-jury trial on waiver of specific findings by the court even where there never was a request for findings by the defendant and he specifically waived his rights at the behest of the trial court.

In response to the issue presented, the Third Circuit held:

[T]he district court erred when it conditioned defendant’s request for a non-jury trial on a waiver by him of his right to request that the court find the facts specially.
******
Findings of fact are essential to proper appellate review of a conviction resulting from a non-jury trial. This was an important consideration when the present text of Rule 23(c) was promulgated, altering pre-existing law and requiring the trial judge to make special findings, if requested.

459 F.2d 798. Accordingly, the case was not reversed but was remanded to the district court so that it could make the special findings of fact. See also, United States v. Snow, 484 F.2d 811, 812 (D.C.Cir.1973) (where district court recognized the need for special findings but through inadvertence failed to do so, the case was remanded for special findings) ; Haywood v. United States, 393 F.2d 780 (5th Cir. 1968) (where general findings made by the district court were inconsistent and confusing and the right of allocution was denied, the case was reversed and remanded).

In some situations, it may be impermissibly coercive for a trial court to condition a non-jury trial on the waiver of special findings of fact. Special findings are necessary, especially in a complex case, for an intelligent appellate review of a defendant’s contentions. Whether the defendant desires special findings should normally be his decision alone.

The Government vigorously contends, however, that the trial court through comments from the bench at the time it delivered its judgment and subsequently at the sentencing hearing elucidated the grounds on which it based its judgment. We agree. Although the reasons delineated at these two hearings were not as complete as they could be, they do suffice as a basis for intelligent appellate review. These observations by the trial court demonstrate to us that the court applied the correct legal principles to the instant case.

It is not necessary for us to answer the precise issue presented to the Ninth and Third Circuits since we hold that even assuming that error was committed below by the trial court’s imposition of the condition, this error was nevertheless cured by its subsequent findings from the bench.

Accordingly, the judgment of the district court is

Affirmed.

      . Appellant was found guilty of violating the four counts charging violations of Section 5 of the Securities Act, (selling unregistered securities) (Counts 6, 7, 8 and 9), two counts charging violations of Section 17(a) of the Securities Act, (fraudulent sales of securities) (Counts 1 and 2), and one count of mail fraud, 18 U.S.C. § 1341 (Count 3). The trial judge acquitted appellant on the two other counts of mail fraud (Counts 4 and 5).

      . Lawn v. United States, 355 U.S. 339, 362, 78 S.Ct. 311, 2 L.Ed.2d 321 (1958); Thomas v. United States, 431 F.2d 940 (5th Cir. 1970); United States v. Abigando, 439 F.2d 827 (5th Cir. 1971).

      . See Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942).

      . The stock was selling for four dollars a share. Johnson agreed to repurchase it at six dollars a share in twelve or eighteen months from the original date of purchase.

      . Evidently, Owens and Doty had become increasingly dissatisfied with their relationship with Johnson and thus sought to organize their own corporation. They located an individual who was interested in financing their new corporation. On March 13, 1970, Owens and Doty incorporated in the State of Georgia the new corporation which they named Television Productions International, Inc. This was several months after Johnson had represented to the investors that he was president of this new corporation with which he had no connection.

      . We have held previously that findings of fact made from the bench following the trial of a civil case may be sufficient to meet the mandatory requirements of Rule 52, F.R. Civ.P. See Movible Offshore, Inc. v. M/V Wilken A Falgout, 471 F.2d 268 (5th Cir. 1973). See also Amplex of Maryland, Inc. v. Outboard Marine Corp., 380 F.2d 112 (4th Cir. 1967). Of course, whether oral findings are sufficient will depend on the circumstances presented by each case.

      . Although not completely applicable to the instant criminal case, our court has previously enunciated standards for determining whether a trial court’s findings of fact are adequate in a civil suit. In Gulf King Shrimp Company v. Wirtz, 407 F.2d 508, 515 (1969), the court explained that:
      “The purpose of F.R.Civ.P. 52 is to afford the appellate court a clear understanding of the basis of the trial court’s decision. Featherstone v. Barash, 10 Cir. 1965, 345 F.2d 246. ‘The ultimate test as to the adequacy of findings will always be whether they are sufficiently comprehensive and pertinent to the issues to provide a basis for decision.’ Carr v. Yokohama Specie Bank, Limited, 9 Cir. 1952, 200 F.2d 251, 255. ‘Findings may be sufficient if they permit a clear understanding of the basis of decision of the trial court, irrespective of their mere form of arrangement.’ Featherstone v. Barash, supra, 345 F.2d at 250.”
      The underlying purpose of Rule 52, F.R.Civ.P., and Rule 23(c), F.R.Cr.P., is the same. In this case, the trial court has made adequate findings for purposes of our review. See also Lettsome v. United States, 434 F.2d 907, 909 (5th Cir. 1970).

      . The trial court noted that the names of the various corporations involved were very similar and that it was quite understandable how potential investors were misled and that this confusion “was part of the scheme” used to defraud investors. He further commented that “there’s no question but that the securities were unregistered, that they were sold and that the mails were used in effecting those sales.” Additionally the district court observed that “[t]here is no evidence that this was a restricted sale, anybody who wanted to buy it could buy that came up and wanted to buy. There was no offer to show the financial status of the company.” It is not necessary that special findings be filed simultaneously with the verdict. Indeed, one court has held they may be filed subsequent to sentencing. See United States v. Ogden, 484 F.2d 1274 (9th Cir. 1974).


source: Caselaw Access Project

author: IRVING R. KAUFMAN, Chief Judge:

license: Public Domain

text:
    Irving MARIASH, Plaintiff-Appellant, v. Charles MORRILL and Bernard Berwick, Defendants, and David R. Pokross et al., Defendants-Appellees.
    No. 889, Docket 73-2587.
    United States Court of Appeals, Second Circuit.
    Argued April 18, 1974.
    Decided May 10, 1974.

      Irving Mariash (Harry H. Lipsig, New York City, on the brief), plaintiff-appellant pro se.
    Frederick A. Nieoll, New York City (Rogers Hoge & Hills, New York City, on the brief; W. Hubert Plummer, New York City, of counsel), for defendantsappellees.
    Before KAUFMAN, Chief Judge, CLARK, Associate Justice, and SMITH, Circuit Judge.

       United States Supreme Court, retired, sitting by designation.

   IRVING R. KAUFMAN, Chief Judge:

Although the Securities Exchange Act of 1934 [1934 Act] is hardly a model of precision, the statute does speak with atypical clarity in authorizing nationwide service of process. We thus find erroneous the district court’s dismissal of this complaint, alleging in substance a violation of Section 10(b) of the 1934 Act — not for improper venue (Fed.R. Civ.P. 12(b)(3)) and not for failure to state a claim (Fed.R.Civ.P. 12(b)(6)) —but for lack of jurisdiction over the person of the moving defendants (Fed. R.Civ.P. 12(b)(2)), all of whom had been personally served in Massachusetts. Convinced that there is nothing so extraordinary about this case to justify such disposition, and after concluding that no alternative grounds for dismissal can be supported on the record before us, we reverse.

I

Since this appeal comes to us at a very early stage in the litigation, we have had, by necessity, to glean the facts from the barest skeleton of a record— the complaint and affidavits in support of and in opposition to the motion to dismiss — fleshed out only minimally by the depositions of plaintiff-appellant Irving Mariash and defendant-appellee A. Warren Wilkinson, taken to shed some additional light on that motion. In late November 1967, six men, including defendant Charles Morrill, organized Viatron Computer System Corporation [Viatron] under the laws of Massachusetts. The founders selected the Boston firm of Peabody, Brown, Rowley & Story [Peabody, Brown] to serve as legal counsel to the corporation. Defendants David Pokross and Wilkinson, partners in Peabody, Brown, were invited, moreover, to serve as Director and “Clerk,” respectively, of Viatron.

Presumably, to avoid the costs of compliance with the registration requirements of Section 5 of the Securities Act of 1933 [1933 Act], 15 U.S.C. § 77e, the organizing group elected to obtain initial capitalization through a private placement exempt from registration under Section 4(2) of the 1933 Act, 15 U.S.C. § 77d(2). Accordingly, the founders sought out friends and relatives who would be willing to purchase Viatron stock, bearing a restrictive legend (so-called “letter stock”), for investment purposes only-.

In the late fall of 1967, Dr. Edward Bennett, one of the original organizers and President of Viatron, approached his uncle, Mariash, in New York City about investing in Viatron stock. Bennett explained to Mariash that the Via-tron securities were of a restricted nature and could not be freely traded unless and until Viatron’s counsel, Peabody, Brown, considered it proper to release the restrictions. Authorization for that release, moreover, would take the form of an opinion letter, issued by Peabody, Brown, to Viatron’s transfer agent. With these limitations in mind, Mariash purchased 250 shares of Via-tron stock for $25,000. Following a series of stock splits, Mariash’s total share holdings multiplied to 50,000 shares of restricted, Viatron stock.

Among the other private placement sales which occurred during this period of initial capitalization was one by Morrill to his cousin, defendant Bernard Burwick. Burwick purchased 78,600 shares of Viatron for an amount not disclosed in the record — all of which, like Mariash’s, were of a restricted nature.

On July 20, 1970, some time after Viatron had floated a public issue of its common stock, Dr. Bennett was removed from the position of President of the company. Shortly thereafter, with the market for Viatron stock falling, Mariash contacted Morrill and, subsequently, Peabody, Brown, demanding an opinion letter authorizing the release of his shares’ restrictions. He urged, as grounds for his request, that Bennett’s removal represented a “change of circumstances,” which entitled Mariash to alter his investment status and sell his shares. Mariash claims he first spoke to Wilkinson about obtaining such opinion letter by telephone on August 11, 1970. Wilkinson, in his deposition, stated that Mariash did not speak with him until August 17. There is agreement, however, that the first letter sent to Wilkinson by Mariash, concerning preparation of an opinion letter, was dated August 14,1970.

Following receipt of this letter, Wilkinson told Mariash that he would be reluctant to prepare an opinion letter without a supporting opinion by independent New York counsel. Mariash then obtained an opinion letter from Breed, Abbott & Morgan, while Mariash’s broker, F. I. duPont, Glore Forgan & Co. [duPont], secured a similar letter from its counsel, Carter, Ledyard & Milburn. Both letters, dated August 20, were promptly mailed to Wilkinson in Boston. On August 24, 1970, Wilkinson drafted an opinion letter, addressed to Viatron’s transfer agent, First National City Bank [FNCB] in New York City, authorizing the removal of the restrictive legend on Mariash’s 50,000 shares of Viatron stock.

The August 24 letter was received by FNCB in New York on August 26. More importantly, according to Mariash’s deposition testimony, he did not receive his copy of the opinion letter until August 26. Upon its receipt, he stated, he immediately brought the letter to duPont to provide the basis for his request that his Viatron stock be offered for sale on the open market. To his chagrin, however, he was informed by duPont that such sale would now be difficult because a large block of approximately 75,000 shares had already been placed on the market. After some inquiry, Mariash learned that this large block of Viatron stock had been offered for sale by Goodbody & Co. on behalf of Bernard Burwick.

Burwick, like Mariash, required, as a prerequisite to the sale of his “letter stock,” an opinion letter from Peabody, Brown authorizing the transfer agent to remove the restrictive legend. Indeed, Burwick had tried to obtain such a letter in late 1969 but when his counsel, Ropes & Gray, balked at issuing a supporting opinion, Peabody, Brown refused the request. It appears from the record that Burwick was similarly unsuccessful at that time in his effort to secure a “no action” letter from the Securities Exchange Commission which, we understand, would also have facilitated sale of the restricted stock. On August 26, 1970, however, Burwick visited Wilkinson once again, and repeated his request for the necessary opinion letter. To support his “change of circumstances” justification for the letter, Bur-wick proffered a medical certificate, dated August 25, 1970, reporting Burwick’s poor health. After Wilkinson telephoned Ropes & Gray and learned that this time it would agree to provide a supporting opinion, he agreed to furnish the requisite opinion letter to Burwick.

The record is silent as to when Bur-wick’s opinion letter, dated August 26, reached FNCB, or for that matter, when Burwick received it, although we note that, unlike Mariash’s opinion letter, a copy of the Burwick opinion letter was prepared for Burwick’s broker, Goodbody & Co. In any event, according to Mari-ash’s version of the facts, when he arrived at his broker’s office in New York some time on August 26, Goodbody & Co. had already announced for sale Bur-wick’s 78,600 shares of Viatron stock. It cannot reasonably be disputed, moreover, that the market value of Viatron facing Mariash had been depressed by Bur-wick’s prior offer to sell his large block of stock.

On January 31, 1973, Mariash, a New York resident, filed a complaint in the Southern District of New York against Morrill, Burwick, and twelve members of Peabody, Brown, including Pokross and Wilkinson. The complaint, sprinkled with the usual number of hortatory terms, alleged inter alia that the defendants had breached their contractual agreement with Mariash by unreasonably delaying issuance of his opinion letter, and that the defendants, in the words of the complaint:

secretly and maliciously conspired to favor the defendant, Berwick [sic], a relative of defendant, Morrill, and issued to him with full knowledge of its illegality,- and unknown to plaintiff, an “opinion letter” unjustifiably and unlawfully releasing his 75,000 shares of restricted stock, all to the detriment of the market price of Yiatron, and to the detriment of the plaintiff, and all in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934.

In lieu of filing an answer to the complaint, the Peabody, Brown defendants moved, pursuant to Fed.R.Civ.P. 12(b)(2) and (3), to dismiss the complaint for lack of personal jurisdiction and improper venue, respectively, or, in the alternative, for a change of venue to the United States District Court in Massachusetts on the ground of inconvenience, 28 U.S.C. § 1404(a). After argument was heard on April 27, 1973, the court ordered that depositions be taken of Mariash and one of the moving defendants for the limited purpose of determining Peabody, Brown’s “contacts” with New York. Reargument, following depositions of Mariash and Wilkinson, was heard on July 20.

On September 5, 1973, the district judge, in a brief, unreported opinion, granted the motion to dismiss, pursuant to Rule 12(b)(2), for lack of in person-am jurisdiction over the Peabody, Brown defendants. The lower court rejected Mariash’s claim that Peabody, Brown was “doing business” in New York through the agency of Dr. Bennett, in the course of his solicitation of Mariash in New York City, thereby eliminating the applicability of New York’s long arm statute, N.Y.C.P.L.R. § 302(a)(1). The court also rejected Mariash’s alternative contention that personal service in Massachusetts was authorized by Section 27 of the 1934 Act, 15 U.S.C. § 78aa, stating, without explanation:

Section 27 is no more than a grant of subject matter jurisdiction to the federal district courts — competence to hear a suit arising under the Act — ■ and a statement of the venue requirements to be followed when such suits are brought. It does not deal with jurisdiction of the persons named as defendants in a given case, (emphasis added)

II

Without reaching the question of in personam jurisdiction under New York law, and, of course, without expressing any views on the ultimate merit of Mariash’s claims, we cannot accept the district court’s interpretation of Section 27 of the 1934 Act. It is simply too late in the day to argue that Section 27 does not authorize nationwide service of process on any individual named in the complaint, provided, of course, the complaint states a claim under the 1934 Act. In this respect, the language of the statute is clear:

Any suit or action to enforce any liability or duty created by this title or rules and regulations thereunder, . may be brought in any such district [wherein any act or transaction constituting the violation occurred] or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found.

15 U.S.C. § 78aa (emphasis added). And, the decisions of this Court amply support this interpretation. See, e. g. International Controls Corp. v. Vesco, 490 F.2d 1334 (2d Cir. 1974), cert. denied - U.S. -, 94 S.Ct. 2644, 41 L.Ed.2d 236, (validity of nationwide service of process under the 1934 Act not contested); Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326, 1340 (2d Cir. 1972).

To be sure, as Judge Friendly noted in Leasco, Congress, in providing for nationwide service of process, remains subject to the constraints of the Due Process clause of the Fifth Amendment. Thus, the service authorized by statute must be reasonably calculated to inform the defendant of the pendency of the proceedings in order that he may take advantage of the opportunity to be heard in his defense. See e. g. Hanson v. Denckla, 357 U.S. 235, 245, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958); Walker v. City of Hutchinson, 352 U.S. 112, 77 S.Ct. 200, 1 L.Ed.2d 178 (1956); Mullane v. Central Hanover B. & T. Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). It is undisputed in this instance that the Peabody, Brown defendants received such notice through personal service in Massachusetts.

Appellees respond, however, by arguing that notice and an opportunity to be heard is not sufficient, for “it is still necessary that defendants have the requisite ‘minimal contacts’ with the State which would exercise its jurisdiction over them. Hansen (sic) v. Denckla, 357 U.S. 235 [78 S.Ct. 1228, 2 L.Ed.2d 1283] (1958).” Brief of Appellees at 15 (emphasis added). Mere statement of this contention reveals its fatal flaw: It is not the State of New York but the United States “which would exercise its jurisdiction over them [the defendants].” And plainly, where, as here, the defendants reside within the territorial boundaries of the United States, the “minimal contacts,” required to justify the federal government’s exercise of power over them, are present. Indeed, the “minimal contacts” principle does not, in our view, seem particularly relevant in evaluating the constitutionality of in personam jurisdiction based on nationwide, but not extraterritorial, service of process. It is only the latter, quite simply, which even raises a question of the forum’s power to assert control over the defendant.

Ill

We turn next to whether venue is proper in the Southern District of New York- — a question raised by the defendants-appellees below, but not reached by the district court. The portion of Section 27 of the 1934 Act already quoted provides for venue:

in any . . . district [wherein any act or transaction constituting the violation occurred] or in the district wherein the defendant is found or is an inhabitant or transacts business

In this instance, it is conceded that none of the defendants was either an “inhabitant” of New York or had been “found” in the Southern District. We need not decide, moreover, whether the Peabody, Brown firm “transacts business” in New York City because we believe it clear that “an act or transaction constituting the [alleged] violation [has] occurred” in the Southern District of New York.

In Hooper v. Mountain States Securities Corp., 282 F.2d 195, 204-205 (5th Cir. 1960), cert. denied, 365 U.S. 814, 81 S.Ct. 695, 5 L.Ed.2d 693 (1961), the Fifth Circuit concluded that “any use of instrumentalities of the mails or other interstate facilities made within the forum district constituting an important step in [the] consummation [of the fraudulent scheme] is sufficient” for venue to lie in that district. More importantly, perhaps, because of appellees’ assertion to the contrary, the Hooper court added that “it is [not] necessary that a false or deceptive or fraudulent paper be sent or statement made through the use of the mails or interstate communication facilities.” Hooper v. Mountain States Securities Corp., supra, 282 F.2d at 204 (emphasis added). Indeed, in International Controls Corp. v. Vesco, supra, we held that the act of the transfer agent in mailing the spin-off dividend to the ICC shareholders from New York City, an essential element in the alleged fraudulently induced spin-off — although an act not fraudulent per se — was sufficient to establish venue in the Southern District of New York. Id. at 1347.

In this case, reading Mariash’s complaint liberally, as we must in considering any motion to dismiss, see Scheuer v. Rhodes, - U.S. -, -, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), he claims a violation of Section 10(b) and Rule 10b-5 through Peabody, Brown’s alleged manipulation of the market in Viatron stock by deliberately enabling Burwick to reach the market with his large block of previously restricted shares before Mariash could. Critical to the success of this alleged scheme was the ability to control the timing of the respective sales — control made possible by the requirement that each shareholder of “letter stock” obtain an opinion letter, from Viatron’s counsel, authorizing the transfer agent to remove the restrictive legend. So, once again, as in Vesco, the role of the transfer agent, located in New York City, is pivotal, and certainly a step of sufficient “importance” to satisfy the Hoover test for venue, which we adopted in Vesco.

IV

Finally, we must address ourselves to the passing claim, made by appellees for the first time on appeal, that Mariash “has failed totally to come forward with anything other than his own assertions which even suggest the defendant attorneys might have been guilty of wrongdoing.” Supplemental Memorandum of Appellees at 3. We construe this claim as requesting us, in effect, to grant summary judgment relief, although neither side had moved for it in the district court. It is well settled, however, that the lack of a proper adversary foundation for consideration of this request requires that we not entertain it. See Fountain v. Filson, 336 U.S. 681, 682-683, 69 S.Ct. 754, 93 L.Ed. 971 (1949); 6 J. Moore, Federal Practice 56.12 at 2243-46 (2d ed. 1974). Certainly, the opposing party should be given an opportunity in the district court to respond to a request for such drastic relief, which rests on the now unilateral and gratuitous assertion that the material facts are undisputed. This Court, needless to say, is not the proper forum for adducing a rebuttal. Accordingly, finding appellees’ prayer for the relief sought here inappropriate, and there being no basis upon which to predicate dismissal of this complaint, we reverse and remand to the district court for further proceedings not inconsistent with this opinion.

      . 15 U.S.C. § 78a et seq.

      . 15 U.S.C. § 78aa.

      . 15 U.S.C. § 78j(b).

      . Section 4, 15 U.S.C. § 77<3, states:
      The provisions of section 5 shall not apply to—
      (2) transactions by an issuer not involving any public offering ....

      . The complaint against one of the Peabody, Brown defendants, Dean W. Carlston, has been dismissed by stipulation of the parties.

      . Congressional power to authorize nationwide service of process in cases involving the enforcement of federal law is beyond question. See American Law Institute, Study of the Division of Jurisdiction Between State and Federal Courts, Official Draft (1965) at 191; 3A J. Moore, Federal Practice If 22.13 at 3100 n. 2 (2d ed. 1974).

      . Certainly this is true where, as here, federal jurisdiction is conferred by federal statute and not by the parties’ diverse citizenship. We express no view on the relevant source of jurisdictional power — state or federal — where the latter is the case. But * compare American Law Institute, supra at 191-95 with National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 329-333, 84 S.Ct. 411, 11 L.Ed .2d 354 (1964) (Black, J. dissenting).

      . In Hanson v. Denckla, supra, the Supreme Court enunciated the following raison d’§tre for the “minimal contacts” principle:
      They are a consequence of territorial limitations on the power of the respective States. However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has had . . . “minimal contacts” with that State that are a prerequisite to its exercise of power over him.
      Hanson v. Denckla, supra, 357 U.S. at 251.

      . Leasco Data Processing Equipment Corp. v. Maxwell, supra, is not to the contrary. In Leasco, the validity of nationwide service of process was not at issue, but rather, the propriety of true extraterritorial service of process under the 1934 Act — service of process on foreign citizens living abroad. Accordingly, when Judge Friendly referred to the “minimal contacts” line of cases, he did so in considering whether the foreign defendants (Fleming Ltd. and Chalmers, Impey & Co.) had sufficient connection with the United States to satisfy the “minimal contacts” required to legitimate extraterritorial service of process by a State.

      . Section 10 of the 1934 Act provides, in pertinent part:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

      . Rule 10b-5, 17 CFR § 240.10b-5, provides, in relevant part:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
      (a) To employ any device, scheme, or artifice to defraud,
      (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . We flatly reject appellees’ argument that if we permit venue to rest on the mailing of a “release letter” to the transfer agent, then venue would be proper “in any jurisdiction to which such letter may be distributed.” Suffice to say that, on the facts of this case, all we need hold is that venue is proper in the district in which the transfer agent is located. In short, the proverbial “slippery slope” simply does not arise on the facts here presented.

      . It is abundantly clear from the record below and the briefs on appeal that appellees did not then nor do they now attack the sufficiency of Mariasli’s Section 10(b) claim. Appellees’ main brief glosses over this crucial, threshold question by stating:
      It is not even necessary to decide if plaintiff’s bizarre theory states a claim under the securities laws. The simple facts absolutely foreclose any finding of wrongdoing by defendants.
      Brief of Appellees at 15. Indeed, in an effort to focus attention on the sufficiency of the complaint, we requested supplementary memoranda on this precise point. Once again, however, appellees went beyond the face of the allegations to a factual appraisal of the merits of Mariash’s claim, arguing:
      Should this Court elect to consider the sufficiency of the Complaint, we urge the evidence submitted by plaintiff fails to demonstrate any genuine issue of fact which merits the perpetuation of plaintiff’s claim.
      Supplemental Memorandum of Appellees at 3.
      We should add that our independent review of the complaint satisfies us that Mariash has stated a claim under Section 10(b) of the 1934 Act. Although we have repeatedly held that mere negligence on the part of the defendants will not support a claim for damages under Section 10(b), see e. g. Lanza v. Drexel, 479 F.2d 1277, 1301-1302 (2d Cir. 1973) (en banc) and cases cited therein, Mariash’s claim of deliberate market manipulation alleges far more than mere negligence by Peabody, Brown. Proof of those allegations is, of course, quite another matter, but one which we do not consider at this stage of the litigation.


author: DURFEE, Senior Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. The FISHER-OTIS COMPANY, INC., and Roy Fisher, Jr., Defendants-Appellants, Raymond H. Coit, Defendant.
    No. 73-1367.
    United States Court of Appeals, Tenth Circuit.
    Argued March 18, 1974.
    Decided May 14, 1974.
    Rehearing Denied June 11, 1974.

      Larry G. Gutterridge, Atty., Dept, of Justice (Wallace H. Johnson, Asst. Atty. Gen., Richard A. Pyle, U. S. Atty., and Edmund B. Clark, Atty., Washington, D. C. on the brief), for plaintiff-appellee.
    A. Camp Bonds, Jr., Muskogee, Okl., for defendants-appellants.
    Before LEWIS, Chief Judge, DURFEE, Senior Judge, and BARRETT, Circuit Judge.

       Honorable James R. Durfee, Senior Judge, United States Court of Claims, sitting by designation.

   DURFEE, Senior Judge.

The United States instituted this action for declaratory judgment to establish its rights, under a flowage easement deed, in certain tracts of land owned by defendants, the Fisher-Otis Co., Inc., Roy Fisher, Jr., and Raymond H. Coit. Defendants appeal from an adverse decision in the United States District Court for the Eastern District of Oklahoma declaring that the Government easement prohibits the use of landfill and the construction and/or maintenance of any structures for human habitation within the flowage easement area. We affirm.

The pertinent facts may be simply stated:

The United States acquired the flow-age easement from Phil and Elizabeth Huls by recorded deed of March 5, 1960. The easement deed covered that portion of certain tracts of land, situated in Pittsburg County, Oklahoma, lying below 602 feet mean sea level (m. s. 1.), and it granted the Government the perpetual right, power, privilege and easement occasionally to overflow, flood and submerge the lands in question as may be required in connection with the operation and maintenance of the Eufaula Reservoir on the Canadian River. The deed included a covenant running with the land, which provided, in pertinent part, as follows:

* * * no structures for human habitation shall be constructed or maintained on the above-described land, and further, that no structures of any type * * * shall be constructed or maintained on the above-described land except such as may be approved in writing by representatives of the Government in charge of said project.

Defendants herein are successsors in title to the ownership of the property in question.

The complaint alleges that defendants have placed (or have permitted to be placed with their knowledge and consent) earth fill within the flow-age easement areas so as to raise the surface elevation of the land above 602 feet m. s. 1. The United States contends that, as a matter of law, the use of earth fill to raise the elevation of land below 602 feet m. s. 1. to above that level cannot circumvent the flowage easement prohibition against construction for human habitation on land with a pre-fill elevation below 602 feet m. s. 1. The United States further contends that the use of such landfill is, of itself, in violation of its easement permitting it occasionally to overflow, flood and submerge the land covered thereby.

Defendants, by their answer, generally deny the allegations of the complaint, and specifically deny any encroachment of the flowage easement as claimed by plaintiff.

A pretrial conference was held on August 28, 1972. Subsequently, on September 6, 1972, the District Court entered a pretrial order which provided, in pertinent part, as follows:

After full discussion, it was agreed that prior to proceeding further in the ease a determination by the court should be made as to the rights of the parties under the flowage easement purchased by the government in 1960 in the area here involved. This determination should include a decision by the court as to what constitutes structures within the meaning of the easement and to what extent, if any, the defendants may encroach upon the flowage easement area without materially interferring [sic] with the hydrology of the lake. * * *

The pretrial order provided for the submission of briefs by the parties relative to these legal issues, and further provided as follows:

After the legal rights of the parties have been determined, there remains to be resolved the question of the location on the ground of 602 MSL.

After considering the briefs submitted by the parties, the District Court — having found that defendants had placed, or had permitted to be placed with their knowledge and consent, earth fill within the flowage easement area so as to raise the surface elevation of the land above 602 feet m. s. 1. — entered judgment on March 14, 1973, in favor of the United States. The court ruled, inter alia, that the positive and negative rights included in the flowage easement acquisition by the United States are valid and binding on defendants as successors in title to Phil and Elizabeth Huís; that, pursuant to the flowage easement, defendants are prohibited from using landfill within the flowage easement areas having elevation below 602 feet m. s. 1.; that defendants are prohibited from constructing and/or maintaining any structures for human habitation within the flowage easement areas other than those that were in place on September 6, 1972; and that defendants are not required to remove landfill that was in place on or before September 6, 1972, but are restricted from building structures for human habitation within areas so filled. It appears that neither party filed a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, but that the District Court entered judgment for plaintiff sua sponte.

Defendants appeal following the denial, on April 2, 1973, of their motion for new trial. They contend (1) that they were denied a trial with respect to controverted factual issues, in violation of the Fifth Amendment to the Constitution; (2) that the District Court’s entry of judgment on its own motion deprived them of due process safeguards of notice and the right to a hearing normally accorded the summary disposition of cases under Rule 56 of the Federal Rules of Civil Procedure; and (3) that there is no basis in law for the judgment of the District Court. Defendants seek reversal and remand for trial.

I

The first question for consideration is whether or not there are genuine issues as to any material fact upon which the outcome of this litigation depends, so that entry of judgment for plaintiff was improper. Defendants claim that they were denied a trial with respect to controverted factual issues, in violation of the Fifth Amendment to the Constitution.

Of course, if there are genuine issues of fact, the granting of summary judgment in a declaratory judgment suit is not in order. United Mine Workers of America, District 22 v. Roncco, 314 F.2d 186 (10th Cir. 1963). Defendants maintain, first of all, that entry of judgment was improvident in the absence of a specific finding as to the location on the ground of the flow-age easement. We do not think, however, that a determination of the exact acreage and precise location of the flow-age easement is material to the resolution of the legal issues raised in this lawsuit. Plaintiff brought this action only to obtain declaratory relief with respect to issues of law, specifically whether landfilling and construction are prohibited by the terms of the Government’s easement deed. Plaintiff requests neither injunctive relief nor an award of money damages. If the Government had demanded removal of landfill and structures already in place, or if it had sought to enjoin future landfilling and construction within the flowage easement area, then any dispute between the parties as to the ground location of the easement would be a pertinent factual issue for trial, the resolution of which would be necessary before entry of judgment granting such relief. But all the United States asks for in this lawsuit is a determination of the legal relations between the parties, that is, a declaration of its rights under the flowage easement deed. A request for relief may be so limited under the Declaratory Judgment Act, and any further necessary and proper relief based upon the declaratory judgment and any additional facts which might be necessary to support such relief can be sought at a later time. 28 U.S.C. § 2202; Edward B. Marks Music Corp. v. Charles K. Harris Music Pub. Co., 255 F.2d 518 (2d Cir. 1958). The exact ground location of the flowage easement is not an issue of material fact upon which the outcome of this litigation depends, and accordingly, the fact that the issue remains unresolved is no bar to the entry of judgment. Zampos v. United States Smelting, Refining and Mining Co., 206 F.2d 171 (10th Cir. 1953); Broderick Wood Products Co. v. United States, 195 F.2d 433 (10th Cir. 1952).

The District Court specifically found that defendants used landfill to raise the elevation of surface lands within the flowage easement area, and further that defendants built structures for human habitation on the areas so raised. Defendants object to these findings claiming that they specifically denied them in their answer, that they at no time made any admission of such conduct, and that there was no other evidence or proceeding upon which the District Court could have based such findings. We agree with defendants that the record does not support these specific findings of the District Court, and accordingly, that they were inappropriately made. The Government is willing to concede that the District Court’s determinations with respect to defendants’ past conduct are not binding and that they have no legal effect. But, the Government argues, it was not necessary in any event to resolve these factual issues in order to enter judgment herein. We agree with the Government’s position that the factual issues as to defendants’ past conduct with respect to land-filling and building of structures are not material to the legal issues raised or to the relief sought by plaintiff in this suit. Again, plaintiff only seeks a declaration of its rights under the flowage easement deed, and does not request removal of any landfill or structures which might have been placed in the past by defendants within the easement area. The fact that there remains unresolved an issue as to what extent, if any, defendants previously used landfill or built structures does not prevent the entry of judgment herein. Zampos, supra; Broderick Wood Products Co., supra.

We therefore conclude that the factual issues which defendants argue require remand for trial are not genuine issues of material fact that would preclude the entry of judgment in this cause. This result is most persuasively supported by the fact that, at the pretrial conference, the parties agreed that prior to proceeding further in the case a determination by the court should be made as to the rights of the parties under the flowage easement deed. Defendants specifically agreed that the court should at that point determine what constitutes structures within the meaning of the easement deed, and to what extent, if any, defendants may encroach upon the flow-age easement area without materially interfering with the hydrology of the lake. Since the parties agreed to the determination of these legal issues, they obviously assumed or conceded that there was a body of undisputed facts before the court upon which the determination of the relevant legal issues could rest. The resolution of these precise legal questions was the sole relief plaintiff sought by the institution of this declaratory judgment action, and the agreement of the parties to submit these issues to the District Court brought the lawsuit to the stage that, upon their resolution, entry of judgment would be appropriate.

At this point in the argument defendants contend that if the Government cannot uphold its allegations with respect to defendants’ past conduct (i. e., landfilling and construction), then no “actual controversy” exists between the parties upon which to base an action for declaratory judgment.

Defendants misconstrue the requirement that a proceeding for declaratory judgment be based upon an actual controversy. The essential distinction between a declaratory judgment action and an action seeking other relief is that in the former no actual wrong need have been committed or loss have occurred in order to sustain the action. Johnson v. Interstate Transit Lines, 163 F.2d 125 (10th Cir. 1947). The purpose of the Declaratory Judgment Act is to settle actual controversies before they ripen into violations of law or a breach of duty. Scott-Burr Stores Corp. v. Wilcox, 194 F.2d 989 (5th Cir. 1952). It is not necessary for the maintenance of this action, therefore, for plaintiff to have proven that defendants placed landfill or structures within the flowage easement area in the past. The test for determining whether or not there is an actual controversy contemplated by the Declaratory Judgment Act is the familiar one stated in Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826, 829 (1941): “Basically, the question in each case is whether * * * there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Accord, Golden v. Zwickler, 394 U.S. 103, 108, 89 S.Ct. 956, 959-960, 22 L.Ed.2d 113, 118 (1969); Lake Carriers’ Assoc. v. MacMullan, 406 U.S. 498, 506, 92 S.Ct. 1749, 1755, 32 L.Ed.2d 257, 266 (1972). Such a controversy is presented in this case. The complaint alleges not only that defendants have placed earth fill within the flowage easement area in the past, but it also alleges that defendants presently contend that such raising of the surface elevation removes that portion of the land from the flowage easement, and that structures for human habitation can be constructed on such filled land. The record and the briefs filed in this court substantiate that defendants assert a present claim of right to landfill within the flowage easement area, which plaintiff contends is in direct violation of the conditions and general intent and purpose of the easement deed. The facts herein alleged, under all the circumstances, establish the existence of a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.

II

Defendants next contend that the District Court erred in entering judgment sua sponte because summary judgment is authorized under Rule 56, Federal Rules of Civil Procedure, only upon a motion filed by a party and a hearing granted upon appropriate notice; defendants argue that the summary disposition of their case denies them due process of law in violation of the Fifth Amendment to the Constitution.

Rule 56, Federal Rules of Civil Procedure, specifically provides that a party seeking to obtain a declaratory judgment may move for summary judgment in his favor upon all or any part of his claim. It appears that Rule 56 contemplates that the parties be afforded a hearing before a motion for summary judgment is ruled upon. The fact that there was no oral hearing in this case, however, is no grounds for defendants to claim deficiency of due process. We point out, once again, that the parties agreed at the pretrial conference to submit the legal issues ultimately in dispute to the District Court for final determination. They filed briefs in support of their arguments. By joining in the submission of the ultimate legal issues herein involved to the District Court for resolution, defendants assumed or conceded that, as to the resolution of those legal issues, there were no essential facts in dispute. Defendants have addressed the issue of whether there are any genuine issues of material fact for trial in their briefs filed in this court, and they have had the opportunity to convince us of their position at oral argument. We have concluded, however, that there are no factual issues which would require a remand for trial (see discussion, supra).

The conduct of plaintiff and defendants shows agreement by the parties to have the ultimate legal issues in this lawsuit resolved by the District Court, and the ease was thereby placed in such a posture that the filing of a motion for summary judgment would have been a mere formality. Had plaintiff filed the appropriate motion, it would have been entitled to summary judgment. In view of the character of the relief sought in this case, the agreement of the parties to submit the legal issues involved to the District Court for final determination, and the fact that there existed no genuine issue of material fact upon which the outcome of this litigation depends, the failure of plaintiff to file a motion for summary judgment does not preclude the entry of summary judgment in its favor. Cf. Local 33, International Hod Carriers Building and Common Laborers’ Union of America v. Mason Tenders District Council, 291 F.2d 496 (2d Cir. 1961); Thompson v. New York Central Railroad, 361 F.2d 137, 144 (2d Cir. 1966); Walters v. Dunlap, 250 F.Supp. 76, 81 (W.D.Pa.1966), aff’d 368 F.2d 118 (3d Cir. 1966); 6 Moore, Federal Practice, f[ 56.12 (2d ed. 1974).

Ill

Finally, defendants object to the District Court’s ruling on the merits.

The plain language of the easement deed provided that “ * * * no structures for human habitation shall be constructed or maintained * * * ” within the flowage easement areas, and the District Court properly ruled that the building of such structures contravenes the terms of the easement. There is nothing ambiguous about this provision of the deed, and defendants’ arguments to the contrary are without merit.

Defendants also contest that part of the declaratory judgment which holds that the easement deed prohibits the use of landfill within the flowage easement areas. They claim the right to place a “moderate amount” of landfill on the land subject to the easement. We are not sure what defendants mean by a “moderate amount” of landfill. In any event, it is clear that the Government’s flowage easement prohibits the use of landfill to raise the surface elevation of land below 602 feet m. s. 1. to above that level in order to build structures for human habitation. Any such claimed right, carried to its logical conclusions, would allow the removal of all lands presently within the easement areas, and consequently would permit the destruction of the Government’s easement. The United States acquired the flowage easement in order' to be able to overflow, flood and submerge the lands in question in connection with its operation and maintenance of the Eufaula Reservoir on the Canadian River. The use of landfill to raise the elevation of property to above 602 feet m. s. 1., thereby removing it from the flowage easement area, is a material interference with the Government’s rights under the flowage easement deed. In our view, such landfilling violates, in general, the overall intent and purpose of the Government’s easement. See United States ex rel Tennessee Valley Auth. v. Hughes, 408 F.2d 619 (6th Cir. 1969). Defendants are concerned that the declaratory judgment prohibits their use of landfill below 602 feet m. s. 1. for the purpose of providing lateral support to the property they own adjoining the flowage easement areas. This issue need not concern us because the Government concedes that the declaratory judgment does not hold that the easement bars the use of sodding, landscaping and erosion control referred to by defendants.

For all the foregoing reasons, the judgment of the District Court is

Affirmed.

      . Pursuant to 28 U.S.C. § 2201 (1970).

      . Defendant Raymond H. Coit has not joined in this appeal.

      . Defendants do not dispute that they hold title to the property in question subject to the Government’s easement; rather, they contest the right of the Government to impose the limitations involved in this suit upon their use of the subject lands.

      . The fact that plaintiff might have brought an action seeking injunctive or other relief does not preclude' a judgment for declaratory relief when it is otherwise appropriate. 28 U.S.C. § 2201; Rule 57, Fed.R.Civ.P.

      . Plaintiff’s Brief, p. 8.

      . The Declaratory Judgment Act, 28 U.S.C. § 2201, limits declaratory judgments to “cases of actual controversy” in recognition of the fact that Federal judicial power extends, under Article III, Section 2 of the Constitution, only to “cases” or “controversies.”

      . Rule 56(c) provides that a motion for summary judgment “ * * * shall be served at least 10 days before the time fixed for the hearing.” It is further provided in that paragraph of the rule that the adverse party “ * * * prior to the day of hearing may serve opposing affidavits.”


author: HASTIE, Circuit Judge.

text:
    Susan GROSS, Devon-Strafford Apartments, Inter. Plff. on behalf of herself and all others similarly situated v. J. Wilson FOX, Deputy Constable, et al., Appellants.
    No. 73-1030.
    United States Court of Appeals, Third Circuit.
    Argued Oct. 30, 1973.
    Decided April 12, 1974.
    Milton S. La2;aroff, Philadelphia, Pa., for appellants.
    Sharon K. Wallis, Stephen A. Sheller, Philadelphia, Pa., for appellee.
    Before HASTIE, ALDISERT and WEIS, Circuit Judges.
   OPINION OF THE COURT

HASTIE, Circuit Judge.

In September of 1970 Susan Gross, the plaintiff-appellee, became a tenant of defendant Devon-Strafford Company, owner of an apartment building. In November of the same year Devon-Strafford caused the defendant J. Wilson Fox, a deputy constable, to execute a distraint upon Gross’ possessions, pursuant to the Pennsylvania Landlord and Tenant Act of 1951, 68 P.S. § 250.302. Fox entered the leased premises, removed a television and a clock-radio, and posted a distraint notice on the outside of the apartment door.

Plaintiff then filed her original complaint, denominating it a class action on behalf of all renters of real property in Pennsylvania. She requested temporary and permanent injunctive relief, as well as a declaration that the distraint statute was unconstitutional on its face. She made no request for damages in that complaint.

After a three-judge district court had been convened to hear the case, the defendant returned the television and the clock-radio and withdrew the distraint.

Following an initial hearing in January 1971, the district court determined that Gross would not fairly and adequately represent the class and denied class action status to the suit. In April 1971 Gross, pursuant to notice that she had given, vacated the premises and terminated her lease. She subsequently filed an amended complaint which contained three counts and again purported to be a class action. Count I was substantially the same as the initial complaint; count II sought damages under both the United States Constitution and Pennsylvania law for Fox’s entries into her home and removal of her property; and count III sought damages in libel based on the language of the publicly exposed distraint notice.

The court severed counts II and III from the amended complaint for trial before a single judge. The three-judge court held another hearing on count I, and, on a stipulated set of facts, eventually granted plaintiff the declaratory judgment from which defendants took the present appeal. That judgment declared the distraint statute to be unconstitutional on its face for failure to require prior notice and hearing.

Appellants urge that the controversy over the constitutionality of the statute was mooted when Gross vacated the leased premises. Appellee predicates her contrary contention upon the circumstance that her claim for damages, still pending before a single judge, may depend upon the constitutionality of the distraint statute. Thus, the decision appealed from may have a function in the resolution of an outstanding controversy.

But the district court can face the constitutional question if and when it is presented in the damage action. Plaintiff has no need of a separate judgment declaring the statute void, for her only interest is in recovery of damages. Although necessity is not always a prerequisite to declaratory relief, in this case the lack of need combines with several independent factors to cause us to conclude that declaratory relief should have been denied, whether or not, in a technical view, the controversy is moot.

First, courts generally try to avoid reaching constitutional issues, especially where, as here, a federal court is asked to pass on a state statute, and the question is not free from doubt. The damage action may be decided without resolution of the constitutional issue, if the facts are disputed, or if a defense of immunity or good faith is asserted, or if Constable Fox should be held not to be a state official.

Second, this declaratory judgment would not terminate the controversy between the parties, a significant factor in deciding whether it was appropriate to enter the judgment.

Third, the Commonwealth of Pennsylvania did not appear below nor is it before us now. The record shows that counsel advised the Attorney General’s office of the existence of the case in February 1972. Although notification was tardy — -the complaint was filed in December 1970 — there was probably sufficient time for the Commonwealth to defend the statute, if it had so elected. The record offers no reason for the state’s failure to appear, but the state may, in a subsequent case, choose to take a position on the constitutional question.

Fourth, the procedure used below seems to open the door to piecemeal review which Congress did not intend to authorize. If we should approve this procedure, any party to a civil case might request a declaratory judgment on a particular issue of law in a pending case. If a stipulation of fact should be obtained, solely for the purpose of this request, the court could proceed to decide the issue presented and enter an appealable judgment, even though only a single issue in a pending lawsuit had been adjudicated. In effect, the requirements of certification for appeals of interlocutory orders, 28 U.S.C. § 1292(b), would be by-passed.

Finally, it is possible that the distraint statute will be amended before another complaint shall call for a declaration or an injunction in a context requiring actual interference with the duties of a state functionary. Such a turn of events would eliminate any occasion for such federal-state friction as the present declaration might engender.

Denial of declaratory relief here will not frustrate the purposes the declaratory remedy was designed to serve. One frequently articulated purpose, to permit determination of the parties’ rights before damages accrue, is inapplicable because whatever damage this plaintiff may claim as. a result of these defendants’ invocation of the state statute has already been realized in full. The second principal purpose of declaratory relief is to “serve a useful purpose in clarifying and settling the legal relations in issue”. True, the present judgment would help to clarify the legal relations of the parties. However, that fact lacks its usual significance in the circumstances of this case. The fact that Gross can obtain all the relief to which she is entitled in the pending one-judge proceeding without a declaratory judgment (and perhaps without any ruling on the act’s constitutionality) prevents the declaratory proceeding from having more than minimal value, and that value is counterbalanced by the undesirability of two proceedings where one will do.

The judgment appealed from will be vacated, and the record remanded with instructions to dismiss count I because the declaratory relief sought is inappropriate in the posture of the litigation between the parties.

      . Apparently that finding was based on the withdrawal of the distraint, subsequently reinforced by Gross’ departure from the premises.

      . Although the district court did not explicitly rule on the class action allegations in the amended complaint, plaintiff’s counsel conceded at oral argument that the action was not accorded class status.

      . The district court’s first opinion did not reach the constitutionality of the statute, but, upon request from all parties, that opinion was vacated and a second substituted.

      . Appeal was properly addressed to this court rather than to the Supreme Court. Gunn v. University Committee to End the War in Vietnam, 1970, 399 U.S. 383, 90 S.Ct. 2013, 26 L.Ed.2d 684.

      . Borchard, Declaratory Judgments (2d Ed. 1941) 307.

      . It is well established that issuance of a declaratory judgment is not a matter of plaintiff’s right even where the court concludes that plaintiff has a valid claim against the defendant. 6A Moore, Federal Practice K 57.08 [1] and cases cited therein.

      . The answers denied material facts. The stipulation applied solely to count I.

      . Compare, Johnson v. Alldredge, 3d Cir. 1973, 488 F.2d 820 (good faith and immunity) with Fidtler v. Rundle, 3d Cir. 1974, 497 F.2d 794 (good faith and immunity), and Bracey v. Rundle, E.D.Pa.1973, 368 F.Supp. 1186 (good faith).

      . Such a ruling would destroy § 1343(3) jurisdiction. The district court might then conclude, on threshold inquiry, that the amount in controversy was less than $10,000, allegations in the complaint notwithstanding. If so, § 1331 jurisdiction would not exist.

        Cf. Monson v. Hospitalization Com’n. for Polk County Iowa, S.D.Iowa 1972, 338 F. Supp. 1315, 1319-1320, in which the court was able to avoid the question of the propriety of a declaratory judgment on the validity of a state statute where its only use would be in a concurrent damage action, and the injury was complete.

      . F.R.Civ.P. 57, Notes of Advisory Committee ; 6A Moore, op. cit. supra n.6, 1f 57.08 [4]; Uniform Declaratory Judgments Act, § 6.

      . McGraw-Edison Co. v. Preformed Line Products Co., 9th Cir. 1966, 362 F.2d 339, 342, quoting, Shell Oil Co. v. Frusetta, 9th Cir. 1961, 290 F.2d 689, 691-692; Luckenbach S.S. Co. v. United States, 2d Cir. 1963, 312 F.2d 545, 548; 6A Moore, op. cit. supra n.6, f 57.05 at 57-26.

      . Borchard, op. cit. supra n.5 at 299, 1st edition cited with approval in Samuel Goldwyn, Inc. v. United Artists Corp., 3d Cir. 1940, 113 F.2d 703, 709.


author: PER CURIAM.

text:
    UNITED STATES of America ex rel. Terry BETTS, Petitioner-Appellee, v. COUNTY COURT FOR LaCROSSE COUNTY, BRANCH II, et al., Respondents-Appellants.
    No. 73-1668.
    United States Court of Appeals, Seventh Circuit.
    Heard Feb. 20, 1974.
    Decided May 13, 1974.
    Robert W. Warren, Atty. Gen., Robert D. Repasky, Asst. Atty. Gen., Madison, Wis., for respondents-appellants.
    Patrick R. Doyle, La Crosse, Wis., for petitioner-appellee.
    Before CUMMINGS and STEVENS, Circuit Judges, and GRANT, Senior District Judge.

      Senior District Judge Robert A. Grant of the Northern District of Indiana is sitting by designation.

   PER CURIAM.

In this habeas corpus proceeding, it was shown that petitioner was convicted upon a plea of guilty to the charge of burglary in the County Court of La Crosse County, Wisconsin. Although the maximum sentence provided by Section 943.10 of the Wisconsin Statutes was ten years, petitioner was sentenced to an indeterminate term of two years in the Wisconsin State Reformatory. On April 13, 1972, his two-year sentence of imprisonment expired. On June 5, 1972, following a confession of error by the State, the Wisconsin Supreme Court allowed withdrawal of petitioner’s guilty plea and remanded the case to the County Court. On September 28, 1972, that court entered an order allowing withdrawal of the guilty plea and called for a new arraignment upon the burglary charge. Thereafter petitioner entered an appearance and filed a motion to dismiss further proceedings, alleging they would violate the double jeopardy clause. After failing to receive relief from the trial court or the Wisconsin Supreme Court, petitioner sought a writ of habeas corpus in the district court.

On May 25, 1973, the district court granted the petition for a writ of habeas corpus. Its opinion relied particularly upon Ex parte Lange, 18 Wall. 163, 85 U.S. 163, 21 L.Ed. 872; the court refused to apply North Carolina v. Pearce, 395 U.S. 711, 89 S.Ct. 2072, 23 L.Ed.2d 656. We conclude that Pearce permits a retrial of the burglary charge and accordingly reverse.

Because petitioner had already served a complete sentence, the district court held that Ex parte Lange, supra, barred his retrial under the principle of double jeopardy. However, that case did not involve a retrial, but rather the validity of a second sentence imposed by the trial court on the original conviction after a maximum sentence had already been served. The original conviction was never questioned there. Here, by contrast, the original conviction has been set aside, and if there is a second sentence, it will be imposed on a second conviction. Lange expressly held that a second trial may be had without violating the double jeopardy clause when the accused has prosecuted a writ of error. 85 U.S. at 174. Lange is further distinguishable because the first sentence imposed here was less than the statutory maximum.

We conclude that this case is controlled by North Carolina v. Pearce, supra, which dealt with “the imposition of wholly new sentences after wholly new trials.” 395 U.S. at 722. There the Supreme Court held that “the guarantee against double jeopardy imposes no restrictions upon the length of a sentence imposed upon reconviction.” Id. at 719. Under Pearce, a trial court has power to impose punishment following retrial, although the prior sentence must be credited.

Pearce also holds that the due process clause provides some protection. If the judge imposes a more severe sentence upon petitioner’s retrial, Pearce requires an affirmative showing of reasons for doing so. As Justice Stewart stated (at p. 726):

“Those reasons must be based upon objective information concerning identifiable conduct on the part of the defendant occurring after the time of the original sentencing proceeding. And the factual data upon which the increased sentence is based must be made part of the record, so that the constitutional legitimacy of the increased sentence may be fully reviewed on appeal.”

The fact that petitioner took an appeal would be an impermissible reason for increasing his sentence. Id. at 724.

In the present case where the first sentence has already been completed, Pearce requires a particularly strong showing by .the State to justify an increased sentence because completion of the first sentence raises the presumption that its purposes have been fulfilled.

At common law, the issue before us could not arise since “the right of appeal was gone when the punishment had once been suffered.” Lange, supra, at 169. Petitioner could have obviated any retrial by withdrawing his then pending appeal after completing his sentence. Since the collateral consequences of his conviction are apparently important to petitioner, it is not so unfair for the State also to consider them important. A retrial will serve to determine petitioner’s guilt or innocence for collateral purposes; Pearce will protect him against additional punishment unless justified.

The order of the district court is reversed with directions to dismiss the petition.


author: DAVIS, Judge:

text:
    In the Matter of INSTRUMENTS FOR INDUSTRY, INC., Debtor-Appellee, v. UNITED STATES of America, Appellant.
    No. 653, Docket 73-2165.
    Second Circuit.
    Argued March 12, 1974.
    Decided May 28, 1974.

      Mary P. McGuire, Asst. U. S. Atty., E. D. N. Y. (Robert A. Morse, U. S. Atty., and L. Kevin Sheridan, Asst. U. S. Atty., E. D. N. Y., of counsel), for appellant.
    Branko Stupar, Washington, D. C. (Faulkner, Shands, Stupar & Tucker, Washington, D. C., Samuel A. Arutt, and Arutt, Nachamie, Benjamin & Rubin, New York City, of counsel), for appellee.
    Before HAYS and MANSFIELD, Circuit Judges, and DAVIS, Judge.

       Of the United States Court of Claims, sitting by designation.

   DAVIS, Judge:

Instruments for Industry, Inc. (“IFi”), ^e appellee, entered into a contract in 1960 with the Bureau of Naval Weapons of the Navy Department for twenty units of electronic countermeasure equipment. The agreement contained a standard form “Disputes” clause requiring initial administrative determination of disputes arising under the contract. The equipment was delivered and accepted by the Government. Under the contract terms inspection was made, and acceptance finalized, at the contractor’s plant. In 1965, within one year of delivery, the contracting officer notified IFI that the equipment had allegedly been defective upon delivery and acceptance, and that IFI owed more than three hundred ninety thousand dollars under the “Guaranty” clause of the contract. However, no final contracting officer’s decision to this effect was issued until July 1972.

In 1966 IFI filed for a Chapter XI arrangement under the Bankruptcy Act in the United States District Court for the Eastern District of New York. A few months later, the United States filed proof of claim in these proceedings for the amount said to be due because of the faulty equipment, as well as for an uncontested balance owing under another contract. IFI moved to delete the Navy’s claim for the defects, arguing that final acceptance under the “Inspection” clause prevented recovery, but the Bankruptcy Judge denied the motion and designated the Armed Services Board of Contract Appeals as a fact-finding body to liquidate the Navy’s claim. On review, the District Court reversed this order. The court decided that the Navy’s rights were cut short by the “Inspection” clause, and expunged the claim. This appeal tests the correctness of that legal ruling.

This is another instance of the frequent tension in federal procurement between two form clauses, both bearing on the same general subject and both inserted into the same government contract without explicit reconciliation. The “Guaranty” clause, under which the Navy makes its claim, provides in relevant part':

The Contractor guaranties that at the time of delivery thereof, the supplies provided for under this contract will be free from any defects in material or workmanship and will conform to the requirements of the contract. Notice of any such defect or nonconformance shall be given by the Government to the Contractor within one year of the delivery of the defective or nonconforming supplies. If required by the Government within a reasonable time after such notice, the Contractor shall with all possible speed correct or replace the defective or nonconforming supplies or part thereof. * * * If the Government does not require correction or replacement of defective or nonconforming supplies, the Contractor, if required by the Contracting Officer within a reasonable time after the notice of defect or nonconformance, shall repay such portion of the contract price of the supplies as is equitable in the circumstances.
This clause shall not limit any rights of the Government under the clause of this contract entitled “Inspection.”

The section of the “Inspection” clause relied upon by the contractor is:

* * * * * *
(d) * * * Except as otherwise provided in this contract, acceptance shall be conclusive except as regards latent defects, fraud, or such gross mistakes as amount to fraud.

At no time has the Government contended that the defects it claims to have discovered were latent, or that any fraud or gross mistakes amounting to fraud were in any way involved. Nor is it asserted that the defects surfaced or came into being after delivery. The only issue is whether the Navy’s rights under the “Guaranty” clause, with respect to preexisting non-latent defects, survive acceptance under the “Inspection” provision.

It is very difficult to harmonize the face of the two clauses which do not in words or by clear inference refer to each other. On the one hand, if the “Guaranty” article preserves the Government’s rights to order correction of or payment for non-latent defects for one year after delivery — as it seems to say — then the earlier acceptance is clearly not “conclusive” as the “Inspection” clause explicitly declares for non-latent deficiencies. On the other, if the “Guaranty” clause in this contract is limited in application — because of the presence of the “Inspection” provision —to latent defects, then its actual scope would be less than its literal terms. The “Guaranty” article, thus restrietively read, would give the Government a flat right to correction of, or price adjustment for, latent defects for one. full year after delivery, but with a co-existing further right, if the circumstances prove it reasonable, thereafter to revoke acceptance under the “Inspection” clause with respect to latent defects.

It has been suggested (see Federal Pacific Electric Co., IBCA 334, 1964 BCA jf 4494) that full reconciliation of the literal terms of the two clauses can be attained through the prefatory phrase of the “Inspection” article — “Except as otherwise provided in this contract.” This language, it is said, refers to the “Guaranty” clause, and on the assumption the latter article “provides otherwise” the “Inspection” provision becomes wholly inoperative for non-latent defects. The obvious vice of this suggested adjustment is that it subverts the clear import of the most important aspect of subpart (d) of the “Inspection” article — “acceptance shall be conclusive except as regards latent defects, fraud or such gross mistakes as amount to fraud” — which affirmatively gives significant rights to the contractor in the absence of the stated exceptions. Instead of according such rights to the contractor, the clause would become, in topsy-turvy fashion, no more than a further protection to the Government with regard to latent defects, fraud and gross mistakes amounting to fraud — and a minimal protection at that. Contractors could not be expected to anticipate that this camouflaged and unusual reversal of the normal role of subpart (d) of the “Inspection” clause would follow from the bland generality of “[ejxcept as otherwise provided in this contract,” especially since there is no reference to any particular clause which “provides otherwise” and no indication in the “Guaranty” article that it has any impact on the “Inspection” provision. A more direct and specific caveat would be necessary, and has in fact been used in other forms of federal contracts to show that acceptance does not have the effect the language of the “Inspection” provision, if read alone, plainly gives it.

The upshot is that the combination of the two mismatched clauses in this one agreement, without adequate textual harmonization, makes them both ambiguous and evokes the familiar principle of contra proferentem — “the general maxim that a contract should be construed most strongly against the drafter, which in this ease was the United States.” United States v. Seckinger, 397 U.S. 203, 210, 90 S.Ct. 880, 884, 25 L.Ed.2d 224 (1970). “The Government, as the author, has to shoulder the major risk of seeing that within the zone of reasonableness the words of the agreement communicate the proper notions— as well as the main risk of a failure to carry that responsibility. If the defendant chafes under the continued application of this check, it can obtain a looser rein by a more meticulous writing of its contracts and especially of the specifications.” WPC Enterprises, Inc. v. United States, 323 F.2d 874, 877, 163 Ct.Cl. 1, 6-7 (1963) (footnotes omitted). “This oft-repeated and much-applied rule serves important purposes. It puts the risk of ambiguity, lack of clarity, and absence of proper warning on the drafting party which could have forestalled the controversy; it pushes the drafters toward improving contractual forms; and it saves contractors from hidden traps not of their own making.” Sturm v. United States, 421 F.2d 723, 727, 190 Ct.Cl. 691, 697 (1970).

There can be no doubt that the interpretation favoring the contractor is “reasonable and practical.” See United States v. Seckinger, supra, 397 U.S. at 210-211. The express terms of the “Inspection” clause are given full effect as to non-latent defects, and, absent an acceptance expressly and reasonably conditioned upon the Government’s later inspection of the supplies and equipment, the one-year-after-delivery portion of the “Guaranty” article is confined to latent defects. See notes 5 and 6, supra, and the pertinent text. That is not an unreasonable or unacceptable rationalization, in the absence of more precise guidelines. It is preferable to the opposite reading which would give full scope to the literal terms of the “Guaranty” article, at the cost of obliterating the “acceptance” portion of the “Inspection” clause. There is a less drastic intrusion upon both the contract language and the reasonable expectations of the parties.

Appellant counters that the Boards of Contract Appeals and the procuring agencies have adopted the other construction, but the administrative declarations in this area either postdate the 1960 contract in the present case, or merely embody a short general dictum unclear in its reach, or involve more explicit forms of agreement. In fact, the board holdings directly in point came within the past few years. There is no uniform, longstanding, continuous administrative interpretations pertinent to this form of contract, and certainly none which is binding on this contractor which made its agreement in 1960, delivered the goods in 1964, and had them accepted in that year.

It follows that the Government has no proper claim and that the District Court was correct in expunging it.

Affirmed.

      . The “Disputes” clause was as follows :
      “12. DISPUTES
      (a) Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. The decision of the Contracting Officer shall be final and conclusive, unless, within 30 days from the date of receipt of such copy, the Contractor mails or otherwise furnishes to the Contracting Officer a written appeal addressed to the Secretary. The decision of the Secretary or his duly appointed representative for the determination of such appeals shall be final and conclusive unless determined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer’s decision.
      (b) This “Disputes” clause does not preclude consideration of law questions in connection with decisions provided for in paragraph (a) above: Provided, That nothing in this contract shall be construed as making final the decision of any administrative official, representative, or board on a question of law.”

      . With one exception irrelevant here.

      . This claim was filed, of course, well before the contracting officer’s final decision under the “Disputes” article.

      . The Government does not argue that, in the circumstances of this case, the legal question before us should have been initially presented to or determined by the Armed Services Board of Contract Appeals in a proceeding under the “Disputes” clause.

      . The normal rule is that a party has the duty to give reasonably prompt notice, in the particular circumstances, of a breach of warranty. See 8 Williston on Contracts § 993 (3d ed. 1964) ; of. ÜCC § 2-607(3) (a).

      . Consonant with the last sentence of the “Guaranty” article, supra, this reading would not construe that clause as limiting in any way the Government’s right under the “Inspection” clause to be entirely free, with respect to latent defects, from any of the consequences of acceptance. In addition, reading the clauses together in this fashion cumulates, as far as possible, whatever warranties these provisions create. See UCC § 2-317.

      . Taken by itself, the “Guaranty” provision seems to cover all types of defects, latent and non-latent, in its twin references to “defects in materials and workmanship” and “conform [ity] to the requirements of the contract.”

      . On that reading, the only addition to the rights granted by the “Guaranty” clause would be a possible protection beyond one year against latent defects. See notes 5 and 6, supra, and the appurtenant text. The protections against fraud and gross mistakes amounting to fraud would no doubt be implied in any event. See S & E Contractors, Inc. v. United States, 406 U.S. 1, 15-17, 92 S.Ct. 1411, 31 L.Ed.2d 658 (1972).

      . See note 12, infra.

      . Cottman Mechanical Contractors, Inc., ASBCA No. 11387, 67-2 BCA If 6566 (1967); Catalytic Eng’r & Mfg. Corp., ASBCA No. 15257, 72-1 BCA 1f 9342 (1972); Cross Aero Corp., ASBCA No. 15092, 71-2 BCA If 9076 (1971); Gresham & Co., ASBCA Nos. 13812, 13865, 70-1 BCA 1f 8318 (1970), overturned on other grounds, 200 Ct.Cl. 97, 470 E.2d 542 (1972). Armed Services Procurement Regulations (ASPE.) §§ 1-324.1, 1-324.2, 1-324.5, 1-324.7, also came after the present contract was made.

      . Catalytic Eng’r & Mfg. Corp., supra (no guarantee article at all in the contract) ; Cottman iMechanical Contractors, Inc., supra (only latent defects involved).

      . In the only board decision antedating this contract (McGrath & Co., ASBCA No. 1949, 58-1 BOA H 1599 (1958)), the “Guaranty” clause expressly begins: “Notwithstanding the provisions of the clause of this contract entitled ‘Inspection’ * * Later authorities with more explicit terms than the agreement at bar include: United States v. Franklin Steel Products, 482 F.2d 400, 402 (9th Cir. 1973); Monroe Garment Co., ASBOA No. 14465, 71-2 BCA If 9142; Armed ■ Services Procurement Regulations (ASPR) § 1-324.7, 32 C.F.R. § 1.324-7 (1973) ; Rexach-HRH Constr. Corp., VACAB No. 966, 71-2 BCA H 9052; Federal Pacific Electric Co., IBCA No. 334, 1964 BCA 1f 4494. The contracts in those instances explicitly set forth the intended interrelationship of the two provisions in one of three alternative ways: (1) the “Guaranty” (or “Warranty”) clause states that it is effective notwithstanding acceptance; (2) the “Inspection” clause states that the “Guaranty” clause is an exception to the conclusiveness of acceptance; or (3) a third clause limits the finality of acceptance.