author: JAMES HUNTER, III, Circuit Judge:

text:
    UNITED STATES of America, Appellant, v. Thomas J. PECORA, Appellee.
    No. 72-2173.
    United States Court of Appeals, Third Circuit.
    Argued June 11, 1973.
    Decided Aug. 31, 1973.

      Richard L. Thornburgh, Sidney Glazer, Kenneth A. Bravo, Asst. Attys., U. S. Dept, of Justice, Pittsburgh, Pa., for appellant.
    Robert E. Wayman, Wayman, Irvin, Trushel & McAuley, Pittsburgh, Pa., for appellee.
    Before GIBBONS, ROSENN and HUNTER, Circuit Judges.
   OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

Thomas J. Pécora was indicted under '§ 186(b) of the Labor-Management Relations Act which makes it an offense for an employee representative to receive from an employer “any payment, loan, or delivery of any money or other thing of value.” After a prehearing conference, the government and appellee entered into a stipulation as to the facts upon which the indictment was returned. This stipulation was attached to a motion to dismiss the indictment filed by appellee. The district court, 351 F. Supp. 164, granted appellee’s motion, and the government has appealed. We must consider two questions: (1) Whether the government has the right to appeal the dismissal of the indictments under 18 U.S.C. § 3731; and (2) if it does, whether the district court was correct in its dismissal.

Appellee Thomas J. Pécora was the business manager of Local 1058, Construction and General Laborers and Materials Handlers. In July, 1968 the Thomas Pécora Testimonial Dinner Committee was formed to honor appellee for his involvement in the labor movement. Tickets to the dinner cost fifty dollars per couple and advertisements in a souvenir program cost three hundred dollars per page. Appellee was not a member of the committee nor did the stipulation state he instigated the planning.

The committee’s efforts were fruitful. It sold $44,400.00 worth of tickets and advertising. Employers who employed some members of Local 1058 purchased $25,450.00 worth of tickets and advertising.

At the dinner, appellee received a new car worth $5,324.96, a color television set worth $448.00, a plaque, a citation from the International Union, and a 30-year pin. Following the dinner, after $11,871.72 was deducted to cover expenses, appellee received the balance of the proceeds: $26,755.32 in cash. It was the receipt of this cash and the gifts which the government claims violated § 186(b).

The district court decided that the stipulated facts did not constitute a violation of § 186 and dismissed the indictment. The court reasoned that the government had not alleged any facts which showed any direct involvement of appel-lee in the solicitation of contributions from the employers. The court determined that a corrupt purpose had to be shown for an indictment to be valid under § 186 and that “the mere receipt of money” was not sufficient. The government challenges that interpretation.

Before we reach that issue, we must decide whether the government has the right to appeal the district court’s order.

I. APPEAL BY THE GOVERNMENT

In 1971, 18 U.S.C. § 3731 was amended to read, in pertinent part, as follows:

“§ 3731. Appeal by United States
“In a criminal case an appeal by the United States shall lie to a court of appeals from a decision, judgment, or order of a district court, dismissing an indictment or information as to any one or more counts, except that no appeal shall lie where the double jeopardy clause of the United States Constitution prohibits further prosecution.
******
“The provisions of this section shall be liberally construed to effectuate its purposes.”

This amendment replaced a statute described by the Supreme Court as “a failure ... an awkward and ancient Act.” United States v. Sisson, 399 U.S. 267, 307, 308, 90 S.Ct. 2117, 2139, 26 L.Ed.2d 608 (1970). Under the old statute, it is most probable that the government would not have been able to appeal the decision of the district court for the Supreme Court had stated in United States v. Brewster, 408 U.S. 501, 506, 92 S.Ct. 2531, 33 L.Ed.2d 507 (1972) about the “old” § 3731:

“Under United States v. Sisson, 399 U.S. 267, 90 S.Ct. 2117, 26 L.Ed.2d 608 (1970), an appeal does not lie from a decision that rests, not upon the sufficiency of the indictment alone, but upon extraneous facts. If an indictment is dismissed as a result of a stipulated fact or the showing of evidentiary facts outside the indiet-raent, which facts would constitute a defense on the merits at trial, no appeal is available. See United States v. Findley, 439 F.2d 970 (CAI 1971).”

As amended, however, Section 3731 provides that the government may appeal from an order or decision dismissing an indictment except where the double jeopardy clause prohibits it. United States v. Sisson, supra, 399 U.S. at 306, 307, note 61, 90 S.Ct. 2117. Because of the amendment of Section 3731, it would appear that the statement in Brewster is no longer an accurate statement of the law. The First Circuit, for example, in United States v. Findley, 439 F.2d 970, 973 (1st Cir. 1971) (cited with approval by the Supreme Court in Brewster), conceded that. the defendant had not been formally placed in jeopardy when a district court judge considered a motion to dismiss an indictment based on stipulated facts before a jury has been impaneled.

We have a similar situation before us and we agree with the conclusion of the First Circuit that jeopardy has not attached. Therefore, the government may appeal the decision of the district court.

In a jury case, jeopardy attaches when a jury has been impaneled and sworn; in a non-jury case, jeopardy attaches after the court has begun to hear evidence. E. g., United States v. Hill, 473 F.2d 759 (9th Cir. 1972). Was this a jury or a non-jury case? Appellee argues that by entering into the stipulation of facts he “essentially waived” his right to a jury trial. Rule 23(a) of the Federal Rules of Criminal Procedure, however, states that a defendant is entitled to a jury trial unless he waives the right “in writing with the approval of the court and the consent of the government.” Entering into the stipulation of facts for the purpose only of attacking the validity of the indictment did not constitute the waiver necessary under Rule 23(a). As the Supreme Court has said, “ ‘courts indulge every reasonable presumption against waiver’ of fundamental constitutional rights and that ‘we do not presume acquiescence in the loss of fundamental rights.’ ” (Footnotes omitted). Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 1023/82 L.Ed. 1461. Although the defendant normally argues that he has not waived a right, there is no reason to subvert a principle which protects defendants because in this particular case it would benefit him to have a less strict standard of waiver. Absent compliance with Rule 23(a), there can be no waiver of a jury trial.

Appellee relies upon the decision m United States v. Hill, 473 F.2d 759 (9th Cir. 1972). In Hill, the defendants were charged with mailing obscene advertisements. The parties stipulated which materials were alleged to be obscene. Based on the indictments and the stipulation, the defendants moved to dismiss the indictments. The stipulated materials were introduced into evidence, and the court granted the motion to dismiss on the ground that the materials were not legally obscene. The Ninth Circuit determined that the government could not appeal the decision.

Hill is distinguishable for two reasons. One, the court did not determine whether the defendant had waived his right to a jury trial; and two, evidence was actually entered into the record. The district court determined the character of that evidence so it may be said that jeopardy had attached.

We are aware of the rationale behind the decision in Findley (and equally applicable in Hill and here):

“If an appeal will lie in the present case, while it cannot if the defendant waits and subjects himself to jeopardy, informed counsel believing they have a defense on the merits will henceforth protect their clients by avoiding an expediting procedure otherwise beneficial to all concerned, and only ignorant and ill-advised defendants will subject their defense on the merits to a government appeal.” United States v. Findley, supra 439 F.2d at 974.

But we find this consideration is outweighed by Congress’ intention as expressed in the plain wording of the statute. As the Supreme Court commented in Sisson, supra 399 U.S. at 307, 90 S.Ct. at 2139 :

“Clarity is to be desired in any statute, but in matters of jurisdiction it is especially important. Otherwise the courts and the parties must expend great energy, not on the merits of a dispute settlement, but on simply deciding whether a court has the power to hear a case.”

Our interpretation of § 3731 does not subvert any constitutional rights of citizens. It merely gives effect to the Congressional intention not to expand on these rights.

II. 29 U.S.C. § 186(b)

Our review of the district court’s interpretation of § 186(b) is governed by our recent decision in United States v. Lanni, 466 F.2d 1102 (3d Cir. 1972). In Lanni, we emphasized that § 186(b) forbids all payments, direct or indirect, between employers and representatives of employees. This result follows from both the plain wording of the statute and the Congressional history. The Supreme Court has read the statute as we read it, United States v. Ryan, 350 U.S. 299, 305, 76 S.Ct. 400, 100 L.Ed. 335 (1956); and so has the Second Circuit. United States v. Ricciardi, 357 F.2d 91, 99 (2d Cir. 1966).

The district court indicated that some kind of “corrupt purpose” was necessary for a violation of § 186(b) to occur. As we have stated, that is simply not correct. To allow a device such as this to go unchecked would make a mockery of attempts to enforce § 186(b). It would not take much ingenuity to devise an insulating body between an employer and a representative of employees and shuttle the payments through the body. The congressional purpose in enacting § 186(b) would be poorly served by our allowing it.

As we stated in Lanni and reiterate here, all that was necessary to prove a wilful violation of § 186(b) is that appellee benefited from the money paid to the Committee with knowledge:

(1) that there were “payments”; and
(2) that the payments came from employers who employed workers represented by Pecora. United States v. Lanni, 466 F.2d 1102, 1110.

There are stated exceptions to the strict rule of § 186(b). Appellee claims that the testimonial dinner falls within subsection (c)(3). This subsection permits “the sale or purchase of an article or commodity at the prevailing market price in the regular course of business.” 29 U.S.C. § 186(c)(3). Appellee contends that the dinner committee “sold” a testimonial dinner at the prevailing market price.

This contention is entirely lacking in merit, and we reject it. Even if we were to assume that a testimonial dinner was a “commodity,” and even if we were to assume that it was sold in “the regular course of business,” it would strain credulity to believe that the market price for an advertisement in the program was $300 or that the value of the dinner was twenty-five dollars per person. The fact that out of gross proceeds of $44,400 the expenses of the dinner amounted only to $11,871.72 belies a conclusion that the testimonial was offered at the market price.

■ Appellee also contends that there was no evidence that he knew or was aware that any of the money he received came from employers whose employees were represented by appellee. This contention is also without merit. Incorporated into the stipulation were portions of the grand jury testimony of the chairman of the dinner committee. In that testimony, the chairman stated that appellee on various occasions would ask the chairman’s secretary how the dinner was “coming along”; that on one occasion he went with the chairman to make arrangements for the dinner; and that at the dinner were various contractors who dealt with local unions represented by appellee. The chairman further testified that appellee was at the dinner, that he had been in the union for thirty years, and that he dealt with contractors “all of the time.” From this testimony, one can easily infer that appellee knew that employers of union members he represented had contributed money.

The order of the district court sustaining the motion' to dismiss the indictment will be reversed, and the case remanded to that court for trial.

      . The pertinent parts of 29 U.S.C. § 186 are as follows:
      “(a) It shall be unlawful for any employer or association of employers or any person who acts as a labor relations expert, adviser, or consultant to an employer or who acts in the interest of an employer to pay, lend, or deliver, or agree to pay, lend, or deliver, any money or other thing of value — ■
      “(1) to any representative of any of his employees who are employed in an industry affecting commerce; or
      “(2) to any labor organization, or any officer or employee thereof, which represents, seeks to represent, or would admit to membership, any of the employees of such employer who are employed in an industry affecting commerce; or
      “(3) to any employee or group or committee of employees of such employer employed in an industry affecting commerce in excess of their normal compensation for the purpose of causing such employee or group or committee directly or indirectly to influence any other employees in the exercise of the right to organize and bargain collectively through representatives of their own choosing ; or
      “(4) to any officer or employee of a labor organization engaged in an industry affecting commerce with intent to influence him in respect to any of his actions, decisions, or duties as a representative of employees or as such officer or employee of such labor organization.
      “ (b) (1) It shall be unlawful for any person to request, demand, receive, or accept, or agree to receive or accept, any payment, loan, or delivery of any money or other thing of value prohibited by subsection (a) of this section.”

      . The district court stated that:
      “On the stipulated facts, however, we can find no indication that the testimonial dinner involved any direct solicitation by Pécora from the employers of his union members. He was insulated from direct contact with the employers by the activities undertaken on his behalf by the Testimonial Dinner Committee. There is no indication in the stipulated facts that Pécora had instigated the dinner for his own profit; or that his judgment or his decisions as Local 1058 Business Manager were influenced by the source of any of the money; or that the representatives of the committee attempted to intimidate employers of Local 1058 members to procure the sale of tickets or advertising. Pécora did not directly solicit the employers to buy tickets or advertising.
      * * * * sfc
      “..... It is true that part of the money the • committee distributed came from employers and the inference is clear that Peeora’s friends had decided to help him pay his indebtedness and that they knew that employers would be amenable to solicitation. On the other hand there is no basis upon which to infer that the employers were intimidated or that they received any favors from Pécora in his work as a business agent.
      “ . . . . Was this activity carried out with a corrupt intention or was it merely an expression of good will? There is insufficient evidence upon which to infer a corrupt purpose.” Appendix, pgs. 47a-A8a.

      . The effective date of the amendment was January 2, 1971. Pub.L. 91-644, Title III, § 14(a), 84 Stat. 189o.

      . The old § 3731 read as follows :
      “3731. Appeal by United States “An appeal may be taken by and on behalf . of the United States from the district courts direct to the Supreme Court of the United States in all criminal cases in the following instances:
      “From a decision or judgment setting aside, or dismissing any indictment or information, or any count thereof, where such decision or judgment is based upon the invalidity or construction of the statute upon which the indictment is founded.
      “From a decision arresting a judgment of conviction for insufficiency of the indictment or information, where such decision is based upon the invalidity or construction of the statute upon which the indictment or information is founded.
      “From the decision or judgment sustaining a motion in bar, when the defendant has not been put in jeopardy.
      “An appeal may be taken by and on behalf of the United States from the district courts to a court of appeals in all criminal cases, in the following instances:
      “From a decision or judgment setting aside, or dismissing any indictment or information, or any count thereof except where a direct appeal to the Supreme Court of the United States is provided by this section.
      From a decision arresting a judgment of conviction except where a direct appeal to the Supreme Court of the United States is provided by this section.
      “From an order, granting a motion for return of seized property or a motion to suppress evidence, made before the trial of a person charged with a violation of any law of the United States, if the United States attorney certifies to the judge who granted such motion that the appeal is not taken for purpose of delay and that the evidence is a substantial proof of the charge pending against the defendant.
      “The appeal in all such cases shall be taken within thirty days after the decision or judgment has been rendered and shall be diligently prosecuted.
      “Pending the prosecution and determination of the appeal in the foregoing instances, the defendant shall be released in accordance with chapter 207 of this title.
      “If an appeal shall be taken, pursuant to this section, to the Supreme Court of the United States which, in the opinion of that Court, should have been taken to a court of appeals, the Supreme Court shall remand the case to the court of appeals, which shall then have jurisdiction to hear and determine the same as if the appeal had been taken to that court in the first instance.
      “If an appeal shall be taken pursuant to this section to any court of appeals which, in the opinion of such court, should have been taken directly to the Supreme Court of the United States, such court shall certify the case to the Supreme Court of the United States, which shall thereupon have jurisdiction to hear and determine the case to the same extent as if an appeal had been taken directly to that Court.”

      . Tlie government contends that:
      “ . . . the Court in Hill erroneously tried to apply 18 U.S.C. § 3731, as amended, to an indictment returned before the effective date of that amendment. 1970 U.S. Code Cong, and Adm. News, pp. 2217, 5849. The Hill indictment was returned on December 22, 1970, and the effective date of the amendment to § 3731 was January 2, 1971. 84 Stat. 1890.” (Government’s reply brief, page 2).
      Since we are not bound by the decision in Hill, it is its reasoning we are concerned with, and not whether its decision was technically correct.'

      . The Senate apparently attempted to make § 3731 even broader. Its draft of the bill permitted the government to appeal any decision or order terminating a prosecution except an acquittal. S. 3132, 91st Cong. 2d Sess. See 116 Cong.Rec. 35658. The conference committee redrafted the provision to read as it now does. 1970 U.S.Code Cong, and Adm. News, pp. 5848-5849. While no reason is given for the change, it would appear that the Senate’s draft would have permitted appeals in cases where the double jeopardy clause would have prohibited them because double jeopardy often prohibits re-prosecution after a trial begins and is terminated even though the defendant was not acquitted. See, e. g., United States v. Jorn, 400 U.S. 470, 91 S.Ct. 547, 27 L.Ed.2d 543 (1971).

      . Even if jeopardy had attached, our inquiry would not end. We would then be obligated to determine whether double jeopardy prohibited reprcseeution.

      . See footnote 2.


source: Caselaw Access Project

author: TRASK, Circuit Judge:

license: Public Domain

text:
    DART INDUSTRIES, INC., a Delaware corporation formerly known as Rexall Drug and Chemical Company, Plaintiff-Appellee, v. LIBERTY MUTUAL INSURANCE COMPANY, a Massachusetts corporation, Defendant-Appellant.
    No. 71-1986.
    United States Court of Appeals, Ninth Circuit.
    Sept. 25, 1973.

      Jean Wunderlich (argued), William D. Jennett, of Gilbert, Thompson, Kelly, Crowley & Jennett, Los Angeles, Cal., for defendant-appellant.
    Bruce A. Beckman (argued), James S. Cline, of Adams, Duque & Hazeltine, Los Angeles, Cal., for plaintiff-appellee.
    Before CARTER and TRASK, Circuit Judges, and BURNS, District Judge.

       Honorable James M. Burns, United States District Judge, District of Oregon, sitting by designation.

   TRASK, Circuit Judge:

Liberty Mutual Insurance Company, a Massachusetts corporation (Liberty), appeals from a final judgment entered in favor of Dart Industries, Inc., a Delaware corporation (Dart), following the granting of a motion for summary judgment in this diversity case. We affirm.

On June 23, 1961, Liberty had issued its Comprehensive General Liability Policy of Insurance, naming The Owl Drug Company (Owl) and Rexall Drug and Chemical Company (Rexall) as named insureds. On April 3, 1962, Owl was merged into Rexall under the “short merger” procedure of Nevada Revised Statutes § 78.486. Such a merger results from the exercise of a statutory right without agreement or action required on the part of the merged corporation and no agreement or action by Owl took place here. Effective April 22, 1969, the name of Rexall was changed to Dart Industries, Inc., a publicly held stock corporation.

Prior to June 23, 1961, one Calabrese had become indebted to Owl for large sums of money, principally in connection with sales of drug stores. Upon receipt of a credit information report concerning Calabrese and this indebtedness from a Credit Managers Association of which Owl was a member, W. H. Fisher, Jr., then president of Owl, sent a letter to the Association dated June 23, 1961, on a letterhead of Rexall controverting some of the statements in the report. Calabrese made no complaint about the letter to Owl prior to the filing of a libel action on March 22, 1963, against Rexall (now merged with Owl) in state court. Despite Rexall’s defense that the letter was privileged, requiring a finding by the jury of malice in the writing of the letter by Owl, a verdict of $880,000 plus costs was recovered by Calabrese. Subsequently this amount was reduced to $550,000 plus costs.

No question of policy coverage has been raised by Liberty. Its principal defense is that under California Insurance Code, Section 533, the insurer is not liable where the loss was caused by the willful act of the insured. Liberty contends this was such a case.

When Liberty refused to pay the judgment, Dart, on April 17, 1969, paid it, plus interest, in the total amount of $615,062.54. Dart then filed this action for recovery of that sum under the provisions of the policy. The summary judgment below permits Dart to recover that amount, plus interest, now grown to $697,564.56.

The thesis of Liberty is that a corporation can act only through its agents; that it is well established that a corporation may be held liable for the wanton, malicious, willful acts of its agents or employees done within the scope of their employment whereby injuries are inflicted on a third person, although such acts have not been expressly authorized or subsequently ratified. It refers generally to 19 C.J.S. Corporations § 1263 and to 19 Am.Jur.2d, Corporations § 1428. No quarrel may be had with such an argument in general and the California authorities support it. California Grape Control Board v. Boothe Fruit Co., 220 Cal. 279, 29 P.2d 857 (1934); Johnson v. Monson, 183 Cal. 149, 190 P. 635 (1920). Therefore, appellant concludes, since the letter which Mr. Fisher wrote was within the general scope of his corporate responsibilities as established by the libel judgment in state court, it also became an act of the corporation within the ambit of section 533.

“An insurer is not liable for a loss caused by the wilful act of the insured; but lie is not exonerated by the negligence of the insured, or of the insured’s agents or others.”

Dart contends that the position of Liberty oversimplifies the problem by confusing in one proposition what in reality involves two considerations. The first is the issue of under what circumstances a principal or an employer can be liable in damages to third persons for acts of its agents or employees. The second and critical issue here, is whether a principal or employer may insure against the potential liability for such acts of its agents or employees, in the light of section 533.

Dart’s argument is that there is a policy of the law to impose vicarious liability upon the principal or employer for damages caused by agents or employees to third persons; that there is also a public policy and established business practice to permit persons including corporations to purchase insurance to indemnify them against damages which might be imposed for not only tortious acts of agents or employees but also willful acts of agents or employees, for which such vicarious liability may be imposed.

The trial court took the view as shown by its comments during argument that where policy coverage was otherwise admitted, as it was here, and there had been no showing that the letter had by formal action of the Board of Directors been previously authorized or subsequently ratified; and no showing that the corporation by some form of informal action had indicated prior approval or later acquiescence, section 533 did not constitute a legal defense.

There is a surprising dearth of direct authority upon the narrow issue involved or collateral authority which might point the way. A group of arson cases decided by the courts of California give support to appellee, Dart. In Aren-son v. National Automobile & Casualty Insurance Co., 45 Cal.2d 81; 286 P.2d 816 (1955), an insured under a general liability policy had a judgment obtained against him for damages caused when his minor son started a fire which injured school property. A statute made a parent liable for all damage which was “wilfully” cáused by a child. The company refused to indemnify because the damage was caused “intentionally by an insured” within the terms of a policy exclusion. The California Supreme Court in reversing a judgment for the insurer, also interpreted section 533 and held that it did not apply where the insured was not at fault. The court said:

“Section 533 of the Insurance Code, which codifies the general rule that an insurance policy indemnifying the insured against liability due to his own wilful wrong is void as against public policy, has no application to a situation where the plaintiff is not personally at fault.” 45 Cal.2d at 84, 286 P.2d at 818.

Here, then, vicarious liability is imposed upon an insured in a damage action for a willful act which the insured did not directly commit, yet the right to insure against the consequences of the willful act was upheld against the claimed exclusion of section 533. Although not a case of corporate liability, it clearly indicates the policy of the statutory exclusion as being limited to a situation where the insured is personally at fault. See also, Erlin-Lawler Enterprises, Inc. v. Fire Insurance Exchange, 267 Cal.App. 2d 381, 73 Cal.Rptr. 182 (1968); Nuffer v. Insurance Co. of North America, 236 Cal.App.2d 349, 45 Cal.Rptr. 918 (1965).

The court in Nuffer, supra, recognized the distinction between vicarious liability of respondeat superior and the rights flowing from a policy of indemnity insurance, saying:

“ . . . [T]he rules governing a determination of the scope of an agent’s authority for the purpose of ascertaining the responsibility of his principal on account of wrongs committed by the agent in the transaction of the business of the agency do not control a determination of the scope of the agent’s authority for other purposes. The case at bench does not concern the responsibility of a principal to a third person for a loss occasioned by wrongs committed by an agent. Instead, the case here concerns the responsibility of a third person under a contract of indemnity for a loss sustained by the principal as a result of an act of the agent. Stated otherwise, the case here concerns the coverage provided by the insurance policies.” 236 Cal.App.2d at 356, 45 Cal.Rptr. at 923.

In Hendrix v. Employers Mutual Liability Insurance Co., 98 F.Supp. 84, 87 (E.D.S.C.1951), reversed on other grounds, 199 F.2d 53 (4th Cir. 1952), the court in an assault and battery case by an employee said:

“It is true, as a general proposition of law, that public policy will not permit an insured to be indemnified for liability incurred by his own unlawful act. Farm Bureau Mut. Automobile Ins. Co. v. Hammer, 4 Cir., 1949, 177 F.2d 793. It is, therefore, necessary to determine whether the counterclaims sought to recover from the plaintiff on account of his personal wrong-doing, or whether they sought to hold him for damages because of the wrong-doing of his agent, under the doctrine of respondeat superior. Indemnity for the latter is not contrary to public policy because the insured in such a case is guilty of no wrong-doing, but simply has the misfortune to be legally responsible for the wrong-doing of another.”

The eases relied upon by appellant are cases where an individual insured was the one who personally committed the act for which he was held responsible in damages. Maxon v. Security Insurance Co., 214 Cal.App.2d 603, 29 Cal.Rptr. 586 (1963); Capachi v. Glens Falls Insurance Co., 215 Cal.App.2d 843, 30 Cal. Rptr. 323 (1963). We do not find them helpful to the solution of the case now under consideration.

An examination of the cases indicates that the rationale of section 533 is that the wrongdoer as a matter of public policy should not profit from his own wrong, or, in other cases, a somewhat similar reasoning that the wrongdoer should not be indemnified against the effects of his wrongdoing. Hendrix v. Employers Mutual Liability Insurance Co., supra; Erlin-Lawler Enterprises, Inc. v. Fire Insurance Exchange, supra.

Here, Fisher certainly will not gain anything from the insurance protection afforded Dart. He has left the employment of the corporation. Neither, does it appear, will those who remain. Whether they were individually sued in the libel action or not, does not appear from the record before us. It would certainly appear that they were subject to suit. Should a recovery be obtained (a possibility upon which we express no opinion) and an action begun for indemnification under a policy like that before us, section 533 would appear to be more germane. Liberty, viewing with alarm, contends that the trial court’s interpretation of section 533 makes the section meaningless. We do not see it so. On the contrary it could be argued that if appellant’s view were adopted a defense could arguably be interposed that almost every tortious act of a corporate agent or employee was “wilful” under the statute. This would make the comprehensive liability policy illusory for corporate purposes. The view of the trial court upon the facts of this case appears to us to be correct in principle and consistent with the construction which would have been accorded by the California courts. Norm Thompson Outfitters, Inc. v. General Motors Corp., 448 F.2d 1293, 1299 (9th Cir. 1971).

Appellant calls our attention to the fact that this case has been decided on cross motions for summary judgment and urges that genuine issues of material fact remain which make it inappropriate to determine now that appellee is entitled to judgment as a matter of law. Rule 56(e) Fed.R.Civ.P. states that a motion for summary judgment may be granted whenever “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” See 6 Moore’s Federal Practice (2d ed.) If 56.15. We have given careful consideration to this argument. Both sides agreed that Fisher was an agent of the corporation as its president; that he was acting in the course of his employment in sending the letter; that other corporate officials were consulted or were aware of its preparation; that it was not the type of matter that would be discussed with the Board of Directors or senior management of Rexall-Dart; and that it was not discussed at that level either before being sent or ratified after being sent. It appears clearly to be the type of activity that would not ordinarily, and did not here, cause a ripple in the management of the affairs of the corporation at the directors’ level. In order to afford counsel every opportunity to fully explore the facts, the court after having twice heard arguments on summary judgment and having indicated its inclinations as to the proper disposition of the case, withheld its ruling in order to give appellant additional opportunity to develop further facts or issues on material facts. It was after this that appellant deposed Mr. Fisher and house counsel Thedens. A careful reading of those depositions discloses no additional facts or genuine issues of fact which would preclude an order for summary judgment. Credibility is not an issue since there is no disagreement concerning the basic facts. Nor are we persuaded that “varying factual conclusions” may be drawn by reasonable persons from the basic facts not in dispute. Whatever “varying conclusions” may be drawn, there remains a complete absence of proof that the policy-making management of the corporation approved, ratified or had any knowledge of the letter or its libel. No additional relevant facts which could be adduced on trial have been suggested and we therefore affirm the decision of the trial court on summary judgment.

Judgment affirmed.

      . Section 533 provides :

      . At the second hearing on motions for summary judgment, counsel for Liberty told the court: “I think eventually, if this case is to be tried, we can stipulate to most of the facts.” R.T. 28.

      . At page 11 of its opening brief, Liberty states “that while the evidentiary facts stated in the depositions . . . and the affidavits are not in dispute, they are subject to varying inferences as to ultimate facts to be drawn therefrom, as well as to the judgment of the trier of facts as to credibility.”

      . In Byrnes v. Mutual Life Ins. Co. of New York, 217 F.2d 497, 501 (9th Cir. 1954), we said,
      “ ‘When a party presents evidence on which, taken by itself, it would be entitled to a directed verdict if believed, and which the opposite party does not discredit as dishonest, it rests upon that party at least to specify some opposing evidence which it can adduce and which will change the result. . . .’ Radio City Music Hall Corporation v. United States, 2 Cir., 1943, 135 F.2d 715, 718.”


author: GIBBONS, Circuit Judge. VAN DUSEN, Circuit Judge

text:
    In the Matter of PENN CENTRAL TRANSPORTATION COMPANY, Debtor. Appeal of TWENTY-ONE RETIRED EMPLOYEES, Appellants in No. 73-1081. Appeal of David C. BEVAN, Appellant in No. 73-1098. Appeal of Alfred E. PERLMAN, Appellant in No. 73-1204. Appeal of Stuart T. SAUNDERS, Appellant in No. 73-1205. Appeal of Arthur E. BAYLIS et al., Appellants in No. 73-1206. Appeal of Allen J. GREENOUGH, Appellant in Nos. 73-1207 and 73-1208.
    Nos. 73-1081, 73-1098, and 73-1204 to 73-1208.
    United States Court of Appeals, Third Circuit.
    Argued May 14, 1973.
    Decided Aug. 21, 1973.

      Theodore R. Mann, Barry E. Ungar, Mann & Ungar, Philadelphia, Pa., for appellants, Twenty-one Retired Employees.
    Joseph W. Swain, Jr., Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., for appellant, James M. Symes.
    James M. Marsh, LaBrum & Doak, Philadelphia, Pa., for appellant, David C. Bevan.
    Thomas B. Rutter, Philadelphia, Pa., for appellant, Alfred E. Perlman.
    Bennett G. Picker, Steven R. Waxman, Bolger & Picker, Philadelphia, Pa., for appellant, Stuart T. Saunders.
    George M. Kevlin, Henry M. Irwin, Kevlin & Irwin, Philadelphia, Pa., for appellants, Arthur E. Baylis, and others.
    Jacob I. Goodstein, Goodstein, Zamore, Mehlman & Krones, New York City, for appellant, Arthur J. Greenough.
    Robert W. Blanchette, Marvin Comis-ky, Goncer M. Krestal, Blank, Rome, Klaus & Comisky, Philadelphia, Pa., for appellees, Trustees of Property of Penn Central Transportation Co., Debtor.
    Before VAN DUSEN, GIBBONS and ROSENN, Circuit Judges.
   OPINION OF THE COURT

GIBBONS, Circuit Judge.

We here consider consolidated appeals from two orders, Nos. 1087 and 1088 of the Penn Central reorganization court, which deal with the continuation of payments to former Penn Central executives pursuant to several retirement programs. The district court’s opinion on these orders is reported. In the Matter of Penn Central Transportation Company, Debtor, 354 F.Supp. 408 (E.D. Pa.1973). Twenty-eight retired Penn Central employees have appealed. The appeals present as issues:

(1) common to all appellants, the propriety of the district court’s conclusion that assets held in Penn Central’s Contingent Compensation Plan (CCP) became, on the filing of the petition for reorganization, property of the trustees in reorganization, leaving appellants as creditors holding unsecured claims for deferred compensation ;
(2) common to six appellants, the propriety of the district court’s ruling that the reorganization court would continue payments under the Contingent Compensation Plan as expenses of operation of the reorganization, but with a limitation that total pension payments from the Penn Central Plan for Supplemental Pensions and Penn Central unfunded retirement programs, including the Contingent Compensation Plan, would not exceed $50,000 a year to any former employee; and
(3) in the case of Symes, the application of the $50,000-a-year limitation not only to his claim under the Contingent Compensation Plan, but also to his claim under a $10,000-a-year special pension awarded to him by the Penn Central Board of Directors on October 23, 1968. Mr. Symes’ case will be dealt with separately hereinafter.

The Contingent Compensation Plan was established by the Board of Directors of the former Pennsylvania Railroad in 1952, was continued after the 1968 merger with New York Central, and was amended, unilaterally, by the Board of Directors from time to time thereafter. When cash salary increases were granted to union employees or to non-union employees not included in the CCP, the qualifying participants were awarded comparable adjustments in compensation, but not in cash. Qualifying participants included employees earning $30,000 or more a year. In its preamble the CCP contains this general description:

“As more fully described below, the Board of Directors, from time to time, may allot to any employe an amount representing contingent compensation subject to the terms and conditions set forth herein. At the discretion of the Board an amount equivalent to such allotment, or any part thereof, may be transferred to a reserve fund and invested; and to the extent of such transfer, the payments to a participant shall be measured by the value of the reserve fund. However, the assets held in the reserve fund will at all times be available for any corporate purpose.
After retirement the compensation contingently allotted to a qualifying employe will be paid to him in installments, subject to certain conditions. In the event of death, before or after retirement, payments will be made to the employe’s beneficiary.”

During the life of the CCP 164 employees were designated by a committee of the Board of Directors as qualifying participants. From 1952, when it was adopted, until June 21, 1970, when by Board action it was terminated, salary increases to the qualifying participants were made in the form of allotments to the CCP. The plan provided for periodic transfer of the allotments to a reserve fund for investment. The extent of such transfer payments to a participant would be measured by the value of the reserve fund. The participant’s allotment units would be paid out after his retirement in annual installments, the amount of an installment being determined by reference to the value of his allotment units on the valuation date preceding the date of payment. The CCP contained forfeiture provisions applicable both before and after retirement. With respect to the reserve fund the CCP provided in relevant parts:

“Section 401. The Board may authorize the establishment at any time of a Contingent Compensation Reserve Fund, hereinafter called the Fund. The Fund shall not be a trust' fund and the assets therein shall be available at all times for any corporate purpose of the Company. A participant shall have no right in or to any funds or property which may be held in the Fund.
*- * * -X- * *
Section 1201. No participant nor any other person shall have any interest in any fund or in any specific asset or assets of the Company by reason of amounts contingently allotted to him, nor any right to receive any distribution under the Plan except as and to the extent expressly provided in the Plan ....
Section 1401. . . . No consent of any participant shall be required, however, in connection with any amendment, suspension or termination of the Contingent Compensation Reserve Fund, which shall remain subject at all times to the unrestricted control of the Company.”

From time to time Penn Central distributed to qualifying employees descriptive summaries of the CCP. Typical of the relevant language of such summaries is the description from the one dated October 1, 1969:

“Either the contingent allotments or the Fund may be discontinued at any time at the discretion of the Board, however, in either instance employes’ rights remain whole for the period prior to such termination date.
* * * * -x- #
The assets of the Contingent Compensation Reserve Fund remain assets of the Penn Central Transportation Company and subject to the rights of all creditors of the Company. No participant has any right to receive payments at any other times or in any other amounts than as provided by the Plan.”

When, shortly before the filing of the petition for reorganization, the Penn Central directors terminated the CCP, the Contingent Compensation Reserve Fund contained in excess of $8.6 million. Of this sum, a substantial amount represented appreciation in the fund investments over the initial allotments made on account of the participants’ services. Further appreciation took place after the filing of the petition for reorganization, so that when the district court made the rulings appealed from the Fund was valued at over $10 million.

Originally the trustees petitioned the reorganization court for authorization to disaffirm all obligations' under the CCP and to expend the entire Contingent Compensation Reserve Fund for general railroad purposes. Thereafter, recognizing that such a result could adversely affect the morale of those qualifying participants who were still employed by the railroad, the trustees filed a revised petition seeking approval of a proposed settlement with the CCP claimants. Under this proposed settlement, $2.6 million of the Fund balance would be placed in a reserve fund managed by an independent financial advisor and would be distributed to the participants in proportion to their allotment units, but with the value fixed at the amounts actually allotted but not yet received, or at the value of the pro rata shares of the Fund as of December 31, 1970, whichever was less, and all subject to a $50,000 limitation per person per year. The proposed settlement had other features which need not be alluded to because for a number of reasons the offer was withdrawn, and the matter proceeded to hearing on a revised trustees’ proposal. That proposal was to liquidate the entire Fund, to use the entire Fund for operating expenses, but to pay the participants, as an administration expense, as cash permitted, the amounts proposed in the earlier settlement proposal. The trustees contemplated that such an undertaking by them would be conditioned upon the relinquishment by the participants of any rights to receive payments beyond their actual allotments (or their share in the Fund valued as of December 31,1970, if that was lower).

The district court did not go so far as the trustees proposed. The court’s conclusions here challenged were:

“3. Participants in the Contingent Compensation Plan have no legal or equitable interest in or claim to the assets in the Contingent Compensation Reserve Fund. Each participant in the Contingent Compensation Plan has a valid claim for the full amount to which he is entitled under the terms of the Plan, but the Trustees should be authorized and directed to recognize such claims during reorganization only to the extent represented by the formula proposed by the Trustees in settlement (i. e., reimbursement of accrued allotments, or pro rata share of the Fund as of December 31, 1970, whichever was less); and such claims should be paid during reorganization only as cash permits. Unless and until otherwise ordered by this Court, the Trustees should set aside and reserve the sum of $2.6 million in order to meet these payments.
4. During reorganization, the Trustees should make no payments from the estate of the Debtor (whether by reason of unfunded retirement programs, or the Contingent Compensation Plan) where the effect of such payment would be that the aggregate amount received by a retired employee from all sources related to the Debtor (i. e., the Plan for Supplemental Pensions, unfunded retirement programs, and the Contingent Compensation Plan) would exceed $50,000 per an-num.” 354 F.Supp. at 419.

This disposition of the Fund was implemented by Order No. 1088, and a stay was denied both by the district court and by this court. All but $2.6 million has now been expended for general railroad purposes. While Order No. 1088 provides that this sum be invested as a reserve to meet the payments to participants contemplated by the decision, it also provides:

“Said reserve shall remain the property of the Trustees; establishment and maintenance of said reserve shall not give rise to any legal or equitable interest or claim therein on behalf of any participant.”

Summarizing, then, the orders appealed from (1) relegated qualifying participants in the CCP to the status of unsecured creditors, to be dealt with in the plan of reorganization in some as yet undetermined manner, (2) authorized the trustees to treat the participants’ claims as in the nature of unfunded pension liabilities and to pay these, in reduced amounts, as current operating expenses, and (3) set aside from the $10 million Contingent Compensation Reserve Fund $2.6 million as a reserve from which to meet those operating expenses. The reserve was recognized to be a matter of grace, however, and subject to reconsideration by the reorganization court.

It is common ground between the appellants and the trustee-appellees that in a railroad reorganization, some payment on account of unfunded pension liabilities by the trustees are properly treated as necessary and usual operating expenses and as a cost of doing business. In Tate v. New York, New Haven & Hartford R. R., 332 F.2d 449 (2d Cir. 1964), the Second Circuit justified such payments as necessary to preserve the morale of present and future employees. In Bowen v. Hockley, 71 F.2d 781, 785-786 (4th Cir. 1934), the practice was justified on the ground that the pensioners’ past services helped to create and preserve the estate being administered. Apparently payment of unfunded pension liabilities during a railroad reorganization is a recognized tradition in the industry. See Myers, Financial Impact of Pension Costs on the Railroad Industry, 7 Lab.L.J. 265, 266 (1956). Compare In re Compania De Los Ferrocarriles De Puerto Rico, 76 F.Supp. 521 (D.P.R.1948); cf. Alpert v. New York, New Haven & Hartford R. R., 348 F.2d 304 (2d Cir. 1965) (distinguishing deferred compensation contracts from pensions). This court has not explicitly ruled on the practice. Since no party to this appeal challenges it, we accept it, for present purposes, as a governing rule. Nor do we reach in this case any issue as to the ultimate priority, if any, to which the CCP claimants may be entitled in a reorganization plan. This appeal deals only with the district court’s rejection of appellants’ contentions as to their present rights in the Contingent Compensation Reserve Fund. These contentions are:

(1) that the CCP should be regarded as a funded rather than as an unfunded pension plan, (or as the trustees prefer, deferred compensation plan) and that the trustees have no interest in the Fund;
(2) that at least as to those participants who retired prior to termination of the CCP, their claims should be treated as vested and secured;
(3) that the reduction in benefits resulting from the refusal of the court to give effect to appreciation in the Fund beyond the original allotments is inconsistent with the practice, referred to above, of recognizing pension liabilities during a railroad reorganization ; and
(4) that the $50,000 per annum ceiling on pension payments during reorganization is discriminatory and improper.

In support of their contention that the CCP should be regarded as a funded rather than an unfunded pension plan, appellants argue that the Contingent Compensation Reserve Fund was a trust, express, constructive, or resulting. The Plan provisions quoted above, the Plan as a whole, and all the documents in the record referring to it negate any intention on the part of the Pennsylvania or Penn Central Directors to create an express trust. See Restatement (Second) of Trusts § 2 (1959). Since there was neither an express trust which failed nor a transfer of property paid for by another, there could be no resulting trust. Restatement (Second) of Trusts, chapter 12 (1959). Had the Fund, while held by Penn Central, been held in a trust capacity, there would be room for argument that the reorganization trustees became constructive trustees. Restatement óf Restitution § 160 (1937). But where, as here, the Plan made clear that the Fund was held as a part of the company’s general assets, subject at all times to its use and disposition, and subject to the claims of its creditors, there is no basis from which a constructive trust could be implied. The CCP was, as the district court found, nothing more than an executory contract calling for compensation after retirement.

Nor can any distinction be made between those participants retired prior to termination of the CCP and those still employed thereafter. The Plan itself makes no such distinction. Even the amount to be paid remains uncertain until the valuation date immediately prior to . the payment. Moreover, the benefits remain forfeitable even after retirement if the retiree does not refrain from activities adversely affecting the company’s best interests. Compare the Plan with Retirement Board v. McGovern, 316 Pa. 161, 174 A. 400 (1934). But in any event, appellants’ argument that their rights “vested” upon retirement is entirely beside the point. Their rights may well be “vested”; they are nevertheless unsecured. The issue remains: how should “vested” ex-ecutory contract pension rights be treated during a railroad reorganization.

Accepting, as have the parties, the general principle that some payments of unfunded pension liabilities are a practical necessity if a railroad is to be successfully operated in reorganization, it does not follow that in applying the principle the reorganization court must enforce each executory pension contract exactly in accordance with its terms. We are dealing with the powers of a court of equity to deal practically with the ongoing problems of employee morale, retention and recruitment. Even looked upon as an equitable recognition of the contributions made to the creation and preservation of the estate, the practice does not necessitate confining the court to the straight jacket of the underlying contract. Indeed, one can envisage a situation where recognizing the exact terms of an unfunded pension contract might both have an adverse effect upon morale of present and future employees and be inconsistent with any contribution made to the debt- or’s estate. Accepting the principle of some payment of unfunded pension liabilities, no more is required than a responsible exercise of equitable discretion. We find no abuse of discretion in Order No. 1087.

What we have said about the court’s equitable discretion with respect to the treatment of payments based upon appreciation in the Contingent Compensation Reserve Fund applies as well to the $50,000-a-year limit. The district court found as a fact that this level of pension would afford each of the participants a decent living standard. We will not second guess his well-considered judgment that no more was appropriate during the pendency of the reorganization.

Finally, there is the separate contention of appellant Symes that the court erred in refusing to continue payment, during reorganization, of a special pension of $10,000 a year voted by the Board of Directors on October 23, 1968. Order No. 1087 makes no final disposition of Mr. Symes’ claim on this special arrangement, but it is subject to the overall limitation of $50,000 a year, and Mr. Symes’ pensions from other Penn Central sources exceed this amount. For purposes of payment during reorganization, nothing distinguishes the October 23, 1968 unfunded pension contract from the other unfunded pension contracts dealt with in Order No. 1087.

We emphasize that because the parties agree that some payments on unfunded pension liabilities during a railroad reorganization are at least proper, this opinion has not dealt definitively with questions of the extent of or the limitations upon the reorganization court’s power in this respect. We also emphasize that the orders appealed from do not determine how the appellants’ claims should be dealt with in a plan of reorganization or a liquidation.

Orders No. 1087 and 1088 will be affirmed.

VAN DUSEN, Circuit Judge

(dissenting in part):

I respectfully dissent only insofar as the majority opinion fails to grant to' James M. Symes any part of the $10,000. per year special pension granted on October 23, 1968, after over 50 years of exceedingly valuable service to the Pennsylvania Railroad. The record, including the Appendix, submitted with respect to this special pension, establishes that the principles of equity and fairness require the payment of all or part of this pension to him for the reasons stated in part II of the brief filed on his behalf concerning this special pension. I would vacate that portion of paragraph 5 of Order 1087 which denies completely this pension and remand with directions that the $10,000. per year special pension be paid to Mr. Symes for the period since June 21,1970.

In all other respects, I concur in the majority opinion.

      . Symes, Greenough, Bevan, Saunders, Smueker and Perlman.

      . The Plan for Supplemental Pensions is a funded retirement plan. Order No. .278 held that the trustees had no interest in the fund. Order No. 1087 authorizes the trustees to continue the Plan in existence, making the necessary employer contributions. There is no appeal from this feature of Order No. 1087.

      . These include two supplementary benefit arrangements of the New York Central, and the New I-Iaven pension plan which Penn Central assumed in the 1968 merger, an Interim or Early Retirement Plan designed to encourage attrition of the labor force, and additional pension benefits for prior service at other railroads. Order No. 1087 authorizes the trustees to continue these plans in effect and to make all payments necessary to implement them. There is no appeal from this feature of Order No. 1087.

      . 47 years and 3 months of continuous active service and approximately 6 additional years as a director prior to Ms retirement.