author: MEDINA, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. James Jerome ASTOLAS et al., Defendants-Appellants.
    Nos. 232-234, Dockets 73-1679, 73-1730, 73-1731.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 4, 1973.
    Decided Nov. 8, 1973.

      Richard J. Arcara, Asst. U. S. Atty., W. D. N. Y., Buffalo, N. Y. (John T. Elfvin, U. S. Atty., W. D. N. Y., Buffalo, N. Y., on the brief), for plaintiff-appellee.
    William B. Mahoney, Buffalo, N. Y., for defendants-appellants, James Jerome Astolas and William Dallas Bermel.
    John P. McKenna, Buffalo, N. Y., for defendant-appellant, Daniel James Edin.
    Before MEDINA, FEINBERG and TIMBERS, Circuit Judges.
   MEDINA, Circuit Judge:

This is an appeal from a judgment entered in the United States District Court for the Western District of New York, Chief Judge John 0. Henderson presiding, after a jury trial convicting each of the appellants of three counts of an indictment alleging that appellants stole certain trailers containing automotive supplies constituting interstate shipments, 18 U.S.C., Sections 659 and 2, and of one count alleging conspiracy, 18 U.S.C., Section 371. Appellant Astolas was sentenced to serve concurrent eight-year terms of imprisonment on each of the substantive counts and a five-year concurrent term on the conspiracy count. Bermel and Edin were given a concurrent five-year term of imprisonment on each of the four counts. Each appellant was fined $20,000.

We find it necessary to discuss only the legal questions arising out of appellants’ contentions that as to two of the trailers interstate shipment had not commenced at the time appellants made off with the trailers and their contents, and that as to the other trailer interstate shipment had terminated.

I

The facts adduced at the trial by the Government to show the interstate ehar-aeter of the shipments were not controverted. Middle Atlantic Warehouse Distributors, Inc., the victim of the theft, is an automobile supplies wholesaler that owns a warehouse in Tonawanda, New York. In the course of its business, it purchases parts from manufacturers, generally located in the Midwest, warehouses them, and resells them to 70 customers, 65 of which are spread throughout 15 Northeastern states. Middle Atlantic employs its own drivers, and uses its own tractor-trailers to carry the parts from manufacturers to Tonawanda, and from Tonawanda to its customers.

On July 20, 1972, Middle Atlantic Trailer 7105 was loaded with supplies from the Middle Atlantic warehouse. A bill of lading was prepared by the warehouse manager describing the contents of the shipment, its weight, together with routing directions to stops in Massachusetts, Connecticut, and Rhode Island. The doors of the trailer were closed and sealed with serially numbered metalstrips inserted between the door and frame of the vehicle.

On Friday, July 21, 1972, Middle Atlantic similarly loaded trailer 7106 with supplies, sealed its doors, and prepared shipping documents.

The following day, Saturday, July 22, a day on which Middle Atlantic was not open for business, the manager returned to the warehouse, attached tractor trucks to trailers 7105 and 7106, and moved them from the loading dock to a Middle Atlantic parking lot adjacent to the warehouse. He then put the respective bills of lading on the consoles next to the drivers’ seats of the tractors, checked the seals, and locked the tractors. Trailer 7105 was scheduled to depart on Sunday, July 23, and Trailer 7106 was scheduled to depart before the opening of business on Monday, July 24. The manager testified that nothing else had to be done to ready the vehicles for transit; they were merely awaiting their assigned drivers.

Trailer 7107 was driven on Friday, July 21, 1972, from the A & P Parts Company in Toledo, Ohio, to Middle Atlantic’s warehouse in Tonawanda, arriving at 8:15 in the evening, after regular business hours. The driver, a Middle Atlantic employee, backed his vehicle up to door 6 of the warehouse and left it there, tractor truck and trailer still connected. He deposited the bill of lading in a mail box, which had been placed for that purpose on a side door leading to the warehouse.

Trailers 7105, 7106 and 7107 and their attached tractors were stolen on Saturday night, July 22.

At the appellants’ trial, Chief Judge Henderson gave the following instructions to the jury on the subject of whether the automobile supplies constituted interstate shipments:

The interstate character of the property stolen is an essential element of this offense. The interstate character of a shipment commences at the time that the property is segregated for interstate commerce and comes into possession of those who are assisting its course in interstate transportation, and continues until the property arrives at its destination and is there delivered, either by actual unloading or by being placed to be unj loaded.
Thus, for example, as to Counts One and Two of the indictment [those relating to trailers 7105 and 7106], if you find beyond a reasonable doubt that Middle Atlantic Warehouse Distributors, Incorporated, had caused the goods in question to be placed in trailers at their loading dock; that the trailers had then been sealed; that tractors were then affixed to the trailers; that the tractor trailers were then moved to a point away from the loading dock and placed in the parking lot of Middle Atlantic Warehouse Distributors, Inc., and that bills of lading had been prepared and placed within the cabs of the tractors; then you may also find that the property in question constituted a shipment in interstate commerce.
In addition, if you find beyond a reasonable doubt that the tractor trailer involved in Count Three of the indictment [relating to trailer 7107], arrived at the yard of Middle Atlantic Distributors, Inc., from another state; you will recall this involved a shipment from Toledo, Ohio, into New York State, that upon arrival in that yard the tractor trailer was placed in the loading dock in a sealed condition; and that the bill of lading was placed in the mail slot of the terminal, then, you may also find that the property in question remained in interstate commerce at the time of the alleged theft.

Appellants noted an exception to these instructions.

Appellants claim that trailers 7105 and 7106 had not yet become interstate shipments at the time they were stolen, and that trailer 7107 had ceased to be an interstate shipment by the time it was stolen. They claim that the trial court erred in its instructions to the jury by giving overbroad content to “interstate shipment,” by giving disjunctive rather than conjunctive effect to the three phrases of the statute preceding the words “interstate shipment,” and by restating the instructions in the terms of the testimony of Government witnesses. They make other claims for reversal on the subject of other exceptions to the charge and to various refusals to charge as requested.

We find no merit in any of these contentions.

II

Section 659

The indictments charged that appellants violated Section 659 of Title 18 of the U.S.Code:

Whoever embezzles, steals, or unlawfully takes, carries away, or conceals, or by fraud or deception obtains from any pipeline system, railroad car, wagon, motortruck, or other vehicle, or from any tank or storage facility, station, station house, platform or depot or from any steamboat, vessel, or wharf, or from any aircraft, air terminal, airport, aircraft terminal or air navigation, facility with intent to convert to his own use any goods or chattels moving as or which are a part of or which constitute an interstate or foreign shipment of freight, express or other property; * * *.

The phrase most important to this appeal, “moving as or which are a part of or which constitute an interstate or foreign shipment,” was the phrase chosen by Congress in 1913 when it first enacted the predecessor of Section 659. The legislative history of the 1913 bill sheds no light on the meaning of the phrase. The bill was reported to the Senate by the Judiciary Committee with the recommendation that it be passed, but without other comment. S.Rep. 1132, 62d Cong., 3d Sess. The floor debates reflect only an attempt to amend the bill to transmute it into a venue provision, defining a federal crime only if venue did not lie in any state because of the interstate character of the theft. The proposed amendment was rejected out of hand.

Although the legislative history of the statute sheds no light on its purpose, this Court has repeatedly held, given the all-inclusive sweep of its terminology, that Section 659 is designed by the Congress to promote the flow of goods in interstate commerce, United States v. Berger, 338 F.2d 485 (2d Cir. 1964), cert, denied, 380 U.S. 923, 85 S. Ct. 925, 13 L.Ed.2d 809 (1965) ; United States v. Thomas, 396 F.2d, 310 (2d Cir. 1968), and that the carrying out of this purpose is not to be hampered by technical legal conceptions. 338 F.2d, supra, at 487.

The scope of the phrase “moving as or which are a part of or which'constitute an interstate or foreign shipment” is plainly to be inferred from the list of places from which theft is proscribed. These places include not only railroad cars and tractor-trailers and other modes of transportation, but any “station, station house, platform or depot * * * .” It was intended that a theft from commerce could be committed before the goods were placed on board, and after they are taken off of a carrier; it is not required that a shipment be in motion.

The statute suggests three ways in which the commerce requirement can be met: the goods can be (1) moving as an interstate shipment, (2) part of an interstate shipment, or (3) constituting an interstate shipment. The use of the conjunction “or” between the clauses suggests that the criteria are disjunctive rather than conjunctive. See United States v. Gollin, 176 F.2d 889; 893 (3d , Cir.), cert, denied, 338 U.S. 848, 70 S.Ct. 89, 94 L.Ed. 519 (1949).

Under all three clauses, the determination that a shipment is interstate is essentially a practical one based on common sense and administered on an ad hoc basis. It depends on such in-dicia of interstate commerce as the relationship of consignee, consignor, and carrier, if they are separate entities, United States v. Cousins, 427 F.2d 382 (9th Cir. 1970), the physical location of the shipment when stolen, United States v. Vilhotti, 452 F.2d 1186 (2d Cir. 1971), cert, denied, 406 U.S. 947 (1972), whether the goods have been delivered to a carrier at the time of theft, United States v. Fox, 126 F.2d 237 (2d Cir. 1942), where there is no carrier, what steps the owner has taken to carry out an interstate shipment, cf. Hughes Brothers Timber Co. v. Minnesota, 272 U.S. 469, 475-476, 47 S.Ct. 170, 71 L.Ed. 359 (1926), and the certainty with which interstate shipment is contemplated, as evidenced by shipping documents. Cf. United States v. Berger, supra, 338 F.2d 485 (2d Cir. 1964), cert, denied, 380 U.S. 923, 85 S.Ct. 925, 13 L.Ed.2d 809 (1965).

HI

Having stated the controlling legal principles applicable to this type of cáse, we turn to a brief discussion of the details of appellants’ contentions.

A

The statute reads in the disjunctive, “or,” and the indictment alleges in the conjunctive, “and.” It is argued that this requires for conviction a finding that the stolen goods not only “constituted” an interstate shipment, but also that the goods were “moving as” and “were a part of” an interstate shipment. Chief Judge Henderson properly refused to instruct the jury to this effect. The main thrust of the case is whether or not we have here an interstate shipment. Chief Judge Henderson acted wisely and properly in refusing to be drawn away, or to have the jury’s attention diverted from this basic concept. An indictment may charge alternate ways of violating a statute in the conjunctive, and a conviction under such an indictment will be sustained if the evidence justifies a finding that the statute was violated in any of the ways alleged. United States v. Conti, 361 F.2d 153 (2d Cir. 1966), rev’d on other grounds, 390 U.S. 204, 88 S.Ct. 899, 19 L.Ed.2d 1035 (1968); Joyce v. United States, 147 U. S.App.D.C. 128, 454 F.2d 971 (1971), cert, denied, 405 U.S. 969 (1972); McGriff v. United States, 408 F.2d 333 (9th Cir. 1969); Rimerman v. United States, 374 F.2d 251 (8th Cir.), cert, denied, 387 U.S. 931, 87 S.Ct. 2053, 18 L. Ed.2d 992 (1967); Smith v. United States, 234 F.2d 385 (5th Cir. 1956).

B

In this case there was no common or contract carrier. Middle Atlantic was the shipper and the tractor trucks and trailers were owned by Middle Atlantic and operated by its employees. Appellants make much of this and call our attention to a variety of quotations from decisions in cases with a bewildering variety of fact situations involving carriers or the taxing powers of the States. It is settled law, however, that carriage of the property by the owner does not put the property outside of the protection of Section 659. Winer v. United States, 228 F.2d 944, 947 (6th Cir.), cert, denied, 351 U.S. 906, 76 S.Ct. 695, 100 L.Ed. 1442’ (1956); United States v. Gollin, supra, 176 F.2d 889 (3d Cir.), cert, denied, 338 U.S. 848, 70 S.Ct. 89, 94 L.Ed. 519 (1949); Marifian v. United States, 82 F.2d 628 (8th Cir.), cert, denied, 298 U.S. 686, 56 S.Ct. 956, 80 L.Ed. 1406 (1936). If the consignor of the goods, in cases where no carrier is involved, takes steps that would normally be taken if a carrier were involved, and this is done with the intent to ship goods in interstate commerce, there is basis for a finding that the goods constitute an interstate shipment. Cf. Hughes Brothers Timber Co. v. Minnesota, supra, 272 U.S. 469, 475-476, 47 S.Ct. 170, 71 L.Ed. 359 (1926).

We are told that this is a case of first impression. Perhaps this is so. But, once it becomes clear that the same rule applies whether or not a separate common or contract carrier is involved, we think the result here is controlled by Judge Mulligan’s ruling for this Court in United States v. Vilhotti, supra, 452 F.2d 1186 (2d Cir. 1971), cert, denied, 406 U.S. 947 (1972). In that case two trailers were loaded and made ready to depart just as were trailers 7105 and 7106 in this case. The goods were stolen before the trailers were moved from the place where they .were parked. These two trailers were in or near the premises of the Crown Drug Stores Distribution Center in Cranford, New Jersey, awaiting the arrival of the tractor trucks and the drivers who were to take the trailers to retail stores in Long Island, New York. According to footnote 1, page 1187 of Vilhotti, the placing of these loaded and sealed trailers in the place from which they were to be driven across state lines “constituted an effective delivery of the goods to the carrier, sufficient to render the goods part of interstate commerce as required by the statute.”

While the facts of Vilhotti are not fully set forth in Judge Mulligan’s opinion, an examination of the briefs indicates that the shipper had contracted with Paul’s Trucking Company to provide tractors and drivers to transport the trailers to Long Island. This trucking company is the “carrier” referred to in the Vilhotti footnote. We think this holding clearly applies to a case such as the one before us where the loading, sealing and routing of the trailers were all completed prior to the arrival of the shipper’s own drivers to drive the trailers away to their interstate destinations. And we also conclude that the same identical principles apply in reverse to the trailer from Ohio. Chapman v. United States, 151 F.2d 740 (8th Cir. 1945); Murphy v. United States, 133 F.2d 622 (6th Cir. 1943); United States v. Cousins, supra, 427 F.2d 382 (9th Cir. 1970).

We cannot agree with appellants’ contention that the cases cited in Judge Mulligan’s footnote in Vilhotti are not in point. The facts in United States v. Gollin, 166 F.2d 123 (3d Cir.), cert, denied, 333 U.S. 875, 68 S.Ct. 905, 92 L. Ed. 1151 (1948), second appeal United States v. Gollin, supra, 176 F.2d 889 (3d Cir.), cert, denied, 338 U.S. 848, 70 S.Ct. 89, 94 L.Ed. 519 (1949), were strikingly similar to those in the case before us. In Gollin 600 cases of beer were stolen from a truck that had been loaded and sealed and driven to a point on a public street in Newark, N.J. in front of Bal-lantine’s brewery garage and two blocks from the loading platform. It was left there to await its previously assigned driver who was to take it to North Tarry town, N.Y. The loader left the completed bill of lading with the truck keys at the garage to be picked up by the driver. Before the arrival of the driver the 600 cases of beer were stolen. The whole tenor of the opinions on both the first and on the second appeal indicated no doubt on the part of any of the judges that the 600 cases of beer constituted an interstate shipment. The first conviction was reversed because the trial judge after a review of the uncontro-verted facts, as above stated, told the jury that as a matter of law the 600 cases of beer constituted an interstate shipment. This amounted to the direction of a verdict to convict, which is not permissible in criminal cases. On the second appeal, after a second conviction, the area of contention involved instructions by the trial judge that permitted conviction only if the jury found not only that the goods constituted an interstate shipment but also that they were moving in interstate commerce. After an explicit and unambiguous statement that the goods constituted an interstate shipment and that “Had the truck remained on the loading platform we would reach a similar conclusion” (United States v. Gollin, supra, 176 F.2d 889, at 893, cert, denied, 338 U.S. 848, 70 S.Ct. 89, 94 L.Ed. 519 (1949) ), the Third Circuit affirmed the second conviction because the instructions were more favorable to the defendants than they were entitled to receive and hence not prejudicial.

We have already commented on United States v. Berger, supra, 338 F.2d 485 (2d Cir. 1964), cert, denied, 380 U.S. 923, 85 S.Ct. 925, 13 L.Ed.2d 809 (1965). United States v. Cousins, supra, 427 F.2d 382 (9th Cir. 1970) involves the same principle but refers to goods stolen from a railroad car placed on the siding of the consignee awaiting unloading. ~

Nor are we persuaded that our decision in United States v. Fox, supra, 126 F.2d 237 (2d Cir. 1942) gives any support to appellants’ contentions. When the Court held “we are satisfied that at least as soon as the goods have finally-left the shipper’s possession and have come into the possession of any of those who are to forward them upon an interstate journey * * * they become a part of'interstate commerce”, the qualification “at least” must be taken to indicate that there are cases where an interstate shipment may be constituted before the goods are delivered to a carrier. This is such a case.

If it be true that the situation before us in this case is a novel one and that the state of the authorities is such as to leave a loophole through which thieves may safely emerge unscathed and unaffected by any federal criminal statute to the frustration of the obvious purpose of the Congress in the enactment of Section 659 to facilitate rather than to impede the movement of goods in interstate commerce, it is high time that the loophole be closed.

IV

The proofs give ample support to the verdict. The highjackers were caught red-handed as they drove the three tractor trucks and trailers away from the premises of Middle Atlantic. One of the appellants was promptly apprehended hiding in a nearby marsh.

With respect to trailers 7105 and 7106 the supplies were packaged and segregated and addressed to Middle Atlantic customers. These supplies were loaded into the trailers. Bills of lading showing out-of-state routings were completed. The trailers were sealed. Unless the statute is to be read as requiring more than proof that the goods constituted an interstate shipment this was enough.

With respect to trailer 7107, the goods were still sealed in the body of the trailer. They were segregated from all other Middle Atlantic property. They had been neither examined nor accepted. A finding that the goods still constituted an interstate shipment was proper.

Affirmed.

      . Subsequent to 1913, the statute was amended a number of times, modernizing its language and including new means of transportation within its scope. See 43 Stat. 793, Jan. 28, 1925; 47 Stat. 773, Jan. 21, 1933; 60 Stat. 656, July 24, 1946; 61 Stat. 52, April 16, 1947. The language “moving as or which are a part of or which constitute an interstate or foreign shipment” has never been altered.


source: Caselaw Access Project

author: McCREE, Circuit Judge.

license: Public Domain

text:
    F. Paul DUFFY and Virginia H. Duffy, Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant.
    No. 72-2050.
    United States Court of Appeals, Sixth Circuit.
    Argued April 11, 1973.
    Decided Nov. 16, 1973.

      Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Elmer J. Kelsey, Jane M. Edmisten, Attys., Tax Div., Dept. of Justice, Washington, D. C., on brief, for defendant-appellant; William W. Milligan, U. S. Atty., Byron E. Trapp, Asst. U. S. Atty., Cincinnati, Ohio, of counsel.
    Frank J. Richter, Richter & Dewan, Cincinnati, Ohio, on brief, for plaintiffs-appellees.
    Before McCREE and KENT, Circuit Judges, and CECIL, Senior Circuit Judge.

       Judge Kent died on May 27, 1973 and did not participate in this decision.

   McCREE, Circuit Judge.

The government appeals from a judgment for taxpayers in an action to recover income taxes paid upon assessment of a deficiency by the Internal Revenue Service for the calendar years 1963 to 1966. The facts were stipulated and the case was submitted on cross-motions for summary judgment. The district court’s opinion is reported at 343 F.Supp. 4 (S. D.Ohio 1972).

The taxpayers, F. Paul Duffy, a physician, and his wife, Virginia H. Duffy, purchased improved real estate in Cincinnati, Ohio on July 31, 1962, for use by Dr. Duffy in his medical practice. Shortly thereafter, on February 26, 1963, the Duffys executed a trust agreement pursuant to which they conveyed this property to the Provident Bank as trustee. On the same day, the Duffys and the bank executed a five year lease-back agreement, renewable for an additional five years, in which Dr. Duffy agreed to pay an annual rent of $8,650, an amount stipulated as reasonable.

The trust agreement created four trusts, one for the benefit of each of their children: James, born on May 30, 1945; Timothy, born on November 23, 1948; Julia, born on August 7, 1951; and Eileen, born on November 8, 1956. These trusts were made irrevocable for 10 years and 30 days and amendable and revocable thereafter. The trust instrument provides that a beneficiary, while a minor, may receive, if necessary in the sole discretion of the trustee, his share of the trust principal or the income generated by it for his education, maintenance or welfare. Income not distributed for these purposes is to be accumulated by the trustee. When each child reaches his majority, his share of the accumulated and unexpended trust income is to be made part of the trust corpus. However, his share of the trust income accruing thereafter must be distributed to him. Moreover, unless the trust is revoked or amended as it may be after 10 years and 30 days, the principal and the income accumulated during the minority of each child will be distributed among the beneficiaries when the youngest becomes 25. No beneficiary has ever received any income during his minority. However, on May 30, 1966, James, the eldest Duffy child, became 21 and began receiving the income thereafter accruing to his trust.

During the tax years 1963 through 1966, taxpayers did not include in their income the taxable income received by the trust from the rental of the property to Dr. Duffy. Moreover, during the same period of time, taxpayers deducted as an ordinary and necessary business expense the rent paid by Dr. Duffy to the trust.

Pursuant to an audit of taxpayers’ joint returns for the tax years 1963, 1964, 1965, and 1966, the Internal Revenue Service (IRS) concluded that either the taxable income of the trust should have been included in taxpayers’ income for these years or alternatively, that the rent paid by Dr. Duffy, less the depreciation allowance for the building was not an ordinary and necessary business expense. Deficiencies of tax and interest were therefore assessed.

After paying the assessed deficiencies, taxpayers filed a claim for refund for each year involved. The District Director disallowed their claims for 1963, 1964 and 1966 but, possibly because of an oversight, allowed their claim for 1965.

Taxpayers then filed a suit in United States District Court. The district court found that the taxable trust income for the years in question was not includible in taxpayers’ income and that the rent paid by Dr. Duffy was an ordinary and necessary business expense. The court, therefore, granted the taxpayers recovery of assessed income taxes and interest for 1963, 1964 and 1966, in the amount of $14,965.25 plus accumulated interest. Duffy v. United States, 343 F.Supp. 4 (S.D.Ohio 1972).

In this appeal the government argues that either the district court erred in holding that the bank is an “adverse party” as defined by section 672(a) of the Internal Revenue Code, 26 U.S.C. § 672(a) (1967) and that therefore the Duffys should have included in their income the taxable trust income under section 677(a)(2) of the Internal Revenue Code, 26 U.S.C. § 677(a)(2) (1967) or that the district court erred in holding that the Duffys were entitled to deduct the rent paid for Dr. Duffy’s office as an ordinary and necessary business expense under section 162 of the Code, 26 U.S.C. 162 (1967). Taxpayers argue, however, that because the trust comes within the excepting clause of section 677, there is no need to consider whether the bank is an “adverse party” and that the district court was correct in holding that the rent payments were dr-dinary and necessary business expenses.

We hold that the taxable income of the trust should have been included in the taxpayers’ income under section 677(a)(2) of the Internal Revenue Code. Accordingly, we do not reach the government’s alternative assignment of error.

Section 677(a)(2) of the Internal Revenue Code, Income for benefit of grantor, 26 U.S.C. § 677(a)(2) (1967), provides in relevant part:

(a) General rule. The grantor shall be treated as the owner of aiiy portion of a trust . . . whose income without the approval or consent of any adverse party is, or, in the discretion of the grantor or a nonadverse party, or both, may be .
(2) held or accumulated for future distribution to the grantor ....

This provision is followed immediately by an “excepting” clause which provides that

[t]his subsection sjhall not apply to a power the exercise of which can only affect the beneficial enjoyment of the income for a period commencing after the expiration of a period such that the grantor would not be treated as the owner under section 673 if the power were a reversionary interest; but the grantor may be treated as the owner after the expiration of the period unless the power is relinquished.

This section is dispositive of the issues in this case: first, whether the taxpayers are exempt from the application of the general rule of the section by virtue of the excepting clause, and second, if the taxpayers do not come within the excepting clause, whether the institutional trustee is an “adverse party” within the meaning of the general rule. We hold that the taxpayers cannot avail themselves of the excepting clause and that the Provident Bank is not an adverse party.

To come within the excepting clause, taxpayers argue, they need only show that they had no power during the initial ten years of the trusts to control the beneficial enjoyment of the trust, income. If during this period they could not control the disposition of trust income, they argue that the taxable trust income should be taxed to the trust, not to them. Taxpayers attempt to bolster this argument by referring to section 673 of the Code, Reversionary interests, 26 U.S.C. § 673 (1967), which provides in relevant part:

(a) General Rule. — The grantor shall be treated as the owner of any portion of a trust in which he has a reversionary interest in either the corpus or the income therefrom if, as of the inception of that portion of the trust, the interest will or may reasonably be expected to take effect in possession or enjoyment within 10 years commencing with the date of the transfer of that portion of the trust.

We, however, interpret the reference to section 673 in the excepting clause to section 677 as referring not merely to the ten year period of time during which the grantor of a trust may not have an existing exercisable power to affect the distribution of trust income but also to the income received by the trust during that ten year period. Thus, we do not agree with taxpayers that a grantor of a trust is entitled to the benefits of the excepting clause of section 677 as long as he may not during the initial ten year period of the trust affect the disposition of the trust income even though after ten years and a day the grantor may cause the accumulated trust income to be distributed to himself.

Nor does the last part of the excepting clause, “but the grantor may be treated as the owner after the expiration of the [ten year] period unless the power is relinquished,” compel a contrary interpretation. That part of the excepting clause provides only that subsection 677(a) does not apply to powers the exercise of which can affect the beneficial enjoyment of trust income received only after ten years. This provision was intended to insure that a power over trust income received after the initial ten year period would not itself taint the trust income received during the ten year period. It was not intended to exempt a grantor from taxation on trust income received during the ten year period if after the expiration of that period the grantor has the power to dispose of that very income. S.Rep.No. 1622, 83d Cong., 2d Sess. 371; 3 United States Code Cong. & Admin.News, pp. 4621, 5012 (1954).

Our interpretation of the excepting clause of section 677 is supported by the considered interpretation of the agencies charged with administering the tax laws. Thus, Treas.Reg. § 1.677(a)-l(e), (f) (1965) explains the excepting clause as follows:

(e) The last sentence of section 677(a) provides an exception to the general rule when a discretionary right can only affect the beneficial enjoyment of the income of a trust received after a period of time which is such that a grantor would not be treated as an owner under section 673 if the power were a reversionary interest. See §§ 1.673(a)-! and 1.-673(b)-l. For example, if the ordinary income of a trust is payable to B for 10 years and then in the grantor’s discretion income or corpus may be paid to B or to the grantor, the grant- or is not treated as an owner with respect to ordinary income under section 677 during the first 10 years. He will be treated as an owner under section 677 after the expiration of the 10-year period unless the power is relinquished.
(f) However, if income is accumulated in any taxable year for future distribution to the grantor, section 677(a)(2) treats the grantor as an owner for that taxable year. The exception set forth in the last sentence of section 677(a) does not apply merely because the grantor must await the expiration of a period of time before he can receive or exercise discretion over previously accumidated income of the trust, even though the period is such that the grantor would not be treated as an owner under section 673 if a reversionary interest were involved. Thus, if income (including capital gains) of a trust is to be accumulated for 10 years and then will be, or at the discretion of the grantor may be, distributed to the grantor, the grantor is treated as the owner of the trust from its inception, (emphasis added.)

Moreover, in 1957, the Internal Revenue Service issued a ruling in which it adopted the same interpretation of the excepting clause of section 677 under the following circumstances. The grantor created a trust, irrevocable for 12 years, in which an independent trustee was empowered to expend any and all of the trust principal and income for the education, maintenance and welfare of the beneficiary, the grantor’s child. Any income not expended or distributed could be accumulated or invested by the trustee at his discretion. At the expiration of the trust, the trustee was required to return to the grantor any principal not expended or distributed and to the grantor or the beneficiary any accumulations of income. In that case the grantor-taxpayer also argued that the trust provisions fell within the excepting clause of section 677. However, the IRS found that because the trustee’s power over current income, that is, income accruing to the trust during its 12 year life, might in fact result in the accumulation of income hot for the benefit of the beneficiary but for the benefit of the grantor, the grantor was taxable for trust income received during the 12 year period. The IRS expressed its opinion in the following rule: “where the trustee has a power to withhold distribution of trust income from the beneficiary and accumulate the amount so withheld for ultimate distribution to the grantor or to his estate, the grantor will be treated as the owner of the trust under the provisions of section 677(a)(2) of the Internal Revenue Code of 1954, and the income therefrom will be taxable to him.” Rev.Rul. 363, 1957-2 Cum.Bull. 326, 329.

This Revenue Ruling was relied upon by the court in Humphrey v. United States, 245 F.Supp. 49 (D.Kan.1965), where the court reached the result we reach here in considering the taxability of the grantor of a trust having provisions similar to the trust in this case. There, the grantor-taxpayer created a trust for the benefit of his children, irrevocable for 15 years, in which the trust corpus consisted of the grantor’s one-third interest in a partnership. The trustee, the grantor, his brother and his father, were authorized to invest or accumulate the earnings of the trust. The trust instrument provided that after the expiration of the trust, all trust property remaining and unexpended would at the option of the grantor revert to him. The court found that because the trustees were empowered to accumulate trust income which might, after 15 years, be distributed to the grantor, the grantor should be treated as the owner of the trust from its inception.

We believe that the Code, the regulations and rulings promulgated thereunder, and the court’s decision in Humphrey, supra, require that when a trus-' tee has the power to accumulate trust income during the initial ten years of the trust and this income may thereafter be received by the grantor, the grantor may not avail himself of the excepting clause of section 677.

Accordingly, the taxpayers in this case are subject to the general rule of section 677(a) unless the trustee is an adverse party within the meaning of section 672(a) of the Code, 26 U.S.C. § 672(a) (1967). Section 672 defines an adverse party as “any person having a substantial beneficial interest in the trust which would be adversely affected by the exercise or nonexercise of the power which he possesses respecting the trust. . . .” Section 672(a), on its face, defines an adverse party as a person having a beneficial interest in the trust, that is, a beneficiary of the trust. In this case, the Provident Bank is not a beneficiary and is not, therefore, an adverse party. This conclusion is reinforced by the Treasury Department’s explanation of this term:

Under section 672(a) an adverse party is defined as any person having a substantial beneficial interest in a trust which would be adversely affected by the exercise or nonexercise of a power which he possesses respecting the trust. A trustee is not an adverse party merely because of his interest as trustee. A person having a general power of appointment over the trust property is deemed to have a beneficial interest in the trust. An interest is a substantial interest if its value in relation to the total value of the property subject to the power is not insignificant. (emphasis added).

Treas.Reg. 1.672(a)-(l) (1956).

We, therefore, reject taxpayers’ argument that a trustee who is independent of the grantor of a trust may properly be considered an adverse party because he is required by law to act solely in the interest of the beneficiaries of the trust. Both the language of the statute requiring an adverse party to have a beneficial interest in the trust and the Treasury Department’s reasonable interpretation of this definition that a trustee, qua trustee, is not an adverse party preclude placing such a gloss on the statute.

Therefore, because the Provident Bank, as trustee, is not an adverse party and because under the terms of the trust it may accumulate trust income during the initial ten years of the trust for possible future distribution to the grantors without the consent of the beneficiaries, we determine that the taxable trust income is properly includible in taxpayers’ income.

Reversed and remanded for proceedings not inconsistent with this opinion.

      . The trust in this case is similar to a “Clifford” trust, a designation derived from the United States Supreme Court’s decision in Helvering v. Clifford, 309 U.S. 331, 60 S. Ct. 554, 84 L.Ed. 788 (1940). In that case, • the grantor acted as trustee of a trust, created for the benefit of his wife. The present sections of the Internal Revenue Code, 26 U.S.C. §§ 671-78 (1967) were enacted to overcome the problems and to close the loopholes in the 1939 Code. A basic concern addressed by both the old and new trust taxation provisions is the ability of one taxable unit, for example, a family, to multiply itself into several taxable units by the creation of trusts.

      . The district court apparently misunderstood the provisions of the trust instrument. Thus, the court stated, in distinguishing Humphrey v. C. I. R., 39 T.C. 199 (1962), that “[t]he clear language and intent of sec.tion 2 of the trust agreement is for the trustee to accumulate the income of the trust for the benefit of the beneficiaries and to distribute such accumulated income to the beneficiaries upon their reaching a certain age.” Duffy v. United States, 343 F.Supp. 4, 8 (1972). If the trust instrument had provided that all accumulated income must. be distributed to the beneficiaries, the trust income would not have been includible in the taxpayers’ income.

      . The Treasury Regulation also provides the following examples to illustrate the application of Section 677(a) :

        Example (1). G creates an irrevocable trust which provides that the ordinary income is to be payable to himself for life and that on his death the corpus shall be distributed to a designated charity. Except for the right to receive income, G retains no right or power which would cause him to be treated as an owner under sections 671 through 677. Under the applicable local law capital gains must be applied to corpus. During the taxable year 1955 the trust has the following items of gross income and deductions :
      Dividends ...................... $5,000
      Capital gain.................... 1,000
      Expenses allocable to income .... 200
      Expenses allocable to corpus .... 100
      Since G has a right to receive income he is treated as an owner of a portion of the trust under section 677. Accordingly, he should include the $5,000 of dividends, $200 income expense, and $100 corpus expense in the computation of his taxable income for 1955. He should not include the $1,000 capital gain since that is not attributable to the portion of the trust that he owns. See § 1.671-3. The tax consequences of the capital gain are governed by the provisions of [subparts A, B, C, and D (section 641 and following), part I, subchapter J, chapter 1 of the Code], Had the trust sustained a capital loss in any amount the loss would likewise not be included in the computation of G’s taxable income, but would also be governed by the provisions of [such subparts].

        Example (2). G creates a trust whose ordinary income is payable to his adult son. Ten years from the date of transfer or on the death of his son, whichever is earlier, corpus is to revert to G. In addition, G retains a discretionary right to receive $5,000 of ordinary income each year. (Absent the exercise of this right all the ordinary income is to be distributed to his son.) G retains no other right or power which would cause him to be treated as an owner under subpart E [(section 671 and following), of such part I]. Under the terms of the trust instrument and applicable local law capital gains must be applied to corpus. During the taxable year 1955 the trust had the following items of income and deductions:
      Dividends ...................... $10,000
      Capital gain ................... 2,000
      Expenses allocable to income .... 400
      Expenses allocable to corpus..... 200
      Since the capital gain is held or accumulated for future distributions to G, he is treated under section 677(a)(2) as an owner of a portion of the trust to which the gain is attributable. Therefore, he must include the capital gain in the computation of his taxable income. (Had the trust sustained a capital loss in any amount, G would likewise include that loss in the computation of his taxable income.) In addition, because of G’s discretionary right (whether exercised or not) he is treated as the owner of a portion of the trust which will permit a distribution of income to him of $5,000. Accordingly, G includes dividends of $5,208.33 and income expenses of $208.33 in computing his taxable income, determined in the following manner:
      Total dividends .............. $10,000.00
      Less: Expenses allocable to income ...................... 400.00
      Distributable income of the trust................... 9,600.00
      Portion of dividends attributable to G (5,000/9,600 X $10,000) 5,208.33
      Portion of income expenses attributable to G (5,000/9,600 X $400) ..................... . 208.33
      Amount of income subject to discretionary right ...... 5,000.00
      In accordance with [paragraph (c) of § 1.-671-3], G also takes into account $104.17 (5,000/9,600 X $200) of corpus expenses in computing his tax liability. The portion of the dividends and expenses of the trust not attributable to G are governed by the provisions of [subparts A through D],

      . This case is substantially the same as Humphrey v. C. I. R., note 2, supra, discussed by the district court, involving identical trusts created by one Humphrey brother in the one case, and the other Humphrey brother in the other.


author: JOHN R. BROWN, Chief Judge:

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. BIRDSALL CONSTRUCTION COMPANY, Respondent.
    No. 73-1412
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Nov. 20, 1973.

      Elliott Moore, Deputy Associate Gen. Counsel, N. L. R. B., Washington, D. C., Harold A. Boire, Director, Region 12, N. L. R. B., Tampa, Fla., for petitioner.
    Alan A. Bruckner, Richard I. Manas, Miami, Fla., Allan M. Elster, North Miami Beach, Fla., for respondent.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   JOHN R. BROWN, Chief Judge:

The Board found that Employer, Bird-sall Construction Company, committed an unfair labor practice in violation of 8(a)(1), NLRA, 29.U.S.C.A. § 158(a), ordered Employer to “cease and desist from coercively interrogating employees about their union membership, views or sympathies”, set aside a representation election in which the employees had rejected local 1680, International Longshoreman's Association’s bid to become the collective bargaining agent of the employees and ordered that a new election be held. Employer petitions us to set aside the Board order. We enforce.

In March 1971 a union representation election was held in Employer’s plant in Riviera Beach, Florida. Prior to the election, John Birdsall, III, vice-president of Employer, made two speeches to the employees. Birdsall delivered the first speech extemporaneously and read the second speech verbatim from a carefully prepared text which had been edited by the company’s attorney. The Administrative Law Judge found that the two speeches were substantially similar. In the second speech, Birdsall pointed out that a large amount of the company’s business came through the ports of Miami and Ft. Lauderdale, that Birdsall operated a trucking service to carry this freight between Riviera Beach and these ports, that the company was in competition with shippers at these ports who did not incur this extra transportation expense, and that the company was able to compete with these unionized firms because it did not incur the added cost of an ILA contract. Birdsall cautioned the employees that if ILA won the representation election, the company would also incur the additional cost of the union contract and would have to seriously consider moving its operation to Miami or Ft. Lauderdale in order to remain competitive. Birdsall also warned the employees of the possibility of lengthy strikes, the employer’s right to replace economic strikers, and of the union referral system all of which could have an adverse effect on the well being of the employees in the event that the union were to win the election. These warnings were all carefully couched in conjectural language.

Birdsall and four employees testified before the Administrative Law Judge concerning the content of private conversations between Birdsall and the employees preceding, in between and subsequent to the speeches. There were substantial differences between Birdsall’s recollection of these conversations as compared with the recollections of the four employees. Birdsall asserted that he had asked the employees whether they had any questions concerning his speech. He also admitted asking two employees whether they understood the implications of the upcoming election, and asking one whether he had ever belonged to a union, whether he knew what it meant to belong to a union and then repeated the warning previously made in his speeches regarding the possibility that unionization, would cause the company to relocate.

On the other hand, all four employees testified that Birdsall had told them that if the union won the election, the company would move. Three of the employees testified that Birdsall asked them how they felt about the union, while the fourth testified that Birdsall asked him what he knew about the union. One employee testified that Bird-sail asked him whether he would be able to move to Miami and another testified that Birdsall asked him whether he belonged to a union. The Administrative Law Judge found that Birdsall’s statements in these private conversations concerning the necessity of moving to Miami, while probably not stated as strongly as the employees remembered them to have been, were no doubt less guarded than in the speeches. He also found that the employees’ testimony detailing BirdsalPs interrogation concerning the union sympathies of the employees was “substantially as they testified.” Birdsall admitted speaking privately with approximately 20 employees in “the same vein” as his conversations with the four who testified at the hearing.

On March 19 the election was held and the employees rejected ILA by a vote of 20 to 14. An unfair labor practice case and a representation case concerning the pre-election conduct of the employer were consolidated and heard by an Administrative Law Judge. He found that the employer violated, interfered with, restrained, and coerced the employees in the exercise of their § 7 rights in violation of § 8(a)(1) of the Act by means of veiled threats to relocate the company’s operations in the event that the union won the election in Birdsall’s speeches and by Birdsall’s coercive interrogation of the employees regarding their union sympathies. He further found that the veiled threats to move, coupled with suggestions that the company might enter into a hiring arrangement with the union which would be unfavorable to the company’s employees, if the union won the election, interfered with the employees exercise of a free and untrammeled choice in the election. On these findings a cease and desist order was proposed.

The Board set aside the Administrative Law Judge’s finding regarding veiled threats in Birdsall’s speeches, holding instead that the speeches were within the area of employer free speech protected by § 8(c) of the Act. The Board also set aside the finding concerning the threat of a discriminatory union referral system on the ground that it was not properly raised in the hearing. The Board sustained the holding that the interrogations pertaining to union sympathies constituted an unfair labor practice and then ordered that the election be set aside because “conduct violative of § 8(a)(1) a fortiori interferes with the exercise of a free and untrammeled choice in an election. Dal-Tex Optical Company, 137 NLRB 1782.”

In view of the totality of circumstances surrounding the systematic interrogations of employees regarding their union sympathies the'Board could properly conclude that the employer violated § 8(a)(1) of the Act. See NLRB v. Cameo Inc., 5 Cir., 1965, 340 F.2d 803, 804, cert, denied, 382 U.S. 926, 86 S.Ct. 313, 15 L.Ed.2d 339.

The time, place and manner of the interrogations enhanced the possibility of employee coercion. The interrogation was conducted by John Birdsall, III, a vice-president of the company, whose strong anti-union views were well known and frequently voiced. The interrogation took place with no one present other than Birdsall and each individual employee. Birdsall called three of the four employees who testified away from their work to speak with them. No assurances against reprisals were ever given to any of the interrogated employees. There was ample evidence to sustain the Board’s finding that the interrogations in the light of the total circumstances could be expected to bring about fear of reprisals. See, NLRB v. Universal Cigar Corp., 5 Cir., 1970, 425 F.2d 867, cert, denied, 400 U.S. 904, 91 S.Ct. 142, 27 L.Ed.2d 140 (1970); NLRB v. Sun-nyland Packing Company, 5 Cir., 1966, 369 F.2d 787. The weighing process of NLRB v. Varo, Inc., 5 Cir., 1970, 425 F. 2d 293, fully justified this conclusion.

All four employees who testified asserted that Birdsall definitely stated that the company would move to Miami if the union won the election. The Board found that the carefully worded predictions in Birdsall’s speeches pertaining to the necessity of relocating the plant were protected under § 8(c). But his talk was not limited, to the speeches. The Board at least inferentially credited the findings that Birdsall’s statements during the private interrogations regarding the potentiality of relocation were “in terms less guarded than those embodied in the carefully phrased and edited speech which he read.” This Court has held that interrogation accompanied by veiled threats that the plant would close down before it would operate under a union contract violated § 8(a)(1). NLRB v. Standard Forge and Axle Company, 5 Cir., 1969, 420 F.2d 508.

There is no evidence of discrimination against union members or anti-union hostility in terms of previous unfair labor practices in the plant. Nevertheless Birdsall’s speeches and his interrogation clearly conveyed the impression to the employees that the company was vigorously opposed to the union. To this extent they may be considered as “background” of employer hostility toward the union. See Hendrix Manufacturing Company v. NLRB, 5 Cir., 1963, 321 F.2d 100; NLRB v. Griggs, 5 Cir., 1962, 307 F.2d 275. The aggregation of these circumstances supports the Board’s finding of an 8(a)(1) violation and the Board’s requiring a new election.

We find no merit in appellant’s contention that the Administrative Law Judge should have dismissed the complaint due to General Counsel’s failure to call a witness who had submitted an affidavit to the Regional Director during the investigation of the case.

The NLRB Public Field Manual which provides that Regional Counsel should assure that evidence adduced during an RC investigation is included in the record is not a rule or regulation promulgated by the Board and binding on the Administrative Law Judge but rather a set of procedural guidelines designed to aid the Regional Counsel in preparing and conducting the case. It had no relevance to the unfair labor practice hearing.

Enforced.

      . There is no merit to Employer’s contention .that the Administrative Law judge did not make the requisite findings of fact on the issue of credibility to support his decision.

      . NLRB Public Field Manual § 11424.4 (Rev.Ed.1971).


author: PER CURIAM:

text:
    NMS INDUSTRIES, INC., d/b/a J. A. Olson Company, Plaintiff-Appellee, v. PREMIUM CORPORATION OF AMERICA, INC., et al., Defendants, Gold Crown Stamp Company, Inc., Defendant-Appellant.
    No. 73-1869
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Nov. 21, 1973.
    Rehearing and Rehearing En Banc Denied Jan. 10, 1974.
    Hardy Lott, Porter W. Peteet, William H. Roberson, Greenwood, Miss., for defendant-appellant.
    William Liston, Winona, Miss., James E. Upshaw, Greenwood, Miss., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir., 1970, 431 F.2d 409, Part I.

   PER CURIAM:

In the second appeal of this diversity case, we again find the defendant-principal attempting to disavow the acts of its agent for which two juries have found it to be liable. In the previous appeal of the case, we reversed a jury verdict for the supplier, finding the District Court’s instructions on the question of ratification by the principal of the acts of the agent were erroneous. The jury, having again determined that the principal was the author of its own dilemma, rendered a verdict for the supplier, apparently finding that the principal had cloaked the agent with the convincing appearance of authority. Now finding itself in the same corner, the principal attempts to extract itself on the same grounds as before. We find there is nothing new in this second appeal of the case, and accordingly we must affirm the trial court’s judgment.

The First Trial

Cutting through the broad spectrum of the many issues in this case as it was originally tried — and following the first appeal, as it was re-tried — the issues come down to a fairly simple question. The record indicates that at the time relevant to the questions under consideration, Edwards was an employee of the Gold Crown Stamp Company, maintaining his office at Shreveport, Louisiana. Edwards’ duty was to investigate, initiate, and develop promotions at supermarkets in various southern states for Gold Crown, a trading stamp company. Prior to the events in question, Gold Crown was acquired by Gold Bond Stamp Company, which in turn was owned by Premium Corporation of America of Minneapolis, Minnesota. Following this change in the chain of command, Edwards began reporting and taking instructions from Eichenberg, a regional supervisor for Gold Bond. Edwards continued to maintain his office in the Gold Crown building at Shreveport, Louisiana, continued to use stationery bearing the corporate name of Gold Crown and business cards with his name and that of Gold Crown, and retained various other indicia of his continued affiliation with the Gold Crown Company.

In January of 1969, only about three months after the acquisition of Gold Crown by Gold Bond, Edwards began to develop the idea of an art print promotion for Gold Crown, which would be handled through many of the same supermarkets where the trading stamps were distributed to the public as premiums for their grocery purchases. The concept was that inexpensive art prints were to be offered as a bonus to shoppers who purchased a certain amount at the particular store. The frames would also be sold at a small price to accompany the prints.

We need not set out all the details — a brief description will suffice. In the early weeks of 1969, Edwards made several trips to the Olson Company plant at •Winona, Mississippi. Letters were exchanged between Edwards and his superior, Eichenberg, regarding the feasibility of the proposed promotion. At some point during this period of time, some understanding, however tenuous and however unclear, was reached between Edwards and Eichenberg regarding the purchase of some quantity of the prints and frames. Whatever this understanding was, and to what quantity and what types of art prints and frames it may have extended is both unclear and disputed. But one thing remains clear. As Edwards testified, he believed that he had the authority to place an order for some quantity of the prints and frames. Nowhere is the contention made that Edwards intended to embarrass his employer by deliberately exceeding or misinterpreting his authority regarding the art print promotion. Whatever he may have understood his authority to be, the fact remains that Edwards did place orders with Olson Company for a rather large quantity of the art prints and frames. There is some indication that Eichenberg intended that perhaps 5,000 prints of each of several types should be ordered or perhaps only 5,000 altogether. Edwards ordered 5,000 prints of each of 128 different types, for a total of 640,000 individual prints. He further ordered some 48,000 frames, the total price of all being approximately $160,000. Subsequently, when the invoices began to be received at the company’s main office in Minneapolis, and there were discovered to be no supporting purchase orders authorized pursuant to established company procedures, a company auditor questioned the transaction and brought the entire dealings to light. At this point, Gold Bond and the parent company Premium Corporation, immediately contacted Olson and attempted to disavow the order except to the extent of the prints already delivered in the amount of approximately $16,000. Having already made- substantial commitments regarding the prints and frames, Olson rejected the disavowal of the majority of the contract and the lawsuit arose.

The first trial of the case resulted in a jury verdict for Olson Company for the entire amount of the contract. On that first trial, one of the theories upon which Olson asserted the liability of Gold Crown was that of ratification by the principal of the acts of the agent. In stating the issues to the jury on the first trial, the Court made a subtle, but nonetheless unmistakable error.

Finding that “ratification by the principal of the acts of his agent must be based on full, actual knowledge of the facts of the transaction” we held that the instruction was erroneous to the extent that it permitted the jury to find Gold Crown liable on the basis of ratification where it should have known of the facts of the transaction between the agent and Olson Company. Accordingly, we reversed and remanded for a new trial with proper instructions. On the second trial the issue of ratification was dropped altogether and Olson proceeded only on the theories of actual or apparent authority of the agent. Even without the issue of ratification as a basis for liability, the jury was still inclined to find favorably for the plaintiff Olson Company.

Instructions On The Second Trial

On this second appeal we are again asked to review the instructions, Gold Crown contending that the trial court erred in instructing the jury that it could return a verdict on the theory of apparent authority and that the trial court should have granted a peremptory instruction on the question of liability. We easily dispose of these objections. When we sift through the contentions, it becomes clear that what Gold Crown now seeks is a directed verdict on the basic question of Edwards’ apparent authority to bind the company in this transaction.

More than merely objecting to the form of the instruction, what Gold Crown actually contends is that the instruction - on apparent authority should not have been given at all. Gold Crown contends that the trial should have been only on the issue of the actual authority ' of Edwards to enter into the transaction and since it is undisputed that such actual authority did not exist at least so far as the company itself' was concerned, it was entitled to a directed verdict. We have carefully reviewed the trial court’s instructions to the jury. They are both clear and unambiguous, and in accord with accepted principles of Mississippi law which recognize the doctrine of apparent authority. See Tarver v. J. W. Sanders Cotton Mill, 187 Miss. 111, 192 So. 17 (1939); Steen v. Andrews, 223 Miss. 694, 78 So.2d 881 (1955); McPherson v. McLendon, 221 So.2d 75 (Miss.1969); Union Compress & Warehouse Co. v. Mabus, 217 So.2d 23 (Miss.1968); American Casualty Co. v. Whitehead, 206 So.2d 838 (Miss.1968). And, having examined the record, we find that there was more than sufficient evidence to support the plaintiff’s position. The testimony tended to show that Edwards did, in fact, use business cards, stationery and purchase orders (which bore no indication of a dollar-amount limitation), with the Gold Crown ensignia, that he did have an office maintained by Gold Crown, and that he apparently had made some purchases of a similar nature for the company previously. This was surely enough to warrant the denial, in the first instance, of a directed verdict. See Boeing Co. v. Shipman, 5 Cir., 1969, 411 F.2d 365. It was further sufficient evidence upon which the jury could have inferred that Edwards was cloaked withrthe authority to make such a purchase for Gold Crown. Whether, as Gold Crown asserts, Olson Company should have inquired as to Edwards’ authority, was a factual issue for the jury to decide. The factual issues now are twice resolved against Gold Crown.

It is clear that there was not only sufficient evidence in the record to warrant submission of the case to the jury, but that there was also sufficient evidence to justify the jury’s verdict. Thus, it only remains for us to recognize the validity of the verdict of the second, and properly instructed jury. See Oil Screw Noah’s Ark v. Bentley & Felton Corp., 5 Cir., 1963, 322 F.2d 3, 1963 A.M.C. 271 (second appeal).

Affirmed.

      . NMS Industries, Inc. v. Premium Corporation of America, Inc., 5 Cir., 1971, 451 F.2d 542.

      . Olson itself did not manufacture the art prints. It ordered them from the Donald Art Company of New York and contracted for the necessary preparation of the prints for mounting. Olson was to manufacture the frames that would accompany the prints but which would be sold separately.

      . We have gleaned from a footnote in the prior report of the case, see note 1, supra, the substance of the erroneous instruction which the District Judge himself acknowledged was faulty. That colloquy sets out what the instruction was and the three requirements tiiat the Court instructed the jury to find before it could ascertain a ratification by the principal. Despite the determination that the instruction had been erroneous, the Court declined to grant a motion for a new trial.

      . The record reveals undisputed testimony that a $50,000 limitation on expenditures existed, except as approved by the Executive Committee of the parent company. Olson Company contended that it was never informed of this secret limitation on Edwards’ authority.

      . It would serve no purpose to set out at length the oral transcript of the instructions. It suffices that the District Judge was cognizant of the prior reversal of the case on the basis of the erroneous instructions. He was therefore quite careful to avoid any repetition of the error. Trial record at 227-28. No one questions that this was the law of the case both on the law and measuring the adequacy of the evidence. See Lincoln Nat’l Life Ins. Co. v. Roosth, 5 Cir., 1962, 306 F.2d 110 (en banc).


author: LUMBARD, Circuit Judge: TIMBERS, Circuit Judge

text:
    UNITED STATES of America, Appellant, v. Robert VIGO and Carmen Pagan, Defendants-Appellees.
    No. 918, Docket 73-1133.
    United States Court of Appeals, Second Circuit.
    Argued June 26, 1973.
    Decided Sept. 11, 1973.
    Timbers, Circuit Judge, filed opinion concurring in part and dissenting in part.

      Lawrence S. Feld, Asst. U. S. Atty. (Whitney North Seymour, Jr., U. S. Atty., S. D. N. Y., and John W. Nields, Jr., Asst. U. S. Atty., on the brief), for appellant.
    Russo Dubin & Goldberg, New York City, on the brief, for defendants-appel-lees.
    Before LUMBARD, HAYS and TIMBERS, Circuit Judges.
   LUMBARD, Circuit Judge:

The government appeals from an order of the Southern District, entered’ January 18, 1973, which suppressed certain evidence relating to the prosecution of Robert Yigo and Carmen Pagan, who were indicted on August 11, 1972, for possession of heroin with intent to distribute it, in’ violation of 21 U.S.C. §§ 812, 841(a)(1), and 841(b)(1)(A), and for conspiracy to violate these sections (18 U.S.C. § 2). Prior to trial defendants moved to suppress tangible evidence obtained during the search of the automobile in which they were riding at the time of their arrest, to suppress other tangible evidence obtained from defendant Pagan’s pocketbook, and also to suppress oral statements made by both defendants shortly after their arrest. The district court, after a hearing, denied the motion with respect to the evidence seized from the automobile, but granted it with respect to the evidence seized from Miss Pagan’s purse and with respect to the oral statements, see-357 F. Supp. 1360 (S.D.N.Y. 1972). The government does not challenge the suppression of Miss Pagan’s statement, but pursuant to 18 U.S.C. § 3731, it has appealed the order to the extent that it suppressed the evidence seized from Miss Pagan and Vigo’s oral statement.

We reverse, and hold that both defendant Vigo’s oral statement and the evidence seized from Miss Pagan are properly admissible.

From the evidence at the hearing, the district court found the following facts. On April 11, 1972, Thomas Smith, a special agent with the Federal Bureau of Narcotics and Dangerous Drugs (BNDD), received information from an unidentified informant that Vigo had offered to sell him up to one kilogram of cocaine. The informant reported that he was to meet with Vigo the following day at Amigo’s Bar, located at 8th Street and Avenue D in Manhattan. Smith instructed the informant to contact Vigo again and attempt to arrange for the delivery of the cocaine to take place at that meeting.

On April 12, 1972, the informant told Smith that he had contacted Vigo and that Vigo had agreed to deliver the cocaine to him later that day for an undetermined price. Smith and the informant decided that the latter would telephone Smith or other BNDD agents when he was with Vigo, that he would inform Vigo he was calling his customers for the cocaine, and that he would try to arrange a meeting place where completion of the transaction could take place. The informant advised Smith that Vigo would be driving to Amigo’s Bar in a 1965 Lincoln Continental with New York license plates. He also gave Smith a description of Vigo.

On the evening of April 12th, BNDD agents (not including Agent Smith) established surveillance of Amigo’s Bar. Members of the surveillance team observed Vigo drive up to the bar in the automobile described by the informant, and they watched Vigo enter the bar at about 9:00 p.m. At 9:45 p.m. Smith received a telephone call at his office from the informant, who advised him that he was calling from the bar and that he was with Vigo and an unidentified customer of Vigo’s. The informant reported that Vigo was having difficulty with the customer regarding some heroin with which the customer was dissatisfied, and that Vigo was unwilling to conduct further business until the other customer was satisfied. The informant asked Smith whether he would be interested in the heroin which the other customer was desirous of returning, or whether the purchase of the cocaine, as originally contemplated, should be pursued. Smith then heard a man in the background say, “I paid $8000. Tell him he can have it for that.” The informant stated that the voice was that of Vigo’s customer and that the customer had just said the package of heroin was “not good” but he would (in the informant’s words) “let you have it for the price he paid for it, just to get his money back.” Smith told the informant that the agents would not purchase the heroin package, that he should continue to negotiate for the cocaine, and that he should attempt to discover what Vigo intended to do with the heroin.

At 11:00 p.m. the informant again telephoned Agent Smith and told him that Vigo intended to take the package of heroin back to his supplier and that he would be leaving Amigo’s Bar shortly. He also said that he believed the heroin was located in the trunk of Vi-go’s car. Informed of this, Smith and another agent left his office and joined the surveillance team. Vigo was observed to leave the bar at 11:45 p.m., accompanied by two unidentified men. The members of the surveillance team followed Vigo and his companions to East 5th Street and Avenue D in Manhattan, where Vigo entered a housing project and returned with Miss Pagan.

The agents subsequently followed the car to the Bronx, where Vigo and his companions stopped at several bars. It shortly became apparent that Vigo was not going to any particular destination, and consequently, at roughly 1:00 a.m. on the morning of the 13th, the agents stopped Vigo’s car in the vicinity of 163rd Street and Third Avenue. All four occupants were removed from the car, were told that they were being arrested, and were advised of the offense for which they were being arrested.

Six agents participated in the arrest,, and as a result the events described below happened nearly simultaneously. The agents frisked Vigo and found a loaded .32 caliber revolver tucked in his belt. They then took Miss Pagan’s purse (they did not search her person) and searched it, discovering, among other things, some notes thought by the agents to contain a formula for cutting narcotics, a scale, and some marihuana. They also searched Vigo’s car, and in the trunk Agent Smith discovered a briefcase containing several packages of heroin as well as narcotics paraphernalia, including spoons, rubber bands, a strainer, and a scale.

After the search of the car, Agent Smith advised Vigo that “. . . he had a right to have an attorney, had a right not to say anything at all, that he had a right to have an attorney present during anything we might discuss, if he wanted to discuss anything, and advised him he had the right to have a court-appointed attorney if he so desired and could not afford his own attorney.” Smith could not recall that he had in-fornied Vigo that anything he said could later be used against him. Vigo was asked whether he understood what he had been told, and in response Vigo expressed a willingness to talk. He admitted that one of the packages contained heroin and that it belonged to him. Furthermore, in what appears to have been an effort to protect his companions, he stated that although Miss Pagan knew there was heroin in the ear, she was not responsible for it, and that the other two occupants of the car did not even have knowledge of it.

We hold that the search of Miss Pagan’s purse was reasonable and proper as a normal protective measure on the part of law enforcement authorities. A loaded concealed gun had just been found on her companion Vigo. A lady’s handbag is the most likely place for a woman similarly to conceal a weapon. Cf. United States v. Berryhill, 445 F.2d 1189 (9th Cir. 1971). The search of the handbag took place directly after the defendants had been stopped. The circumstances fall well within the limits of permissible protective search established in Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968). Cf. United States v. Johnson, 467 F.2d 630 (2d Cir. 1972). Nor did the search spill over into an unrelated and therefore unreasonable search for evidence. The agents did not search Miss Pagan’s person. They did no more than ascertain the contents of the place where she would have been most likely to hide a weapon. Evidence of crime discovered by virtue of such a limited investigation is not the fruit of an unreasonable search and is admissible. See United States v. Del Toro, 464 F.2d 520 (2d Cir. 1972).

Defendant Vigo’s oral admissions made at the time of his arrest are also admissible. In Miranda v. Arizona, 384 U.S. 436, at 478, 86 S.Ct. 1602, at 1630, 16 L.Ed.2d 694 (1966), the Supreme Court stated:

In dealing with statements obtained through interrogation, we do not purport to find all confessions inadmissible. Confessions remain a proper element in law enforcement. Any statement given freely and voluntarily without any compelling influences is, of course, admissible in evidence. The fundamental import of the privilege [against self-incrimination] while an individual is in custody is not whether he is allowed to talk to the police without the benefit of warnings and counsel, but whether he can be interrogated. There is no requirement that police stop a person who enters a police station and states that he wishes to confess to a crime [footnote omitted], or a person who calls the police to offer a confession or any other statement he desires to make. Volunteered statements of any kind are not barred by the Fifth Amendment and their admissibility is not affected by our holding today.

Vigo’s statements were voluntary within the meaning of this language, and their admission into evidence did not violate the Fifth Amendment privilege against self-incrimination. Nor does it contravene the purpose behind Miranda of curtailing illegal custodial interrogation by law enforcement authorities. The statements were made immediately after Vi-go’s arrest, at the scene of the arrest and before any systematic inquiry was begun by the arresting agents. None of the inherently compelling factors of station-house interrogation were present. The arresting agents did not coerce or deceive him. He was aware of the illegality of his acts, and had in addition been given three of the four warnings required by Miranda. He spoke in an effort to protect his companions, particularly Miss Pagan, and with evident knowledge of the meaning and consequences of what he said. Under these circumstances, the admissibility of his statements was not precluded either by the Fifth Amendment or by Miranda. Stone v. United States, 385 F.2d 713 (10th Cir. 1967), cert, den., 391 U.S. 966, 88 S.Ct. 2038, 20 L.Ed.2d 880 (1968); Pitman v. United States, 380 F.2d 368 (9th Cir. 1967); Parson v. United States, 387 F.2d 944 (10th Cir. 1968); Sablowski v. United States, 403 F.2d 347 (10th Cir. 1968); United States v. Tafoya, 459 F.2d 424 (10th Cir. 1972); United States v. Cruz, 265 F.Supp. 15 (W.D. Tex., 1967); People v. Gant, 264 Cal.App.2d 420, 70 Cal.Rptr. 801 (1968); Cameron v. State, 214 So. 2d 370 (Fla.D.C.App. 1968). See also People v. Dorado, 62 Cal.2d 338, 354, 42 Cal.Rptr. 169, 179, 398 P.2d 361, 371 (1965).

Inasmuch as we hold defendant Vigo’s statements voluntary and admissible under the requirements of Miranda v. Arizona, supra, they are similarly voluntary and admissible under the requirements of 18 U.S.C. § 3501. It is therefore unnecessary to reach the question of the application and constitutionality of § 3501.

The order of the district court suppressing the evidence seized from defendant Pagan’s purse and suppressing the oral statements of defendant Vigo is accordingly reversed.

TIMBERS, Circuit Judge

(concurring in part and dissenting in part):

I concur in the judgment of the Court and in the majority opinion to the extent that they reverse that part of the order of the district court which suppressed the evidence seized from defendant Pagan’s purse.

With deference, however, I respectfully dissent from the reversal of that part of the order of the district court which suppressed the oral statements of defendant Vigo._

The majority holds that Vigo’s incul-patory statements are admissible. In holding these statements to have been “voluntary” and therefore admissible without the necessity of finding an “intelligent waiver”, the majority, it seems to me, has unjustifiably ignored the rationale and holding of Miranda v. Arizona, 384 U.S. 436 (1966). The instant case is strikingly different from those which have admitted voluntary exclamations. To hold Vigo’s inculpatory statements to have been “voluntary” so that Miranda warnings need not have been given, in effect is to return to the pre-Miranda test of voluntariness and to validate, sub silentio, Title II of the Omnibus Crime Control and Safe Streets Act of 1968, 18 U.S.C. § 3501 (1970).

In Miranda, the Supreme Court held that persons in police custody are subject to a form of “compulsion inherent in custodial surroundings”. 384 U.S. at 458. In order to protect the individual against this inherent compulsion, and to safeguard his right “to remain silent unless he eho.oses to speak in the unfettered exercise of his own will”, id. at 460, the Court held that individuals in custody must be made aware of their “right of silence”, id. at 444, and must be given warnings prior to custodial interrogation. One of the required warnings — not given to Vigo — is that the person to be questioned be told that anything said “can and will be used against the individual in court”. Id. at 469. The Supreme Court emphasized the importance of this specific warning:

“This warning is needed in order to make him aware not only of the privilege [against self-incrimination], but also of the consequences of foregoing it. It is only through an awareness of these consequences that there can be any assurance of real understanding and intelligent exercise of the privilege. Moreover, this warning may serve to make the individual more acutely aware that he is faced with a phase of the adversary system — that he is not in the presence of persons acting solely in his interest.” 384 U.S. at 469.

True, as the majority in the instant case correctly recognizes, a determination under Miranda of whether an individual “knowingly and intelligently waived his privilege against self-inerimi-nation”, 384 U.S. at 475, is not a precondition to the admission of an inculpatory statement if it can be initially shown that the Miranda warnings need not have been given. The types of cases envisaged by the Supreme Court as not requiring Miranda warnings are those involving an absence of questioning which result in “volunteered statements”, such as where an individual “enters a police station and states that he wishes to confess to a crime”. Id. at 478. Thus, in United States v. Tafoya, 459 F.2d 424 (10 Cir. 1972), although the Miranda warnings were not given and there was no intelligent waiver, an inculpatory statement was properly admitted since it was “obviously not the product of interrogation but was simply a spontaneous utterance volunteered by the defendant”. 459 F.2d at 427. Similarly, other cases have recognized that incriminatory statements were admissible without the necessity of finding a Miranda waiver where it was found that such admissions were “spontaneous”, were made “before any questions had been asked”, were “entirely voluntary”, Pitman v. United States, 380 F.2d 368, 370 (9 Cir. 1967), and, “if the arresting officer has not attempted or is not attempting to have the arrested person incriminate himself”. United States v. Cruz, 265 F.Supp. 15, 20 (W.D.Tex.1967). See Parson v. United States, 387 F.2d 944 (10 Cir. 1968).

Here, it cannot be said that Vigo’s statements to Special Agent Smith, made after Vigo was placed in custody, were spontaneous or were made before questioning began. Vigo’s inculpatory statements were made during a discussion in response to questions by Smith which sought to elicit such admissions. The Miranda requirements therefore are applicable. As the district court found, 357 F.Supp. at 1366, since Vigo was not warned that anything he said could and would be used against him, the government has not satisfied its “heavy burden . . . [of demonstrating] that the defendant knowingly and intelligently waived his privilege against self-incrimination” (quoting from Miranda, 384 U.S. at 475).

I think the majority also has erred in holding that Vigo’s statements were voluntary because “[n]one of the inherently compelling factors of station-house interrogation were [sic] present. The arresting agents did not coerce or deceive him”. Supra at 299. It was precisely this type of determination of voluntariness, required by pre-Miranda law, which Miranda rejected but which was codified in 18 U.S.C. § 3501(b). Furthermore, in holding that Vigo spoke “with evident knowledge of the meaning and consequences of what he said”, supra at 299, the majority seems to me to have rejected the rationale of Miranda and to have embraced the “totality of the circumstances” analysis prescribed by Section 3501(b). The validity of the majority’s criticism of Miranda cannot be gainsaid. It has been as a result of occasional unduly harsh Miranda rulings that this Court previously has interpreted Miranda to avoid having “[t]he criminal . . . . go free because the constable has blundered.” People v. Defore, 242 N.Y. 13, 21 (1926) (Cardozo, J.). See, e.g., United States v. Lamia, 429 F.2d 373 (2 Cir.), cert, denied, 400 U.S. 907 (1970). Dissatisfaction with a controlling Supreme Court decision, however, does not warrant judicial legislation. I am sure that my colleagues do not suggest it does. But their application of Miranda to the facts of the instant case strikes me as coming perilously close to frustrating the rationale of this controlling Supreme Court decision.

I would affirm the district court’s suppression of the oral statements of defendant Vigo.

      . The record reveals that Agent Smith had known the informant since January, 1972. The informant was registered with the Bureau of Narcotics and Dangerous Drugs as a cooperating informant. He had previously provided the Bureau with information in another ease which had resulted in the seizure of a kilogram of heroin and a half kilogram of cocaine and the arrest of one suspect. He had also supplied information concerning other narcotics traffickers which had resulted in the arrest of one other suspect.

      . Neither the transcript of the suppression hearing nor the district court’s Memorandum Opinion on the motion to suppress indicates the exact sequence of events immediately following the arrest. But it is clear that all the events occurred within a very short span of time after the automobile was stopped.

      . Agent Smith testified that among Vigo’s fii words after being taken out of the car were, “I know what you got me for.”

      . Agent Smith testified that, after advising Vigo of some of his constitutional rights, he and Vigo “discussed the package that he had. . . .i. é. [and] also discussed whether or not any of the other people in the car had knowledge. . . . ” Transcript of Suppression Hearing at 14. It is obvious from the testimony of Smith that “a lot of things were said”, id. at 14-15, and that Vigo was being questioned in detail.

      . This is consistent with the government’s position on this appeal. It seeks reversal of the suppression order not on the ground that Miranda has been improperly applied, but rather on the ground that Section 3501 and not Miranda should govern. See Brief of Appellant at 6.

      . Section 3501 provides that any confession is admissible if it is found to be “voluntarily given”. 18 U.S.O. § 3501(a) (1970). The statute further provides that:
      “(b) The trial judge in determining the issue of voluntariness shall take into consideration all the circumstances surrounding the giving of the confession, including (1) the time elapsing between arrest and arraignment of the defendant making the confession, if it was made after arrest and before arraignment, (2) whether such defendant knew the nature of the offense with which lie was charged or of which he was suspected at the time of making the confession, (3) whether or not such defendant was advised or knew that he was not required to make any statement and that any such statement could be used against him, (4) whether or not such defendant had been advised prior to questioning of his right to the assistance of counsel and (5) whether or not such defendant was without the assistance of counsel when questioned and when giving such confession.
      The presence or absence of any of the above-mentioned factors to be taken into consideration by the judge need not be conclusive on the issue of voluntariness of the confession.”

      . The difficult questions of whether Section 3501 was intended to overrule Miranda, and whether it would be constitutional if it did, are not presently before us. Today’s opinions are not addressed to those questions.


text:
    STAUFFER CHEMICAL COMPANY, Plaintiff, v. TUG NEPTUNE, her engines, tackle, apparel, etc., and Arthur Smith Corporation, her owner and operator, and the TUG SHOAT, her engines, tackle, apparel, etc., and Bacon Towing Company, her owner, etc., et al., Defendants-Appellants, Olin Mathieson Chemical Corp., Defendant-Appellee.
    No. 73-2444
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Nov. 13, 1973.
    Thomas A. Brown, Jr., Houston, Tex., for Neptune and Arthur Smith.
    W. Garney Griggs, Houston, Tex., for Shoat & Bacon Towing.
    Robert C. Davee, Ed Bluestein, Jr., Houston, Tex., for Olin Mathieson Chemical.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

       Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty Company of New York et al., 5 Cir. 1970, 431 F.2d 409, Part I.

   PER CURIAM:

This is a dispute among the defendants to determine who is liable to Stauf-fer for the sinking of its barge and the consequent loss of cargo. The barge was damaged in a collision, and the two tug owners, Arthur Smith Corp. and Bacon Towing Co., stipulated mutual fault. The barge at the time of the collision did not appear to be seriously damaged, but that evaluation was disproved by the barge’s sinking during the unloading operation at the Olin Mathieson Terminal.

The district court absolved Olin of any liability for the sinking. The tug owners in this appeal attempt to upset that determination.

■ We are of the firm view that the findings of fact made by the district court are not clearly erroneous, McAllister v. United States, 1954, 348 U.S. 19, 75 S. Ct. 6, 99 L.Ed. 20, and that “the trial judge * * * has fairly weighed the matter and has reached a conclusion which seems substantial and reasonable even though another result might have been achieved either by him or others.” Ohio Barge Lines, Inc. v. Oil Transport Company, 5 Cir. 1960, 280 F.2d 448, 449.

Affirmed.


text:
    In re INTERNATIONAL HOUSE OF PANCAKES FRANCHISE LITIGATION. Robert J. HELFENBEIN and Circle Investments of Missouri, Inc., on behalf of themselves, etc., Plaintiffs-Appellees, v. INTERNATIONAL INDUSTRIES, INC., et al., Defendants-Appellants. Robert J. HELFENBEIN and Crescent Investment of Iowa, Inc., on behalf of themselves, etc., Plaintiffs-Appellees, v. INTERNATIONAL INDUSTRIES, INC., et al., Defendants-Appellants. Joe Jimmie REED, on behalf of himself, etc., Plaintiff-Appellee, and Thomas Lee Simmons, IntervenorPlaintiff-Appellee, v. INTERNATIONAL INDUSTRIES, INC., Defendant-Appellant. Rudolf WETH, on behalf of himself, etc., Plaintiff-Appellee, v. INTERNATIONAL INDUSTRIES, INC., Defendant-Appellant. Richard L. ERICKSON, Plaintiff-Appellee, v. INTERNATIONAL INDUSTRIES, INC., Defendant-Appellant.
    No. 73-1574.
    United States Court of Appeals, Eighth Circuit.
    Nov. 2, 1973.
    Harry L. Gershon, Los Angeles, Cal., and Maurice O’Sullivan and Thomas J. Wheatley, Kansas City, Mo., made appearance for defendants-appellants in this Court.
    Barton P. Cohen, Overland Park, Kan., and Loeb H. Granoff Kansas City, Mo., filed motion of plaintiffs-appellees to affirm.
    Before GIBSON, LAY and STEPHENSON, Circuit Judges.
   SUPPLEMENTAL ORDER OF SUMMARY AFFIRMANCE

This Court, on September 26, 1973, entered our order summarily affirming an order of the District Court for the Western District of Missouri, The Honorable William R. Collinson. The District Court’s order disapproved a proposed settlement agreement between In-ternátional Industries, Inc., the defendant in a multi-district class action suit alleging violations of • the Sherman Anti-Trust Act, and certain of the numerous plaintiffs in the case. The proposed settlement agreement had been actively opposed by a number of the plaintiffs at the hearing on the proposed settlement agreement.

After our order of summary affirmance had been entered, defendant-appellant filed suggestions in opposition to the motion to affirm which had been filed by the plaintiff-appellees in violation of Rule 9(b) of the Rules of the United States Court of Appeals for the Eighth Circuit, in that it was filed prior to the filing of appellant’s brief. However, as our order of September 26, 1973, recites, our action of summary af-firmance was based as well on Rule 9 (a) of the Local Rules, which provides that the Court upon its own motion may summarily affirm when the questions presented do not require further argument.

To insure that the interests of justice have been served in this appeal, we have carefully considered the suggestions filed in opposition to summary affirmance. Upon review of the record and the suggestions, we conclude that there is no clear showing that the trial court was guilty of an abuse of discretion in refusing to approve the proposed settlement. This is the standard of review we apply to an appeal of the approval or disapproval of a proposed settlement. See, United Founders Life Ins. Co. v. Consumers Nat. Life Ins. Co., 447 F.2d 647, 655 (7th Cir. 1971); West Virginia v. Chas. Pfizer & Co., 440 F.2d 1079, 1085 (2d Cir.), cert, denied sub nom., Cotler Drugs Inc. v. Chas. Pfizer & Co., 404 U.S. 871, 92 S.Ct. 81, 30 L. Ed.2d 115 (1971).

In view of the fact that members of the plaintiff class opposed the settlement and that it would continue in effect the very provisions of the franchise agreement challenged as violative of the anti-trust laws, we think Judge Collinson properly exercised his discretion in disapproving the settlement. Our Order of Summary Affirmance filed September 26, 1973, pursuant to Local Rule 9(a) was correct and will not be disturbed.

This supplemental order, after consideration of appellant’s suggestions and contentions, reaffirms our prior order summarily dismissing the appeal and affirming the order of the District Court disapproving the proposed settlement.

      . Rule 9(b) of tlie Local Rules provides in pertinent part:
      The appellee may file a motion for summary disposition of a docketed appeal. * * * A motion to affirm may be based on the ground that the questions presented for review are so unsubstantial as not to need further -argument. S}< Sj{
      * * * A motion to dismiss on the ground that the appeal is frivolous and entirely without merit or a motion to affirm must be filed within fifteen (15) days after the appellant’s brief has been filed, but may not be filed prior to the filing of appellant’s brief, (emphasis supplied).

      . Rule 9(a) of the Local Rules provides in pertinent part:
      The Court may at any time, on its own motion and without notice, dispose of an appeal summarily * * *. The court may dismiss an appeal that is not within the jurisdiction of the court or that it finds to be frivolous and entirely without merit, or may affirm or reverse when the questions presented do not require further argument.