author: SPRECHER, Circuit Judge.

text:
    UNITED STATES of America and L. J. Marberry, Revenue Agent, Petitioners-Appellees, v. Robert J. AWERKAMP, Respondent-Appellant.
    No. 73-2051.
    United States Court of Appeals, Seventh Circuit.
    Argued April 4, 1974.
    Decided June 3, 1974.
    Robert J. Awerkamp, for respondent-appellant.
    Scott P. Crampton, Asst.- Atty. Gen., Michael J. Roach, Atty., U. S. Dept, of Justice, Tax Div., Washington, D. C., Donald B. Mackay, U. S. Atty., Springfield, 111., for petitioners-appellees.
    Before PELL and SPRECHER, Circuit Judges, and CAMPBELL, Senior District Judge.

       Senior District Judge William J. Campbell of the Northern District of Illinois is sitting by designation.

   SPRECHER, Circuit Judge.

Respondent, Robert J. Awerkamp, appeals from an order directing him to appear before a proper officer of the Internal Revenue Service “for the purpose of giving testimony concerning his responsibility to prepare and file Federal Income Tax Returns for the periods ending December 31, 1970 and December 31, 1971.” We affirm.

I

Petitioner, revenue officer L. J. Mar-berry of the Collection Division of the Internal Revenue Service, was assigned to conduct an investigation with respect to the preparation and filing of delinquent federal income tax returns. As a part of this investigation, a summons was issued by Marberry on January 23, 1973, directing respondent Robert J. Awerkamp to appear before him on February 5, 1973. This summons, personally served on Awerkamp, further directed him “to give testimony relating to [his] tax liability or the collection of [his] tax liability” and to bring with him:

[a] 11 documents and records in [his] possession or control which are necessary to enable a representative of the Internal Revenue Service to complete a federal income tax return for the taxable years 1970 and 1971 . . .; a blank federal income tax return is attached hereto to guide you in your production of the necessary documents and records.

Awerkamp did not appear before Mar-berry on the appointed date.

By letter dated March 9, 1973, the regional counsel for the IRS informed Awerkamp that he should appear before Marberry on March 30, 1973 with “all documents and records specified in the summons” in order to avoid legal proceedings which could be brought against him for continued noncompliance with the summons. On March 30, Awerkamp hand delivered to Marberry a copy of a letter dated March 27, 1973, addressed to the IRS regional counsel, stating that:

[t]he “summons” requests my records in violation of my God given rights as guaranteed by at least the 4th, 5th, 6th, 7th and 9th Amendments to the United States Constitution. The summons even fails to cite the “Miranda warning”. Naturally I ignored his “Summons” as I’m sure you would.
******
Should you still wish to discuss any of my alleged records please send me a written promise of immunity from prosecution, penalty or punishment of any kind or form.

Awerkamp did not testify or submit any documents or records.

On May 7, 1973, the United States and Revenue Officer Marberry petitioned the district court for enforcement of the summons, 26 U.S.C. §§ 7402(b), 7604(a). The petition prayed, inter alia, for an order directing Awerkamp to show cause “why he should not comply with and obey the aforementioned summons in each and every requirement thereto.” The district court issued the order to show cause pursuant to which a hearing was held on July 2, 1973. At the hearing, Awerkamp appearing pro se reiterated the constitutional arguments raised in his pleadings; to wit, that 26 U.S.C. §§ 7602, 7402(a), and 7604(a) were violative of the 4th, 5th, and 13th Amendments. Awerkamp did not present any evidence or call any witness at the hearing.

On August 9, 1973, the district court entered an order granting the relief requested by petitioners in the exact language employed in the petition: that respondent “appear for the purpose of giving testimony concerning his responsibility to prepare and file Federal Income Tax Returns . . . . ”

II

In proceedings to enforce a summons, the Supreme Court has enunciated the following guidelines for the Court’s inquiry :

It is the court’s process which is invoked to enforce the administrative summons and a court may not permit its process to be abused. Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation. The burden of showing an abuse of the court’s process is on the taxpayer

United States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964).

Respondent argues that the summons is being used for an improper purpose because the information being sought will be used to recommend a criminal prosecution for a violation of 26 U.S.C. § 7203. In Donaldson v. United States, 400 U.S. 517, 91 S.Ct. 534, 27 L.Ed.2d 580 (1971), the Supreme Court held that “Congress clearly has authorized the use of the summons in investigating what may prove to be criminal conduct” up until the point “where the sole objective of the investigation is to obtain evidence for use in a criminal prosecution . . . . ” This point is reached when a recommendation for criminal prosecution is made. 400 U.S. at 531-536. Accord, United States v. Moriarity, 7 Cir., 435 F.2d 347, 349-350. Thus in Donaldson where the summons was issued by agents of the IRS Intelligence Division which is responsible for enforcement of the criminal provisions of the Internal Revenue Code, 26 C.F.R. § 601.107 (1973), the Supreme Court held that the summons was not outside the scope of section 7602.

Any other holding, of course, would thwart and defeat the appropriate investigatory powers that the Congress has placed in “the Secretary or his delegate.” . . . Donaldson was not under indictment and, indeed, no recommendation had been made for his prosecution. That he might be indicted and prosecuted was only a possibility, no more and no less in his ease than in the case of any other taxpayer whose income tax return is undergoing audit. Prosecution will necessarily depend on the result of that audit and on what the examination and investigation reveal.
******
There is no statutory suggestion for any meaningful line of distinction, for civil as compared with criminal purposes, at the point of a special agent’s appearance. See Mathis v. United States, 391 U.S. 1, 4 [88 S.Ct. 1503, 1504, 20 L.Ed.2d 381] (1968). To draw a line where a special agent appears would require the Service, in a situation of suspected but undetermined fraud, to forgo either the use of the summons or the potentiality of an ultimate recommendation for prosecution. We refuse to draw that line and thus to stultify enforcement of federal law. See United States v. Kordel, 397 U.S. 1, 11 [90 S.Ct. 763, 769, 25 L.Ed.2d 1] (1970.)

400 U.S. at 533-536.

Here, the purpose of the summons was to gather information for the completion of tax returns for 1970 and 1971. The summons was issued by a revenue officer in the Collection Division. There is not the merest suspicion in the record that a recommendation for prosecution had been made. The existence of a possibility of criminal prosecution does not make the summons unenforceable. See United States v. Turner, 480 F.2d 272, 275 (7th Cir. 1973).

Respondent further argues that the summons was unenforceable because it was issued for the improper purpose of ascertaining how much he earned and to take wealth earned by him in order to “give it to the enemies of our country or to those who will not work or even to those who cannot work.” Respondent contends that the government does not have these powers because the populace does not have such rights to delegate. Respondent’s argument insofar as it attacks the constitutionality of the taxing and spending powers is close to frivolous. See Daly v. United States, 393 F.2d 873, 877 (8th Cir. 1968).

Respondent next argues that the summons procedure of 26 U.S.C. § 7203 violates the Fifth Amendment protection against self-incrimination because the “administrative subpoena” is a device for compulsory disclosure. He further contends that by complying with the summons his freedom is under official restraint in an atmosphere of official coercion and that this, is “custodial interrogation” to which the Miranda warning applies. First, we note that in this circuit “Miranda warnings must be given to the taxpayer by either the revenue agent or the special agent at the inception of the first contact with the taxpayer after the case has been transferred to the Intelligence Division.” United States v. Dickerson, 413 F.2d 1111, 1116-1117 (7th Cir. 1969). There is no evidence in the record that the case had been referred to the IRS Intelligence Division. Secondly, it appears that respondent has confused the questions of when the Fifth Amendment can be invoked and how this may properly be accomplished. As the district judge explained to Awerkamp at the hearing, enforcement of the summons at this stage in the proceedings does not preclude the invocation of the Fifth Amendment privilege once respondent appears in compliance with the summons. As we interpret the proceedings below in terms of the questions passed upon, respondent was prohibited by the order from making a Fifth Amendment assertion in limine; he was not required to answer any particular question.

In responding to a summons, the individual summoned must present himself for questioning and “claim the constitutional privilege as particular questions are asked.” In re Turner, 309 F.2d 69, 71 (2d Cir. 1962). Accord, United States v. Roundtree, 420 F.2d 845, 852 (5th Cir. 1969). Cf. United States v. Ellsworth, 460 F.2d 1246, 1248 (9th Cir. 1972). This manner of invoking the privilege enables the district judge in any subsequent proceeding to decide the merit of the claim of privilege. In Hoffman v. United States, 341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118 (1951), the Supreme Court in reversing a conviction for criminal contempt based on refusal to answer certain questions before a special federal grand jury stated:

[T]his protection [from self-inerimination] must be confined to instances where the witness has reasonable cause to apprehend danger from a direct answer. Mason v. United States, 244 U.S. 362, 365 [37 S.Ct. 621, 622, 61 L.Ed. 1198] (1917), and cases cited. The witness is not exonerated from answering merely because he declares that in so doing he would incriminate himself — his say-so does not of itself establish the hazard of incrimination. It is for the court to say whether his silence is justified, Rogers v. United States, 340 U.S. 367 [71 S.Ct. 438, 95 L.Ed. 344] (1951), and to require him to answer if “it clearly appears to the court that he is mistaken.” Temple v. Commonwealth, 75 Va. 892, 899 (1881).

341 U.S. at 486-487.

The same reasoning was employed in Sullivan v. United States, 274 U.S. 259, 47 S.Ct. 607, 71 L.Ed. 1037 (1927), where the Supreme Court held that the Fifth Amendment does not excuse a failure to file an income tax return. The Court reasoned that “[ijf the form of return provided called for answers that the defendant was privileged from making he could have raised the objection in the return, but could not on that account refuse to make any return at all.” 274 U.S. at 263. While not deciding that a claim of privilege as to certain questions would constitute a valid defense for failure to answer on a tax return, the Court indicated that a more narrow assertion of the privilege would have allowed the court to pass on the merit of the claim. “He could not draw a conjurer’s circle around the whole matter by his own declaration that to write any word upon the government blank would bring him into danger of the law.” 274 U.S. at 264. Thus in Albertson v. SACB, 382 U.S. 70, 86 S.Ct. 194, 15 L.Ed.2d 165 (1965), the Supreme Court stated that the Sullivan holding was “based on the view, first, that a self-incrimination claim against every question on the tax return, or based on the mere submission of the return, would be virtually frivolous, and second, that to hon- or the claim of privilege not asserted at the time the return was due would make the taxpayer rather than a tribunal the final arbiter of the merits of the claim. 382 U.S. at 79.

Respondent further asserts that his Fourth and Thirteenth Amendment rights will be violated by enforcement of the summons provision requesting the gathering together and presentation of books and records. Inasmuch as the district court order only requires respondent to “appear for the purpose of giving testimony,” this question is not properly before us.

Finally, respondent Awerkamp argues that the summons should not be enforced because he was not offered any mileage and witness fees as provided by 5 U.S.C. § 503(b). See Roberts v. United States, 397 F.2d 968, 970-971 (5th Cir. 1968). We note that 28 U.S.C. § 1825 states that “[f]ees and mileage need not be tendered to the witness upon service of a subpena issued in behalf of the United States or an officer or agency thereof . . . . ” When respondent appears before the revenue officer, he may request reimbursement. In any event, a claim for witness fees and mileage does not insulate respondent from process.

Affirmed.

      . 26 U.S.C. § 7602 provides the following:
      For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax or the liability at law or in equity of any transferee or fiduciary of any person in respect to any internal revenue tax, or collecting any such liability, the Secretary or his delegate is authorized—
      (1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry ;
      (2) To summon the person liable for tax or required to perform the act, or any officer or employee of such person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary or his delegate may deem proper, to appear before the Secretary or his delegate at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry; and
      (3) To take such testimony of the person concerned, uhder oath, as may be relevant or material to such inquiry. See also Treas.Reg. § 301.7602-1.

      . Sec. 7402. Jurisdiction of district courts, (b) To Enforce Summons. — If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, or other data, the district court of the United States for the district in which such person resides or may be found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or other data.
      (a) Jurisdiction of district court. — If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, records, or other data, the United States district court for the district in which such person resides or is found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data.
      Sec. 7604. Enforcement of summons.

      . 26 U.S.C. § 7203 makes it a misdemeanor for “[a]ny person required under this title to make a return . . . [to] willfully fails to . make such return

      . See California v. Byers, 402 U.S. 424, 434 n. 6, 91 S.Ct. 1535, 29 L.Ed.2d 9 (1971).

      . The order adopts the language employed in petitioners’ prayer for relief and, in their brief, petitioners concede that the order does not “direct the taxpayer to produce any specific records for examination . . . .” Brief for Petitioners at 12.

      . During oral argument, Awerkamp stated that subsequent to the proceedings in the district court he filed tax returns for the years in question listing only his name and address. This fact does not affect our disposition of the case.


source: Caselaw Access Project

author: WEIS, Circuit Judge.

license: Public Domain

text:
    James HESS, Jr., Appellant, v. SECRETARY OF HEALTH, EDUCATION AND WELFARE, United States of America.
    No. 73-1937.
    United States Court of Appeals, Third Circuit.
    Submitted under Third Circuit Rule 12(6) April 2, 1974.
    Decided June 5, 1974.

      W. J. Krencewicz, Shenandoah, Pa., for appellant.
    Robert E. J. Curran, U. S. Atty., Richard J. Stout, Asst. U. S. Atty., Philadelphia, Pa., for appellee.
    Before VAN DUSEN, WEIS and GARTH, Circuit Judges.
   OPINION OF THE COURT

WEIS, Circuit Judge.

To arrive at a consensus on the priority to be afforded the matters entrusted to the jurisdiction of the federal courts might be difficult indeed, but few would dispute the premise that claims of those entitled to disability benefits from the Social Security Administration must rank high on the scale of human concern. On appeal, a court is bound by findings of fact of the Secretary, supported by substantial evidence, but “substantial” means just that and is not the equivalent of a “scintilla.” The statute further grants the right to the district court, for good cause shown, to remand to the Secretary for the taking of additional evidence. We are aware, also, of the 1968 amendments (P.L. 90-248) to 42 U.S.C. § 423(d) expressing the intent of Congress to establish firm standards for recovery of benefits. With these not inconsistent considerations in mind, we approach our review of this case.

The plaintiff last worked on July 19, 1971. He has been under medical treatment and has had hospital care since that time for his condition which was diagnosed as bronchial asthma with obstructive ventilatory impairment. After his application for disability benefits under the Social Security Act, 42 U.S.C. § 416(i), was rejected, he was granted a hearing before an administrative law judge on October 10, 1972 where he was again denied. His appeal to the district court was unsuccessful, and he now seeks review in this court. After a careful review of the record, we conclude that there is a significant lack of important factual data which requires a remand to the Social Security Administration.

In preparing his hearing decision, the administrative law judge reported, “ . . . In evaluating this case, the undersigned is strongly cognizant of the puzzling nature of Mr. Hess’s condition, the cause of which has so far evaded those managing his medical care.” He found that the diagnosis was chronic bronchitis with a history of recurrent infectious bronchitis productive of a moderately severe obstructive ventilatory impairment. Because of this condition, the administrative law judge felt that the plaintiff was not capable of doing light work but could perform sedentary work and, hence, was not disabled within the meaning of the Social Security Act, 42 U.S.C. § 423(d)

This conclusion was reached despite Hess’s testimony that he was unable to and, in fact, had not worked for more than 17 months and the absence of any medical opinion on plaintiff’s ability to perform even sedentary work.

„At the hearing it was established that Hess was 43 years of age, had completed the eighth grade, had worked at various unskilled jobs, and from 1963 to 1971 had been employed as a stock selector for North American Rockwell Company. Although he had originally done some work as a tinsmith with that company for a short period of time, Hess spent the last eight years of employment with North American Rockwell moving parts weighing as much as 50 to 70 pounds in and out of the stock room.

On his final day of work, the plaintiff experienced sharp chest pains, and two days later his family physician, Dr. Schlitzer, had Hess admitted to the Good Samaritan Hospital in Pottsville, Pennsylvania where he remained for twelve days. After discharge from the hospital, the condition did not improve sufficiently to allow the plaintiff to return to work, and Dr. Schlitzer referred Hess to Dr. Ricchiuti, an allergist.

The plaintiff was admitted to the Pottsville Hospital in November, 1971 for testing because of the continuing complaints of shortness of breath, wheezing, and coughing. On March 9, 1972 he was referred to the Geisinger Medical Center in Danville, Pennsylvania on an outpatient basis for evaluation of the same condition.

Hess testified that at the suggestion of the Geisinger Center he went walking every day that the weather was nice and that he would go on the average of about a half mile “and then I just can’t go any farther . . . When I get home, I have to lay down.”

To clear mucous and phlegm from his lungs, he performs a routine each morning consisting of lying over the bed on his stomach, then on each side for a period of ten minutes each. He testified that he was unable to perform any of the routine chores about his home and was unable to sleep at night until 2:00 or 3:00 A.M.

In response to a hypothetical question assuming the truth of the plaintiff’s complaints, a vocational expert testified, “These factors would appear to limit him considerably in terms of full time substantial gainful employment.” When asked by the administrative law judge to assume that from the medical evidence in the case there was no physical impediment to sedentary work activity, the vocational expert said there would be employment for a man of his age, background and education in the region.

During the hearing, Hess also testified that he was to report back to the Geisinger Medical Center on October 19, 1972, that he currently received two injections every week from Dr. Ricchiuti, and that he took one medication four times and another three times daily. Plaintiff reported also that Dr. Schlitz-er, the family physician, saw him twice a month and had not released him for work.

Before closing the record, the administrative law judge said, “I may very seriously consider asking the Geisinger people if they can come up with a report for your latest visit there. Now it all depends on how I feel about the state of your record when it comes time for me to write the decision and review all the records in the case.” Since no reference appears in the record to any further report from the Geisinger Clinic, we assume that it was never secured.

The plaintiff was not represented by counsel at the hearing, and he produced neither physicians nor medical reports on his behalf. The only medical evidence in his file was secured by the Social Security Administration and consisted of summaries of the hospital records at Pottsville Hospital and the Geisinger Medical Center. No reports were secured from the family physician, Dr. Schlitzer, and the only information attributable to Dr. Ricchiuti was that contained in the Pottsville Hospital records of the admission of November, 1971, almost a year before the hearing date. None of the records contains any reference to or opinion on the claimant’s ability to engage in any type of employment.

There are two forms in the file, each of which bears the signature of a person having the title of “Reviewing Physician” who in June and July of 1972 concluded that the pulmonary function study indicated that Hess “retains the functional capacity to perform his former job . . . ” This finding apparently was made without consultation with either of the attending physicians and without interview or examination of the plaintiff.

Although Hess was given an opportunity to examine the exhibits, including this form, nothing in the record indicates that he understood it. It may well be that, had the matter been explained to him or discussed with him, some helpful comment would have been elicited.

Although the burden is upon the claimant to prove his disability, due regard for the beneficent purposes of the legislation requires that a more tolerant standard be used in this administrative proceeding than is applicable in a typical suit in a court of record where the adversary system prevails. As the court remarked in Easley v. Finch, 431 F.2d 1351, 1353 (4th Cir. 1970):

“A hearing on an application for benefits is not an adversary proceeding. The applicant is confronted with no adversary in the usual sense of that term. The Social Security Administration provides an applicant with assistance to prove his claim.”

We do not say that an administrative law judge must search out all the relevant evidence which might be available, since that would in effect shift the burden of proof to the government. But, these proceedings are extremely important to the claimants, who are in real need in most instances and who claim not charity but that which is rightfully due as provided for in Chapter 7, Sub-chapter II, of the Social Security Act.

20 C.F.R. § 404.927 (1973), in addressing the duties of the hearing officer, says in part:

“ . . . The Administrative Law Judge shall inquire fully into the matters at issue and shall receive in evidence the testimony of witnesses and any documents which are relevant and material to such matters. If the Administrative Law Judge believes that there is relevant and material evidence available which has not been presented at the hearing, the Administrative Law Judge may adjourn the hearing or, at any time prior to the mailing of notice of the decision, reopen the hearing for the receipt of such evidence . . . ”

20 C.F.R. § 404.926 (1973) says in part:

“When reasonably necessary for the full presentation of a case, an Administrative Law Judge . . . may, either upon his own motion or upon the request of a party, issue subpoenas for the attendance and testimony of witnesses and for the production of books, records, correspondence, papers, or other documents which are relevant and material to any matter in issue at the hearing . . . ”

Our reading of the record confirms the administrative law judge’s conclusion that the claimant’s condition is puzzling, and we think that current medical evidence would have been extremely helpful in removing some of the doubts which the hearing officer and this court entertain. Furthermore, we note that although no definite commitment was made, the claimant may well have inferred that the latest records of the Geisinger Medical Center would be obtained before a decision would be handed down.

We do not say that the responsibility will always be upon the hearing officer to secure current medical evaluations, but some lesser effort might be employed, such as advising the claimant of the importance of this information and suggesting that it be submitted at a later date. See the technique followed in Steimer v. Gardner, 395 F.2d 197 (9th Cir. 1968). It may also be that in this case after remand the Social Security Administration might avail itself of its right to have an examination by a physician of its own selection.

Since readily obtainable information was not secured so as to resolve doubts about this unrepresented claimant’s right to disability benefits, we believe that he did not receive the full hearing to which he was entitled. Accordingly, the case will be remanded to the district court with directions for remand to the Social Security Administration for further proceedings consistent with this opinion.

      . Sedentary work was defined by a vocational expert who testified at the hearing as “a term implying work in which maximum lifting required is 10 pounds with occasional lifting of small dockets and carrying about parts or small dockets, tools. Sedentary work is predominantly done in a seated position with only incidental or occasional walking and standing.”

      . “(d)(1) The term ‘disability’ means — (A) inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months; . . . ”

      . The records of that institution reveal that a pulmonary function study on March 17, 1972 was interpreted as showing “moderately severe obstructive ventilatory impairment.”

      . The fact that plaintiff was not represented at the hearing is not, in and of itself, ground for remand. Domozik v. Cohen, 413 F.2d 5 (3d Cir. 1969).

      . We note that the claimant has now been granted a disability compensation award by the Veterans Administration. During the hearing before the administrative law judge, the plaintiff stated that he had applied to the Veterans Administration but had not yet heard from them. In the affidavit filed to permit proceeding in forma pauperis in this court, Hess states that he is currently receiving a nonservice connected disability pension from the Veterans Administration. We assume, therefore, that the Veterans Administration decided favorably upon his application after the hearing before the Social Security Administration had been concluded. Of course, the fact that the Veterans Administration made a disability award is not binding upon the Social Security Administration, and we mention it only to indicate our concern that the physical condition of the plaintiff may not have been fully delineated in the administrative proceeding below.


author: ADAMS, Circuit Judge.

text:
    CAMERON FINANCIAL CORPORATION, Petitioner, v. BOARD OF GOVERNORS OF the FEDERAL RESERVE SYSTEM, Respondent, Purolator Courier Corp., Intervenor.
    No. 73-2001.
    United States Court of Appeals, Fourth Circuit.
    Argued April 3, 1974.
    Decided June 4, 1974.

      J. Carlton Fleming, Charlotte, N. C., for petitioner.
    Irving Jaffee, Asst. Atty. Gen., Leonard Schaitman and Eloise E. Davis, Dept, of Justice, for respondent.
    Samuel K. Abrams and Roger W. Langsdorf, Washington, D. C., for intervenor.
    Before HAYNSWORTH, Chief Judge, and BUTZNER and ADAMS, Circuit Judges.

       United States Circuit Judge for the Third Circuit, sitting by designation.

   ADAMS, Circuit Judge.

This appeal presents a formidably complicated question of statutory construction. Specifically, we must decide whether section 4(a)(2) of the Bank Holding Company Act extends so-called “grandfather” privileges to a bank holding company which controlled, prior to June 30, 1968, a bank subsidiary that also engaged in limited courier activities, but which “spun-off” the courier activities to a nonbanking subsidiary subsequent to June 30,1968.

1. The Factual Background

There exists no disagreement concerning the factual background prompting this litigation. Cameron Financial Corporation, a bank holding company, was established on May 4, 1968. It controlled, among other things, one bank, First Union National Bank of North Carolina. First Union operated courier services at the time of Cameron’s organization. Several months after Cameron was organized, on July 29, 1968, Courier Express Corporation was incorporated and Cameron shortly thereafter acquired all of Courier’s common stock. Courier Express proceeded to purchase all of the equipment used by First Union in its courier activities. The net result of this reorganization was to remove the courier activities from the regulatory authority of the Comptroller of the Currency and to leave them largely unregulated. Courier Express is presently authorized to transport a variety of materials intrastate in North Carolina and Virginia and interstate between North Carolina and South Carolina, Virginia and Tennessee.

Prior to December 31, 1970, the Bank Holding Company Act did not cover one-bank holding companies. However, on that date, Congress amended the Act primarily to bring within the Act’s regulatory scope one-bank holding companies like Cameron. The Board of Governors of the Federal Reserve, pursuant to section 4(a) (2) of the Act, notified Cameron that it may be entitled to grandfather privileges under that section, which had been added in 1970, and requested Cameron to furnish information relating to. its courier operations. Cameron complied with the Board’s request by furnishing such information and, in addition, claimed grandfather rights for the courier services operated by its nonbanking subsidiary, Gourier Express. The Board, however, advised Cameron that only activities conducted by a nonbanking subsidiary prior to June 30, 1968 were entitled to grandfather privileges under section 4(a)(2). Since Cameron had effected the transfer of the assets and, hence, the courier operations from First Union to Courier Express after June 30, 1968, no non-banking subsidiary of Cameron was engaged, prior to the critical date, in the activities sought to be grandfathered. The Board, therefore, concluded that “no indefinite grandfather benefits accrue [d] to Cameron Financial with respeet to the activities carried on by the Courier Express Corporation.” Cameron thereupon filed a petition for review of the Board’s determination.

2. Section 4(a)(2) of the Bank Holding Company Act

Although the Bank Holding Company Act provides for the imposition of significant limitations on the conduct of nonbanking activities by bank holding companies, section 4(a)(2), nonetheless, permits a bank holding company to “engage in those activities in which directly or through a subsidiary ... it was lawfully engaged on June 30, 1968 . . . and it has been continuously engaged since June 30, 1968. . . .”

The Board may require a holding company to cease activities falling within the parameters of the grandfather proviso if, after an opportunity for a hearing has been afforded, “it determines, having due regard to the purposes of this chapter that such action is necessary to prevent undue competition, conflicts of interest, or unsound bank practices. . . . ” Otherwise, activities within the proviso’s terms may continue indefinitely.

3. Cameron’s Contention

Since the grandfather proviso of section 4(a) (2) stipulates that a bank holding company may “engage in those activities in which directly or through a subsidiary ... it was lawfully engaged on June 30, 1968 . . . .” and since Cameron’s banking subsidiary, First Union, was conducting courier activities on June 30, 1968, it claims that its courier activities come within the grandfather proviso. Cameron contends that the term “subsidiary,” as used in the grandfather proviso embraces a banking as well as a nonbanking subsidiary controlled by a bank holding company prior to June 30, 1968. It points to the definition of “subsidiary” contained in section 2(d) and notes that the definition makes no distinction between a banking and a nonbanking subsidiary. Cameron also points to other provisions that specifically refer to a banking, as opposed to a nonbanking subsidiary, or contrariwise, to • a nonbanking, as opposed to a banking subsidiary. Cameron reasons from the draftsmen’s facility to distinguish between a banking and a nonbanking subsidiary in these instances that when the draftsmen failed so to distinguish in section 4(a)(2), they intended the appellation “subsidiary” to refer to both a banking as well as a non-banking subsidiary.

Cameron also asserts that the legislative history suggests no intention on the part of Congress to limit the applicability of the grandfather clause to activities conducted by a nonbanking subsidiary. It endeavors to buttress its view of the Congressional intent by suggesting that removing from the grandfather clause activities conducted by any banking subsidiary of a bank holding company inhibits the organizational flexibility with respect to grandfathered activities that Congress sought to attain through section 4(c)(11). Cameron asserts, it would seem, that since grandfathered activities may be transferred between subsidiaries under section 4(c) (11), we ought to decide that a particular activity is, in fact, entitled to ■ grandfather privileges.

Further, Cameron claims that the evident concern of Congress in enacting the 1970 Amendments to the Bank Holding Company Act, including section 4(a)(2), was to check anticipated future abuses of the single bank holding company device, and since Cameron was, on June BO, 1968, carrying on courier services, albeit through .its banking subsidiary, those activities cannot be properly considered in the category of future abuses.

Cameron also points out that while activities conducted by nonbanking subsidiaries of single bank holding companies were completely unregulated prior to 1970, the activities of banking subsidiaries were regulated either by national authorities such as the Comptroller or by state authorities. According, to Cameron, if the previously unregulated activities of a nonbanking subsidiary could remain essentially unregulated by virtue of the grandfather proviso, it would follow that extending the grandfather proviso to the previously regulated activities, i. e. the courier services conducted by First Union, is consistent with the purposes of the Act generally and section 4(a) (2) in particular. Cameron appears to suggest in this regard that so long as Congress was prepared to tolerate the potential for abuse inherent in allowing some unregulated activities to continue unregulated, it was also prepared to tolerate the potential for abuse in deregulating previously regulated activities.

Finally, Cameron contends that the Board, itself, has recognized the benign nature of courier activities when conducted by a nonbanking subsidiary by amending its Regulation Y to include courier services among those activities “so closely related to banking or controlling banks as to be a proper incident thereto.”

b. The Board’s Contentions

The Federal Reserve Board counters Cameron’s arguments that are based on the language of the Act, and specifically the definition of “subsidiary” contained in the statute, by emphasizing the section and subsection headings of section 4(a)(2) which, according to the Board, indicate that the grandfather provision does not cover banking subsidiaries. Further, the definition of “subsidiary” in section 2(d), according to the Board, is designed primarily to delineate more fully the scope of the authority conferred upon the Board by the 'Bank Holding Company Act and was not addressed to the use of the word “subsidiary” in section 4(a)(2).

Also, the Board contends .that since Congress recognized that banking subsidiaries were already regulated by agencies other than the Federal .Reserve, i. e., Comptroller of the Currency, Federal Deposit Insurance Corporation, and state authorities, Congress intended to grant to the Federal Reserve Board authority to regulate only the previously unregulated nonbanking subsidiaries, an intent at odds with the interpretation of section 4(a) (2) urged by Cameron.

Finally, the Board claims that permitting a. bank holding company to transfer activities to a nonbanking subsidiary. — in the process freeing the transferred activities from regulation because of the grandfather proviso — creates the opportunity for the type of competitive abuse against which the 1970 amendments to the Bank Holding Company Act were specifically designed to güard.

5. The Objectives and Statutory Scheme of the Bank Holding Company Act

Both Cameron and the Board offer plausible syntactical arguments support-, ing their competing views of the reach of the term “subsidiary” in section 4(a)(2). This antiphony, by itself, strongly suggests that the bare words of the statute cannot conclusively answer the question posed by this appeal. With the process of statutory construction in this posture, it is necessary to examine the statutory scheme more broadly and to acquire an appreciation of the general considerations motivating its enactment. These two inquiries are inextricably intertwined and it would seem, therefore, unobjectionable first to attempt to reach an informed conclusion regarding the considerations underlying the enactment of the Bank Holding Company Act generally and the 1970 Amendments in particular.

Prior to 1956, a bank holding company, then completely unregulated, was utilized to achieve geographical expansion and service diversification unattainable by its banking subsidiary alone because the banking subsidiary was subject to national or state regulation. Misgivings were developing among Congressmen that proliferation of the bank holding device was having anticompetitive effects in the economy. Banking resources were becoming increasingly concentrated and the combination in one enterprise of a major creditor in a locality, a bank, and another service business created a condition ripe for exploitation through tying relationships. In response to these concerns, Congress enacted the Bank Holding Company Act of 1956.

In essence, the Act brought multibank holding companies under the regulatory authority of the Federal Reserve Board. It limited the acquisition of banking subsidiaries and restricted the scope of allowable diversification. But the 1956 Act did not extend to one-bank holding companies. Since concentration of banking resources was facilitated by the acquisition of several banking subsidiaries, the bank holding company that controlled only one bank did not represent as significant a threat to competition as the multi-bank holding company. Further, the general small size, at the time, of one-bank holding companies and the absence of evidence of competitive abuse of the one-bank holding company device provided support in terms of the Act’s objectives for exempting from the reach of the Act the holding companies that controlled only one bank.

But several large banks responded to the promise of stricter regulation as the result of court rulings limiting the authority of the Comptroller of the Currency to permit national banks wide-ranging entreprenurial discretion by turning to the one-bank holding company device. “The nations largest banks,” including the six largest, “rushed to form one-bank holding companies, many of which engaged in commercial and industrial enterprises not even arguably within banking powers, such as TV broadcasting, furniture manufacturing, and pizza parlors.” In view of the large growth of the assets held by the one-bank holding company industry, and in view of the theoretical freedom of a one-bank holding company to engage in any business, or acquire anything it desires . . . ,” Congress amended the Act to include within its regulatory scheme one-bank holding companies as well as the multi-bank holding companies already covered.

The 1970 Amendments were directed primarily at the portent of serious anti-competitive consequences presented by the trend of unregulated one-bank holding company proliferation and expansion. Congress was not, therefore, eager to effect a dramatic alteration of the existing organizational structure of the banking industry. Furthermore, Congress “felt that the one-bank holding companies existing at the time set in the clause, most of which were quite small, had not caused great problems and was thus reluctant to require them to undergo the hardships of divestiture, which would be particularly harsh for small banks.”

Turning to an examination of how these considerations are reflected in the statutory scheme, we note that one-bank holding companies that seek to engage in nonbanking activities or to continue to engage in such activities initiated subsequent to the grandfather date of June 30, 1968, must seek Board approval pursuant to section 4(c)(8), which provides :

[S]uch prohibitions shall not, with respect to any other bank holding company, apply to—
shares of any company the activities of which the Board after due notice and opportunity for hearing has determined (by order or regulation) to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. In determining whether a particular activity is a proper incident to banking or managing or controlling banks the Board shall consider whether its performance by an affiliate of a holding company can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair eompetition, conflicts of interest, or unsound banking practices. In orders and regulations under this subsection, the Board may differentiate between activities commenced de novo and activities commenced by the acquisition, in whole or in part, of a going concern;

Thus, “[u]nder section 4(c)(8), an application may not be approved without an affirmative showing that public benefits exceed harms. . . . ”

If, however, the activity of the one-bank holding company falls within the scope of the grandfather proviso of section 4(a)(2), the Board may order the bank holding company to disassociate itself from the activity “if it determines, having due regard to the purposes [of the Act], that such action is necessary to prevent undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices . . .” Although section 4(a)(2) dispenses with the requirement that the Board consider possible beneficial consequences resulting from allowing the bank holding company to participate in a given activity, the bank holding company need not establish that the particular activity is “closely related to banking” as it must under section 4(c)(8).

Even after the Board has ordered a one-bank holding company to terminate an activity, the holding company may retain control of the subsidiary for a period of ten years. In contrast, a denial of approval under section 4(e)(8) apparently requires termination of the activity forthwith. Hence, even though both sections — 4(a)(2) and 4(c)(8) — possess features that tend to facilitate the Board’s efforts to accomplish the statutory objectives, the Board may well prefer remitting a bank holding company to proceedings pursuant to section 4(c)(8) because this latter section makes available immediate termination and places the burden on the bank holding company to show that the activity is closely related to banking.

6. Cameron’s Claim for Grandfather Privileges and the Statutory Objectives and Scheme

The geographic scope of the courier services conducted by Cameron has broadened since the post-June 30, 1968 transfer of these activities from Cameron’s banking to its nonbanking subsidiary. It also appears that Cameron now offers a wider variety of courier services than it did when all courier operations were conducted by its banking subsidiary. So long as the courier services were conducted by the banking subsidiary, the Board lacked regulatory authority over them. Indeed, so long as banking authorities such as the Comptroller of the Currency were overseeing the courier activities when they were conducted by the bank itself, it would appear that the danger of anti-competitive consequences was substantially mitigated. However, when Cameron transferred these courier activities to its non-banking. subsidiary, there existed no regulatory authority guarding against potential competitive abuse unless, of course, the transfer occurred after June 30, 1968, which in this case it did, and the term “subsidiary” in section 4(a)(2), as the bank contends, is interpreted to refer solely to nonbanking subsidiaries.

To prevent the formerly regulated activities of a banking subsidiary to escape regulation through transfer of such activities to a nonbanking subsidiary seems a persuasive reason for declining to extend grandfather privileges to the activities conducted prior to June 30, 1968 by a banking subsidiary. To construe the ambiguous term “subsidiary” to relate to a nonbanking subsidiary only, and thus to achieve this result, seems entirely consistent with the objectives of the 1970 Amendments.

Deciding that Cameron’s courier activities do not qualify under section 4(a) (2) does not necessarily mean that Cameron must divest it,self of its courier business. It still may show that its courier services are closely related to banking under section 4(c)(8). Certainly, Cameron’s case before the Board in a section 4(c) (8) proceeding would be substantially strengthened by the recent addition to Regulation Y that includes certain courier services among the activities regarded as closely related to banking. Cameron would, of course, have to establish that its own services do come within the ambit of the addition to Regulation Y. At the same time, it would be able to press the argument made here that Cameron’s participation in courier activities has pro-competitive effects.

On balance, it would seem more consistent with the congressional objectives to require Cameron to seek approval of its expanded courier activities in a section 4(c)(8) proceeding than to permit such activities to continue on a perhaps unregulated basis by virtue of section 4(a)(2).

7. Conclusion

In sum, since we agree with the Board that “subsidiary” in section 4(a)(2) does not refer to a banking subsidiary, Cameron’s courier activities are not entitled to grandfather privileges under that section. Accordingly, Cameron’s petition for review will be denied.

      . June 30, 1968 is the critical date for determining whether and under what conditions certain activities may be conducted by a bank holding company after 1970.

      . Section 4(a) (2) of the Bank Holding Act provides as follows:
      “Except as otherwise provided in this chapter, no bank holding company shall—
      after two years from the date of which it becomes a bank holding company, or in the case of a company which has been continuously affiliated since May 15, 1955, with a company which was registered under the Investment Company Act of 1940, prior to May 15, 1955, in such a manner as to constitute an affiliated company within the meaning of that Act, after December 31, 1978, or, in the case of any company which becomes, as a result of the enactment of the Bank Holding Company Act Amendments of 1970, a bank holding company on the date of such enactment, after December 31, 1980, retain direct or indirect ownership or control of any voting shares of any company which is not a bank or bank holding company or engage in any activities other than (A) those of banking or of managing or controlling banks and other subsidiaries authorized under this chapter or of furnishing services to or performing services for its subsidiaries, and (B) those permitted under paragraph (8) of subsection (c) of this subject to all the conditions specified in such paragraph or in any order or regulation issued by the Board under such paragraph : Provided, That a company covered in 1970 may also engage in those activities in which directly or through a subsidiary (i) it was lawfully engaged on June 30, 1968 (or on a date subsequent to June 30, 1968 in the case of activities carried on as the result of the acquisition by such company or subsidiary, pursuant to a binding written contract entered into on or before June 30, 1968, of another company engaged in such activities at the time of the acquisition), and (ii) it has been continuously engaged since June 30, 1968 (or such subsequent date). The Board by order, after opportunity for hearing, may terminate the authority conferred by the preceding proviso on any company to engage directly or through a subsidiary in any activity otherwise permitted by that proviso if it determines, having due regard to the purposes of this chapter that such action is necessary to prevent undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices; and in the case of any such company controlling a bank having bank assets in excess of $60,000,000 on or after December 31, 1970, the Board shall determine within two years after such date (or, if later, within two years after the date on which the bank assets first exceed $60,000,000), whether the authority conferred by the preceding proviso with respect to such company should be terminated as provided in this sentence. Nothing in this paragraph shall be construed to authorize any bank holding company referred to in the preceding proviso, or any subsidiary thereof, to engage in activities authorized by that proviso through the acquisition, pursuant to a contract entered into after June 30, 1968, of any interest in or the assets of a going concern engaged in such activities. Any company which is authorized to engage in any activity pursuant to the preceding proviso or subsection (d) of fills section but, as a result of action of the Board, is required to terminate such activity may (notwithstanding any otherwise applicable time limit prescribed in this paragraph) retain the ownership or control of shares in any company carrying on such activity for a period of ten years from the date on which its authority was so terminated by the Board.
      The Board is authorized, upon application by a bank holding company, to extend the two year period referred to in paragraph (2) above from time to time as to such bank holding company for not more than one year at a time, if, in its judgment, such an extension would not be detrimental to the public interest, but no such extensions shall in the aggregate exceed three years. (Emphasis added)

      . So long as the courier services were conducted by First Union, a national bank, the Comptroller of the Currency exercised regulatory authority with respect to them. The Comptroller’s regulatory jurisdiction, however, does not extend to nonbanking subsidiaries of one-bank holding companies such as Courier Express.

      . 12 U.S.C. § 1841(d).

      . E. g., 12 U.S.C. § 1842(d).

      . E. g„ 12 U.S.C. § 1842(a) (4).

      . “. . . such prohibitions [of section 4] shall not, with respect to any . . . bank holding company, apply to—
      ill) shares owned directly or indirectly by a company covered in 1970 in a company which does not engage in any activities other than those in which the bank holding company, or its subsidiaries, may engage by virtue of this section. . . .”
      12 U.S.C. § 1843(c) (11).

      . 12 C.F.R. §§ 225.1-5.

      . 38 Fed.Reg. 32126 (1973).

      . The section and subsection headings of section 4(a) (2) read as follows:
      “§ 18Jf8 Interest in nonbanking organizations. [a] Ownership or control of voting shares of any company not a bank; engagement in activities other than banking.”

      . Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum.L.Rev. 527, 537-746 (1947).

      . Note, Implementation of the Bank Holding Company Act Amendments of 1970: The Scope of Banking Activities, 71 Mich.L.Rev. 1170, 1170-72 (1973) (hereinafter Note) Chase, The Emerging Financial Conglomer- ■ ate: Liberalization of the Bank Holding Company Act, 60 Geo.L.J. 1225, 1226-27 (1972).

      . See S.Rep.No.609, 84th Cong., 1st Sess. 2 (1955); Chase, The Emerging Financial Conglomerate: Liberalization of the Bank Holding Company Act, 60 Geo.L.J. 1225, 1231-32 (1972).

      . Note at 1176.

      . S.Rep.No.1084, 91st Cong. 2d Sess. 3 (1970), U.S.Code Cong. & Admin.News 1970, p. 5519.

      . Note at 1176 (footnote omitted).

      . S.Rep.No.1084, 91st Corig. 2d Sess. 3 (1970), U.S.Code Cong. & Admin.News 1970, p. 5522.

      . Id. at 5.

      . Note at 1181.

      . 12 U.S.C. § 1843 (c)(8).

      . Note at 1182-83.

      . But of. Note at 1179 n. 75.


author: GIBSON, Circuit Judge.

text:
    IZAAK WALTON LEAGUE OF AMERICA, Appellee, v. George W. ST. CLAIR et al., Appellants. IZAAK WALTON LEAGUE OF AMERICA, Appellee, v. Robert L. HERBST, Commissioner of Conservation of the State of Minnesota, Appellant. Earl L. BUTZ et al., Appellants, v. IZAAK WALTON LEAGUE OF AMERICA, Appellee.
    Nos. 73-1407, 73-1408 and 73-1409.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 14, 1974.
    Decided May 17, 1974.
    See also, D.C., 313 F.Supp. 1312.

      Eva Datz, Land & Natl. Resources Div., Appellate Sect., Dept, of Justice, Washington, D. C., William P. O’Brien, Duluth, Minn., and Philip Olfelt, Asst. Atty. Gen., Dept, of Natural Resources, St. Paul, Minn., for appellants.
    Raymond A. Haik, Minneapolis, Minn., for appellee.
    Before GIBSON, STEPHENSON, and WEBSTER, Circuit Judges.
   GIBSON, Circuit Judge.

The Izaak Walton League of America (hereafter the League) brought this action for declaratory judgment to determine the extent of the mineral rights possessed by George W. St. Clair and his successors in interest and the validity of his attempted exercise of those rights within the Boundary Waters Canoe Area (BWCA).

The BWCA, consisting of some one million acres, is a part of Superior National Forest, and is included in the National Wilderness System pursuant to the National Wilderness System Preservation Act of 1964.3 The League contends that the Wilderness Act precludes any exercise of St. Clair’s mineral rights in land within the boundaries of the BWCA. Also named as defendants were the Secretary of Agriculture, the Chief of the United States Forest Service, and the Supervisor of the Superior National Forest, who are responsible for the management of the BWCA, and the Minnesota Conservation Commissioner and Commissioner of Taxation who have various types of jurisdiction over state lands within the BWCA. The State of Minnesota is a nominal defendant since by cross-claim it supports the League’s claim against the other defendants in all but one respect.

The League also requested injunctions against the federal and state defendants to forbid them granting St. Clair any permits to explore for, drill for, or remove minerals from the BWCA. The District Court held that mining activities were incompatible with the wilderness character of the BWCA. It therefore enjoined St. Clair from any exercise of his mineral rights, and enjoined the federal and state defendants from permitting any exercise by St. Clair of his rights in the BWCA. St. Clair and the federal defendants appeal this decision of the District Court.

In addition, the State of Minnesota appeals the District Court’s refusal to allow an amendment to its cross-claim against St. Clair. It attempted to show that the lands in which St. Clair claims mineral rights were fraudulently patented under the federal homesteading laws then in effect, and therefore that title to these lands remains in the United States. The District Court denied leave to amend, holding that the statute of limitations bars such an action, and further, that the State lacks standing to assert this claim.

This litigation, in the defendant St. Clair’s words, is “born of frustration.” Although Congress has been repeatedly memorialized to appropriate funds to purchase the private mineral rights (this was one of the recommendations of the Selke Committee on Review of the BWCA in 1963 to then Secretary of Agriculture Freeman), Congress has not done so. With the growing demand for minerals and the inability to sell their rights to the Government, the mineral rights owners feel they have no choice but to attempt to exercise them. It is clear from the record that the Forest Service had been expecting such an attempt for several years before the present actions of St. Clair.

Within the BWCA, the surface land area is owned in roughly the following percentages: United States, 71.3%; Minnesota, 26.3%; Minnesota counties, 1.4%; and private parties, 1%. This latter figure is steadily declining as more and more land passes from private to federal ownership. The ownership of the underlying mineral rights is in quite different proportions. The United States owns only 44%; the State and counties, the same 26.3% and 1.4% respectively ; while the rights held by private owners amount to 28.3% of the total area. The Forest Service says that the subsurface private ownership of mineral rights in the BWCA represents a serious problem for the management of the BWCA and recognizes that “[a]ny mineral exploration or extraction would jeopardize the surface resources and wilderness character of the area.”

St. Clair, through various lease agreements, accumulated the mineral rights in approximately 150,000 acres of BWCA land, and in 1969 had crews enter the BWCA for preliminary exploratory work. With the permission of the Forest Service, his crew established a base camp, and traveling by canoe undertook surface mineral exploration. Apparently encouraged by the preliminary findings, St. Clair notified the Forest Service in December, 1969, of his intention to send a drill and crew into the BWCA in late December or early January, 1970, to drill four or five test holes.

The Forest Service, in response, notified St. Clair that before any permit could be issued he would have to furnish the documents establishing his claimed rights, and that the Forest Service would be looking for any possible way to keep him from carrying out his planned activities in the BWCA. This lawsuit was commenced before St. Clair furnished the requested documentation; the Forest Service still has not received the necessary documents; and no administrative determination has been made as to whether a permit should be granted. There have been no additional exploratory activities during the pendency of this lawsuit.

St. Clair contends that: (1) federal laws provide specifically for the exercise of mineral rights within the BWCA; (2) the injunction against St. Clair and the federal defendants was improper and further that it lacks necessary specificity; and (3) the decision of the District Court constitutes a constructive taking of his property requiring the Court to determine reasonable compensation.

The federal defendants argue that: (1) the doctrine of primary jurisdiction should have been applied, as judicial intervention might be unnecessary if the Forest Service is allowed to rule on the permit application; (2) the Wilderness Act makes specific provision for mining activities compatible with wilderness; and (3) the District Court erred when it found, without a hearing, that “prospecting” is incompatible with wilderness.

The League urges affirmance. It asserts that: (1) the Wilderness Act and other federal and state laws prohibit exploratory mining operations; (2) the federal government has effectively zoned the BWCA to prohibit mining operations; (3) injunctive relief was properly granted; and (4) the doctrine of primary jurisdiction in no way precludes judicial review, especially where the Forest Service has violated its own regulations in allowing St. Clair to use prohibited equipment within the BWCA.

The State of Minnesota seeks reversal of the refusal to allow amendment of its cross-claim, asserting that (1) it has standing, and (2) its claims are not barred by the statute of limitations. It can thus readily be seen that there is no shortage of issues raised on appeal; all save the dispositive issue, primary jurisdiction, have been exhaustively briefed and argued. We have, however, determined that the doctrine of primary jurisdiction should have been applied by the District Court and that the question of whether a permit should be issued for exploratory mining operations should first be determined by the Forest Service.

The Government argues that judicial review in this case is precluded by the doctrine of primary jurisdiction. While we believe the facts of this case require our determination that primary jurisdiction should be exercised by the Forest Service, we cannot accept the Government’s view that judicial review is precluded. Such a contention confuses the doctrine of primary jurisdiction with that of the exhaustion of administrative remedies, which, although similar in some respects, exists for different reasons. See 3 K. Davis, Administrative Law Treatise, § 19.01 (1958) [hereinafter cited as Davis], The Supreme Court has distinguished the two doctrines in this manner:

“Exhaustion” applies where a claim is cognizable in the first instance by an administrative agency alone; judicial interference is withheld until the administrative process has run its course. “Primary jurisdiction,” on the other hand, applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.

United States v. Western Pac. R. Co., 352 U.S. 59, 63-64, 77 S.Ct. 161, 165, 1 L.Ed.2d 126 (1956).

In our present case, the League’s claim regarding the construction of the Wilderness Act and other federal and state regulatory statutes is a legal issue, properly cognizable in the courts. Yet the factual questions regarding the effect of mining activity upon the wilderness, and whether a permit should issue with restrictions that would be adequate to protect the wilderness quality of the BWCA are those types of questions peculiarly within the competence of the Forest Service, and statutorily delegated to it by the Wilderness Act. Section 1133(d) provides in part:

(5) Other provisions of this chapter to the contrary notwithstanding, the management of the Boundary Waters Canoe Area, * * * shall be in accordance with regulations established by the Secretary of Agriculture in accordance with the general purpose of maintaining, without unnecessary restrictions on other uses, including that of timber, the primitive character of the area, particularly in the vicinity of lakes, streams, and portages * * *.

The Secretary, pursuant to this authority, promulgated 36 C.F.R. § 251.85 (1971) governing the BWCA. Section 251.85(e) provides in pertinent part:

To the extent not limited by the Wilderness Act, the Chief, Forest Service, may prescribe measures * •* * necessary to protect and administer the Area; * * * and may require permits for, or otherwise limit or regulate, and [sic] use of National Forest land * * *.

A permit to mechanically prospect within the BWCA is required by § 441.-13 of the BWCA Management Handbook, and 36 C.F.R. § 251.15 (1971) requires any holder of reserved mineral rights in federal land to apply for and receive a permit before any mining activities may be carried out. Therefore, St. Clair had no right to mine or mechanically prospect for minerals within the BWCA until he had completed application for a permit and the Forest Service had determined whether a permit should issue. In making this determination we must presume that the Forest Service would determine whether or not the planned mining activities were compatible with the wilderness character of the area, and it is this determination upon which a court should give the Forest Service the opportunity to make a As Davis, supra § 19.01 at 6 record, states:

[T]he choice that lies behind the doctrine is between judicial action taken without the benefit of what the agency has to offer to the particular problem, and judicial action that fully takes into account the administrative position on the particular problem.

Rather than taking “judicial notice” that St. Clair’s planned activities were incompatible with the wilderness quality of the BWCA, without a hearing and without the benefit of a Forest Service record on the question, the District Court should have stayed the proceedings until after Forest Service action on the permit application, or dismissed the case without prejudice to any suit commenced after final Forest Service action. Although the League’s legal claims cannot be decided by the Forest Service, recourse to the courts will be available after final Forest Service action. Allowing the Forest Service to initially determine whether any mining activity will be allowed, consistent with maintaining the wilderness character of the BWCA, would provide the necessary factual record for the District Court’s determination of the legal issues presented.

As the necessary documents in support of a permit application have not been filed with the Forest Service, and there is no indication as to when or whether the permit application will be pursued, the cause will be remanded to the District Court with instructions that the Forest Service be allowed to determine upon proper application whether a permit should be issued. The District Court shall, in its discretion, determine whether the present suit should be stayed pending completion of Forest Service action, or whether the suit should be dismissed without prejudice to the institution of any later suit.

Having determined that the judgment of the District Court must be reversed and the case remanded, we express no opinion as to the correctness of the District Court’s decision on the other issues raised by St. Clair, the League, and the federal defendants.

Further, we think the posture of the case at the time of the State’s motion to amend requires our approval of the District Court’s refusal to allow amendment. The State has made no clear showing of an abuse of discretion in refusing to allow amendment. We, of course, recognize that Rule 15, Fed.R.Civ.P. requires that leave to amend be freely given. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); 3 Moore’s Federal Practice ¶15.02, ¶5.08 (2nd ed. 1974) [hereinafter cited as Moore]. The allowance of leave, however, lies within the discretion of the trial court, Zenith Radio Corp. v. Hazeltine Research, 401 U.S. 321, 330, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971), and is reviewable only for an abuse of discretion. Gallon v. Lloyd-Thomas Co., 264 F.2d 821, 823 (8th Cir. 1959); Moore, supra ¶15.08 [4].

The original cross-claim by the State was filed March 9, 1970. The case was progressing towards trial upon the Wilderness Act and zoning theories advanced by the League and supported by the State. The State did not file its motion to amend until August 19, 1971, some 17 months after its original pleading. This claim of the State injected new issues; and the attempt to prove fraud for each of the parcels of land held by St. Clair would have required extensive preparation and consumed voluminous amounts of trial time to the detriment of a speedy resolution of the case. The refusal to allow amendment is affirmed.

However, we do not decide whether the State has standing or the fraud claim is barred by the statute of limitations; resolution of these issues should await their presentation in an appropriate action. We do note that although 43 U.S.C. § 1166 does bar an action to annul patents, it has been found not to bar actions to impose a constructive trust upon lands fraudulently obtained, United States v. Carbon County Land Co., 46 F.2d 980 (10th Cir. 1931), aff’d sub nom. Utah v. United States, 284 U.S. 534, 52 S.Ct. 232, 76 L.Ed. 469 (1932); United States v. Carbon County Land Co., 9 F.2d 517, 519 (8th Cir. 1925), aff’d sub nom. Independent Coal & Coke Co. v. United States, 274 U.S. 640, 47 S.Ct. 714, 71 L.Ed. 1270 (1927); Milner v. United States, 228 F. 431 (8th Cir. 1915), appeal dismissed, 248 U.S. 594, 39 S.Ct. 132, 63 L.Ed. 437 (1918), or to recover the value of the lands fraudulently obtained, United States v. Whited & Wheless, 246 U.S. 552, 38 S.Ct. 367, 62 L.Ed. 879 (1918).

The cause is reversed and remanded with directions that the Forest Service be allowed to determine, upon proper application, whether a permit should be granted; and, of course, St. Clair is not at liberty to explore or prospect without a permit from the Forest Service. The District Court may, in its discretion, stay proceedings in the present suit or dismiss without prejudice to any later action. Each party shall bear its or his own costs on appeal.

      . George W. St. Olair is now deceased and his successors in interest are named in the suit. Reference to St. Clair in the opinion includes his successors in interest.

      . 16 U.S.C. § 1131 et seq., popularly known as the Wilderness Act.

      . While the League contends that mining activities are totally barred within the BWCA, the State contends that there may be mining activity in the event of a national emergency.

      . The Honorable Philip Neville, now deceased, United States District Judge for the District of Minnesota. His opinion is reported at 353 F.Supp. 698 (D.Minn.1973).

      . Izaak Walton League v. St. Clair, 55 F.R.D. 139 (D.Minn.1972).

      . 43 U.S.C. § 1166, which provides :
      Suits by the United States to vacate and annul any patent shall only be brought within six years after the date of the issuance of such patents.

      . Draft Boundary Waters Canoe Area Management Plan at 20. The Draft also proposes to “[pjrohibit insofar as legally possible all commercial mining exploration and extraction.” Id. at 21.

      . The defendants characterize the activity as “prospecting” while the League says they were engaged in “mining activity.” Whatever the connotations of these terms, from the record it appears that no harm to the wilderness character of the BWCA ensued from these activities. Although the crews did carry prohibited mechanical equipment into the BWCA, this was done without the knowledge or consent of the Forest Service.

      . The Government cites five eases to support its argument that primary jurisdiction precludes judicial review. All but one deal with exhaustion. Dow Chemical Co. v. Ruckelshaus, 477 F.2d 1317 (8th Cir. 1973) “exhaustion” ; Bankers v. Village of N. Palm Beach, 469 F.2d 994 (5th Cir. 1972), cert. denied, 411 U.S. 916, 93 S.Ct. 1543, 36 L.Ed.2d 307 (1973) “ripeness”; United States v. Consolidated Mines & Smelting, 455 F.2d 432 (9th Cir. 1971) “exhaustion”; Sterling Drug, Inc. v. F. T. C., 146 U.S.App.D.C. 237, 450 F.2d 698 (1971) “exhaustion”; Lockhart v. United States, 420 F.2d 1143 (9th Cir. 1970) “exhaustion”.


author: BARRETT, Circuit Judge. HOLLOWAY, Circuit Judge

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Felix Earl LEMON, Defendant-Appellant.
    No. 73-1584.
    United States Court of Appeals, Tenth Circuit.
    May 29, 1974.

      Stephen K. Lester, Asst. U. S. Atty., Topeka, Kan. (Robert J. Roth, U. S. Atty., Adrian M. Farver, and E. Edward Johnson, Asst. U. S. Attys., Topeka, Kan., on the brief), for plaintiff-appellee.
    William G. Horlbeck, Denver, Colo. (John M. Law, Denver, Colo., on the brief), for defendant-appellant.
    Before HOLLOWAY and BARRETT, Circuit Judges, and DURFEE, Judge, Court of Claims.

       Honorable James R. Durfee, sitting by designation.

   BARRETT, Circuit Judge.

Felix Earl Lemon appeals his jury conviction and sentence for violation of 18 U.S.C.A. § 659. He was indicted along with two other persons, for unlawfully, wilfully, and knowingly (with the intent to convert to their own use) taking and carrying away a large number of cigarettes from a freight depot.

The Government established that the burglary occurred on January 9, 1972, at the Santa Fe Trail Transportation Company freight depot; that fifty-four (54) cases of cigarettes were stolen; that the cigarettes had a value in excess of $6,000; and that the cigarettes were moving as part of an interstate shipment from Kansas City, Missouri, to Forbes Air Force Base, Kansas.

Two of the Government’s witnesses, Edward Louis Robinson and Edward James Paden, had given previous statements implicating Lemon. However, they denied the truth of the prior implicating statements during direct examination. Thereupon the Court permitted the Government the use of their previous statements for impeachment purposes.

On appeal Lemon contends that: (1) the Trial Court erred in permitting the Government to introduce the hearsay statements of Paden which tended to implicate Lemon; (2) it was prejudicial error for the Trial Court to permit the Government to impeach the credibility of its own witnesses without any inquiry to establish a foundation showing surprise and hostility; and (3) the Trial Court erred in refusing Lemon’s requested instructions concerning “uncharged misconduct.”

I.

Lemon contends that the Trial Court committed reversible error in permitting the Government to introduce hearsay statements made by its witness, Paden, to law enforcement officials, which tended to implicate Lemon in the alleged crime. Lemon argues that since Paden was a co-defendant, although tried separately, all acts and declarations made by him before the conspiracy was formed or after it had been terminated were inadmissible. In support of his contention, Lemon relies on our opinion in Mares v. United States, 383 F.2d 805 (10th Cir. 1967), cert. denied 394 U.S. 963, 89 S.Ct. 1314, 22 L.Ed.2d 564 (1969). In Mares we noted:

The defense argues that no conspiracy was charged and that activities and statements outside the scope of any possible conspiracy were received in evidence. The indictment contained no conspiracy count but charged the defendant and Albert jointly with the substantive offense. We have held that in such circumstances the acts and declarations of one are admissible against the other even though no conspiracy is charged. This rule is subject to the qualifications that the existence of the conspiracy must be shown by independent evidence and that acts or declarations of one conspirator either before the formation or after the termination of the conspiracy are not admissible against a co-conspirator. The record here contains independent evidence of conspiracy to rob the bank and to conceal the proceeds of the robbery. The basic issue is whether the actions and statements complained of occurred after the termination of the conspiracy. 383 F.2d at 809, 810.

Under Mares, statements of co-eonspirators may be admitted if proven by independent evidence, and if the acts declarations are made during the conspiracy. This rule has been followed and expanded upon by our court. We recently held in United States v. Coppola, 479 F.2d 1153 (10th Cir. 1973), that statements of co-conspirators are admissible against one another if made during the “continuation” of the conspiracy. See also Green v. United States, 386 F.2d 953 (10th Cir. 1967). Such statements, of course, must be made in “furtherance” of the conspiracy. Grunewald v. United States, 353 U.S. 391, 77 S.Ct. 963, 1 L.Ed.2d 931 (1957); Krulewitch v. United States, 336 U.S. 440, 69 S.Ct. 716, 93 L.Ed. 790 (1949); United States v. Coppola, supra.

Applying these standards, together with full appreciation that a third Government witness, Robert White, afforded substantial “independent evidence” of the conspiracy, Paden’s statement was inadmissible as substantive proof because it was neither in “furtherance” of the conspiracy nor was it made during the “continuation” of the conspiracy. However, the statement was not received into evidence and was used only in a limited, careful manner to impeach Paden. No error was committed.

The confrontation clause of the Sixth Amendment as made applicable to the States by the Fourteenth Amendment is not violated by admitting a declarant’s out-of-court statements, so long as he testifies at trial and is subject to cross-examination. The purpose of the amendment is satisfied because the declarants appeared as witnesses in court, under oath, subject to cross-examination, and their demeanor was observed by the trier of fact. California v. Green, 399 U.S. 149, 90 S.Ct. 1930, 26 L.Ed.2d 489 (1970). We have held that prior inconsistent statements are admissible to impeach or discredit one’s witness. United States v. Eaton, 485 F.2d 102 (10th Cir. 1973); Brooks v. United States, 309 F.2d 580 (10th Cir. 1962). Such statements are admissible solely for purposes of impeachment, and then only insofar as they serve to remove the damage of surprise. Such statements cannot be used, by indirection, to present testimony to the jury which the Government expected the witness to supply directly. United States v. Hill, 481 F.2d 929 (5th Cir. 1973).

It follows that a prior inconsistent statement may be used solely insofar as it relates to credibility, and in no event is it to be considered for the truth of its contents. United States v. Gilliam, 484 F.2d 1093 (D.C.Cir. 1973). The use of Paden’s statement was proper, if thus limited.

Our careful review of the Court’s instructions leads us to conclude that the usage of the prior Paden statement was properly limited. The statement was not received into evidence. The Trial Court instructed the jury, twice, concerning the statement, as follows:

Members of the Jury, you will recall that there have been witnesses in the case who have testified and have denied making statements that were attributed to them at a former occasion. And they say that — well, the witness Paden said that these were lies that he told. I think the witness Robinson said he hadn’t made such statements at all. Now, I have permitted these witnesses who testified to be impeached by permitting the Government’s attorney to show that former statements and declarations made by them are contradictory and inconsistent with the answers they have given on the witness stand in this trial. And the witnesses particularly have been James Paden and Edward Robinson. There may have been some others, but my notes don’t reveal it. But in the event that did occur with any other witnesses that statement applies with equal force to the impeaching evidence that was offered.
Now the purpose of impeachment is to discredit the witness. It is not to establish the existence of a fact in dispute. Statements made to officers before trial are admissible only to impeach or discredit the witness, and may be — may not be considered by you as competent evidence of the fact to which the former statements relate. Now this rule applies where the Court permits the Government’s attorney to impeach a Government witness who is shown to be recalcitrant or hostile. Such impeaching testimony may not be considered by you in determining the guilt or innocence of the Defendant on trial in this case. These statements attributed to these witnesses which they deny or which they now say are false may not be considered as any evidence in support of the charge that the Government has brought against the Defendant.

TR. pp. 465-466.

The Court has permitted some of the witnesses who have testified in this ease to be impeached by permitting the Government’s attorney to show that former statements and declarations made by them are contradictory or inconsistent with the answers they have given at this trial.
The purpose of impeachment is to discredit the witness and not to establish the existence of a fact in dispute. The statements made to the officers before trial are admissible only to impeach or discredit the witness and may not be considered by you as competent evidence of the fact to which the former statements relate. And this rule applies here where the Court permitted the Government’s attorney to impeach a Government witness who is shown to be recalcitrant and hostile. Such impeaching testimony may not be considered by you in determining the guilt or innocence of the Defendant on trial in this case.

TR. pp. 733-734. (Instruction Number 27).

It is presumed that jurors will be true to their oath and that they will conscientiously observe the instructions and admonitions of the Court. Ellis v. State of Oklahoma, 430 F.2d 1352 (10th Cir. 1970), cert. denied 401 U.S. 1010, 91 S.Ct. 1260, 28 L.Ed.2d 546 (1971); Welch v. United States, 371 F.2d 287 (10th Cir. 1966), cert. denied 385 U.S. 957, 87 S.Ct. 395, 17 L.Ed.2d 303 (1966). Since the statements were not admitted in evidence and were used only in the limited manner expressed by the Court, and since the jury was properly charged concerning the statements, we hold that the usage thereof was proper.

II.

Lemon contends that it was reversible error for the Court to permit the United States to impeach the credibility of its own witnesses by the use of prior inconsistent statements without establishing a foundation showing surprise and hostility.

It is established in this circuit that when a party calls a hostile witness or is surprised by the testimony from his own witness, the trial court may, in its discretion, permit the party calling the witness to cross-examine and impeach him. United States v. Eaton, supra; United States v. Coppola, supra; United States v. Maynard, 452 F.2d 1087 (10th Cir. 1971); United States v. Holsey, 414 F.2d 458 (10th Cir. 1969); Guffey v. United States, 310 F.2d 753 (10th Cir. 1962); Brooks v. United States, supra. In United States v. Coppola, supra, we held that positive damage and surprise to the calling party are requisite to impeachment via a prior inconsistent statement. The format for impeachment was set forth in Brooks v. United States, supra, i. e., that a proper foundation was bringing the statements to the witness’ attention and thereafter permitting him to admit, deny or explain them. This procedure was pursued by the Government in impeaching Robinson and Paden.

Just as we have recognized the discretion vested in the trial court, supra, so, too, have courts held that the amount of proof necessary to demonstrate “surprise” is largely within the discretion of the trial court and great latitude should be allowed. Lerma v. United States, 387 F.2d 187 (8th Cir. 1968), cert. denied 391 U.S. 907, 88 S.Ct. 1658, 20 L.Ed.2d 421 (1968); United States v. Kahaner, 317 F.2d 459 (2nd Cir. 1963), cert. denied 375 U.S. 836, 84 S.Ct. 74, 11 L.Ed.2d 65 (1963); Bieber v. United States, 276 F.2d 709 (9th Cir. 1960); United States v. Maggio, 126 F.2d 155 (3rd Cir. 1942), cert. denied 316 U.S. 686, 62 S.Ct. 1275, 86 L.Ed. 1758 (1942). The trial court was in a position to hear the testimony of the witnesses and remarks of counsel and to observe the appearances, expressions, and general overall demeanor and reactions of the witnesses and counsel. A trial court alone is best able to appreciate and analyze the degree to which the Government’s witnesses are hostile and the degree to which their testimony smacks of surprise. This type of determination by the Court does not invade the province of the jury. United States v. Cooper, 464 F.2d 648 (10th Cir. 1972), cert. denied 409 U.S. 1107, 93 S.Ct. 902, 34 L.Ed.2d 688 (1973). We may not reverse such a determination, absent clear error.

With regard to witness Robinson, the only notice to the Government of any possibility of his recantation occurred during trial. His attorney stated to the Court at the bench when Robinson was called by the Government that “there are certain discrepancies in that statement from anything he might have made to the officers, and thinks it might have been due to the confusion at the time . . .” and that “. . .he made no statement concerning the Defendant in this case . . .” When the Court inquired of Robinson’s counsel, he stated that his concern was that the Government may proceed against Robinson on a perjury charge. The Court responded that there was no danger in that regard. Even so, Robinson’s obvious reluctance to implicate Lemon when he testified was such that the Court specifically observed that “this witness seems to be awfully reluctant, maybe we can find out what he knows.” We believe that the record reflects surprise on the part of the prosecutor when Robinson denied the contents of his prior statement implicating Lemon.

With regard to the witness, Paden, the matter of “surprise” is more elusive. The Government, at trial, was in possession of an F.B.I. investigative report which referred to an interview between Agent Thompson and witness Robert White which occurred about two months prior to trial. White told Thompson that Attorney Jarvis, who represented Lemon at all times, talked with him in the county jail about two months prior to trial and advised White to keep his mouth shut about “the Lemon deal”; that White then told Jarvis that he (White) would not testify against Lemon; that he (White) wanted Lemon to leave him alone because he had been previously beaten by one McPherson and one Gilbert; that Jarvis responded that it was fine that White would not testify against Lemon and that he (Jarvis) understood that Paden had been lying to the F.B.I. and would not testify against Lemon; that Jarvis remarked that Lemon had hired McPherson and Gilbert to beat White up and that it was a good thing he (White) had not signed a statement. Attorney Jarvis did not at any time deny the contents of the report. Significantly, while counsel for Lemon did generally object to the impeachment of Paden, he acknowledged that he was doing so “for the record” but he specifically acknowledged that “certainly under the new federal rules the prosecution has the right to impeach their own witness.” Attorney Jarvis had not advised the Court or the Government prior to trial of the fact that he had conversed with White in the county jail. He acknowledged the conversation for the first time at trial. The Trial Court was perplexed with respect to Pad-en’s recantation, noting that Lemon and “those who were working for him were maneuvering around to keep people from testifying” and “there are some very peculiar situations have come up” to which Attorney Jarvis responded, “I would agree, Your Honor.” Many other matters in this record reflect, we believe, that the Government was in fact surprised by Paden’s recantation. The atmosphere was such that the Trial Judge was so troubled by the reluctance of witnesses Robinson and Paden upon direct examination by the Government that he observed that he intended to “investigate” the “very peculiar situations which had come up” and that “something happened to cause that.” In ruling against the Motion for Judgment of Acquittal, the Judge observed:

Now, the picture, as I see it, picking up the fragments of the evidence, would support a situation where Paden and McPherson have been gambling with the Defendant and they got in debt to him ... A couple of fellows get in debt to somebody they have got to get out . . . One way of looking at it, he (Lemon) got his money. These gambling debts were paid.

The Court made it abundantly clear in the instructions to the jury that the Government had been permitted to impeach Robinson and Paden only after they were shown to be recalcitrant and hostile, and that the statements attributed to them which they contradicted on the witness stand could not be considered as evidence in support of the charge against Lemon. Under all of the circumstances, if there was error it was harmless. We hold that the Trial Court properly allowed the impeachment of Robinson and Paden by the limited usage of the previous inconsistent statements.

III.

Lemon contends that the Court erred in refusing to charge the jury as to the limited purpose for which existence of prior “uncharged misconduct” could be used. He argues that the Court should have instructed the jurors that the testimony, relating to his instructing White how to hot-wire a car and the formation of the “original conspiracy” from which he allegedly withdrew prior to the consummation of the burglary, was to be used only for the limited purpose of showing intent, knowledge, plan, or scheme, and not to be treated as direct evidence of his guilt.

At the outset we observe that the testimony concerning hot-wiring a car and the “original conspiracy” were both intermingled with the general narrative testimony of several witnesses, in such a manner that neither subject was treated improperly. We further observe that the Government witnesses were subject to detailed cross-examination by able defense counsel.

Although the Trial Court declined to use either of Lemon’s detailed, lengthy, proffered instructions on “mischarged conduct”, he did charge the jury:

The Defendant is not on trial for any act or conduct not alleged in the indictment.

We are compelled to reiterate that jurors will be true to their oath and that they will conscientiously observe their duty. Ellis, supra. In view of the above partial instruction, we hold that the Court did not err in refusing to give Lemon’s requested instruction. The Court had already adequately covered the area requested. Lowther v. United States, 455 F.2d 657 (10th Cir. 1972), cert. denied 409 U.S. 857, 93 S.Ct. 139, 34 L.Ed.2d 102 (1972).

A conviction will not be disturbed on appeal where it is clear after a careful examination of the whole record that the alleged error did not deprive the accused of substantial rights. Woodring v. United States, 367 F.2d 968 (10th Cir. 1966); Wright v. United States, 301 F.2d 412 (10th Cir. 1962).

Affirmed.

HOLLOWAY, Circuit Judge

(concurring) :

I agree with the majority opinion in all respects, except as to the conclusion that the Government was surprised by the adverse testimony from Robinson and Paden. In that regard I have a different impression of the record, but agree that the disposition of the issue before us concerning impeachment of these two witnesses is proper.

With respect to the testimony of Robinson, there was a statement before he testified by an attorney appointed to advise him of his rights. In the presence of Government counsel the attorney stated to the trial court that his client had informed him that he made no statement concerning the defendant in this case. I feel this put the Government on notice before it called Robinson and that surprise during adverse testimony could not be claimed as is required for such impeachment.

Again as to the testimony of Paden, I feel the record reveals notice to the Government that he would not testify in accord with his statement. Government counsel in fact referred to an FBI report of an interview two months before trial in which another witness stated that he understood Paden was going to change his story and say he committed the burglary, and that Lemon was not implicated. With this report before the Government prior to trial, I feel the requisite surprise during testimony is again disproved. In view of the statement by Government counsel showing notice of Paden’s change of attitude, no claim of surprise could be made and Paden’s subsequent demeanor on the stand was irrelevant as to surprise.

Nevertheless I join in the disposition on this issue. I am satisfied that any error in permitting the impeachment of Robinson was harmless. And I find no adequate objection to the impeachment procedure on Paden. There being no plain error affecting substantial rights, Rule 52(b), F.R.Crim.P., I agree that the challenge raised on appeal to the impeachment procedure should not be upheld.

      . 18 U.S.C.A. § 659 provides in part:
      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, stationhouse, 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 ; or .

      . It is not enough that during trial there is surprise — which is commonplace when one repudiates his earlier statements. The surprise must occur during testimony of the witness on the stand so that damage is inflicted by one’s own witness, contrary to the reasonable expectations of the party calling him. See United States v. Coppola, 479 F.2d 1153, 1157—1158 (10th Cir.); United States v. Eaton, 485 F.2d 102, 105 (10th Cir.); and see Yonng v. United States, 97 F.2d 200, 205-206 (5th Cir.).