author: GEE, Circuit Judge: COLEMAN, Circuit Judge

text:
    Charles N. BIRD et al., Plaintiffs-Appellees, v. William H. FERRY, Jr., et al., Defendants, v. The ROBINSON-HUMPHREY COMPANY, INC., Defendant-Appellant.
    No. 73-3107.
    United States Court of Appeals, Fifth Circuit.
    July 11, 1974.
    Rehearing and Rehearing and Rehearing En Banc Denied Oct. 24, 1974.
    See also D.C., 51 F.R.D. 310.
    Hoke Smith, Prentiss Q. Yancey, Jr., Sam F. Lowe, Jr., Atlanta, Ga., for defendant-appellant.

      Sidney L. Nation, Conyers, Ga., for plaintiffs-appellees.
    Casper Rich, Decatur, Ga., for other interested parties.
    Before COLEMAN, CLARK and GEE, Circuit Judges.
   GEE, Circuit Judge:

In 1959 William H. Ferry, a securities salesman, organized the Twenty-Ten Investment Club from citizens of Rockdale County, Georgia, near Atlanta. The club, an unincorporated association, -had as a major purpose familiarizing its members with securities transactions, and with the ways of the world of corporate stocks, markets, brokers, etc. As we shall see, there can be no doubt on this record that, in return for their rather modest monthly dues, the members received a great deal of useful information, some of it of a striking nature and delivered in such a manner as to make an indelible impression.

Ferry handled the club’s securities account until 1970. During his eleven-year tenure as the club’s investment ad-visor, Ferry worked at various times for three different brokers, always taking the club with him as a customer. Appellant Robinson-Humphrey Company employed him from May or June of 1962 until April 3, 1967. Shortly after transferring the club’s account to Robinson-Humphrey, Ferry began to use the club’s funds for personal speculation and, by the time he left appellant, had lost nearly all of them. He covered his tracks by furnishing regular statements to the club tracing the vicissitudes of their non-existent stocks. Had he followed the club’s instructions, the value of its portfolio at the time he left Robinson-Humphrey would have been a figure over $48,000. Ferry and Robinson-Humphrey were held jointly liable to the club for the above amount, plus interest from the date of loss, on Federal securities’ law grounds and in common-law fraud. Robinson-Humphrey appeals, asserting three heads of error, and we affirm.

In the first, complaint is made that, since payments from the club’s bank account exceeded the contributions of club members by almost $23,000, the club necessarily realized a gain rather than a loss. Appellant has misunderstood the evidence; the “contributions” figures used in appellant’s calculation are those of present club members only and do not include those of members who have retired, while the “payments” figure includes payments to retiring members. The “gain” thus computed-— by subtracting pineapples from pine cones — is without significance.

Appellant also complains that the damages awarded were “theoretical” and should have been computed on a cost or out-of-pocket basis rather than the value basis used. We see nothing inappropriate in the court’s use of a measure of damages calculated to restore the club to the position it would have occupied had the defalcations not occurred. Nor, more importantly, are we cited to any Georgia case to the contrary. An additional complaint that the evidence is insufficient to support the damages found is meritless; it may be that the proof falls short of mathematical precision. A host of cases holds it may and still suffice.

Appellant’s second point asserts that Ferry’s conversion of the securities took place prior to his employment by appellant. The argument is founded in the circumstance that they were held in the club’s own account with the former employer, but were placed by Ferry in his personal account when he came to work at Robinson-Humphrey. The trial court found otherwise, however, and its finding is amply supported by such evidence as that the club’s account was opened by Ferry with appellant in April, while the club’s letter to the former employer requesting transfer of the stocks to appellant is dated in June. The court correctly found that Ferry was appellant’s employee before the defalcations began, despite Ferry’s testimony in one instance to the contrary.

Finally, appellant argues that the finding by the trial court that the club members exercised due diligence for their own protection is clearly erroneous, and that under Clement A. Evans & Co. v. McAlpine, 434 F.2d 100 (5th Cir. 1970), cert. denied, 402 U.S. 988, 91 S.Ct. 1660, 29 L.Ed.2d 153 (1971), therefore, the club may not recover. Thinking the finding sufficiently supported by evidence, we disagree. It is true that the club requested Ferry’s former employer to deliver the stocks, held in street name, to Ferry, and that the club requested neither a broker’s receipt from appellant for them nor confirmations of the authorized trades. Appellant’s books of account were never audited or checked by the club. And there was evidence that in 1960 Ferry mishandled nearly $5,000 in funds belonging to one member of the club, who felt Ferry stole his money and may have told other members of his suspicions, though he did not regard Ferry as a crook. On the other hand, Ferry was in, and in the nature of things was known by Robinson-Humphrey to be in, a quasi-fiduciary position: he was the teacher of the club members, who invested with him as much for the experience as for profit. Their degrees of knowledge were, and were acknowledged by all hands to be, unequal. Appellant was a well-known and respected Atlanta house, admittedly supervising such employees as Ferry was with greater stringency today. The club required and received regular reports from Ferry on trades and the portfolio. Many of these appear in the record. Though entirely spurious, they are detailed and convincing. All checks were made payable to Robinson-Humphrey and not to Ferry, and the stamped endorsements are those of appellant, for deposit only. We cannot say that the trial judge, who heard the witnesses and observed their demeanor, was clearly in error in this finding.

Affirmed.

COLEMAN, Circuit Judge

(dissenting).

For the reasons hereinafter appearing, I respectfully dissent.

For lack of due diligence, indeed for the lack of any diligence at all, I would hold that the plaintiffs-appellees are not entitled to mulct the securities dealer in damages under the Securities and Exchange Act when there is no showing that the dealer ever knew that the salesman Ferry had unlawfully converted stock turned over to him personally without a receipt from the broker, nor did the dealer know that Ferry was converting to his own use money turned over to him for the purpose of buying stock, on which the intended purchasers never asked for a receipt or confirmation.

I

FACTS

On November 1, 1959, principally motivated by and at the behest of William H. Ferry, Jr., then a securities salesman for J. W. Tindall and Company of Atlanta, the Twenty-Ten Investment Club was formed. It was a private mutual investment partnership. When a new member came in he was required to, and did, sign the partnership agreement. At various times during the life of the Club its membership included a lawyer, a doctor, a bank teller, two real estate brokers, two pharmacists, and the president of a corporation. The basic objectives of the Club were to provide each member with an opportunity to learn about the operations of securities markets, how to buy and sell stocks, how to invest in various securities, and, of course, to make money. The Club had regular, stated monthly meetings, as well as some called meetings. The necessary operating capital was raised by the collection of monthly dues from the membership. Under the terms of the partnership agreement, a security could be purchased or sold only after a majority of the members had authorized it by a vote appropriately taken. William H. Ferry was a member of the Club and also handled the purchases and sales, reporting on his stewardship at the regular monthly meetings. At the outset, stock purchases were made by check drawn by the Club treasurer. As time passed and as the portfolio grew, this practice was amended by allowing the proceeds of the sales to accumulate in a special cash account maintained by the securities dealer, the treasurer writing checks only when needed to supplement funds on hand in order to complete a purchase.

From 1959 until the Spring of 1962, while William H. Ferry was working for Tindall, all went well. For one thing, the Club treasurer required and diligently kept up with the confirmation slips received of the broker when a sale or a purchase was made, thus eliminating any significant possibility of unilateral fraud on the part of Ferry, had he been disposed to commit such.

In the Spring of 1962, certainly prior to June 14 of that year, Ferry severed his connection with Tindall and went to work as a securities salesman for Robinson-Humphrey, the defendant-appellant, continuing, however, his functions as a member of, advisor to, and salesman to the Twenty-Ten Investment Club.

It was at this point that Ferry began the defalcations involved in this litigation, exposing Robinson-Humphrey to liability for his actions.

J. W. Tindall and Company held the Club’s stock in street name. The Club directed that it be transferred to Ferry’s new employer. This was done in a most singular fashion. The Club treasurer wrote Tindall:

“Please deliver all stocks held in the account of Twenty-Ten Investors to Mr. William H. Ferry, Jr. for transfer to Robinson-Humphrey Company”.

It must be emphasized that the written direction was not that the stock be transferred to Robinson and a receipt obtained, to be filed with the treasurer, but Tindall was told to deliver the stocks to Ferry.

Tindall invoiced the stocks to Robinson, but gave both the invoice and the stocks to Ferry. Ferry took the stocks to Robinson, all right, but he there deposited them in his own personal account, not to the Club account as had been the case at Tindall’s.

Incredible as it is, no member or officer of the Club ever asked for a confirmation of the transfer or a broker’s receipt for the stock. During the eight years that Ferry’s fraud continued, as hereinafter described, no member or officer of the Club ever audited, or had audited, or requested a look at the books at Robinson to determine if that Company received the stock or held it in the Club’s account.

This occurred despite the fact that during the three year Tindall period the officers-partners of the Club were well familiar with the practice of receiving dealer confirmations for authorized transactions. When a Club officer was replaced he passed these records on to his successor.

With the Club’s stock, worth $10,130.-75, in his personal account, and with nothing in this record to show that Robinson was ever notified by any officer or Club member that the stock belonged to the Club, Ferry proceeded thereafter to handle the account as if it were really his own. For five years at Robinson, Ferry continued to take directions from the Club and report pretended compliance with those directions as to purchases and sales of stock. Despite his regular reports, generally in writing, he was not making the purchases and sales which the Club had authorized, but was trading on his own, during the course of which he lost the Club’s assets in toto. Again incredibly, no confirmation of the authorized purchases and sales was ever requested or received by any of the Club officers or members, although the treasurer admitted at the trial that he knew about confirmations and knew what they meant. Indeed, when the treasurer wrote a cheek to Robinson, intended for the purchase of stock, the checks, in some manner, received a Robinson endorsement but the funds went to Ferry personally. He also lost those funds.

This does not end the matter. In April, 1967, Ferry left Robinson and went with another securities firm. By that time he had lost the Club’s assets. He had virtually nothing to transfer to the new employer, but the Club made no attempt to verify the status of its account at that transfer and continued on for two more years before Ferry’s dealings were, in a manner not disclosed by the record, at last uncovered.

It is to be noted, however, that from time to time members would retire from the Club and withdraw the assets which the “record” indicated they were entitled to receive. Ferry would make these payments out of any funds available, including his “personal funds”, so the Club, its officers, and members proceeded on their way without ever pausing at any time during an eight year period to do so simple a thing as to verify the status of the Club account, relying wholly and solely on Ferry’s reports. The only excuse for this course of conduct given at the trial below was that they had confidence in Ferry and relied on the belief that they were doing business with a reputable securities firm.

In its findings of fact, the District Court held as follows:

“That the Investment Club and its members acted as reasonable men under all the circumstances and exercised due diligence”.

In light of the undisputed evidence hereinabove recited, I would hold this finding as to diligence to be clearly erroneous. Instead of exercising due diligence, or even minimal diligence, to know the status of its accounts, the Club, acting by its officer-partners, if not by its individual members, exercised no diligence whatever, not even that of an ordinary individual examining his bank statements at the end of the month. Moreover, I am aware of no logical argument in favor of the proposition that it was reasonable for lawyers, doctors, pharmacists, real estate brokers, and corporate presidents to follow over such a long period of time this course of total non-action.

This, of course, is no defense as to Ferry’s liability, but we are here concerned with the liability of a securities dealer as a “controlling person”, a dealer who has been cast in damages in an amount twice the “out of pocket losses” of the Club.

This does not relieve Robinson of liability under the Georgia law of respondeat superior, for Ferry was undisputably an employee of that Company, but it does affect the application of the Securities Exchange statutes to the liability of the defendant-appellant.

II

THE APPLICABLE LAW

On the facts recited, plaintiffs filed suit, alleging various violations of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C.A., § 78j and § 78t, Commission Rule 10(b)-5, 17 C.F.R., § 240.10(b)-5 (1970) and the Georgia common law of fraud and respondeat superior.

To recapitulate, plaintiffs claim that due to the lack of adequate supervision, as required by the substantive policy of the Securities Exchange Act of 1934, Ferry was enabled by fraudulent means to convert their property, citing Reynolds and Company, 1960, 39 S.E.C. 902; R. H. Johnson and Company v. Securities & Exchange Commission, 2 Cir., 1952, 198 F.2d 690; Hecht v. Harris, Upham and Company (N.D., Cal.), 1968, 283 F.Supp. 417; and Rule 405 of the New York Stock Exchange.

Robinson argues that due to the plaintiffs failure to act in a reasonable manner and use due diligence in verifying their account, they should be precluded from recovering against it as a “controlling person” who had no other connection with the fraud.

From the plaintiffs’ standpoint, the law was perhaps best stated in Reynolds and Company, supra:

“We have repeatedly held that brokers and dealers are under a duty to supervise the actions of employees and that in large organizations it is especially imperative that the system of internal control be adequate and effective and that those in authority exercise the utmost vigilance whenever even a remote indication of irregularity reaches their attention. * * * * a contrary rule would encourage ethical irresponsibility by those who should be primarily responsible
* * -X- * * *
“Supervisory personnel cannot rely solely upon complaints from customers to bring misconduct of employees to their attention, particularly where customers may be inexperienced and may fail to realize when they have been mistreated
* * * * * -X-
“Customers dealing with a securities firm expect, and are entitled to receive, proper treatment and to be protected against fraud and other misconduct, and may properly rely on the firm to provide this protection
******
“In the light of these considerations we are of the opinion that, where the failure of a securities firm and its responsible personnel to maintain and diligently enforce a proper system of supervision and internal control results in the perpetration of fraud upon customers or in other misconduct in wilful violation of the Securities Act or the Exchange Act, for purposes of applying the sanctions provided under the securities laws such failure constitutes participation in such misconduct, and wilful violations are committed not only by the person who performed the misconduct but also by those who did not properly perform their duty to prevent it.”

Under the law as thus enunciated, the plaintiffs-appellees point out, correctly, that the statute should be liberally construed, that actual direction to hold a controlling person liable is not required, and that § 20(a) requires a broker/dealer to take affirmative action and to demonstrate supervision if it is to avoid liability as a controlling person. Admittedly, Robinson did not supervise Ferry between 1963 and 1967, and it did not examine endorsements placed on its checks made payable to the Twenty-Ten Investment Club and endorsed by Ferry as agent of the Club, thereafter deposited in his personal account.

On the other hand, the defendant-appellant relies on the decision of this Court in Clement A. Evans & Company v. McAlpine, 5 Cir., 1970, 434 F.2d 100, cert. denied, 402 U.S. 988, 91 S.Ct. 1660, 29 L.Ed.2d 153. The plaintiff in Evans alleged violations of § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A., §§ 78a et seq., 78j, and Commission Rule 10B-5, 17 C.F.R., § 240.10(b)-5 (1970).

Although Evans was a suit between brokerage firms, rather than between broker and customer, it involved, as here, the question of who-should bear the loss occasioned by dishonesty, in that instance worthless checks in the amount of $308,133.95, drawn by a customer and honored by the plaintiff firm after it had notice of prior worthless checks drawn by the customer. The defendant firm had falsely certified customer ownership of certain stocks, which enabled him “to mirror an image of financial responsibility and solvency while the evidence indicates the contrary was true”. In other words, the defendant had violated the Securities Exchange Act and it was alleged that this caused the substantial loss sustained by the plaintiff.

We there held that to recover damages based upon the Securities Exchange Act a plaintiff is obliged to show reasonable diligence and investigation on its own part. On this defense, the verdict was for the defendant and was affirmed on appeal.

The trial judge instructed the jury:

“Now, the defendants also contend that the plaintiff did not exercise reasonable diligence to discover the existence of the alleged fraud. In that connection, I charge you that it is impossible to lay down any general rule as to the amount of evidence or number or nature of evidential facts admitting discovery of fraud. But, facts in the sense of indisputable proof or any proof at all, are different from facts calculated to excite inquiry which impose a duty of reasonable diligence and which, if pursued, would disclose the fraud. Facts calculated to excite inquiry merely constitute objects of direct experience and, as such, may comprise rumors or vague charges if of sufficient substance to arouse suspicion. Thus, the duty of reasonable diligence is an obligation imposed by law solely under the peculiar circumstances of each case, including existence of a fiduciary relationship, concealment of the fraud, opportunity to detect it, position in the industry, sophistication and expertise in the financial community, and knowledge of related proceedings.
“If you find from the evidence in this case that the plaintiff had knowledge of facts sufficient to excite its inquiry, and that the peculiar circumstances of this case were sufficient to impose upon the plaintiff a duty of reasonable diligence, and that the plaintiff failed to exercise this duty, then you should return a verdict for the defendants.”

We approved the jury instruction, and declined to “stamp with judicial imprimatur plaintiff’s further assertion that reasonable diligence on its part is not a duty imposed by law in a 10(b)-5 civil action for damages”.

Further along in the opinion, 434 F.2d at 104, we added:

“Surely plaintiff would not contend that a purchaser or seller could justifiably rely on a fraudulent misrepresentation, no matter how willfully and intentionally made, if that misrepresentation would tax even the most credulous mind.”

We then concluded that, “the plaintiff’s sophistication, expertise and business acumen in the financial community, his access to information and opportunity to detect the fraud are all relevant considerations in determining the exercise of reasonable diligence (citing cases)”.

Upon the application of these standards, note that our present case was not one which involved misrepresentations as to the value, or any aspect of the value, or any other attribute of any stock, bought or sold. The asserted violation of the Securities Exchange Act rested altogether upon an unlawful conversion of plaintiffs’ existing stock and the money paid for the purchase of stock which the salesman took for his own. That these plaintiffs had easy and undisputable access to information and a similar opportunity to detect the fraud, had they only asked for it, is not to be doubted. They did not ask for it, although their officers and fellow partners, if not they themselves, knew that they had gone along for five years (as to Robinson) without so much as seeking a confirmation slip or any other verification that they had an account with the Securities Company or what that account contained. No special business acumen or sophistication or expertise is required to put one on notice that he needs some kind of receipt or confirmation of how one is spending his money or whether he is spending it as directed. In any event, as already indicated, the partner-officers knew, or should have known, from the experience with Tindall, what confirmations were all about.

For the lack of due diligence, or any diligence whatsoever, I would hold that the plaintiffs were not entitled to recover against Robinson-Humphrey under the terms of the Securities Exchange Act or the regulations promulgated thereunder.

I do agree that in his dealings with the Twenty-Ten Investment Club, Ferry was an employee of the defendant-appellant and acting within the scope of his authority, although he totally abused that authority. It would necessarily follow that the defendant-appellant was liable in damages under the Georgia common law of fraud and respondeat superi- or. The amount of the liability, however, is different.

Ill

DAMAGES

The District Court held Robinson liable under either or both the Securities Exchange Act and the Georgia common law. While the findings and conclusions of the District Court dated May 31, 1973 [Appendix, 47 et seq.] do not state the basis upon which the Court computed damages, it seems highly probable from a consideration of the record as a whole, and particularly from the contents of the appellees’ brief, that the computation may largely have depended upon the Securities Exchange Act.

Even so, appellees [Brief, 25-27] concede that there was a factual basis upon which the Court could have assessed primary liability in the sum of $28,476.32. In this attitude of the case, I would consider it the better part of justice to remand the case to the District Court for an assessment of damages grounded specifically upon the Georgia' law of fraud and respondeat superior. In performing this function, the District Court could, of course, consider the record as compiled to date and could hear additional argument of counsel if it should desire to do so.

In short, I would affirm as to liability under the Georgia law of respondeat superior and remand for a computation of damages accordingly.

      . Ferry’s third employer was also sued by the club, but settled.

      . Robinson-Humphrey’s liability was vicarious only.

      . Apparently as based on stocks which were not, because of Ferry’s disobedience, actually purchased.

      . On May 8, 1962 (Plaintiffs’ Exhibit 3) the Club treasurer wrote a check to Robinson-Humphrey for $329.75 for twenty shares of Alpo Oil stock, indicating beyond question that Ferry had started to work for Robin-son-Humphrey at least by that date.

      . 15 U.S.C.A., § 78j — Manipulative and Deceptive Devices:
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of any facility of any national securities exchange—
      (a) To effect a short sale, or to use or employ any stop-loss order in connection with the purchase or sale, of any security registered on a national securities exchange, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
      (b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

      . 15 U.S.C.A., § 78t — Liabilities of Controlling Persons:
      (a) Every person who, directly or indirectly, controls any person liable under any provision of this chapter or of any rule or regulation thereunder shall also be liable jointly and severally with and to the same extent as such controlled person to any person to whom such controlled person is liable, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action.
      (b) It shall be unlawful for any person, directly or indirectly, to do any act or thing which it would be unlawful for such person to do under the provisions of this chapter or any rule or regulation thereunder through or by means of any other person.
      (c) It shall be unlawful for any director or officer of, or any owner of any securities issued by, any issuer required to file any document, report, or information under this chapter or any rule or regulation thereunder without just cause to hinder, delay, or obstruct the making or filing of any such document, report, or information.

      . 17 C.F.R., § 240.10(b)-5 (1970) :
      Rule 10(b) 5. Employment of Manipulative and Deceptive Devices.
      It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange,
      (1) to employ any device, scheme, or artifice to defraud,
      (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

      . “Instead, the Court chose to fashion what it deemed an appropriate remedy for violation of Rule 10(b) 5”, Appellees’ Brief, page 29, with further elaboration appearing at pages 30, 31, and 32.


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    Katie Ruth ANDERSON et al., Plaintiffs-Appellants, v. J. T. ROBINSON, Individually and as police chief of the City of Natchez, Mississippi, etc., Defendant-Appellee.
    No. 73-2638.
    United States Court of Appeals, Fifth Circuit.
    July 11, 1974.
    Herman Wilson, Lawyers’ Committee for Civil Rights Under Law, Jackson, Miss., Thomas E. Engel, Asst. U. S. Atty., Lawrence D. Ross, New York City, Bernard Jolles, Portland, Or., Lionel G. Hest, New York City, for plaintiff s-appellants.
    Joseph S. Zuecaro, Natchez, Miss., A. F. Summer, Atty. Gen., William A. Al-lain, 1st Asst. Atty. Gen., Charles A. Marx, Jackson, Miss., Edwin E. Benoist, Jr., Natchez, Miss., for defendant-appellee.
    Before COLEMAN, CLARK and GEE, Circuit Judges.
   PER CURIAM:

One hundred-fifty plaintiffs appeal, as an abuse of discretion, the refusal of the trial court to grant a new trial on the ground of grossly inadequate damages awarded them by a jury for false imprisonment. We affirm.

Phases of this matter have now occupied our court four times. As a result of panel and en banc decisions, Appellee Robinson, then Police Chief of Natchez, was found liable for false imprisonment of racial protest demonstrators in 1965. On remand for assessment of damages, seven of the 157 plaintiffs appeared and testified to specific individual damages resulting from their imprisonment. Those who presently appeal did not. The case went to the jury on the testimony of the seven and on stipulation that all 157 were confined for varying specified periods in the Mississippi State Penitentiary.

The jury returned a verdict assessing damages of all plaintiffs at a uniform rate of five dollars per day. The court ordered a new trial for the seven who testified but denied that relief to these appellants. An earlier appeal was dismissed for jurisdictional defects which have since been remedied, and we now consider the merits, having already received briefs and heard argument thereon.

One falsely imprisoned is entitled to at least nominal damages. Whirl v. Kern, 407 F.2d 781 (5th Cir. 1969). No evidence was offered by these plaintiffs of any particular or specific damages, and their counsel expressly invited the jury to assess damages at a per diem rate. The precise complaint on appeal is that the compensation rate selected by the jury for an abstract day’s detention in prison is so grossly and palpably inadequate that the district court abused its discretion in refusing a new trial.

We possess no yardstick with which to measure such abstractions. Here the jury appears in its town-meeting aspect, the evaluator of the unevaluable, the last recourse for answers to questions to which there is no sure answer. That we, or that another town-meeting, might answer differently does not signify. We are unable to say that the court below abused its discretion in refusing to ask another jury for another set of answers.

Affirmed.

      . Anderson v. Nosser, 438 F.2d 183 (5th Cir. 1971), modified en banc, 456 F.2d 835 (5th Cir. 1972).

      . Where they were sent to await trial, there being insufficient local confinement facilities.

      . Anderson v. Robinson, 494 F.2d 45 (5th Cir. 1974).

      . Robinson’s sole liability is for failing to take the plaintiffs before a magistrate after their arrest; our en banc decision determined that he was not to be cast in damages under 42 U.S.C. § 1983 for the conditions of detention at the prison.


text:
    Charles HEYMAN, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee. George W. GOLDEN, Jr., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
    Nos. 73-2879, 73-2912.
    United States Court of Appeals, Fifth Circuit.
    July 15, 1974.

      Sidney A. Soltz, Miami, Fla., for plaintiffs-appellants.
    Robert W. Rust, U. S. Atty., Mervyn L. Ames, Clemens Hagglund, Asst. U. S. Attys., Miami, Fla., Jay R. Weill, Atty., Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Crombie J. D. Garrett, David English Carmack, Gordon S. Gilman, Attys., Tax Div., Dept, of Justice, Washington, D. C., for defendantappellee.
    Before WISDOM, AINSWORTH and GODBOLD, Circuit Judges.
   PER CURIAM:

These cases have a common issue. Each plaintiff paid wagering excise taxes and sued for a refund. The government counterclaimed for a substantial unpaid balance on the assessment against each plaintiff. In each case the government moved for and was granted a directed verdict on the issue of the correctness of the assessment.

Each plaintiff’s records, such as bet slips, summary sheets and records indicating balances due, were seized by state officials investigating illegal lottery operations. State officers notified the Internal Revenue Service and made the records available to an IRS agent, who prepared summaries and used them for the purpose of calculating the respective amounts of taxes claimed by the government to be due. The assessments were based thereon. Subsequently a state court ordered that plaintiffs’ records be returned to them, but in the interim they had been destroyed by state officers. There is no contention that the federal government was in any manner involved or at fault in the destruction.

The plaintiffs recognize the burden of proof that is upon them with respect to their refund suits and to the counterclaims to establish that the respective assessments are wrong and to come forward with convincing evidence from which proper determinations of their respective tax obligations can be made. But each urges that he should be relieved from his burden because of the destruction of his records rendering it impossible, each says, to establish that the assessment against him is incorrect. If that argument could ever have validity, it has none here. In each instance the seized records covered only a brief time span, and from that period the agent projected the average daily business carried on for the entire period in question, a method long held valid and not contested here. The best evidence with which each plaintiff could have refuted the projected business for the entire period would have been the daily records of actual wagers required by tax regulations to be kept. Neither plaintiff had kept such records. Therefore, neither is in position to complain that the limited records available to the federal government and used for its projections are unavailable.

Golden raises a second point relating to him only. He claims that a substantial part of the wagers reflected by his limited [and seized] records that were the basis for projecting his business and calculating his assessment, were not wagers actually placed by him but bets placed with others and with respect to which he was a mere conduit of information. Golden admits he was engaged in the gambling business but says that he wore two hats, one as bettor and one as a mere clerk, and that wagers reflected by his records were an admixture of bets placed with him and bets placed with others. The only evidence tending to show that the records contained the alleged admixture was Golden’s own testimony. With respect to the capacity in which Golden dealt with wagers revealed by his records (just as with amounts), the burden is upon taxpayer to show incorrectness and to come forward with evidence supporting a correct determination. His oral testimony that some of the bets shown on his bet slips and other papers are not his is insufficient to meet that burden.

In each case, the judgment for the United States is affirmed.


author: PER CURIAM.

text:
    Robert THOMAS, Jr., #190254, Plaintiff-Appellant, v. Bill SHAW, District Clerk of Dallas County, Defendant-Appellee.
    No. 73-2135
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 18, 1974.
    Robert Thomas, Jr. pro se.
    John B. Tolle, Asst. Dist. Atty., Dallas, Tex., for defendant-appellee.

      Before BELL, SIMPSON and MORGAN, Circuit Judges.

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

   PER CURIAM.

Robert Thomas, Jr., presently incarcerated in the Ellis Unit of the Texas Department of Corrections at Huntsville, appeals from an order of the district court dismissing his civil rights complaint filed pursuant to 42 U.S.C. § 1983 et seq. We vacate and remand.

In his complaipt filed' below the appellant contends that the “ [d] efendant, Bill Shaw, on the 25 day of July 1965, A.D. * * * did then and there unlawfully and knowingly make the following false entry upon the record of his said court and the forestated false entry was certified and forward [ed] to the prison record office. Entry: ‘Rape of a white woman,’ which said entry was and is false and said entry does prejudice and injure the rights of Plaintiff Robert Thomas.” (Emphasis in the original.) The appellant seeks compensatory and punitive damages and requests injunctive relief “against [the] continue [d] use of the false entry, and removal from plaintiff’s records.”

The district court, without a response or a hearing, dismissed the appellant’s complaint construing it to be in the nature of a habeas corpus petition and, as such, the appellant had failed to exhaust state remedies. Because in reviewing the prison record herein we cannot say that the appellant can prove no set of facts in support of his claim which would entitle him to relief, we must vacate the dismissal and remand for further proceedings. Holland v. Connors, 5th Cir. 1974, 491 F.2d 539. Also see Haines v. Kerner, 1972, 404 U. S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652, and Neal v. State of Georgia, 5th Cir. 1972, 469 F.2d 446.

The appellant in his brief is apparently contesting the documents filed in case number E-8533 JI, wherein he was convicted of robbery after a trial by jury. He was sentenced on June 25, 1966, to life imprisonment. The judgment of conviction was affirmed on direct appeal. Thomas v. State, Tex.Cr.App.1966, 403 S.W.2d 801.

The records in the case sub judice reveal, and the appellate opinion substantiates the fact that the appellant was convicted on a charge of robbery. While it does appear that the appellant’s codefendant attempted to rape the proprietress of the pharmacy in question, the record tends to reveal that the appellant did not participate in, nor was he charged with such action. However, while the complained-of conviction summary on file at the Texas Department of Corrections also indicates that the appellant is presently incarcerated for robbery, contained therein is one sentence advancing the appellant’s contention.

Since this' court does not sit as a fact finder, Welch v. Beto, 5th Cir. 1968, 400 F.2d 582, we must, on authority of Holland v. Connors, supra, vacate the judgment below for further fact development.

Vacated and remanded.

      . The appellee failed to file a brief in this court.

      . The following sentence appears on page 3, Part V: “Current offense involves the subject and co-defendant robbing a pharmacy at gunpoint and attempting to rape a 46-year-old white female attendant.”


text:
    John C. HENDERSON, Plaintiff-Appellant, v. Warden, THROWER, etc., et al., etc., Defendants-Appellees.
    No. 73-3788
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 12, 1974.
    John C. Henderson, pro se.
    William H. Brigham, County Atty., Chandler Kite Stanard, Mobile, Ala., for defendants-appellees.
    Before WISDOM, GOLDBERG and GEE, Circuit Judges.

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

   PER CURIAM:

For some three weeks in June of 1973 plaintiff Henderson, a federal prisoner usually confined at the Atlanta Penitentiary, was temporarily placed in the Mobile, Alabama city jail while hearings were conducted on his motion to supplement the record in a federal appeal. After his return to Atlanta, plaintiff brought the present action against various jail officials in the United States District Court for the Southern District of Alabama under 42 U.S.C. § 1983. Henderson sought monetary and injunctive relief for alleged deprivation of adequate medical care during his brief stay. The district court dismissed the complaint for failure to state a claim, noting that:

“. . . the United States Marshal was instructed to place the plaintiff in the Mobile City Jail for care and safekeeping, in accordance with the Federal Contract No. Jlc-23558 between the City of Mobile and United States of America, United States Department of Justice, Bureau of Prisons, Washington, D. C. Defendants were thus not acting under color of State law, but were providing for the care and safekeeping of the plaintiff in accordance with the Federal Contract. . . .”

Finding that the district court measured plaintiff’s allegations against an erroneous legal standard, we reverse.

In Tolbert v. Bragan, 5 Cir. 1971, 451 F.2d 1020, this Court upheld the right of an individual convicted for violation of federal law and housed temporarily in a county jail to challenge the conduct of his keepers in a suit under § 1983. In determining the question of the defendants’ liability for jailhouse care, we concentrated, not on the particular circumstances which brought the plaintiff under state control, but rather on the fact of that control and the manner of its exercise.

It does not appear from the brief statement of facts in Tolbert that the prisoner’s lodging in that case as in the case at bar, had been provided under the formal arrangements with local officials permitted by 18 U.S.C. § 4002. However, the existence of such a contract between the City of Mobile and the federal government neither requires nor permits deviation from the Tolbert line here. As the Supreme Court pointed out in Logue v. United States, 1973, 412 U.S. 521, 93 S.Ct. 2215, 37 L.Ed.2d 121, these agreements between the Bureau of Prisons and state officials, though imposing an obligation on the national government to inspect the state facilities to insure proper conditions, in no way authorize federal interference with the operation of the prisons or jails. Control of the inmates, state and federal, rests in the local authorities. Defendants in this action — the warden, associate warden, prison physician, and jailors — supervised and treated all prisoners in the Mobile City Jail by virtue of the positions conferred on them by the city, a creature of the State of Alabama. They cannot now escape liability under § 1983 on the basis of plaintiff’s peculiar status.

Reversed and remanded.

      . The statute provides in part that:
      “For the purpose of providing suitable quarters for the safekeeping, care, and subsistence of all persons held under authority of any enactment of Congress, the Director of the Bureau of Prisons may contract, for a period not exceeding three years, with the proper authorities of any State, Territory, or political subdivision thereof, for the imprisonment, subsistence, care, and proper employment of such persons.”

      . Of course, not every prisoner contention of improper medical treatment while in state institutions makes out a claim under 42 U.S.C. § 1983. Prison officials are invested with broad discretion in the area of medical care. We have previously held that a district court may dismiss even a pro se petition for failure to state a claim in the absence of some allegation of misconduct rising to the level of an abuse of that discretion. Robinson v. Jordan, 5 Cir. 1974, 494 F.2d 793, [1974]; Lawrence v. Wainwright, 5 Cir. 1971, 440 F.2d 379; Haskew v. Wainwright, 5 Cir. 1970, 429 F.2d 525. Due to its misconception, of the law discussed above, the district court never passed on the sufficiency of plaintiff’s complaint when measured against that standard; and we have not, therefore, reached the matter on this appeal.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Robert J. MURPHY, Defendant-Appellant.
    No. 74-1397
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 12, 1974.

      Virgil M. Wheeler, Jr., Harry Nowalsky, New Orleans, La., for defendant-appellant.
    Gerald J. Gallinghouse, U. S. Atty., John R. Schupp, Mary Williams Cazalas, Asst. U. S. Attys., New Orleans, La., for plaintiff-appellee.
    Before GEWIN, GODBOLD and CLARK, Circuit Judges.

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

   PER CURIAM:

Robert J. Murphy, upon a plea of nolo contendere, was adjudged guilty as charged in two counts of a four-count indictment for wilfull evasion of income tax, in violation of 26 U.S.C. § 7201 (1970). In addition to assessing a $10,000 fine on each count, the trial court ordered Murphy committed to the custody of the Attorney General for a period of one year on each count to run concurrently, with provision for incarceration for a three month period and probation for the duration of the sentence. Pursuant to Rule 35, F.R.Cr.P. Murphy moved for a reduction of his sentence. Coupled with this motion was a renewal of a petition for access to the probation officer’s presentence report which the trial judge had considered in camera. Allegedly included in this report were the prosecutor’s files and information garnered from an interview with an Internal Revenue Service special agent investigating Murphy, both of which purportedly contained erroneous personal opinions concerning Murphy’s tax liabilities for the years 1966-1969. It is from the denial of his Rule 35 motion and petition for disclosure of the presentence report that Murphy appeals. We affirm.

This court has long maintained that it is within the discretion of the trial judge to grant or deny a defendant access to his presentence report. See United States v. Rollerson, 491 F.2d 1209 (5th Cir. 1974); United States v. Hartford, 489 F.2d 652 (5th Cir. 1974); United States v. Espinoza, 481 F.2d 553 (5th Cir. 1973); United States v. Battaglia, 478 F.2d 854 (5th Cir. 1972). Of course, the discretion with which a district judge is endowed must yield where it is ascertained that he relied upon erroneous information contained in the report in imposing a sentence. United States v. Rollerson, supra at 1213; United States v. Hartford, supra at 657. Thus, in United States v. Espinoza, supra, this court deemed it an abuse of discretion for a district court, after announcing a lengthy sentence, to refuse to permit the defendant to rebut the factual grounds upon which he expressly relied in imposing the sentence. And in United States v. Battaglia, supra, we held that a mere unexplained assertion by a trial judge on motion for re-sentencing that he would impose the same sentence as that previously prescribed on the basis of a concededly factually erroneous presentence report was insufficient to assure the vindication of a defendant’s rights.

In the instant case, Murphy requests that we endorse the Seventh Circuit’s absolute proscription against in camera consideration by a district judge of a prosecution’s files. See United States v. Solomon, 422 F.2d 1110, 1121 (7th Cir. 1970); United States v. Allsenberrie, 424 F.2d 1209, 1216 (7th Cir. 1970). Irrespective of the abstract merit of this position, we cannot countenance the application of an intractable rule. Here, unlike Espinoza and Battaglia, the sentence imposed was of minimal duration. And here, also unlike Espinoza and Battaglia, the information contained in the report appears to have been helpful and not detrimental to Murphy’s cause. Indeed, at the hearing upon the motion for reduction of sentence and petition for disclosure of the presentence report, the trial court stated:

“•Well, I take the position on that counsel, that in view of the really moderate penalty imposed, if anything, it would be reasonable to conclude, almost, that Mr. Neilson’s [the probation officer] report was very favorable in many respects to the de- . fendant.
And frankly, I don’t think there was anything in the report so stirring or so thought provoking for me or so prejudicial that it would incline me to exercise some bad discretion with regard to any sentence.”

Moreover, at the original hearing on sentence, the district judge was particularly solicitous of Murphy’s precarious health and financial condition and was sensitive to the disruption to his family life that would be precipitated by his incarceration. In these circumstances, the denial of access to the presentence report was not an abuse of discretion and hence the sentence imposed was proper.

Affirmed.

      . The presentence report was ordered to be sealed and made a part of the record on appeal to be opened only by Judges of the district court or the Judges of this court. We have examined the presentence report and conclude that the district court’s assessment of it is reasonable.


text:
    James D. JOHNSON, Plaintiff-Appellant, v. U. S. POSTAL SERVICE, Plaintiff-Appellee.
    No. 74-1241
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 11, 1974.

      Ralph K. Helge, Pasadena, Cal., Kent Spriggs, Tallahassee, Fla., for plaintiff - appellant.
    Nathan Lewin, Washington, D. C., Dennis Rapps, Nat’l Jewish Commission on Law & Public Affairs, Brooklyn, N. Y., amicus curiae, for plaintiff-appellant.
    William H. Stafford, Jr., U. S. Atty., Clinton Ashmore, Melvin Horne, Asst. U. S. Attys., Tallahassee, Fla., for plaintiff-appellee.
    Mozart G. Ratner, George B. Driesen, Washington, D. C., for National Assoc, of Letter Carriers, AFL-CIO.
    Before BROWN, Chief Judge, and THORNBERRY and AINSWORTH, Circuit Judges.

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

   PER CURIAM:

The sole issue in this appeal is whether the appellant’s religious beliefs and practices placed an undue hardship on the United States Postal Service thereby justifying his dismissal as a flexible part-time clerk. The District Court dismissed Johnson’s suit brought under § 717 of the Civil Rights Act of 1964 (42 U.S.C.A. § 2000e-16(a)), finding that the Postal Service could not accommodate the appellant’s demands. We conclude that the record adequately supports the District Court’s decision and therefore affirm.

Johnson had worked as a flexible part-time clerk in the Post Office at Chattahoochee, Florida, from June 1966 until his dismissal in 1972. In 1971 there were only five clerks employed in the small Chattahoochee Post Office, two full-time, two part-time and one temporary. Johnson had seniority over the other part-time clerk and temporary clerk but was junior to both full-time clerks. Saturday business at the Post Office required three or four clerks to work a full day. It was standard practice for one of the full-time clerks to have Saturday as his day off. Therefore, Johnson was required to work several Saturdays. Since Johnson was a flexible part-time clerk, he received his work schedule every Wednesday and worked his hours covering others on vacation, sick leave, or days off. The Post Master needed someone in Johnson’s position who was flexible.

In the summer of 1971 Johnson converted to the religion of Church of God. There is no dispute as to Johnson’s sincere belief in the teachings of his religion which forbid any work frdm sundown Friday to sundown Saturday. In an attempt to get every Saturday off, Johnson offered to work every Sunday since the Post Office did keep a man on duty for five hours on Sunday. The Post Master found this unacceptable because it was not a regular work day nor did Johnson’s working on Sunday relieve the problem of forcing men senior to him to work on Saturday. After failing to show up for work on several Saturdays, Johnson was dismissed. He filed a charge of discrimination with the Civil Service Commission and subsequently brought suit in Federal court.

The Federal Regulations clearly define the obligations of the employer to attempt to make all reasonable accommodations to the religious needs of their employees.

29 C.F.R. § 1605.1 Observation of the Sabbath and other religious holidays.

(b) The Commission believes that the duty not to discriminate on religious grounds, required by section 703(a)(1) of the Civil Rights Act of 1964, includes an obligation on the part of the employer to make reasonable accommodations to the religious needs of employees and prospective employees where such accommodations can be made without undue hardship on the conduct of the employer’s business. Such undue hardship, for example, may exist where the employee’s needed work cannot be performed by another employee of substantially similar qualifications during the period of absence of the Sabbath observer.
(c) Because of the particularly sensitive nature of discharging or refusing to hire an employee or applicant on account of his religious beliefs, the employer has the burden of proving that an undue hardship renders the required accommodations to the religious needs of the employee unreasonable.

In an attempt to accomodate Johnson’s request for every Saturday off, the Post Master offered to allow Johnson as many Saturdays off as possible or in the alternative to recommend Johnson for a transfer to the larger Post Office in Tallahassee. Johnson refused to accept either offer of accomodation, requesting that he be allowed to remain on his old job at the Chattahoochee office even though he could not work on Saturdays.

The Postal Service made a good faith effort to reasonably accommodate Johnson’s religious observances and practices. To accept Johnson’s demands would result in an undue hardship on the effective operation of the Chattahoochee Post Office. The Post Master clearly needed a person in Johnson’s position who was truly a flexible employee, available whenever needed.

When an employer adequately demonstrates its inability to reasonably accommodate an employee’s religious practice, then dismissal does not violate § 2000e-16. See Riley v. Bendix Corp., 5 Cir., 1972, 464 F.2d 1113; Dawson v. Mizell, E.D.Va., 1971, 325 F.Supp. 511.

Affirmed.

      . § 2000e-16. Employment by Federal Government — Discriminatory practices prohibited; employees or applicants for employment subject to coverage

      (a) All personnel actions affecting employees or applicants for employment (except with regard to aliens employed outside the limits of the United States) in military departments as defined in section 102 of Title 5, in executive agencies (other than the General Accounting Office) as defined in section 105 of Title 5 (including employees and applicants for employment who are paid from nonappropriated funds), in the United States Postal Service and the Postal Rate Commission, in those units of the Government of the District of Columbia having positions in the competitive service, and in those units of the legislative and judicial branches of the Federal Government having positions in the competitive service, and in the Library of Congress shall be made free from any discrimination based on race, color, religion, sex, or national origin.

      . The record shows that the Civil Service Commission entered a finding of no discrimination on the basis of religion and this terminated all agency action on Johnson’s complaint.


author: SIMPSON, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Abraham T. OLIVA, Defendant-Appellant.
    No. 73-3109.
    United States Court of Appeals, Fifth Circuit.
    July 17, 1974.

      Manuel W. James, Key West, Fla., Lewis S. Kimler, Miami F]a., for defendant-appellant.
    Robert W. Rust, U. S. Atty., Michael Patrick Sullivan, Asst. U. S. Atty., Miami, Fla., for plaintiff-appellee.
    Before BROWN, Chief Judge, and TUTTLE and SIMPSON, Circuit Judges.
   SIMPSON, Circuit Judge:

Appellant was convicted after a jury trial under three counts of a six-count indictment: Count I, conspiring with an unindicted co-conspirator (Charles Maige) and others unknown to the grand jury to possess and distribute 169 grams of cocaine in violation of Title 21, U.S.C. Sec. 841(a)(1); Count V, aiding and abetting in the distribution of the same cocaine in violation of Title 21, U.S.C. Sec. 841(a)(1) and Title 18, U.S.C. Sec. 2; and Count VI, knowingly and intentionally carrying a firearm during the commission of a felony, the violation of Title 21, U.S.C. Sec. 841(a)(1), in violation of Title 18, U.S.C. Sec. 924(e)(2). We reverse for the trial court’s failure to exclude hearsay testimony. Since this hearsay formed a vital link in the appellee’s case, we render rather than reverse for new trial.

THE FACTS

The events leading to appellant’s arrest began the evening of June 26, 1972, when Special Agent Walde of the Bureau of Narcotics and Dangerous Drugs (BNDD) met with one Charles Maige at an establishment called Big Daddy's Lounge in the Oakland Park section of Ft. Lauderdale, Florida, to arrange for the purchase of six to eight ounces of cocaine. At this meeting, Maige told Walde that he had a connection in Key West, Florida, who might be able to supply cocaine in that quantity at a price of $450 per ounce F.O.B. Key West, or $480 per ounce delivered in Ft. Lauder-dale.

Maige purported to make contact with his Key West source and through further conversations with Agent Walde arranged a delivery of six ounces of cocaine for a price of $4,000 to be made in Ft. Lauderdale the following evening, June 27th. Maige was not given the money, but was promised it. At approximately 11:45 P.M. on the 27th, Maige arrived at the apartment of a confidential informant working with BNDD. Special Agent Walde and other agents were present. Maige at this time borrowed the agents’ automobile and was gone for approximately 20 minutes. When he returned a beige Cadillac was observed by the agents following Maige into the parking lot of the informant’s apartment. The Cadillac remained parked in the lot as Maige left the agents’ car and entered the apartment building. Agent McFarland, who was present, testified that he asked Maige the identity of the two occupants of the Cadillac, and that Maige replied that they were his people from Key West. Once inside the informant’s apartment, Maige produced from under his shirt a bag containing the 169 grams of cocaine. Agent McFarland testified that at this time he attempted to open the apartment door and was interrupted by Maige who cautioned him not to do so because his people from Key West would shoot him. Special Agent Walde field-tested the substance contained in the bag produced by Maige and found a positive indication of cocaine. Agent Perez then informed Maige that he would have to obtain the $4,000 from the trunk of the agents’ automobile. This was a prearranged signal for other agents to move in and arrest Maige.

Meanwhile the beige Cadillac left the parking lot, and the BNDD agents dispatched a radio call for other law enforcement officials to stop the car and to arrest the occupants. Shortly thereafter a beige Cadillac containing the appellant Oliva and his ex-wife was intercepted by enforcement agents a short distance away. The two occupants were arrested. A search of Oliva revealed a .25 caliber Bauer automatic pistol in his pants pocket.

SUFFICIENCY OF THE EVIDENCE

It is helpful to consider the evidence presented by the government in two categories: (i) the hearsay declarations of appellant’s alleged co-conspirator, Maige, and (ii) evidence aliunde the hearsay. In weighing the sufficiency of the evidence to support the verdict we must decide whether the government’s evidence aliunde the hearsay was sufficient to establish appellant’s participation in a conspiracy. Only if the conspiracy was proved prima facie by independent evidence was the trial court justified in admitting the hearsay statements of Maige for the jury’s consideration.

It is a long-standing rule in this Circuit that the government must introduce sufficient independent evidence of the existence of a conspiracy and of defendant’s participation therein before the judge may allow declaration of a co-conspirator to go before the jury, United States v. Apollo, 5 Cir. 1973, 476 F.2d 156, 159; Montford v. United States, 5 Cir. 1952, 200 F.2d 759, 760, but we have never stated in explicit terms the standard to be used by a trial judge in determining the sufficiency of the evidence other than the hearsay. We find it necessary therefore to make precise the implications of prior holdings of this court.

We define the test as whether the government, by evidence independent of the hearsay declarations of a co-conspirator, has established a prima facie case of the existence of a conspiracy and of the defendant’s participation therein, that is whether the other evidence aliunde the hearsay would be sufficient to support a finding by the jury that the defendant was himself a conspirator. This test has been expressly adopted by the First, Eighth, and Ninth Circuits. United States v. Johnson, 1 Cir. 1972, 467 F.2d 804, 807, cert. denied, 1973, 410 U.S. 909, 93 S.Ct. 963, 35 L.Ed.2d 270 (evidence “credible and sufficient to support the finding of concerted action”); Carbo v. United States, 9 Cir. 1963, 314 F.2d 718, 737, cert. denied sub nom. Palermo v. United States, 1964, 377 U.S. 953, 84 S.Ct. 1625, 12 L.Ed.2d 498 (“[T]he test is . whether, accepting the independent evidence as credible, the judge is satisfied that a prima facie ease (one which would support a finding) has been made”); Rizzo v. United States, 8 Cir. 1962, 304 F.2d 810, 826 (“sufficient prima facie showing . . . aliunde of the declaration of an alleged co-conspirator”). A requirement of this nature, though never clearly articulated has been implicit in our own prior decisions: United States v. Apollo, supra, 476 F.2d at 162 (“evidence . . . sufficient to support a reasonable inference [of conspiracy]”); Panci v. United States, 5 Cir. 1958, 256 F.2d 308, 311 (“evidence pointing, with the degree of clarity required for conviction in such cases, to appellant’s guilt”).

We must decide here, therefore, whether the government proved by evidence independent of the hearsay statements of Maige: (i) the existence of a conspiracy and (ii) appellant’s knowing participation in that conspiracy. The independent evidence offered by the government to connect appellant with Maige in a conspiracy to possess and distribute cocaine may be summarized as follows: (i) appellant’s presence in a crowd to which Maige made an initial inquiry as to the possible purchase of cocaine; (ii) telephone records indicating calls between numbers listed to Maige in Ft. Lauderdale and to appellant in Key West on June 27, 1972, the date of the sale; (iii) the circumstance that appellant, in the beige Cadillac, followed Maige into the parking lot adjacent to Maige’s apartment shortly before the delivery of the cocaine; (iv) testimony of an Oakland Park police officer that the appellant appeared very nervous when the officer saw him in his car in the parking lot; (v) the appellant’s action in driving away from the parking-lot at approximately the time of Maige’s arrest (characterized by the government as evidence of flight); (vi) the pistol discovered in appellant’s possession upon his subsequent arrest.

Viewing the evidence in the light most favorable to the government, Glasser v. United States, 1942, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680, 704, we must determine whether, from the independent evidence offered, “reasonable minds could conclude that the evidence is inconsistent with the hypothesis of the accused’s innocence,” United States v. Warner, 5 Cir. 1971, 441 F.2d 821, 825 cert. denied, 1971, 404 U.S. 829, 92 S.Ct. 65, 30 L.Ed.2d 58. Proof of agreement in conspiracy trials must usually rest on the inferences to be drawn from circumstantial evidence, Warner, supra, at 830, but we have consistently held that mere proof of association with one “bad man” is insufficient without more to show the necessary agreement to commit criminal acts. United States v. Martinez, et al., 5 Cir. 1973, 486 F.2d 15, 24; Panci v. United States, 5 Cir. 1958, 256 F.2d 308, 312.

In the instant ease, the government’s evidence reduces to a showing that appellant was aware of Maige’s interest in securing cocaine, that several telephone calls were placed between appellant’s and Maige’s residences immediately prior to the attempted sale of cocaine, and that appellant was present in the parking lot at the time of the attempted sale. There was no showing that appellant and Maige ever discussed the sale of cocaine to the government agents, that appellant ever agreed to supply Maige with cocaine, or that appellant ever actually furnished Maige with cocaine. No cocaine was ever shown to be in appellant’s possession. This meager evidence simply is not supportive of a jury finding of conspiracy. The necessary predicate was lacking and hence the hearsay testimony detailing Maige’s statements about his people from Key West should not have been permitted to go before the jury. Without the benefit of this hearsay, the government's conspiracy charge falls. The aiding and abetting distribution of cocaine conviction under Count V collapses also, because of the same infirmity of relying on hearsay. Lastly, without either of these felony convictions under-girding it, the Count VI conviction for knowingly and intentionally carrying a firearm during the commission of a felony may not be permitted to stand. The judgment of conviction appealed from is reversed, with directions to the lower court to dismiss the indictment.

Reversed and rendered.

      . Under Title 21, U.S.C. § 846, the special conspiracy penal provision of the Drug Abuse, Prevention and Control Act, P.D. 91-513, Title II, § 406, October 27, 1970, 84 Stat. 1265.

      . Prior to trial, the government dismissed Counts II and III of the indictment, which charged appellant with knowing, possession of with intent to distribute and aiding and abetting in the distribution of 1.8 grams of cocaine, violations of Title 21, U.S.C. Sec. 841(a)(1) and Title 18, U.S.C. Sec. 2. The jury found the appellant not guilty as to Count IV of the indictment which charged him with knowing and intentional possession with intent to distribute 169 grams of cocaine, also a violation of Title 21, U.S.C. Sec. 841(a)(1).

      . We recognize that this approach, at first blush, appears to render submission of the hearsay declarations for the consideration of the jury superfluous. As the Second Circuit has pointed out, however: “Although the proof aliunde may suffice for submission to the jury, the jury might not be convinced, by it and the utterances might tip the scale.” United States v. Geaney, 2 Cir. 1969, 417 F.2d 1116, 1120, cert. denied sub nom. Lynch v. United States, 1970, 397 U.S. 1028, 90 S.Ct. 1276, 25 L.Ed.2d 539. It should be noted that the Second Circuit has expressly refused to adopt the prima facie test for admissibility of co-conspirator hearsay. That court relies instead on a determination whether, weighing all the evidence, the government has proved the defendant’s participation in the alleged conspiracy by “a fair preponderance of the evidence independent of the hearsay utterances.” Id. If so, then the hearsay is admissible. Accord, United States v. D’Amato, 2 Cir. 1974, 493 F.2d 359.

      . The Tenth Circuit applies a test which appears similar to the prima facie showing test. That court conditions the admissibility of con-conspirator hearsay upon “proof of circumstances from which the existence of the conspiracy fairly may be inferred . . . . ” Bartlett v. United States, 10 Cir. 1948, 166 F.2d 920, 925. Accord, Briggs v. United States, 10 Cir. 1949, 176 F.2d 317, 320, cert. denied 338 U.S. 861, 70 S.Ct. 103, 94 L.Ed. 528. As we stated in note 3, supra, the Second Circuit has formulated a different standard. On the independent evidence requirement, see generally Davenport, The Confrontation Clause and the Co-Conspirator Exception in Criminal Prosecutions, 85 Harv.L.Rev. 1378, 1388-1391 (1972) ; Developments in the Law — Criminal Conspiracy, 72 Harv.L.Rev. 920, 984-89 (1959).

      . The government cites the recent decision in United States v. D’Amato, 2 Cir. 1974, 493 F.2d 359, in support of its argument that the evidence in the instant case sustains the appellant’s conviction. We distinguish D’Amato, on two grounds. On the facts, there was stronger evidence of the participation of D’Amato, Abrama, and Zito — Oliva’s analogues — in a conspiracy to distribute heroin. On the law, as we noted in footnote 3, supra, the Second Circuit applies a less stringent test of the sufficiency of the evidence to support admission of co-conspirator hearsay than is applied in this circuit. In D’Amato, it was the independent evidence together with the co-conspirator hearsay that was found to be sufficient to support the jury finding of guilt.

      . The government’s case, prior to trial, was expected to be stronger than events at trial bore out. Maige, under a grant of transactional immunity, had testified before a grand jury to appellant’s involvement in the cocaine transaction forming the basis for this prosecution. When called to the witness stand, however, Maige contracted a suspicious and questionable lapse of memory as to his grand jury testimony. He sought to account for his poor memory by stating that he was on drugs the evening of the sale. The district judge, obviously finding it difficult to credit Maige’s sudden lapse of memory, sternly advised him that he might be indicted for perjury if his testimony on the stand varied from his grand jury testimony. The judge further threatened to hold Maige in contempt should he fail to answer questions about matters as to which he had been granted transactional immunity. Finally, the judge questioned Maige at length about his testimony. Appellant’s appeal is based on an additional contention that the judge so far took over the questioning and indicated his disbelief of Maige as to require reversal. Cf. United States v. Danham, 5 Cir. 1969, 416 F.2d 1140; Baker v. United States, 5 Cir. 1966, 357 F.2d 11; Gomila v. United States, 5 Cir. 1944, 146 F.2d 372. Since we find the evidence insufficient to support conviction and reverse the conviction on that ground, we do not reach the question whether the judge’s conduct of the trial was such as to require reversal.


author: GEWIN, Circuit Judge:

text:
    In the Matter of Rodger A. Monson and Linda S. Monson, Bankrupts. Rodger A. MONSON and Linda S. Monson, Bankrupts, Appellants, v. FIRST NATIONAL BANK OF BRADENTON, Appellee.
    No. 74-1133
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    July 5, 1974.
    Robert H. Schultz, Bradenton, Fla., for appellants.
    William T. Keen, Tampa, Fla., for appellee.
    Don M. Stiehter, Tampa, Fla., for other interested parties.
    Before GEWIN, GODBOLD and CLARK, Circuit Judges.

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

   GEWIN, Circuit Judge:

Appellants Rodger Monson and Linda Monson, husband and wife, were adjudicated bankrupts on March 22, 1972, pursuant to voluntary petitions. The trustee subsequently filed his report of exempt property, including therein the home in Bradenton, Florida in which Rodger Monson and Linda Monson had continuously resided from 1968 until marital discord prompted their separation in July of 1971. At that time, the latter, accompanied by their two children, moved to Kentucky. In an attempt to effect a reconciliation, Rodger Monson followed suit. Because at the time the petition was filed, appellant and his wife had been absent from the claimed exempt property, a creditor, the First National Bank of Bradenton, interposed an objection to the trustee’s report of exempt property. Both the referee and the district court upheld the Bank’s contention that the Monsons had abandoned their homestead exemption. It is the district court’s determination that appellants contest on appeal, and that we reverse.

The record consists of evidence adduced at two hearings conducted before the referee in bankruptcy. These hearings revealed, as was indicated above, that marital difficulties had befallen the Monsons in the summer of 1971. Mrs. Monson’s move to Kentucky was accompanied by her filing in August of 1971 of a petition to dissolve the marital bonds. This petition was followed in September of 1971 by a pre-dissolution agreement in which the parties agreed to live apart and to continue to do so. Rodger Monson contested the petition for divorce. Upon relocation in Kentucky at the residence of her parents, Mrs. Monson enrolled her children in the Kentucky public schools and matriculated at Western Kentucky University.

The pre-dissolution agreement, however, was of short duration, for in October of 1971, Rodger Monson left Bradenton and moved to Kentucky in order to be near his family. He testified that he and his wife reconciled their marital difficulties in the fall of 1971. They were never divorced. The reconciliation thus effected, the Monsons continued to live in Kentucky until after the petition for voluntary bankruptcy was filed. Rodger Monson, a traveling salesman operating in Tennessee, Alabama, Georgia and North Florida, spent the weekends with his family during their sojourn in Kentucky and traveled on the road during the week. Mrs. Monson attended the university, thereby qualifying herself to receive a college degree in May of 1972. Both Rodger and Linda Monson stated that she completed her degree requirements in order to enable her to obtain attractive employment upon their return to Florida, and thereby help the family financially. Indeed, the Monsons returned to their Brandenton home immediately after a degree was conferred upon her in May of 1972. Significantly, however, despite this evidence of reconciliation, the divorce proceedings were not terminated until the Monsons returned.

Several additional facts, relevant to the abandonment issue, appear in the record. First, both Rodger and Linda Monson retained their licenses and remained registered to vote in Florida. Second, during their absence they made no attempt to lease or sell the Branden-ton home. Indeed, one unsolicited offer to purchase was rejected. Third, Rodger Monson continued receiving his mail in Brandenton and continued maintaining the lawn and shrubbery on the property. Fourth, even throughout their abbreviated separation, he supported his wife and two children. Finally, prior to the filing of the petition for voluntary bankruptcy, Linda Monson submitted an application for employment to the state of Florida.

The facts are not in dispute. The issue to be resolved is a legal one involving the correct application of Florida law to uncontroverted facts. The referee stated the issue as follows:

“The objective and hard facts germain (sic) to this controversy are not in dispute. As a matter of fact, they were established by stipulation of the parties. The parties differ, however, on the legal significance of these facts and particularly draw different conclusions and inferences from these facts.”

In the face of the aforementioned evidence, the referee determined that the homestead exemption for the Branden-ton residence had been abandoned. He placed particular emphasis on Brown v. Hutch, 156 So.2d 683 (Fla.App.1953), construing this decision to mandate continuing communal living by at least two individuals in such circumstances that one is regarded as the person in charge, for the exemption to exist. The district court endorsed the referee’s disposition, merely summarizing the relevant evidence and stating its conclusion that the referee’s determination that the homestead had been abandoned could not be deemed clearly erroneous.

II

It is axiomatic that to determine the availability of exemptions, the bankruptcy court must look to state law. Myers v. Matley, 318 U.S. 622,

625, 63 S.Ct. 780, 87 L.Ed. 1043, 1044 (1943); Long v. Hayslip, 227 F.2d 555, 556 (5th Cir. 1955); In re Jackson, 472 F.2d 589, 590 (9th Cir. 1973); 1A Collier on Bankruptcy, § 6, p. 876 (14th ed. 1973). And if the governing principles are correctly applied by the referee and the district court, an appellate court cannot overturn findings of fact unless they can be deemed clearly erroneous. This court delineated the authority allocated to the referee, the district court and the Court of Appeals, and the standard of review appropriate at each stage of bankruptcy proceedings in Porterfield v. Gerstel, 249 F.2d 634, 636 (5th Cir. 1957), where we stated:

“On review to the District Court, the District Judge is required to accept the findings of fact made by the referee, unless they are clearly erroneous. Phillips v. Baker, 5 Cir., 1948, 165 F.2d 578, 581.
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The rule guiding district courts has its analogue in the Circuit Court. ‘The district judge is required to accept the findings of fact made by the Referee unless clearly erroneous. Bankruptcy General Order 47, 11 U.S.C.A., following section 53. Such is the rule which governs us with respect to findings of the district court. Rule 52(a), Fed.Rules Civ.Proc., 28 U.S.C.A.’ Frazier v. Ash, 5 Cir., 1956, 234 F.2d 320, 326. This Court has held many times that when the district judge has approved the referee’s findings, the Court of Appeals will not interfere with the decision unless error is clearly demonstrated.”

In this case, the district court apparently relied upon the referee’s assessment of the applicable Florida law. Beyond alluding to the standard of review prescribed in Porterfield v. Gerstel, supra, the district court cited no case law. Hence, it is the referee’s decision that we must examine in order to determine whether Florida law was correctly applied.

The referee attributed paramount significance to Brown v. Hutch, 156 So.2d 683 (Fla.Ct. of App.1963) and Barlow v. Barlow, 156 Fla. 458, 23 So.2d 723 (1945). Our interpretation of these cases conflicts with that of the referee.

Brown v. Hutch, supra, was construed to hold that the presence of communal living is a precondition to a finding that a homestead exemption exists. We disagree, and quote the relevant portion of the language from that decision, 156 So.2d at 685:

“For determination of the existence of a family relationship [for homestead purposes], there are, in Florida, two basic recognized tests to be met, either singly or in combination: (1) a legal duty to maintain arising out of the family relationship; (2) a continuing communal living by at least two individuals under such circumstances that one is regarded as the person in charge.” (emphasis added)

Clearly, the italicized words indicate that communal living is not essential to the availability of the exemption. See also Vandiver v. Vincent, 139 So.2d 704, 709 (Fla.Ct. of App.1962) (“It is not necessary that any dependent reside with the head of the family on the homestead property. But if not, the head of the family must not only be obligated to, but must actually support such dependent.” (citations omitted)). That our interpretation of the language in Brown v. Hutch, supra, comports with the view of the Florida Supreme Court is witnessed by the fact that in Lockhart v. Sasser, 156 Fla. 339, 22 So.2d 763 (1945), decedent’s property was deemed to be embraced by the homestead exemption despite the fact that he and his wife had been separated.

We also disagree with the import attributed to Barlow v. Barlow, supra. In that case, the Florida Supreme Court rejected the homestead claim of a wife who, two weeks before her husband died, had left the family home for “keeps,” taking her belongings with her. The death of her husband when coupled with her abandonment of the family home, left no one available to claim the exemption. As Lockhart v. Sasser, supra, indicates, however, a wife’s mere departure from the family home does not frustrate the homestead claim.

Having discerned that error was committed by the referee, and by the district court through its unarticulated but yet implicit reliance upon the referee’s statement of the law, we proceed to set forth the applicable Florida law. Initially, we note the repeated admonition by Florida courts that “[t]he homestead exemption laws should be interpreted liberally and so as to shelter and preserve the family and family home so long as they are not interpreted in such manner as to become an instrument of fraud.” Vandiver v. Vincent, supra at 139 So.2d at 709. See Quigley v. Kennedy & Ely Insurance, Inc., 207 So.2d 431, 432 (Fla.S.Ct.1968); Olesky v. Nicholas, 82 So.2d 510, 512 (Fla.S.Ct.1955); Marsh v. Hartley, 109 So.2d 34, 38 (Fla.Ct. of App.1959). Exceptions to the homestead exemption should be strictly construed. Quigley v. Kennedy & Ely Insurance, Inc., supra. To this end, the Florida courts have held that mere absence from the household, when necessitated by health, see Saint-Gaudens v. Bull, 74 So.2d 693 (Fla.S.Ct.1954), financial, see Olesky v. Nicholas, supra; Marsh v. Hartley, 109 So.2d 34, 38 (Fla.Ct. of App.1959), or familial concerns, see Poppell v. Padrick, 117 So.2d 435 (Fla.Ct. of App.1960), does not effect an abandonment of the homestead exemption.

In the instant case, Mrs. Mon-son’s departure to Kentucky, for whatever reason, did not vitiate the status of the Bradenton home as homestead property as long as Mr. Monson continued, as he did, to support her and their children. Such is the thrust of our reading of Brown v. Hutch, supra, and Lockhart v. Sasser, supra. Hence, the only ques-/ tion is whether his attempt to resurrect the marriage, entailing as it did, his temporary movement to Kentucky, changes the homestead status. We conclude that it does not.

In Poppell v. Padrick, 117 So.2d 435 (Fla.Ct. of App.1960), the court held that a husband and wife who had absented themselves from their homestead in order to insure that the husband’s widowed mother would not live alone did not abandon the homestead. There, as in the instant case, the household furnishings remained on the claimed homestead property and the husband and wife remained registered to vote in the precinct in which the homestead property was situated. In addition to relying on these indicia of an intent to return, the court noted that “[i]t is not unnatural for a son to desire that his mother not live alone.” Poppell v. Padrick, supra 117 So.2d at 437. Manifestly, it is no less natural for a husband to desire to reconcile marital differences with his wife, even if reconciliation entails a temporary absence from the home in which he lives.

Moreover, it is eminently clear that Mr. Monson, and Mrs. Monson after settlement of their differences, possessed an intent to return to Bradenton. The household was left intact. No attempt was made to dispose of the property. They retained their licenses and eligibility to vote in Florida. Moreover, the reason for their delayed return and the belated dismissal of the divorce proceedings was in no way incompatible with their avowed intent to return. In view of their dire financial condition, it seems perfectly reasonable for Mrs. Monson to have finished her college education and thereby enhance her ability to obtain gainful employment. Thus, we conclude that on the basis of the applicable Florida law, the Monsons cannot be deemed to have abandoned their homestead exemption.

Reversed.

      . We would note that Mrs. Monson’s automobile continued to be registered in Florida. While in Kentucky, Mr. Monson purchased an automobile, financed it through a banking institution in Taylor County, Kentucky, and registered it in that state. Rodger Monson explained that he purchased and registered the vehicle in Kentucky because as a result of iiis bankruptcy, he could not obtain credit in Florida. Ilis first cousin was the president of the Kentucky bank which enabled him to purchase the vehicle.

      : The Florida homestead exemption is set forth in Fla.Const. art. 10, § 4 F.S. (1970) : “Homestead — exemptions
      (a) There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, except for the payment of taxes and assessments thereon, obligations contracted for the purchase, improvement or repair thereof, or obligations contracted for house, field or other labor performed on the realty, the following property owned by the head of a family:
      (1) a homestead, if located outside a municipality, to the extent of one hundred sixty acres of contiguous land and improvements thereon, which shall not be reduced without the owner’s consent by reason of subsequent inclusion in a municipality ; or if located within a municipality, to the extent of one-half acre of contiguous land, upon which the exemption shall be limited to the residence of the owner or his family;
      (2) personal property to the value of one thousand dollars.
      (b) These exemptions shall inure to the surviving spouse or heirs of the owner.
      (c) The homestead shall not be subject to devise if the owner is survived by spouse or minor child. The owner of homestead real estate, joined by the spouse if married, may alienate the homestead by mortgage, sale or gift, and, if married, may by deed transfer the title to an estate by the entirety with the spouse. If the owner or spouse is incompetent, the method of alienation or encumbrance shall be as provided by law.”
      Subsequent to the decision of the referee, the exemption provision was amended. The amendment does not, however, affect this litigation. See Fla.Const. art. 10, § 4 (Supp.1974-75).

      . The extreme reluctance of Florida courts to hold the exemption abandoned is evidence in Marsh v. Hartley, 109 So.2d 34 (Fla.Ct. of App.1959). There, John Hartley lived on the claimed homestead property in Orlando from 1935-1939, but as a result of a job demotion, moved to 5 different towns from 1939-44. In one of the towns, St. Cloud, he purchased a house, furnished it with furniture from the Orlando home and announced his intention to remain. Moreover, during his absence from Orlando, Hartley rented his home. The court nevertheless concluded that no abandonment had taken place. The assertion of abandonment in the instant case rests on a decisively weaker reed.