author: VOGEL, Senior Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. Robert J. BEVANS, Appellant.
    No. 73-1803.
    United States Court of Appeals, Eighth Circuit.
    Submitted March 13, 1974.
    Decided May 2, 1974.

      Harry O. Moline, Jr., Clayton, Mo., for appellant.
    David W. Harlan, Asst. U. S. Atty., St. Louis, Mo., for appellee.

      Before VOGEL, Senior Circuit Judge, and LAY and ROSS, Circuit Judges.
   VOGEL, Senior Circuit Judge.

Robert J. Bevans appeals from his judgment of conviction, based on jury verdicts, of misapplying bank funds and of making false entries in the books of a bank in violation of 18 U.S.C. §§ 656 and 1005. Bevans was convicted on three counts of an eleven-count indictment and was sentenced to the maximum term under each count, the sentences to run concurrently and pursuant to the provisions of 18 U.S.C. § 4208(bj.

A fairly detailed statement of the pertinent evidence appears necessary. In 1965 the appellant became associated with the Bank of Lincoln County as its executive vice-president and cashier. Approximately one year later Mr. Quincy Kinsler, a local contractor, and the appellant jointly purchased a plot of land suitable for housing development. Thereafter lots from the development were sold to area contractors for the construction of homes. Within the next year Bevans purchased Kinsler’s interest in the subdivision and continued the sale of lots to area contractors. One of the builders who purchased lots from the appellant and financed them through the bank was the Bass Construction Company, which was owned and operated by Mr. Burton Bass, Jr. Construction money was borrowed from the bank and placed in an escrow account which was controlled and disbursed by Mr. Bevans.

In August 1971 Harry Benear became associated with Bass Construction Company. Benear took over the internal operations of the company and found that its books and records were in such a state of disarray that he was unable to balance the checkbook. In December 1971 Bevans informed Bass, Jr., and Be-near the extent to which they had overdrawn the checking account of Bass Construction, “ * * * forty-some thousand dollars in the red.” In March 1972 Bass, Jr., decided either to sell the company or to shut down. Benear became the purchaser with funds loaned to him by the Bank of Lincoln County through Mr. Bevans.

Thereafter, Benear met with Bevans regularly to give him status reports on the condition of the company. During the early summer of 1972 a debit balance existed in the checking account of Bass Construction. Bevans advised Be-near to write checks on the company account in payment of some debts, and told him to delay payment of others. On June 30, 1972, the bank was holding a considerable number of Bass Company cheeks. Bevans purchased a 92-acre farm owned by the Bass Construction Company and deposited his cash payment directly into the Bass Company checking account. The trial testimony indicated that this was done in order to cover the then accumulated checks. The checks drawn on insufficient funds then being held by the bank were immediately paid from the proceeds of this purchase. The opening and closing amount in the account of Bass Construction Company on June 30 indicates that the total deposit was needed to cover the checks then being held.

In July 1972 Bevans again began holding Bass Construction Company checks as they were received at the bank. The first check was received by the bank on July 13, 1972, and the last on August 1, 1972. During this time period the bank accumulated a total of $51,222.29 of Bass Company checks drawn on insufficient funds. Counts VI and VII of the indictment relate to entries made in the books of the bank during this time period.

In May of 1972 Mr. Emil Hoechst purchased the bank. On June 15 at the board of directors meeting he proposed an audit which Bevans opposed. On July 26 Hoechst was elected president of the bank and on the 27th he ordered an audit. On July 31 and August 1 Bass, Sr., Bass, Jr., and Benear each executed $18,000 unsecured notes payable to the bank at the insistence of Bevans. The proceeds of these loans were credited to the general account of Bass Construction and disbused to cover the accumulated overdraft checks. Count II of the indictment charged that this transaction resulted in the misapplication of bank funds. Hoechst became aware of these unsecured loans and in mid-August Bevans was relieved of his duties at the bank.

The appellant was convicted on three counts of the indictment and on this appeal he challenges the sufficiency of the evidence on all three counts. He also contends that the charge to the jury with respect to Count II — relating to the misapplication of bank funds — was erroneous.

We first turn to the appellant’s contentions that the evidence was insufficient. The conviction on Count II resulted from the replacement of the checks held by the bank with the proceeds of the unsecured notes executed by Bass, Sr., Bass, Jr., and Benear on July 31 and August 1 of 1972. The appellant argues that the evidence is insufficient in three respects: (1) there is no evidence of loss to the bank; (2) there is no evidence that the defendant misapplied the $54,000 to his own use and benefit; and (3) there is no evidence that the defendant acted with the intent to injure and defraud the bank. From our review of the evidence, we are convinced that the government made a submissible case. In reviewing the sufficiency questions, we bear in mind the principle that:

In resolving the question whether a submissible case was made, we view the evidence in the light most favorable to the Government, * * * and accord to the Government the benefit of all inferences that may reasonably be drawn from the proven facts. Whiteside v. United States, 346 F.2d 500, 502 (8th Cir. 1965), cert. denied, 384 U.S. 1023, 86 S.Ct. 1946, 16 L.Ed. 2d 1025 (1966).

The jury heard evidence from which it could logically infer that the money was lost to the bank. Bass, Jr., testified that Mr. Bevans told him that he, Bass, Jr., would not be responsible for the note which he signed on July 31. He also indicated in his testimony that the note had not been paid at the time of trial. Mr. John Smith, the present executive officer of the bank, testified that the three $18,000 notes had been charged off in full. Mr. Smith testified that at the time the notes were charged off against the bank’s reserve for bad debts it became a loss to the bank. We also note that as a result of these actions the bank was deprived of the use of the money in question. We think this ample evidence to allow the jury to find that the bank lost $54,000 as a result of the appellant’s conduct.

We likewise find sufficient evidence to refute the appellant’s other two contentions relating to Count II of the indictment. He contends that there is no evidence that he misapplied the monies to his own use and benefit. From the facts presented at trial, we have no doubt that the jury could reasonably conclude that the appellant made the loans so that the individuals involved could complete and sell the houses and thereafter repay their debts to him. This benefit is a sufficient conversion to his own use. United States v. Rickert, 459 F.2d 352, 355 (5th Cir. 1972). Appellant also submits that the evidence is insufficient to show that he acted with the intent to injure and defraud the bank. The jury heard evidence of the appellant’s opposition to an audit at the time that Mr. Hoechst took over the bank. Bass, Jr., also testified that the appellant told him that he would not have to be responsible for the note that he signed. From these facts, the jury could reasonably conclude that the defendant was acting in his self-interest and that he had abandoned his position of trust, thereby intending for the bank rather than himself to bear the consequences of his transactions with Bass Construction.

The appellant next contends that there was not sufficient evidence to show that he directed the entry of false statements into the records of the bank. The indictment charged that false entries were made on or about July 20, 1972, and on July 27, 1972. These charges stem from the holding of the Bass Company checks from July 13 to August 1. The evidence relating to Counts VI and VII charging false record entries is sufficient. Testimony at trial indicated that the appellant directed that the Bass checks should be held and therefore not returned by the “midnight deadline” or paid as an overdraft. The amounts therefore were not entries in the overdraft ledger account of the bank. When the checks drawn on the Bass Company account were “kicked out” because of insufficient funds, the bank debited the cash item general ledger account and credited the demand deposit account of the bank. At the opening of the next business day, a reversing entry would be made to the cash items account and the demand deposit account, and the accumulated cheeks plus any new arrivals would be processed as if they had just been received by the bank on that date. This is referred to in the banking business as “rolling the checks over.” Such a “roll-over” had the effect of concealing their status as overdrafts and thus enabled the appellant to omit reporting them to the board of directors as required by Missouri law. V.A.M.S. § 362.275 (1969). The trial testimony also reveals that the appellant personally ordered the employees of the bank to “roll the checks over.” Each day this procedure was used, a bank employee took the accumulated checks and any new ones that had been received to the appellant for his instructions. He personally told the employees to roll the checks over on a number of occasions.

The appellant rejoins with ihe argument that since the “roll-over” had no effect on the total current assets picture of the bank, the entries are not false. Mr. John Smith, the present executive vice-president and cashier of the bank and an ex-bank examiner, testified that the accounting procedures used— debiting cash items instead of debiting overdrafts — did not actually overstate the assets of the bank since both are current assets. Conversely, though, he indicated that the procedure used by the bank — debiting cash items and crediting demand deposits' — reflected a misstatement of the current assets of the bank. We feel that this evidence is sufficient for the jury to infer that the entries in the demand deposits and cash items ledgers were false as charged in the indictment. The government is not required to prove all the allegations of the indictment as long as it proves facts charged in the indictment which satisfy the essential elements of the crime. United States v. Trexler, 474 F.2d 369, 371 (5th Cir.), cert. denied, 412 U.S. 929, 93 S.Ct. 2759, 37 L.Ed.2d 157 (1973).

Appellant also contends that the entries charged in the indictment were not falsely made within the meaning of 18 U.S.C. § 1005, because the entries were not created by the appellant for the purpose of hiding a particular transaction or series of transactions. The testimony at trial indicated that Mr. Be-vans instructed the employees to roll the checks over and no witnesses could remember any other situation where checks were held and run through the bank day after day. Although checks of other customers were held occasionally, there was no evidence that checks in large amounts were held for long periods of time. The jury also heard evidence that the appellant was regularly informed of the status of the Bass account, both by Harry Benear and an employee of the bank. Although there is testimony which indicates that the accounting procedures used were instituted prior to the time the appellant became associated with the bank, we find that the jury could reasonably conclude from the evidence as a whole that the entries were false within the meaning of § 1005. See Meredith v. United States, 238 F.2d 535, 540 (4th Cir. 1956).

The appellant also claims that there was no evidence to indicate that he acted with the intent to injure or defraud the bank. The testimony indicated that the appellant did not report the ckecks he was holding to the board of directors as overdrafts. The bank maintained an overdraft account for the purpose of covering insufficient funds checks which it decided to pay. The highest daily balance in this account between June 12 and August 7 of 1972 was $892.75, while the Bass checks drawn on insufficient funds reached a total of well over $50,000. This evidence, together with the already referred to loss of use of the money to the bank, was sufficient to make the case a submissible one for the jury. The evidence that the appellant directed the entries to be made, and that they were false, was sufficient for the jury to accept the inference of the appellant’s intention to-injure and defraud the bank as charged in Counts VI and VII of the indictment.

Finally, appellant contends that the trial court erred in refusing to give his essential elements instruction. The government argues that this claimed error was not preserved for review in accordance with the provisions of Rule 30 of the Federal Rules of Criminal Procedure. Certainly the attempt here to comply with the strict provisions of Rule 30 leaves something to be desired. See, Friedman v. United States, 381 F. 2d 155, 161 (8th Cir. 1967). We find it unnecessary, however, to resolve the issue. Our examination of the court’s instructions to the jury convinces us that the instructions, considered as a whole, were correct, adequate and understandably presented. The trial court was not obliged to use the exact language of a request but could, of course, use its own language. It felt that the charge, considered as a whole, properly included appellant’s request. We agree. Friedman v. United States, 381 F.2d 155, 160-161 (8th Cir. 1967); Pritchard v. United States, 386 F.2d 760, 767-768 (8th Cir. 1967), cert. denied, Borchelt v. United States, 390 U.S. 1004, 88 S.Ct. 1247, 20 L.Ed.2d 104 (1968).

We clearly find sufficient evidence on this record to submit the case to the jury on the three counts on which the defendant was convicted. Likewise, the charge to the jury adequately covered the law as applicable to this ease and the substance of appellant’s requested instructions.

Affirmed.

      . Tlie record indicates that at this time the bank was holding checks totalling approximately $28,000 which had been drawn on the Bass Construction Company account.

      . A total deposit of $28,464.72 was made by the appellant to the Bass account. Of this total, $18,250 represented a payment for the 92-acre farm. An additional $3,432.25 was a payment by appellant to Bass for the construction of a swimming pool at the appellant’s motel. The opening balance on June 30 was $6.71. At the close of the business day the balance was $6.78.

      . Under Missouri, law, V.A.M.S. § 400.4-302 (1969), the bank could no longer return the check when it was held past the “midnight deadline.”

      . The defendant requested the following essential elements instruction:
      Five essential elements are required to be proven in order to establish the offenses charged in Counts I, II, IX and X of the indictment:
      FIRST: The act of misapplying the sum of $42,000 and $54,000 respectively by an officer of a federally insured bank.
      SECOND: Doing such act with the intent to injure or defraud the bank.
      THIRD : Doing such act or acts willfully ; FOURTH: That as a result, such sums were lost to the bank; and FIFTH: Misapplying such sums to the use and benefit of the Defendant.
      The court refused this request but instructed the jury as follows :
      Three essential elements are required to be proven beyond a reasonable doubt in order to establish the offense of misapplication: first, that the Defendant was an officer, agent or employee of, or connected in any capacity with a bank, the deposits of which were insured by the Federal Deposit Insurance Corporation; second, that while being so connected with the bank, he misapplied monies, funds or credits belonging to or entrusted to the care and custody of the bank; and third, that he did such act knowingly, willfully and with the intent to injure or defraud the bank.
      The willful misapplication which is condemned by Section 656, Title 18, United States Code, means something more than irregular, negligent or improper use of the bank’s funds, but means the unlawful taking or conversion of the monies, funds or credits of the bank by a bank officer for his own use or benefit, or for the use and benefit of some other person or company other than the bank, and done willfully, with the specific intent to injure or defraud the bank.
      It is not necessary, in order to constitute the offense of willful misapplication, that the bank officer who makes the willful misapplication derive any personal benefit from the transaction.
      Conversion is an unauthorized assumption and exercise of ownership over the property of another by a person to his own use and benefit, or to that of a third person, which deprives the owner of his property permanently or for an indefinite time.
      You are instructed that permanent loss to the institution is no part of the offense of misapplication. Restitution is no defense to such an offense. However, in order to show misapplication of funds with intent to defraud, a showing of at least a momentary loss is required. The test is whether or not the bank was defrauded of something, defrauded of its rights to have custody of its funds, or the right of the bank to make its' own decisions as to how those funds were to be used.
      This instruction adequately covers the substance of the appellant’s requested instructions.


source: Caselaw Access Project

author: CELEBREZZE, Circuit Judge.

license: Public Domain

text:
    Claude E. LONG, Plaintiff-Appellee, v. FORD MOTOR COMPANY, Defendant-Appellant.
    No. 73-1993.
    United States Court of Appeals, Sixth Circuit.
    Argued Feb. 7, 1974.
    Decided April 30, 1974.

      Louis F. Oberdorfer, Washington, D. C., for defendant-appellant; James Robertson, Peter A. Bell, Cary Lerman, Washington, D. C., Joseph A. O’Reilly, James R. Jackson, Ford Motor Co., Dearborn, Mich., on brief; Wilmer, Cutler & Pickering, Washington, D. C., of counsel.
    William D. Haynes, Detroit, Mich., for plaintiff-appellee; Y. Paul' Donnelly, Detroit, Mich., on brief.
    Before CELEBREZZE and ENGEL, Circuit Judges, and ROSENSTEIN, Senior Customs Judge.

      The Honorable Samuel M. Rosenstein, Senior Judge, United States Customs Court, sitting by designation.

   CELEBREZZE, Circuit Judge.

Ford Motor Company appeals from a judgment awarding Claude E. Long $10,949 on his claim that his discharge from Ford was racially discriminatory in violation of the Civil Rights Act of 1866, 42 U.S.C. § 1981. We reverse and remand for further consideration.

Claude Long, a black college graduate and former Department of Labor compliance officer, sought employment with Ford Motor Company, hoping to get into industrial management in the field of labor relations. On July 19, 1967, Long was hired as a production line foreman. After nearly two years on this job, during which time he received three satisfactory and one unsatisfactory performance evaluations, Long filed a complaint with the Michigan Civil Rights Commission, alleging that his race was the cause of harassment, an unfair performance review, and the denial of a promotion. In May 1969, Long was transferred to the Industrial Relations Department of Ford’s Frame Plant, and he withdrew his charge prior to investigation.

At the Frame Plant, Long was rotated among several positions. He began as a “wage analyst” on June 1, 1969. In January 1970 he was assigned to head the Suggestions Program, in which capacity he received an award. In April he was shifted to a position where he developed the Frame Plant’s medical leave procedures. He was returned to the wage analyst position in June 1970. On these jobs, Long received a “satisfactory plus” performance evaluation on December 1, 1969, a letter of repimand on July 24, 1970 (prompted primarily by work left on his desk when he left for vacation on June 28), and an “unsatisfactory” rating on October 26, 1970. After this final evaluation, Long submitted a letter of rebuttal to the poor rating. Following a meeting with his immediate and plant supervisors, Long resigned on November 30, 1970, after being offered the choice of discharge or resignation. On November 17, 1971, Long filed a complaint in Federal District Court, alleging violations of Title VII of the 1964 Civil Rights Act, 42 U. S.C. § 2000e et seq., and of the Civil Rights Act of 1866, 42 U.S.C. § 1981. On May 1, 1972, the District Court dismissed his claim under Title VII for failure to comply with th'e requirement of a timely filing with the Federal Equal Employment Opportunity Commission. The District Court proceeded to a hearing on the merits of the § 1981 claim.

Testimony was taken from Long, his supervisors, and his fellow workers. Long’s primary argument was that he had been treated in a dissimilar manner from other persons, that he had received outright antagonism from his plant supervisor, and that the actions which prevented him from rising to a position in labor relations were prompted by racial prejudice.

The District Court found for Long. While it made various findings and observations, the District Court’s central holding was that Ford violated Section 1981 by failing to train Long adequately for his tasks. The District Court characterized Long as a “capable man,” who because he “was not adequately trained . . . could not perform adequately.” The Court concluded:

“If [black] people are not given adequate job training and are, as a result, terminated, then unequal employment opportunity still results. This imbalance is a real factor in racial discrimination. Racial discrimination in employment will not end until such people are given thorough job training so that they can perform adequately. Inadequate job training in a situation such as this fosters racial discrimination. Thus, this court is convinced that race was a factor (possibly not the only factor) in the termination of Claude Long.”

Ford makes two basic arguments on appeal. First, it contends that Appellee’s complaint should have been dismissed because he failed to pursue his remedies under Title VII of the 1964 Civil Rights Act. Second, Ford contends that reversal on the merits is necessary because the record and findings of the District Court do not sustain a judgment for Long under the principles of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973).

Ford does not contend that Section 1981 does not apply to private employment contracts. It is settled that Section 1981 prohibits racial discrimination in private employment.

Ford argues, however, that Long’s complaint should have been dismissed because he failed to file a charge with the Equal Employment Opportunity Commission within 210 days of his discharge. This was a jurisdictional prerequisite for bringing a Title VII suit under 42 U.S.C. § 2000e-5(d) (1970), and, so it is argued, impliedly a jurisdictional prerequisite to a § 1981 action.

Ford’s procedural objection is not without support in the case law. In Waters v. Wisconsin Steel Works of Int’l Harvesters Co., 427 F.2d 476 (7th Cir.), cert. denied, 400 U.S. 911, 91 S.Ct. 137, 27 L.Ed.2d 151 (1970), the Seventh Circuit held that a plaintiff in a § 1981 action must show a reasonable excuse for having bypassed his Title VII remedies. See also Kinsey v. Legg, Mason & Co., Inc., 60 F.R.D. 91 (D.D.C.1973).

This viewpoint is a minority position. The Third, Fifth, Eighth, and District of Columbia Circuits have concluded that Section 1981’s availability is not limited to those plaintiffs who have pursued their Title VII remedies or have shown a reasonable excuse for not doing so. Young v. Int’l Telephone & Telegraph Co., 438 F.2d 757 (3d Cir. 1971); Caldwell v. National Brewing Co., 5 Cir., 443 F.2d 1044 (1971); Brady v. Bristol-Meyers Co., 459 F.2d 621 (8th Cir. 1972); Macklin v. Spector Freight Systems, Inc., 156 U.S.App.D.C. 69, 478 F.2d 979 (1973). Furthermore, this Court has held in another context that “ § 1981 [is] a separate and concurrent cause of action with Title VII.” Head v. Timken Roller Bearing Co., 486 F.2d 870 (6th Cir. 1973). We adopt the prevailing view that a plaintiff need not pursue his Title VII remedies before instituting a cause of action under Section 1981.

We are impelled to this conclusion by rules of statutory construction. If Congress had expressly limited Section 1981’s availability in the manner Ford urges upon us, we would, be bound by the partial repeal of the earlier statute. Here, however, the question is whether we may imply á change in Section 1981 from the silent face of Title VII of the 1964 Civil Rights Act. This task is complicated by the fact that in 1964 Congress may not have recognized that Section 1981 was available to litigants against racial discrimination in private employment.

In Posadas v. National City Bank, 296 U.S. 497, 503, 56 S.Ct. 349, 80 L.Ed. 351 (1936), the Supreme Court stated that a repeal of a statute by implication is not favored. There are two categories where repeal by implication is possible.

(1) [W]here provisions in the two acts are in irreconcilable conflict, the later act to the extent of the conflict constitutes an implied repeal of the earlier one; and (2) if the later act covers the whole subject of the earlier one and is clearly intended as a substitute, it will operate similarly as a repeal of the earlier act. 296 U.S. at 503.

Title VII is not “in irreconcilable conflict” with Section 1981, and it does not cover the field in which Section 1981 was sown. See Sullivan v. Little Hunting Park, 396 U.S. 229, 237, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969) (regarding the compatibility of § 1982 and the provisions of the Fair Housing Act of 1968). Thus, the availability of Section 1981 is not limited by the existence of remedies under Title VII. “ [Legislative enactments in [the area of racial discrimination in employment] have long evinced a general intent to accord parallel or overlapping remedies against discrimination.” Alexander v. Gardner-Denver Co., 415 U.S. 36, 94 S.Ct. 1011, 39 L.Ed.2d 147 (1974) (citingto § 1981). Thus the District Court correctly proceeded to the merits of Appellee’s claim.

We cannot affirm the District Court’s decision on the merits, however, because it rests upon an erroneous view of Section 1981. That provision, first enacted as part of the Civil Rights Act of 1966,states:

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

When a person sues under this statute to enforce his right not to be discriminated against in private employment, he must show that he was unable to make or enforce a contract that white citizens were able to make or enforce. Applied to the facts of this case, Appellee Long must show that he was forced to resign because of dissimilar treatment caused in part by his race.

As originally designed in 1866, Section 1981 was intended to uproot the institution of slavery and to eradicate its badges and incidents. See Jones v. Alfred H. Mayer Co., 392 U.S. 409, 422-437, 88 S.Ct. 2186, 20 L.Ed.2d 1189, (1968) (analysis applied to § 1981 in Tillman v. Wheaton-Haven Recreation Assn., 410 U.S. 431, 439, 93 S.Ct. 1090, 35 L.Ed.2d 403 (1973).) When an employer, public or private, places more stringent requirements on employees because of their race, Section 1981 is violated. The purpose for which the Section was enacted — to afford equal opportunities to secure the benefits of American life regardless of race — requires1 that a court adopt a broad outlook in enforcing Section 1981. Schemes of discrimination, whether blatant or subtle, are forbidden. Newbern v. Lake Lorelei, Inc., 308 F.Supp. 407, 416 (S.D.Ohio 1968). Cf. Lane v. Wilson, 307 U.S. 268, 275, 59 S.Ct. 872, 83 L.Ed. 1281 (1939).

Section 1981 is by its very terms, however, not an affirmative action program. It is an equalizing provision, seeking to ensure that rights do not vary according to race. It does not require that persons be accorded preferential treatment because of their race. On this point we view the Supreme Court’s discussion of Title VII as applicable to Section 1981:

“Congress did not intend by Title VII, however, to guarantee a job to every person regardless of qualifications. In short, the Act does not command that any person be hired simply because he was formerly the subject of discrimination, or because he is a member of a minority group. Discriminatory preference for any group, minority or majority, is precisely and only what Congress has proscribed. What is required by Congress is the removal of artificial, arbitrary, and unnecessary barriers to employment when the barriers operate invidiously to discriminate on the basis of racial or other impermissible classification.” Griggs v. Duke Power Co., 401 U.S. 424, 430-431, 91 S.Ct. 849, 853, 28 L.Ed.2d 158 (1971).

Thus, it was error for the District Court to hold Appellant liable for a failure to train Appellee adequately, absent a showing that this failure constituted either dissimilar treatment from the training whites receive or treatment similar on its face but dissimilar in its effects upon racial minorities and unfounded on business necessity. See Griggs v. Duke Power Co., supra; McDonnell Douglas Corp. v. Green, 411 U. S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973); Robinson v. Lorillard, 444 F.2d 791 (4th Cir. 1971).

Although the District Court made various observations and findings of fact, we cannot perceive an alternative holding sufficient in detail under Rule 52(a), Fed.Rules Civ.Proc., to permit review. Rather than specify that Appellee had received dissimilar treatment, the District Court relied on a rationale of inadequate training per se. Thus, we must remand for further proceedings to determine whether Appellee should recover on a proper ground.

The parties and the District Court did not have the benefit of McDonnell Douglas’ reasoning in the proceedings below. On remand, the District Court should apply McDonnell Douglas’ principles on the order and allocation of proof. A person alleging a § 1981 violation must first establish that his employment terms vary from those which his employer accords to similarly situated white workers. This can be shown by proof either that intentional racial prejudice entered into his treatment or that a facially neutral practice (here Appellant’s performance evaluation system) operates diseriminatorily against minority employees. In this case, Appellee may be able to establish that he was trained inadequately whereas white co-employees were trained adequately. He may be able to establish that Ford’s promotion system, which relies heavily upon the subjective evaluation of supervisors, has a discriminatory impact on minority employees, so that its use in discharging him was improper. Appellee may be able to establish that similarly situated white employees with comparable records would have been offered different positions within Ford rather than discharged, whereas he was forced to leave Ford altogether. We express no opinion as to whether the record below would support any of these possible holdings.

If Appellee establishes a prima facie case of dissimilar treatment due in part to racial discrimination, Appellant must then establish “some legitimate, nondiscriminatory reason for the employee’s rejection.” McDonnell Douglas Corp. v. Green, 411 U.S. at 802. In this case Appellant would argue that Appellee’s unsatisfactory performance review justified his termination and that its system of evaluation is grounded on business necessity.

If Appellee has established a prima facie case but Appellant’s rebuttal is sufficient to overcome Appellee’s initial showing, Appellee must then prove that his discharge was nonetheless a violation of Section 1981 because Appellant’s stated reason for the discharge was merely a pretext for a termination actually based on racial prejudice. 411 U.S. at 804. If the proofs reach this point, the District Court will have the task of evaluating the objectivity, sincerity, and honesty of the witnesses to arrive at a necessarily subjective conclusion.

Because of the new light shed on employment discrimination cases by McDonnell Douglas, we remand this case for such further proceedings as the District Court deems necessary to arrive at a just and proper conclusion. Affirmed in part and reversed in part for further proceedings in conformance with the principles enunciated herein.

      . The District Court’s opinion is reported at 352 F.Supp. 135 (E.D.Mich.1972). Long’s lack of training was cited as the “fact that is controlling in this situation.” 352 F.Supp. at 139.

      . Id.

      . Id. at 140.

      . Although the Supreme Court has not yet squarely held that this is the case, in Tillman v. Wheaton-Haven Recreation Assn., Inc., 410 U.S. 431, 439-440, 93 S.Ct. 1090, 35 L.Ed.2d 403 (1973), the Supreme Court held that § 1981 is applicable to private discriminatory acts. An employment contract is covered by § 1981, and Title YII of the 1964 Civil Rights Act has not preempted the field of employment discrimination. Johnson v. City of Cincinnati, 450 F.2d 796 (6th Cir. 1971).
      Furthermore, although this Circuit has not explicitly held that § 1981 prohibits racial discrimination in private employment, this conclusion is implicit in at least two holdings. Head v. Timken Roller Bearing Co., 486 F.2d 870 (6th Cir. 1973); Marlowe v. Fisher Body, 489 F.2d 1057 (6th Cir. 1973). This conclusion is unanimous among the circuits that have decided the question. Young v. Int’l Telephone & Telegraph Co., 438 F.2d 757 (3d Cir. 1971); Brown v. Gaston County Dyeing Machine Co., 457 F.2d 1377 (4th Cir. 1972); Sanders v. Dobbs Houses, Inc., 431 F.2d 1097 (5th Cir. 1970), cert. denied, 401 F.2d 948, 91 S.Ct. 935, 28 L.Ed. 2d 231 (1971); Waters v. Wisconsin Steel Works of Int’l Harvesters Co., 427 F.2d 476 (7th Cir.), cert. denied, 400 U.S. 911, 91 S. Ct. 137, 27 L.Ed.2d 151 (1970); Brady v. Bristol-Meyers, Inc., 459 F.2d 621 (8th Cir. 1972); Macklin v. Spector Freight Systems, Inc., 156 U.S.App.D.C. 69, 478 F.2d 979 (1973) .

      . This requirement has been changed by recent amendments to Title VII. Pub.L. 92-261, § 4(a). See 42 U.S.C.A. § 2000e-5 (1974) .

      . The 1968 decision of Jones v. Alfred H. Mayer Co., 392 U.S. 409, 88 S.Ct. 2186, 20 L.Ed.2d 1189 (1968), is credited with having resuscitated the Civil Rights Act of 1866, of which § 1981 was a part, as to private defendants.

      . Amendments to make Title VII the exclusive remedy for employment discrimination have been defeated. 110 Cong. Record 13650-52 (1964); 118 Cong. Record, 1524-26 (daily ed. Feb. 9, 1972); 1791-97 (daily ed., Feb. 15, 1972).
      Title VII and 1981 afford different tactical advantages and handicaps to aggrieved parties. The existence of § 1981 as a procedurally separate source of relief will not likely deter the use of Title VII’s conciliation procedures. See Note, “Racial Discrim¡nation in Employment under the Civil Rights Act of 1866,” 36 U.Chi.L.Rev. 615, 639-41 (1969); Comment, “Is Section 1981 Modified by Title VII of the Civil Rights Act of 1964?,” 1970 Duke L.J. 1223, 1235 (1970) ; Peck, “Remedies for Racial Discrimination in Employment: A Comparative Evaluation of Forums,” 46 Wash.L.Rev. 455, 476-79 (1971) ; Larson, “The Development of Section 1981 as a Remedy for Racial Discrimination in Private Employment,” 7 Harv.Civ.Rights — Civ.Lib.L.Rev. 56, 69-84 (1972).

      . The provision was re-enacted with some changes in 1870 and codified in 1874. See Jones v. Alfred H. Mayer Co., 392 U.S. 409, 422, n. 28, 88 S.Ct. 2186, 20 L.Ed.2d 1189 (1968).

      . There are obligations to take affirmative action in hiring and training minority citizens as a precondition to being awarded government contracts. See Exec.Order No. 11,246, 3 C.F.R. 418 (1972). Section 1981 does not impose such an obligation on employers. Castro v. Beecher, 334 F.Supp. 930, 938 (D.Mass.1971), aff’d in part and rev’d in part, 459 F.2d 725 (1st Cir. 1972).

      . Title VII of the 1964 Civil Rights Act, as amended 42 U.S.C.A. § 2000e et seq. (1972), is not before us. Except for the language quoted, we express no opinion as to the similarities between § 1981 and Title VII.

      . Although McDonnell Douglas was a Title VII case, the principles governing these procedural matters apply with equal force to a § 1981 action. Cf. United States v. Chesterfield County School District, 484 F.2d 70 (4th Cir. 1973).

      . Cf. E.E.O.C. No. 72-0777 (1971).

      . See Rowe v. General Motors Corp., 457 F.2d 348 (5th Cir. 1972); United States v. N. L. Industries, Inc., 479 F.2d 354 (8th Cir. 1973); Brown v. Gaston County Dyeing Machine Co., 457 F.2d 1377 (4th Cir. 1972); Young v. Edgcomb Steel Co., 363 F.Supp. 961 (M.D.N.C.1973); United States v. Local 189, 301 F.Supp. 906 (E.D.La.1969), aff’d, 416 F.2d 980 (5th Cir. 1969), cert. denied, 397 U.S. 919, 90 S.Ct. 926, 25 L.Ed.2d 100 (1970); Baxter v. Savannah Sugar Refining Corp., 350 F.Supp. 139 (S.D.Ga.1972).

      . See Griggs v. Duke Power Co., 401 U.S. 424, 431, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-803, 93 S.Ct. 1817, 36 L. Ed .2d 668 (1973); Robinson v. Lorillard, 444 F.2d 791, 798 (4th Cir. 1971); United States v. Bethlehem Steel Corp., 446 F.2d 652 (2d Cir. 1971); United States v. Jacksonville Terminal Co., 451 F.2d 418 (5th Cir. 1971); United States v. St. Louis-San Francisco Ry., 464 F.2d 301 (8th Cir. 1972); Brito v. Zia Co., 478 F.2d 1200 (10th Cir. 1973); Moody v. Albermarle Paper Co., 474 F.2d 134 (4th Cir. 1973); McAdory v. Scientific Research Instruments, Inc., 355 F.Supp. 468 (D.Md.1973); Note, “Fair Employment Practices: The Concept of Business Necessity,” 3 Memph.St.U.L.Rev. 76 (1972).


text:
    UNITED STATES of America, Appellee, v. Willard BRUNO MAKES ROOM FOR THEM, Appellant.
    No. 73-1700.
    United States Court of Appeals, Eighth Circuit.
    Submitted March 12, 1974.
    Decided May 7, 1974.
    David L. Bergren, Fort Pierre, S.D., for appellant.

      Robert D. Hiaring, Asst. U. S. Atty., Sioux Falls, S.D., for appellee.
    Before VOGEL, Senior Circuit Judge, and LAY and ROSS, Circuit Judges.
   VOGEL, Senior Circuit Judge.

Willard Bruno Makes Room For Them, a 22-year-old male Indian residing on the Rosebud Indian Reservation in South Dakota, was charged by grand jury indictment with two counts of involuntary manslaughter in violation of 18 U.S.C. § 1153 and § 1112. Specifically, Count I charged that on or about the 1st day of July 1972 the defendant did “wilfully (sic), knowingly and unlawfully kill a human being while engaging in the commission in an unlawful manner and without due caution and circumspection, of a lawful act which might produce death, to-wit: in operating or driving a motor vehicle while under the influence of intoxicants, and without due caution and circumspection, and as a result did collide with an embankment, which caused the death of Anna Alvina Brave Hawk, a human being.” Count II carried a similar charge with reference to the death of Doris E. Tools. Upon being found by a jury guilty of involuntary manslaughter as charged in Count I and Count II, the defendant was sentenced to two years’ confinement with eligibility for parole in accordance with 18 U.S.C. § 4208(a)(2).

The first contention on appeal is that the trial court erred in permitting an investigating officer to testify to certain admissions of the appellant. The interview in question took place on July 10, 1972, at the home of the appellant some ten days after the accident. He was not in custody at the time. Before being interviewed he was advised of his Miranda rights, which he waived. Following objection to the testimony of the investigator, with reference to the appellant’s admissions, the trial judge very carefully held an in-chambers hearing. Testimony, including that of the appellant himself, was adduced after which the judge concluded that any statements given by the appellant were voluntary and made with full knowledge of his rights as explained to him by the interviewer ; that no duress, threats or promises were made, and that the statements were admissible, properly leaving to the jury the ultimate determination. We find no error in the first contention.

The second alleged error is that the trial court permitted an examining doctor to testify with reference to what the appellant now claims to be a doctor-patient privilege. After the accident out of which this prosecution arose, appellant was taken to the Public Health Service Hospital at Rosebud, South Dakota. While there he was examined by Dr. Philip K. Olson, a physician in the employ of the Public Health Service. Over objection, Dr. Olson was allowed to testify as to his findings regarding intoxication of the appellant. The appellant relies upon the statutory law of South Dakota in support of his contention that the testimony of Dr. Olson was privileged information. We find it unnecessary to determine the applicability of the South Dakota statutes, since under the circumstances of this case, the claimed error was not properly preserved for review.

Although originally counsel, in anticipation of the government’s offering medical testimony to the effect that the appellant was intoxicated when examined at the hospital shortly after the occurren ce of the accident, made objection, his objection was general:

I object to any testimony of any doctor as to an opinion on any degree of intoxication that might be a bearing on the guilt of the Defendant.

At that time no grounds were given for the objection. It was sustained, however, because of obvious lack of foundation, and the trial judge so stated. Subsequently, after foundation for the medical opinion had been established, Dr. Olson testified, stating that he did have an opinion with reference to the condition from which the appellant was suffering. He was asked to state that opinion. Counsel for appellant objected as follows:

Now, just a moment. I am going to object again, Your Honor, to that Doctor expressing an opinion for the reason that it lacks foundation.
THE COURT: Overruled. You
may answer.
THE WITNESS: I may answer
the question?
THE COURT: Yes.
THE WITNESS: Okay. He appeared on the basis of my examination to be under the influence of alcohol.

An examination of the record clearly indicates that the government laid sufficient foundation for the expression by the doctor of his opinion regarding what was wrong with the appellant.

Rule 51 of the Federal Rules of Criminal Procedure provides in pertinent part that an objecting party must make “ * * * known to the court the action which he desires the court to take or his objection to the action of the court and the grounds therefor * * We agree with the rationale of the Second Circuit that “ * * * a specific objection overruled will be effective to the extent of the grounds specified, and no further.” United States v. Indiviglio, 352 F.2d 276, 279 (2d Cir. 1965); see, also, Dranow v. United States, 307 F.2d 545, 568 (8th Cir. 1962). Since counsel’s objection failed to specify the grounds now claimed, the error, if any, was not preserved for review. Furthermore, we find that the admission of this evidence does not constitute plain error under Rule 52(b) of the Federal Rules of Criminal Procedure.

For his third contention, the appellant claims that error was committed in admitting, over objection, testimony as to the extent of one of the decedent’s injuries, claiming that to do so was inflammatory and prejudicial where appellant had agreed to stipulate to the cause of death. Resolution of the issue clearly called for an exercise of discretion on the part of the trial court. In the absence of an abuse of such discretion the trial court’s determination may not be disturbed on appeal. United States v. DeVerse, 464 F.2d 80 (8th Cir. 1972), cert. denied, 409 U.S. 988, 93 S.Ct. 342, 34 L.Ed.2d 253 (1972); United States v. Leach, 429 F.2d 956 (8th Cir. 1970), cert. denied, 402 U.S. 986, 91 S.Ct. 1675, 29 L.Ed.2d 151 (1971). We find no abuse of discretion. The testimony had some relevancy in connection with establishing the point of impact of the automobile, as well as the speed of the vehicle. We find no error in the admission of the testimony.

Appellant’s fourth and final claim of error involves the sufficiency of the evidence to sustain the conviction on the two counts of involuntary manslaughter. It is contended that there is a failure to establish that the appellant was driving the automobile at the time of the accident and, second, a failure to establish intoxication on his part. An examination of the record indicates that both contentions áre utterly without foundation. The transcript is replete with statements of the appellant’s drinking during the day and evening immediately preceding the accident, and that on at least one occasion he passed out. The physician who examined him at the hospital shortly after the occurrence of the accident testified that in his opinion he was “under the influence of alcohol.”

As to the question of the sufficiency of the evidence to establish that the appellant was driving the automobile at the time of the accident, we again find the record replete with testimony and other evidence from which the jury could unerringly conclude that the appellant was the driver of the car at the time of the accident. He was seen many times driving the car on the day and evening preceding the accident. He was the driver when he and his party of five left Cedar Butte, some 12 miles from where the accident occurred. There were six persons in the appellant’s automobile, including the appellant himself. Immediately after the accident three of the people were found in the back seat of the car*. The body of Anna Brave Hawk was on the ground on the front right side of the ear. Doris Tools was partially in the automobile on the front right side. The appellant was outside the ear near the open front door on the driver’s side. Clearly this claim of insufficiency is without merit.

We have examined the record in this case, conclude that the appellant had a fair trial, and that there was more than ample evidence to support the jury’s verdict of guilty.

Affirmed.

      . S.D.C.L. (1967) § 23-44-9 and § 19-2-3.

      . We note that under F.R.Crim.P. 26 federal courts have not always agreed upon the applicability of state-created privileges in federal courts. Wright, The Law of Federal Courts, § 93 at 414 (2d Ed. 1970). Professor Wright indicates that in situations where federal courts are dealing with federal law, the testimony should be allowed regardless of the privilege recognized by state law. Wright, supra, at 414. Likewise, the Advisory Committee Notes to the Proposed Rules of Evidence for the United States Courts and Magistrates is in accord with Professor Wright. Proposed Rules of Evidence for the United States Courts and Magistrates, Article V, Rule 501, p. 46.


author: BRIGHT, Circuit Judge.

text:
    UNITED STATES of America, Appellee, v. James J. GAROFALO, Appellant. UNITED STATES of America, Appellee, v. Alphonse PATRIZZI, Appellant.
    No. 73-1534, 73-1553.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 11, 1974.
    Decided May 7, 1974.
    Donald G. Stubbs, and Lloyd F. Dieckman, Kansas City, Mo., for appellants.
    Kurt P. Schulke, Sp. Atty., Dept, of Justice, Kansas City, Mo., for appellee.

      Before HEANEY and BRIGHT, Circuit Judges, and WANGELIN, District Judge.

       H. KENNETH WANGELIN, District Judge, Eastern and Western District of Missouri, sitting by designation.

   BRIGHT, Circuit Judge.

Alphonse Patrizzi and James J. Garofalo were tried before a jury in the United States District Court for the Western District of Missouri and convicted of: (1) transportation of stolen securities in interstate commerce in violation of 18 U.S.C. § 2314; (2) sale of stolen securities which had been moved in interstate commerce in violation of 18 U.S.C. § 2315; and (3) conspiracy to commit these offenses in violation of 18 U.S.C. § 371.

On this appeal, defendants raise several issues. We have examined the record closely and find no merit whatsoever to their contentions. Messrs. Patrizzi and Garofalo received a preeminently fair trial in which the Government proved defendant-Patrizzi’s guilt overwhelmingly and presented a strong case against Garofalo. Only the latter questions the sufficiency of the evidence.

I.

PATRIZZI’S APPEAL

Defendant-Patrizzi’s sole claim is that his warrantless arrest on August 23, 1972, was without probable cause, and, hence, the incidental search and seizure of incriminating items on his person violated the fourth amendment. He contends that agent Lueckenhoff, the arresting officer, acted solely on the basis of hearsay information from agent Knox, his supervisor, who in turn relied entirely on an informer’s false statement that the informer had personally observed stolen securities in the defendant s possession on August 2, 1972. He argues that there can have been no probable cause for the arrest, because it was based on a “tip” which was ultimately proven untrue at trial by the informer’s own testimony that he never physically saw the defendant until August 20, 1972.

Although it is quite dubious that the questioned statement was the sole “impelling force” of the arrest as defendant-Patrizzi contends, even assuming that it was, his contention is irrelevant to our inquiry regarding probable cause. He concedes that the facts related in the supervising officer’s affidavit attached to the post-arrest complaint form would support a finding of probable cause if true. The discrepancy between what the informer may have told the F.B.I. and what was actually proved at trial may not now be used to invalidate an arrest, absent any showing of fraud or deceit on the part of the law enforcement officials involved. Cf. United States v. Marihart, 492 F.2d 897 (8th Cir., 1974). “[PJrobable cause is not defeated because an informant is later proved to have lied, as long as the affiant accurately represented what was told him.” United States v. Sultan, 463 F.2d 1066, 1070 (2d Cir. 1972). Moreover, an examination of the record does not establish any clear falsity of the affidavit. More probably, the affiant simply made a mistake in attributing facts related to him by the informer who apparently passed on information received from his associate who dealt with the criminals on or about August 2, 1972. The record of the trial does not undercut the conclusion of District Judge Hunter that the arrest and search were valid.

II.

GAROFALO’S APPEAL

Defendant-Garofalo asserts first that the trial court’s instruction on the inferences that may be drawn from the possession of “recently stolen” property violated his fifth amendment rights. This circuit has regularly upheld the use of such an instruction, under circumstances similar to those presented here, as a matter that may reasonably be submitted to the jury. See, e. g., Sewell v. United States, 406 F.2d 1289 (8th Cir. 1969). As appellant’s counsel concedes, the Ninth Circuit has considered the merits of the fifth amendment argument and rejected it in McAbee v. United States, 434 F.2d 361 (9th Cir. 1970). We agree with the McAbee court.

Garofalo next contends that the trial court should have held as a matter of law that he was entrapped by the Government. The defense of entrapment focuses on the “predisposition” of the defendant and is properly a matter for the jury. See United States v. Russell, 411 U.S. 423, 93 S.Ct. 1637, 36 L.Ed.2d 366 (1973). It has been said that “[t]o determine whether entrapment has been established, a line must be drawn between the trap for the unwary innocent and the trap for the unwary criminal.” Sherman v. United States, 356 U. S. 369, 372, 78 S.Ct. 819, 821, 2 L.Ed.2d 848 (1958). Under the facts in this case, when that line is drawn, it was proper for the jury to be allowed to determine into which category the luckless Garofalo’s circumstances fell.

Finally, Garofalo claims that the evidence was insufficient to support his conviction. The testimony adduced at trial — which we will shortly describe— establishes Garofalo’s active involvement in a criminal enterprise with defendantPatrizzi, who arranged for the transportation and sale of stolen securities.

We take the time to set forth the facts of this case at length not only in order to answer fully Garofalo’s insufficiency-of-the-evidence claim, but also because the record unfolds for us a fascinating tale of two hoodlums who were undone when their own gullibility and rapacity met head-on with as neat a bit of undercover detective work as we have seen in a month of Sunday television mystery movies. For those who find satisfaction in detective fiction — which sometimes seems like the only occasion where law almost always triumphs over outlaws — we offer the Runyonesque but true story of this case.

III.

During the summer of 1972, Irving Richards, an ex-convict employed as a special investigator for a Los Angeles private detective agency, was retained by Fireman’s Fund Insurance Company to recover some $700,000 worth of securities which had been stolen from one of its insureds, a New York bank. Richards and an associate, Frank Michaels, also a former small-time hoodlum, advised certain underworld contacts that they had a market for stolen securities through an outlet in Kansas City, Missouri.

These contacts led to long distance telephone conversations with “Al” Patrizzi who was at that time in Boston. Patrizzi advised Richards that he would see what he could do and promised to keep in touch through Michaels. Richards, accompanied by Michaels, then flew to Boston, but was unable to meet personally with Patrizzi who insisted that he would not meet further with Michaels.

After a week of seemingly fruitless negotiations in Boston, Richards again telephoned Patrizzi. “Are you going to do business or not?” he asked, “I am going back to California.” But Patrizzi already had risen to the bait. He announced that he would be flying to Kansas City within a few days and that he would be bringing $250,000 worth of securities. According to Richards’ testimony, Patrizzi added that, if the deal went through all right, he would try to produce another $700,000 worth of securities. They agreed to meet in Kansas City the next day.

At approximately 8:00 P.M. on the evening of August 20, 1972, Richards and Michaels met Patrizzi and Garofalo in the cocktail lounge of the Holiday Inn in downtown Kansas City. Patrizzi made it clear that successful negotiation of the $250,000 in securities which he then had in his possession was the necessary first step before he would be allowed to bring any more securities from back East. Richards then told Patrizzi his manufactured tale about a bank vice-president who was going to help pass these securities.

This friend, Richards told Patrizzi, controlled the loan board of his bank and could push the securities through as collateral for a loan. According to the story, the banker had invested heavily and lost bank funds in the commodities market. He needed to recoup his investments and was willing to market the securities to cover his losses. After listening to Richards, Patrizzi agreed to a fifty-fifty split after the banker got his share. They arranged for a further meeting the next day to discuss the deal with the banker.

During this entire period, Richards had kept in constant contact with F.B.I. Special Agent Jack Knox of the Kansas City office, notifying him of the progress of the negotiations. Agent Knox had obtained the cooperation of a real banker, Henry Walton, executive vice-president of Livestock National Bank in Kansas City, who had formerly been a deputy sheriff in Johnson County, Kansas. He agreed to help in recovering the stolen securities and apprehending those dealing in the stolen property. That next morning before the meeting scheduled with Patrizzi, Richards met with Walton and F.B.I. agent Steve Travis, who was to pose as Walton’s assistant in the bank. They discussed a strategy to induce Patrizzi to produce all the securities available to him, not merely the $250,000 worth initially offered. Richards warned Walton that Patrizzi was an intelligent man and that Walton better be “on the ball” to put over the deal.

When the meeting adjourned, Richards brought Patrizzi to the Golden Ox Restaurant, located below the Livestock National Bank. Introductions were effected and business began after Walton’s posed assistant (F.B.I. agent Travis) departed. Walton explained his predicament, his market losses, and the weight of his debt. He told Patrizzi he wanted to get on with the deal. Patrizzi responded with a promise to produce $250,000 in securities. Walton resisted, stating that he wanted the “big deal.” Patrizzi responded first that the $250,000 worth was “front money” necessary to get the “big package.”

“I said I wouldn’t do that,” Walton explained at trial. “My part of — I could only loan about-50 or 60 percent of the amount of the securities, and my part of that at 20 percent of half would not be enough to get me out of debt, and I wouldn’t do it for that.”

The banker played his part to the hilt. He surged forward with his spiel: “I just said you are going — -you can go to hell, I am not going to do it for that little amount. I will do it for the big one. I am only going to do it once, and it is that way or not at all.”

Banker-Walton continued his explanation — one big loan might not lead to any prosecution; his bank would probably. think Walton had just used bad judgment ; he might get fired but not prosecuted; but two deals would be different —the second time the bank might investigate further.

Stunned by Walton’s vehement refusal, Patrizzi temporized, saying that he would check and let the banker know. Walton disappeared upstairs to get a loan application and a collateral receipt form. Impressed by the force of Walton’s arguments, Patrizzi turned wonderingly to Richards and remarked, “That is the crookedest banker I ever met.”

When Walton returned with the forms that day, he explained to Patrizzi that, since the discount committee met the next day, it would be useful to have a list of the additional securities and serial numbers that Patrizzi would be supplying so that approval of the loan could be prearranged. Patrizzi agreed to do what he could, and the meeting terminated.

The next morning, August 22, 1972, Patrizzi met with Richards and produced a written list of the names, numbers, and maturity dates on the securities. Suddenly, for Richards, the game was over. The paper in his hands that morning carried sad news: they were the wrong securities as far as he was concerned. They were not the securities that belonged to Fireman’s Fund. Nevertheless, he went on playing his part, telling Patrizzi he would, take the list to the bank. In actuality, he immediately turned it over to the F.B.I.

A short time later in the morning, Richards again met with Patrizzi. The latter was accompanied by Garofalo, who stated that the additional securities would be arriving later on in the afternoon. That afternoon Garofalo, while under F.B.I. surveillance, met Allen Kirchick, an inbound Boston passenger, at the Kansas City airport. Kirchick carried a portfolio, presumably containing the additional securities. He carried no other baggage. He and Garofalo travelled together to the Holiday Inn in Kansas City. At a brief third meeting that night, the first arrangements for the actual exchange were made. On the next morning, Richards and Patrizzi would go to the bank to get the loan proceeds.

On the morning of August 23, 1972, Patrizzi and Richards went to the bank as planned, but Richards explained that Walton had arranged to issue a cashier’s check because Walton’s small bank lacked the necessary cash on hand. With Patrizzi waiting outside, watching through the glass doors, Richards entered the bank, picked up the cashier’s check from Walton’s assistant (F.B.I. agent Travis), and held it in the air for Patrizzi to see. Laying the check back down, Richards went outside and told Patrizzi that the check was all made out. Patrizzi said he would return to the hotel and wait in the lobby to exchange the securities for his share of the money.

As soon as Patrizzi was out of sight, Richards and Travis set to work forming a package of cash to falsely represent Patrizzi’s full share. They prepared stacks of bills — dollar bills on the inside and one hundred dollar bills on the outside of several stacks of currency. Thus, approximately $3,000 in currency looked like $300,000. Richards and Travis placed this currency in a briefcase, then travelled by cab to another Kansas City bank, in case they were being watched. There Richards called Patrizzi and announced that he and Travis would be at the hotel in five minutes. A meeting in the lobby was arranged.

When Travis and Richards arrived, Patrizzi and Garofalo were waiting. Richards opened his briefcase, exhibiting the money. Patrizzi nodded to Garofalo who handed Richards a briefcase which contained the stolen securities. The transaction itself was rapid and furtive. Immediately after the briefcases were exchanged, the participants wheeled around and departed in different directions. No sooner than Richards and Travis went out the front door, F.B.I. agents who had been quietly observing the exchange darted forward. Patrizzi was arrested as he stepped onto an elevator ; Garofalo was arrested as he walked down a hallway. The trap had been sprung; the criminals were caught red-handed.

IV.

The evidence shows that Garofalo was privy to the initial discussion of the illegal transaction on August 20, 1972. On the day following Patrizzi’s meeting with Walton, Garofalo advised an apparent confederate, Richards, that the additional securities would be arriving that afternoon, and he actually delivered the stolen securities in a briefcase to Richards in the lobby of the Holiday Inn. Based on these key facts, the jury could properly have found him to have been a co-conspirator in the conspiracy count and either a principal or an aider-and-abettor in the substantive counts of the indictment.

Accordingly, we affirm.

      . Two co-defendants — Gerald M. Marshman and Allen I. Kirchick — were granted judgments of acquittal at the close of the prosecution’s case for lack of evidence to connect them with the crimes charged.

      . The district court carefully considered this claim after an extended pretrial suppression hearing and denied Patrizzi any relief. Summarizing his findings regarding the conduct of the arresting officer in a detailed memorandum, Judge Hunter stated :
      The Court is convinced that Agent Lueckenhoff has sufficient probable cause to believe that defendant Patrizzi was immediately prior to bis arrest engaging in criminal activity. Agent Lueckenhoff had received information through his subordinate agents and through Agent Knox. This information, and the facts known to Agent Lueekenhoff personally at the time of the arrest were such that he could reasonably conclude that defendant Patrizzi liad in his presence accomplished a “pass” of stolen securities. See United States v. Stratton, 453 F.2d 36 (8th Cir. 1972). This knowledge was sufficient to establish probable cause for the arrest of Patrizzi, and to justify a search of his person incident to that arrest.

      . See note 1 supra.


author: COFFIN, Chief Judge.

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, and Milk Wagon and Creamery Workers’ Union, Local 380, affiliated with International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Intervenor, v. H. P. HOOD, INC., Respondent.
    No. 73-1334.
    United States Court of Appeals, First Circuit.
    Heard March 5, 1974.
    Decided May 2, 1974.

      Elliott Moore, Deputy Associate Gen. Counsel, Washington, D. C., with whom Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Alan D. Cirker, and David S. Fishback, Washington, D. C., were on brief for petitioner.
    John J. Delaney, Jr., Boston, Mass., with whom Murray S. Freeman and Nutter, McClennen & Fish, Boston, Mass., were on brief, for respondent.
    ENFORCEMENT OF AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD
    Before COFFIN, Chief Judge, and McENTEE and CAMPBELL, Circuit Judges.
   COFFIN, Chief Judge.

This is the third occasion we have had in recent years to deal with the question whether intervenor, Milk Wagon and Creamery Workers’ Union, Local 380, affiliated with International Brotherhood of Teamsters, Chauffeurs, Warehouse-men and Helpers of America (the International), was disqualified from representing employees of a milk distributor, here H. P. Hood, Inc., because of an alleged conflict of interest arising from loans to a competing distributor, Whiting Milk Company, by a pension fund, the Central States, Southeast and Southwest Areas Pension Fund (the Fund), affiliated with the International.

In N. L. R. B. v. David Buttrick Co., 361 F.2d 300 (1st Cir. 1966) (Buttrick I), a milk distributor, Buttrick, had refused to bargain with Local 380 because of loans totaling $4,700,000 made by the Fund to Whiting. The Board had ruled that there was no definite or substantial connection between Local 380 and the loans by the Fund to Whiting, and that the Local was therefore not disqualified. We held that the salient focus was not the existence of improper conduct by the Local or the International but the potential — i. e., whether the innate danger posed by power and temptation to commit an abuse was proximate enough to poison the collective bargaining process. We remanded, suggesting that the Board develop guidelines governing the possible conflict of interest arising from the increasing investments by union pension funds in companies having collective bargaining agreements with affiliated locals.

The Board on remand reported that the creation of guidelines was not feasible at that time and that it found the possibility of any intervention by the International in the affairs of Local 380 too limited and remote to disqualify Local 380. We accepted that judgment and, following an argument advanced by the Board, added that in any event there was no showing that Whiting’s financial situation had so deteriorated that the Fund could be said to have an equity-like interest and, therefore, the incentive of a stockholder to keep a closer watch over his investment. Buttrick was finally held to have violated the Act in refusing to bargain. N. L. R. B. v. David Buttrick Co., 399 F.2d 505 (1st Cir. 1968) (Buttrick II).

In the present case, the same Local 380, in May of 1968, after Buttrick I and before Buttrick II, sought to be certified as the bargaining representative of certain of Hood’s Boston ice cream plant employees. After hearing had been held, Buttrick II was issued, and Hood sought to reopen the hearings to introduce evidence of conflict of interest arising from the Fund’s loan to Whiting. The motion was denied without prejudice to Hood’s right to raise the point by post-election objections. In October, 1968, Local 380 won the election by a small majority of the 149 votes cast. After objections were filed, hearings were held between November, 1968, and April, 1969. In July of 1969 the hearing officer recommended that the objections be overruled. Nine months later, on April 28, 1970, the Board also decided to overrule the objections and certify Local 380 as the bargaining representative.

Thirteen days later, on May 11, 1970, Hood declined to recognize Local 380 and a refusal-to-bargain charge was filed. Hood defended, inter alia, on the ground that the Fund’s interest had become, in the lexicon of Buttrick II, “equity-like” and proffered new evidence. The Board denied the General Counsel’s motion for summary judgment and another substantial set of hearings was held before an Administrative Law Judge.

The Administrative Law Judge rendered a decision, adopted by the Board, remarkable for its thorough examination of the financial condition of Whiting and the security behind the Fund’s loan as of the date when Hood refused to bargain. He concluded, “that a prudent investor in the place of the Fund, as of May, 1970, would have considered itself to be the holder of an equity-like rather than a creditor-like interest; and, following Buttrick, I conclude that this would have created the temptation, likelihood, or incentive for the Fund to have affected, if it could affect, Local 380’s bargaining to protect its loan to Whiting.” This led him to the proposition that “Local 380, although twice removed [from the Fund], must be presumed to be in the position of being willing to cooperate with its affiliate to take steps to protect the Whiting-to-Fund obligation.” But, he added, the presumption is rebuttable.

He went on to conclude that the presumption had been completely rebutted and that Hood had not, finally, met “its considerable burden to show a clear and present danger of conflict.” The factors which he considered were: the fact that Local 380 was twice removed from the Fund; the absence of evidence of past domination by the Fund over the International or by either over Local 380; the limited powers of the International; the absence of any evidence of intervention in any negotiations with Whiting prior to May 11, 1970; the absence of any evidence of intervention at the most recent hearing concerning post-1970 events; the testimony of Local 380’s executive officer concerning absence of any pressure on or temptation by Local 380 to protect the loan in negotiations with Whiting prior to May 11, 1970. He then stressed that Whiting had been union dominated and that Local 380 had been relentless in its bargaining in the face of losses, of threatened shutdown, and finally, “in the face of the realization of that threat”, and did not, on May 11, 1970 or thereafter suffer from a conflict of interests. The result followed that Hood, in refusing to recognize and bargain with Local 380 on and after May 11, 1970, was in violation of Section 8(a)(5).

There are three preliminary questions. Local 380 argues that the Board erred in adopting the Administrative Law Judge’s conclusion that Hood and Whiting were in competition. Whiting was engaged almost wholly in the distribution of milk. Its ice cream business was minimal. The Hood target of Local 380, on the other hand, was its ice cream division. While these two economic units were largely in different fields, the Administrative Law Judge reasoned that Local 380, acting in Whiting's behalf, could legally have picketed Hood’s ice cream division, and could conceivably have extended the picketing to Hood’s milk plant. While perhaps a remote contingency, this is the kind of decision which lies within the expertise of the Board — -similar to certification of a particular group of employees for bargaining purposes. We do not disturb it.

The second attack, also made by Local 380, is that May 11, 1970 was not the critical date at which the refusal' to bargain should be judged. The Union argues that the critical date was when the hearings closed, March 12, 1973. The Board cannot realistically constantly adjust its adjudications to constantly changing conditions. The initial refusal to bargain occurred on May 11, 1970. That is the time when Hood’s decision was made and the time as of which its legality should be judged.

A third preliminary issue, raised by Hood, is whether the certification of Local 380 is invalid. Hood argues that the certification order of April 28, 1970 was “stillborn” because later evidence was introduced which convinced the Administrative Law Judge that, as of May 11, 1970, Whiting was in such straits that the Fund had an equity-like interest in Whiting. Hood rather quickly asserts the point without either demonstrating the logical imperative or citing authority. We grant that by the time the Board issued the certification, Whiting was in extremis. We also grant that if the information later developed about Whiting’s condition as of that time had been available to the Board, it might not have certified the Local pending further scrutiny. But the fact is that the Board acted on the basis of the record which had been formed in 1969. Had it acted within two or three months of the -hearing and report, the argument would in all likelihood not have been made. The coincidence of the Board’s decision with the date of the later assessment of Whiting’s financial condition cannot impeach the decision. There has to be some finality of decision. And just as we reject the Union’s claim that the critical date is advanced to March of 1973, so do we reject Hood’s claim that the Board’s decision, based on its preexisting record, should be voided because it did not take into account the conditions existing at the time of its issuance.

This brings us to Hood’s major argument that the Board (and the Administrative Law Judge) erred in finding that the “presumption” that Local 380 was “in the position of being willing to cooperate with [the Fund] to take steps to protect the Whiting-to-Fund obligation” was rebutted. Hood claims first that the only meaningful rebuttal would be proof that the Local did not favor Whiting over Hood in contemporaneous bargaining with both. This, of course, postulates a state of affairs which could not come about until Hood enters into a bargaining relationship with Local 380, a relationship which would have to hinge on prior effective rebuttal of the presumption — a perfect circle of an argument. Hood then argues that while Local 380’s bargaining efforts prior to the critical date of May 11, 1970 may not have reflected any interference from the Fund, they do not rise to the level of affirmative evidence of aggressiveness which could overcome the presumption. This leaves evidence of Local 380’s resistance to Whiting’s proposals in late 1972 and 1973 as the only ■ positive rebuttal evidence. Hood concludes that since the propriety of its refusal to bargain is being adjudged as of May 11, 1970, it is patent error for the Board to rely on later events.

These arguments, scrutinizing the bargaining record for “positive” evidence of union aggressiveness, not merely lack of domination and interference, point up, in our minds, the unsuitability of a presumption-rebuttal analysis in a situation presenting this kind of conflict of interest potential. Its rigorous application would require that, whenever a company, owing money to a union pension fund, finds itself in serious financial difficulty, its employees’ union must, if it wishes also to represent the employees of a competitor, increase its aggressiveness and intransigence. This concept of presumption and rebuttal we find too wooden and artificial to fit the wide variety of conflict situations which can arise.

In this case, for example, the powers of the International Union are limited; the possibility of its intervening in Local bargaining is remote; the maximum effect of any default by Whiting on the assets of the Fund are, relatively, miniscule; and the competitive impact of Hood’s operations on Whiting’s, or vice versa, is at best marginal. The fact that, as of May 11, 1970, Whiting’s financial situation had deteriorated to the point where the Fund’s interest approximated that of a stockholder’s is clearly a signal that the continued independence of Local 380 merits close scrutiny to see if the danger (created by “sufficient power and temptation”) is “proximate enough”, Buttrick I, 361 F.2d at 307, or “clear and present”, Buttrick II, 399 F. 2d at 507. But whether the danger of a local’s subordinating its duty to its members to the financial interest of a fund is so proximate as to poison the bargaining relationship is a question which can be answered by more than one kind of data.

Here, in addition to the factors we have cited which portray the incentive or temptation, though real, as being circumscribed by other limiting realities, the Board had before it a record of bargaining between 1967 and May 11, 1970 which it found free of any loan-protection interference. The testimony of the executive officer of Local 380 that loan protection or temptation did not exist during this period was accepted by the Administrative Law Judge. During this period, both Whiting and Local 380 made concessions, the company realizing certain economies by having fewer drivers servicing larger routes, the Union realizing higher pay for the reduced work force. Hood characterizes the bargaining as reflecting “amiable acquiescence” on the part of Local 380 and minimizes the significance of the wage increases granted.

The Board disagreed. It concluded that Hood had not met its “considerable burden to show a clear and present danger of conflict” and that Local 380 did not, as of the critical date of May 11, 1970, suffer from a conflict of interests. The assessmeht of the force and motivation of union efforts in bargaining with its members’ ailing employer is the kind of judgment which the Board is peculiarly qualified to make. Its expertise, assuming the presence of substantial evidence, must control the result. We have no difficulty in holding that the Board’s conclusion was supported by substantial evidence. In so holding, we confine our review to the evidence and the Board’s holding as to the status of Local 380 on the critical date; its holding as to Local 380’s freedom from conflict of interest “thereafter” is irrelevant. The evidence of bargaining before the critical date was itself substantial, without considering any later evidence.

The Board, in reaching its decision, may well have invoked a higher standard of proof than necessary in requiring enough evidence to rebut the presumption of Local 380’s willingness to alter its collective bargaining to protect the Fund’s loan. In saying this, we do not imply that we are substituting our own rationale for that of the Board, in violation of S.E.C. v. Chenery Corp., 318 U.S. 80, 63 S.Ct. 454, 87 L.Ed. 626 (1943). It is not that we have made “a determination of policy or judgment which the agency alone is authorized to make”, id. at 88, 63 S.Ct. at 459, or that we consider the Board’s grounds “inadequate or improper”, S.E.C. v. Chenery Corp., 332 U.S. 194, 196, 67 S.Ct. 1575, 1760, 91 L. Ed. 1995 (1947). Our observation is merely that in reaching its ground for judgment, in compliance with the prior standards of Buttrick I and II, it erected some unnecessary hurdles. A remand in such a situation would be a venture in supererogation. We therefore affirm the Board’s conclusion that Hood’s refusal to bargain was an unfair labor practice.

For the present, however, we shall not enforce the order. In its brief to us the Board suggested that, if we should find that Hood was not obliged to recognize Local 380 because of a disqualification that is now removed, we remand the case so that the Board could deal with the question whether a bargaining order should be entered on the basis of an election which was held approximately five and one half years ago, on October 22, 1968. This delay, unlike that in many cases, cannot be attributed to the tactics of Hood. Most of it stemmed from the various proceedings and the ensuing time for deliberation and decision. -Even though we have upheld the Board, we think that under the circumstances the Board should have the opportunity prior to outright enforcement of the bargaining order to consider whether entry of the order remains appropriate. While this means an additional' lapse of time in these already hoary proceedings, we think fairness will be better served than by immediately locking the parties into a lengthy relationship on the basis of ancient events.

We therefore withhold entry of judgment enforcing the Board’s order for sixty days and remand the case to the Board for such further consideration and action as it deems advisable. Should the Board within this period determine that the order should be enforced, it should so report. Should other action be taken so that the order should not issue, it should so advise.

      . The Board in its brief had argued, “Moreover, the nature of the Fund’s investment in Whiting is not like a stock purchase that would give the Fund (on behalf of its employee beneficiaries) a day-to-day interest in every rise or fall of Whiting’s business . . . . So long as Whiting continues to meet its fixed monthly payments, the Fund has no basis for concern with its operations, and has indicated no concern . . . .”

      . Local 380 also argues that the Board was incorrect in finding that the Fund had an “equity-like interest” in Whiting as of May 1970. But we think this finding of the Board is supported by substantial evidence.

      . Although not expressly advanced in its brief, Hood seems to imply throughout its argument on this point that a subjective standard should apply. In view of the fact that no punitive sanctions are involved and in view of the practical problems of proof which inevitably would inhere in such a standard, we believe that a subjective standard — that is, a requirement of finding of “bad faith” — is not the proper standard to apply to this kind of case.

      . The Board found that as of May, 1970, the balance of the loan owed to the Fund by Whiting stood at slightly over $3 million, App. Yol. I at 40. At about the same time the reported assets of the Fund amounted to over $800 million, Charging Party’s Exhibit No. 4, App. Yol. I at 238, 240.

      . We find support for tlie approach we take in Clark’s Gamble Corp. v. N. L. R. B., 407 F.2d 199 (6th Cir.), remanded, 396 U.S. 23, 90 S.Ct. 197, 24 L.Ed.2d 143 (1969), on remand, 422 F.2d 845, cert. denied, 400 U.S. 868, 91 S.Ct. 100, 27 L.Ed.2d 108 (1970).


author: PICKETT, Circuit Judge.

text:
    HI-PLAINS ENTERPRISES, INC., Petitioner-Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellant.
    No. 73-1641.
    United States Court of Appeals, Tenth Circuit.
    May 8, 1974.

      Howard A. Spies of Schroeder, Heeney, Groff & Spies, Topeka, Kan. (Barney J. Heeney, Jr., Topeka, Kan., with him on the brief), for petitioner-appellee.
    Scott P. Crampton, Asst. Atty. Gen., and Dennis M. Donohue, Atty., Tax Div., Dept, of Justice, Washington, D. C. (Meyer Rothwacks and Jonathan S. Cohen, Attys., Tax Div., Dept, of Justice, Washington, D. C., with them on the briefs), for respondent-appellant.
    Before LEWIS, Chief Judge, and PICKETT and BARRETT, Circuit Judges.
   PICKETT, Circuit Judge.

For the years 1966, 1967 and 1968, Hi-Plains Enterprises, Inc., a Kansas corporation engaged in the business of feeding cattle for market, filed its income tax return on a cash method of accounting. The Commissioner of Internal Revenue concluded that the taxpayer was not a “farmer” and its business was such that its income should be determind on an accrual basis. Consequently, substantial deficiencies were assessed against the taxpayer. On petition for redetermination, the Tax Court found that the taxpayer’s operations were those of a farmer, which permitted it to elect to report its income on a cash basis, and vacated the deficiencies. 60 T. C. 158 (1973). We affirm the Tax Court.

The taxpayer corporation was organized as of March 1, 1966. It owned lands near the town of Leoti, Kansas upon which it constructed and operated feedlots for the fattening and conditioning of cattle to be sold to meat packers. During the taxable period in question, the capacity of the lots varied from 12,000 to 24,000 cattle. The taxpayer was not a cattle producer, but in the course of is business purchased feeders for itself and for others, known as customers, who desired to utilize its services and feedlots for the purpose of fattening cattle. Over the period in ques-ton, the cattle on feed in the lots were owned on the average approximately 50% by the taxpayer and 50% by customers. The entire operation was conducted as one business, with the exclusive management in the taxpayer. All services necessary for conditioning of the cattle, regardless of ownership, were the same. The customer paid for the use of lots, feed and other necessary services, according to an arrangement between the parties resulting in income to the taxpayer. In making its tax returns, the taxpayer deducted the total amounts expended for cattle feed during the taxable year as an item of expense. Its taxable income was the amount received from the sale of its own cattle and receipts from its customers, less necessary costs and expenses. The feed costs constituted the principal item of expense. The Commissioner concluded that the taxpayer was not a farmer in any of its operations, and therefore must report its total income on the accrual method of accounting, allowing as an expense deduction only the cost of feed actually utilized during the taxable year. A computation of the income on an accrual basis resulted in the deficiencies.

The contention that the taxpayer does not qualify as a farmer in any of its operations has been abandoned. Consequently, the narrow question presented here is whether the taxpayer is a “farmer” as defined in United States Treasury Regulations on Income Tax, permitting it to exercise the option to report, on a cash method of accounting, its income from customer accounts.

United States Treasury Regulation § 1.471-6, Inventories of livestock raisers and other farmers, provides:

(a) A farmer may make his return upon an inventory method instead of the cash receipts and disbursements method. It is optional with the taxpayer which of these methods of accounting is used ....

Section 1.162-12 authorizes a farmer, in computing taxable income, to deduct from gross income all necessary expenses, including “[t]he purchase of feed and other costs connected with raising livestock . . . insofar as such costs represent actual outlay . . . .” See United States v. Catto, 384 U.S. 102, 106, n. 6, 86 S.Ct. 1311, 1314, 16 L.Ed.2d 398 (1966). Section 1.61-4(d), Definition of “farm”, is as follows :

As used in this section, the term “farm” embraces the farm in the ordinarily accepted sense, and includes stock, dairy, poultry, fruit, and truck farms; also plantations, ranches, and all land used for farming operations. All individuals, partnerships, or corporations that cultivate, operate, or manage farms for gain or profit, either as owners or tenants, are designated as farmers. .

In holding that the taxpayer was engaged in farming, the Tax Court said:

If petitioner is not a farmer, then it is undoubtedly proper for the Commissioner to hold petitioner to the strict accrual method of reporting, just like an ordinary business that keeps its books and records on that basis. Thus the issue is squarely joined, and we think the authorities point to the conclusion that petitioner should be classed as a farmer for tax accounting purposes. Cases like W. P. Garth, supra, and United States v. Chemell, supra, tell us that the definition of the term “farm” for our purposes herein can be found in section 1.61— 4(d), Income Tax Regs. Those two cases held respectively that an integrated poultry business and a poultry hatchery business are farms. W. Cleve Stokes, supra, held that a nursery was a farm under the regulation. The breadth of the definition cannot be denied.

See also United States v. Chemell, 243 F.2d 944 (5th Cir. 1957).

The essence of the Commissioner’s argument is that in its activities as to the customers’ cattle, the taxpayer is engaged in furnishing a service that is comparable to any other business which has farmers for customers, including one which sells cattle feed to farmers. The Commissioner overlooks the fact that the taxpayer is engaged only in the business of feeding cattle, which is conceded to be that of a farmer within the meaning of the regulations. Its activities with reference to customers’ cattle are identical with those of its own. This arrangement is not analogous to a grain elevator or a feed store selling grain or feed to a farmer, and having no control or management of the farm operation. The regulation defining “farm” includes the livestock business and the management of farms. Nowhere in the regulations or decisions has there been any indication that a farmer’s right under the regulations is affected by the ownership of farm property which he operates. We think the indications are otherwise. See United States Treasury Regulation § 1.175-3.

Affirmed.

      . Apparently the Commissioner concedes that the taxpayer is a farmer as to the feeding of its own cattle and seeks a remand to the Tax Court for the purpose of allowing the taxpayer to establish the portion of its total expenditures incurred in its business allocable to its own cattle.


author: PER CURIAM:

text:
    Larry MILBERG and Irene Milberg, Plaintiffs-Appellants, v. LAWRENCE CEDARHURST FEDERAL SAVINGS AND LOAN ASSOCIATION, Defendant-Appellee. Bernhard BRONHEIM and Gloria Bronheim, Plaintiffs-Appellants, v. FRANKLIN SOCIETY FEDERAL SAVINGS AND LOAN ASSOCIATION, Defendant-Appellee.
    Nos. 891, 892, Dockets 73-2583, 73-2592.
    United States Court of Appeals, Second Circuit.
    Argued April 15, 1974.
    Decided April 29, 1974.

      Lawrence Milberg, New York City (Milberg & Weiss, New York City, on the brief), for appellants.
    Morris Zweibel, Mineola, N. Y. (Crowe, McCoy & Agoglia, Mineóla, N. Y. on the brief), for appellee Lawrence Cedarhurst Federal Savings and Loan Ass’n.
    Matthew F. Sarnell, New York City (Amend & Amend, New York City, on the brief), for appellee Franklin Society Federal Savings and Loan Ass’n.
    Before KAUFMAN, Chief Judge, CLARK, Associate Justice, and SMITH, Circuit Judge.

       United States Supreme Court, retired, sitting by designation.

   PER CURIAM:

Plaintiffs-appellants in this consolidated appeal allege that defendant-appellee banks are exacting monthly escrow payments from them and all other borrowers of their class that exceed the amount permitted by federal law for the payment of taxes becoming due on real property mortgaged to the banks to secure plaintiffs-appellants’ loans. Jurisdiction was asserted under the provisions of 28 U.S.C. § 1337 granting original jurisdiction to the district courts “of any action and proceeding arising under any Act of Congress regulating commerce . . and specifically, pursuant to Section 545.6-11 of the Regulations of the Home Loan Bank Board as authorized by the Home Owners Loan Act of 1933, 12 U.S.C. § 1461 et seq. The learned trial judge dismissed the actions on the ground that the court lacked subject matter jurisdiction in that the complaints alleged nothing further as a jurisdictional ground except that the Associations were chartered under the Home Owners Loan Act of 1933. We read the allegations differently.

The Regulation which is involved here and has the force of statute, Community Federal Savings and Loan Association v. Fields, 128 F.2d 705 (8th Cir. 1942) reads that the obligors, such as the plaintiffs-appellants, may be required to pay “the equivalent of V12 of the estimated annual taxes, assessments, insurance premiums and other charges on real estate security.” The mortgage note involved here tracks this language adding that if such sum is found deficient, the obligor agrees to pay such deficiency on demand; and on default for 30 days the whole of the principal of the note immediately becomes due.

Despite the Regulation and the provisions of the note the plaintiffs-appellants alleged that the moneys exacted from them “far exceeded any sum prospectively required to pay real estate taxes in that year and defendant’s estimates as to said amount were made in bad faith.” Finally, plaintiffs-appellants each alleged that defendant-appellee bank “has used and is using said excess sums as part of the general funds of the bank, has earned interest thereon and has not paid or applied interests to the plaintiffs.”

The record shows that the plaintiffs-appellants applied to the Federal Home Loan Bank Board for relief and by letter its Deputy General Counsel advised that any excessive escrow requirement would violate its regulation. However, it deemed it appropriate that “the resolution of the merits of the controversy be left to the determinations of the Court.”

We held in Murphy v. Colonial National Bank & Trust Co., 388 F.2d 609, 615 (2d Cir. 1962), that an alleged violation of a regulation promulgated under the Home Owners Loan Act of 1933 sufficed to confer § 1337 jurisdiction. See Cupo v. Community Nat’l Bank & Trust Co., 438 F.2d 108 (2d Cir. 1971) (alleged violation of National Banking Act, 12 U.S.C. § 61 et seq.); Gibson v. First Federal Savings & Loan Ass’n., 347 F.Supp. 560 (E.D.Mich.1972) (alleged violation of 12 C.F.R. 545.6-11, promulgated under Home Owners Loan Act, 12 U.S.C. § 1461 et seq.). Moreover, Murphy teaches that where the Board refuses to act, a private right of action may be implied from the statute. See Murphy v. Colonial Nat’l Bank & Trust Co., supra, 388 F.2d at 612-614. Accordingly, we are of the view that the complaint asserts a basis for federal jurisdiction sufficient to withstand the motion to dismiss.

The judgment dismissing the action is reversed and the case is remanded.

      . The letter from the Deputy General Counsel also states that “What is ‘excessive’ in any given case would, of course, depend on the relevant facts and circumstances.” In this regard, we note that the district court lias not determined the propriety of maintaining these suits as class actions and, accordingly, that question is not before us. In view of our disposition of the appeal, we assume the arguments the banks have presented in this court on the class action question will be pursued on remand in the district court.


author: HUFSTEDLER, Circuit Judge: WALLACE, Circuit Judge

text:
    STANLEY T. SCOTT & CO., INC., a Washington corporation, Appellee, v. MAKAH DEVELOPMENT CORPORATION et al., Appellants.
    No. 71-2983.
    United States Court of Appeals, Ninth Circuit.
    April 8, 1974.
    Robert L. Pirtle, of Ziontz, Pirtle & Morisset, Seattle, Wash., for appellant.
    Charles E. Watts, Seattle, Wash., for appellee.
    Before DUNIWAY, HUFSTEDLER and WALLACE, Circuit Judges.
   OPINION

HUFSTEDLER, Circuit Judge:

Appellee Stanley T. Scott & Co., Inc. (“Scott”), a marine insurance broker, at appellants’ request obtained underwriters who subscribed Marine Hull and Protection and Indemnity insurance for appellants’ fishing fleet; Scott placed an oral binder for the required coverage and advanced the necessary premiums. The policy thereupon issued, and appellants failed to reimburse Scott for the premiums. The issue on appeal is whether Scott’s claim to recover its advanced premiums is within admiralty jurisdiction conferred by 28 U.S.C. § 1333.

Scott’s implied-in-law contractual right to reimbursement for the premiums is integrally related to the marine insurance policy that emerged from appellants’ bargain with Scott. (Cf. Gilmore and Black, The Law of Admiralty § 2-3, at 52 (1957).) A marine insurance policy is a “maritime contract.” (Insurance Co. v. Dunham (1870) 78 U. S. (11 Wall.) 1, 20 L.Ed. 90). Scott’s claim “arises out of a maritime contract,” and it is thus within admiralty jurisdiction. (Archawski v. Hanioti (1956) 350 U.S. 532, 76 S.Ct. 617, 100 L.Ed. 676; cf. Grow v. Loraine K (6th Cir. 1962) 310 F.2d 547.)

Affirmed.

WALLACE, Circuit Judge

(dissenting) :

The majority has needlessly expanded federal jurisdiction to encompass a suit on a contract to procure marine insurance, a cause of action which has never been within the admiralty jurisdiction. While a policy of marine insurance is a maritime contract, Insurance Co. v. Dunham, 78 U.S. (11 Wall.) 1, 20 L.Ed. 90 (1870), a contract to procure marine insurance is not any more maritime than a contract to build or to sell a ship, actions which are also not within admiralty jurisdiction.

Because of the difference between marine insurance and other forms of insurance, a suit on a marine insurance policy requires the application of special admiralty rules over which a substantial body of law has developed. Such a suit is peculiarly maritime. But an action on a contract to procure insurance or one for insurance premiums does not involve admiralty law; it involves basic common-law contract doctrine. There is nothing peculiarly maritime about a suit for insurance premiums just because it is on a marine insurance policy. No special aspect of maritime law or maritime matters is involved. That a contract may in some extended way deal with ships does not change a simple breach of a common-law obligation to pay money into an admiralty action. Aware of this distinction, the district courts in this circuit have held that contracts to procure marine insurance are not within admiralty jurisdiction. Warner v. The Bear, 126 F.Supp. 529, 530-531, 15 Alaska 370 (D.C.Alaska 1955); Puget Sound Nav. Co. v. Puget Sound Tug & Barge Co., 75 F.Supp. 404 (W.D.Wash.1948). In a line of cases extending back to 1822 [Andrews v. Essex Fire & Marine Ins. Co., 1 F.Cas. 885, No. 374 (C.C.Mass. 1822)], many other district and circuit courts have so consistently held that a contract to procure marine insurance is not within admiralty jurisdiction that one would have thought that the rule was as well settled as any black letter rule out of a hornbook. St. Louis Shipbuilding & Steel Co. v. Petroleum Barge Co., Inc., 249 F.2d 905, 908 (8th Cir. 1957); Koch-Ellis Marine Contractors, Inc. v. Phillips Petroleum Co., 219 F.2d 520, 521 n. 2 (5th Cir. 1955); The Barryton, 54 F.2d 282, 284 (2d Cir. 1931); Virginia-Carolina Chemical Co. v. Chesapeake Lighterage & Towing Co., 279 F. 684 (2d Cir. 1922); David Crystal, Inc. v. Cunard Steam-Ship Co., 223 F.Supp. 273, 293 (S.D.N.Y.1963), aff’d, 339 F.2d 295 (2d Cir. 1964), cert. denied, 380 U. S. 976, 85 S.Ct. 1339, 14 L.Ed.2d 271 (1965); D. C. Andrews and Co., Inc. v. United States, 124 F.Supp. 362, 363, 129 Ct.Cl. 574 (1954); The D. T. Gilmartin, 66 F.Supp. 382 (E.D.N.Y.1946); Reliance Lumber Co. v. Rothschild, 127 F. 745, 748-749 (E.D.Pa.1904); City of Clarksville, 94 F. 201, 205 (D.Ind.1899); Marquardt v. French, 53 F. 603 (S.D.N. Y.1893); The Thames, 10 F, 848 (S.D. N.Y.1881).

The necessities of international trade and commerce dictate that the development of maritime law should be along uniform lines. Because the majority opinion directly contravenes an established admiralty rule, destroys the uniformity in application of that rule and constitutes an unwarranted expansion of federal jurisdiction which will needlessly funnel cases into our already overburdened federal system, I would reverse the case and order it dismissed for lack of jurisdiction.