author: ALDRICH, Senior Circuit Judge.

text:
    Marshall FRENCH and Susan French, Plaintiffs, Appellees, v. UNITED STATES of America, Defendant, Appellant.
    No. 73-1282.
    United States Court of Appeals, First Circuit.
    Heard Nov. 7, 1973.
    Decided Dec. 3, 1973.

      Jane M. Edmisten, Atty., Tax Div., Dept. of Justice, with whom Scott P. Crampton, Asst. Atty. Gen., Carroll F. Jones, U. S. Atty., Meyer Rothwacks, and Jonathan S. Cohen, Attys., Tax Div., Dept. of Justice, were on brief, for appellant.
    John W. Hanrahan, Manchester, N. H. , with whom Hanrahan & Flynn, Manchester, N. H., was on brief, for ap-pellees.
    Before ALDRICH, McENTEE and CAMPBELL, Circuit Judges.
   ALDRICH, Senior Circuit Judge.

This is an action to recover a payment of additional income tax for the year 1964 assessed as a result of the Commissioner’s classification of a claimed business bad debt as a nonbusiness one. Nonbusiness bad debts are equated with short term capital losses, and deductions on account thereof are subject to those limitations. Int.Rev. Code of 1954, § 166. The jury found for the plaintiffs, Marshall and Susan French, and the government appeals because of the court’s failure to direct a verdict in its favor.

Mr. French, hereinafter taxpayer, at all material times was an automobile dealer and salesman, the principal employee of his wholly-owned corporation in Meredith, New Hampshire, Meredith Motors. In the late 1'950’s he became acquainted with one Kelley, a similar dealer in a nearby' town, who wholly owned and operated Pease Motors. From time to time he advanced money to Kelley for Pease Motors’ needs, first as a friend, but subsequently receiving stock from Kelley, until by 1960 he owned all of the company stock. Thereafter he made loans to Pease Motors. In 1961 Pease Motors was obliged to borrow from a finance company for a car floorplan (factoring) account. The finance company required, and obtained, taxpayer’s personal guarantee. Pease Motors failed and went out of business in 1964, and because of its insolvency taxpayer was obliged to pay $19,406 on his guarantee, for which he had no recourse. He claimed this as a business bad debt.

Taxpayer states the single issue as follows.

“Where a taxpayer’s livelihood is the salary and commissions he earns from wholly owned corporations, whether his payment as guarantor of the obligation of one of the corporations, then insolvent, made in order to protect and maintain the credit standing of himself and the other wholly owned corporation so that it might continue to generate his salary is such as to qualify as a business bad debt?” (Emphasis suppl.)

He spells this out:

“In 1964, taxpayer French was in the unenviable position of being forced to honor his personal guarantee of the financing commitments of a defunct automobile sales business [Pease] in order to permit the continued operation of his neighboring automobile dealership [Meredith], his only source of livelihood. The evidence in this ease establishes that French’s payment to New Hampshire Finance was for the ‘dominant motive’ of protecting the sources of credit and supply for Meredith Motors, his only source of salary which at all times relevant hereto was his only income from Meredith Motors.” (Emphasis suppl.)

We do not accept this analysis. Taxpayer says, and we may agree, that the jury could have found that financing was essential to the business existence of Meredith Motors. From this it might be argued that if taxpayer had guaranteed a loan to Meredith Motors, his employer and source of his commissions, the debt resulting therefrom would have been a business debt. Cf. United States v. Generes, 1972, 405 U.S. 93, 92 S.Ct. 827, 31 L.Ed.2d 62. But even if we accept taxpayer’s assertion that his personal credit standing was a condition essential to Meredith Motor’s continued financing, we could not agree with his ultimate contention.

To qualify the loss as a business bad debt under section 166, the taxpayer had to show that it was,

“(A) a debt created or acquired (as the case may be) in connection with a taxpayer’s trade or' business of the taxpayer; or
“(B) a debt the loss from the worthlessness of which' is incurred in the taxpayer’s trade or business.” Int.Rev.Code of 1954, § 166(d) (2).

Unless the debt was a business debt when created — a characterization we will answer later — taxpayer’s contention must be that since he had to pay the debt to the finance company to maintain his personal credit standing, it is to be regarded as a business debt under subsection B. But in talking about motive for the payment, instead of for the incurrence of the debt, taxpayer is speaking of an event as to which he admittedly had no choice. To say that a payment which is unavoidable has a “dominant [business] motive” and hence is to be regarded as a business debt because of collateral consequences of nonpayment is to confuse substance with tangential result.

The reality of the situation is that the loss from the worthlessness of the debt was incurred as a result of the act of the defendant in 1961 in undertaking the obligation. The business or non-business quality of the loss was not changed because taxpayer in 1964 decided to fulfill the already vested obligation voluntarily. If taxpayer did not make the guarantee originally as a business obligation, it did not become such by the mere fact that his paying in cash, instead of by distraint of a lawsuit, may have avoided business complications. The fallacy of emphazing the circumstances of payment instead of those surrounding the incurring of the loss may be illustrated in simple terms by considering an individual whose business success depends on his personal credit rating, and who says that since nonpayment of his personal bills would injure his credit, paying them is a business expense. However attractive, this is not a viable proposition.

Nor, to go beyond taxpayer’s brief, do we see any question as to the proper characterization of the transaction viewed as of 1961. As a granting of credit, taxpayer’s guarantee could be considered a loan, as the court properly charged the jury. It was not, however, a business loan within the meaning of section 166. In 1959, before acquiring all of its stock, taxpayer received wages from Pease Motors. But after that, payments to him were treated as repayments on account of his cash loans. The dominant motive in keeping Pease alive could not be seen as protecting taxpayer’s source of wages. Rather, it was directed toward preserving or recovering what, whether viewed as a purchase of stock or as a loan, was in the nature of an investment, as taxpayer made clear in explaining his later loans to Pease. When Pease Motors was obliged to borrow more money, “It was a matter of I had lent somebody some money, and in order to protect the money that I had lent him in the first place, I put some more in, and it became this way.” “I loaned the corporation money to keep it alive and in the hopes that I would be able to get it back.” This same purpose applied to the guarantee. “I signed it so that I could get — so that I could keep my proper finance. Otherwise, I would have lost the whole picture right then and there.”

The court'charged the jury as follows.

“Now, ask yourself several questions. One, was the debt incurred approximately related to the taxpayer’s trade or business? Did it have anything closely connected? Was it closely connected to the taxpayer’s trade or business ?
“Ask yourself this question: what was Mr. French’s dominant motivation in making the guarantee? Was it to protect his investment in Pease Motors, or was it to further and protect his own trade or business, which I am instructing you was that of an-automobile dealer in Meredith, as an employee of Meredith Motors, Inc.? Or, to put it another way, was Mr. French operating Pease Motors as an investment or was it ip fact part of his own trade or business ?”

On the record, however, taxpayer’s “dominant motivation in making the guarantee” could not have been “to further and protect his own trade or business . . . of an automobile dealer in Meredith Motors.” No meaningful connection, even collaterally, between the guarantee and his trade or business at Meredith Motors appears until, in 1964, taxpayer envisaged consequences to Meredith Motors that would attend his default in payment. Nor can taxpayer’s rendering management services to Pease itself be considered his trade or business, since it was done primarily to protect or enhance his investment rather than to earn a salary. Whipple v. Commissioner, 1963, 373 U.S. 193, 202, 83 S.Ct. 1168, 10 L.Ed.2d 288. It was none the less so because, unlike Whipple, taxpayer owned all of the company stock. In short, on his own view of the facts it could not be found that the guarantee-produced bad debt was a business debt within section 166.

The judgment of the District Court is reversed, and judgment is ordered for the defendant.

      . The government also seeks to press an exception to tlie charge, relying solely on an attempt to save its rights in a lobby conference before the charge was given. This practice, in violation of F.R.Civ.P. 51, has been “strongly condemned,” Dunn v. St. Louis-San Francisco Ry. Co., 10 Cir., 1966, 370 F.2d 681, 683, to the extent that such procedure will be recognized only in extraordinary cases. Bouley v. Continental Cas. Co., 1 Cir., 1972, 454 F.2d 85; United States v. Taglianetti, 1 Cir., 1972, 456 F.2d 1055, 1057.

      . The “forced to honor” language previously quoted from his brief paraphrased taxpayer’s testimony, “X had to cover it, anyway. I had no choice.”


source: Caselaw Access Project

author: BELL, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Jimmie DAVIS, Defendant-Appellant.
    No. 73-2692
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Dec. 13, 1973.

      Murray M. Silver, Atlanta, Ga. (Court-appointed), for defendant-appellant.
    John W. Stokes, Jr., U. S. Atty., Eugene A. Medori, Jr., Asst. U. S. Atty., Atlanta, Ga., for plaintiff-appellee.
    Before BELL, GODBOLD and GEE, Circuit Judges.

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

   BELL, Circuit Judge:

Appellant was convicted after a jury trial on a two-count indictment charging distribution of heroin and cocaine in violation of 21 U.S.C.A. § 841(a) (1). His only contention on appeal is that the government should have disclosed the identity of a confidential informer who introduced narcotics agents to a man they identified as the appellant, and who was present during the transactions for which appellant was convicted. The informer did not otherwise participate in the sales transaction, and the actual bargaining, payment and receipt of the drugs were accomplished by two government agents. These same agents were the only prosecution witnesses at the trial.

Appellant testified in his own behalf, as the sole defense witness and denied having participated in the transaction. He also denied ever having been nicknamed “Coon,” the name which the informer used when making the initial contact for the agents. His principal defense, as developed during cross-examination of the government agents, was the possibility that they had in fact dealt with a different man, one who indisputably was commonly known as “Coon.”

Appellant utilizes two theories to support the contention that the informer’s identity should have been disclosed. First, he argues that under Brady v. Maryland, 1963, 373 U.S. 83, 83 S.Ct. 1194, 10 L.Ed.2d 215, the informer’s identity was potentially exculpatory information that should have been disclosed. However he misconstrues Brady. That case does not justify a defense fishing expedition whenever it is possible that exculpatory information may be discovered. Rather, it deals with prosecutorial misconduct in the form of withholding information which itself is material to exculpating the defendant or impeaching government witnesses. See also Giglio v. United States, 1972, 405 U.S. 150, 92 S.Ct. 763, 31 L.Ed.2d 104. This could be a Brady case only if the informer would in fact materially contradict or impeach the agent’s testimony. Since that is not the situation before us, appellant must rely on his second theory, based on Roviaro v. United States, 1957, 353 U.S. 53, 77 S.Ct. 623, 1 L.Ed.2d 639.

Roviaro governs requests for identification of confidential informers. It recognizes that informer anonymity contributes to effective law enforcement and therefore is to be accorded conditional protection. One condition is that disclosure of an informer’s identity will be required if it would be “relevant and helpful to the defense of an accused, or essential to a fair determination of a cause . . . .” 353 U.S. at 60-61, 77 S.Ct. at 628, 1 L.Ed.2d at 645. While numerous cases have- considered the problem, we have found none that clearly control this case. On the one hand, relief has been denied in situations where the informer’s role has been less important to the criminal transaction than is true here. See e. g., United States v. Humphrey, 5 Cir., 1972, 456 F.2d 683 (informer did nothing save notify that a narcotics pickup was to take place, and was not present when it did); United States v. Acosta, 5 Cir., 1969, 411 F.2d 627 (similar to Humphrey). On the other hand, in every case granting relief the informer’s role has been more critical than here. See e. g., Roviaro v. United States, supra (informer made the purchase, and was the only witness who could testify as to whether the defendant knew a package contained heroin, and if so whether he had been entrapped); United States v. Jiminez-Serrato, 5 Cir., 1971, 451 F.2d 523 (informer’s testimony necessary to establish mens rea); Gilmore v. United States, 5 Cir., 1958, 256 F.2d 565 (informer not only introduced narcotics agent to the defendant, but also was the only witness to the conversation between defendant and agent which connected defendant to drugs subsequently placed in agent’s car); Portomene v. United States, 5 Cir., 1955, 221 F.2d 582 (cited in Roviaro) (informer made the purchase charged in the indictment).

In applying Roviaro to this case we conclude that the district court properly denied appellant access to the informer’s identity. In doing so we are aware that, as in Gilmore, supra, the informer was present at the transactions and that he doubtlessly contributed to the “atmosphere of confidence,” Gilmore, supra, 256 F.2d at 567, necessary to induce appellant to deal with the agents. However, and unlike Gilmore, we are at a loss as to how disclosure would have contributed to appellant’s case. As noted above, his only defense was misidentification by the government agents — if he was properly identified there is no question that he in fact knowingly distributed narcotics to the agents. In support of this identification we find in the record that the agents corroborated each other’s testimony, that they had been in close contact with appellant on two occasions, that the descriptions entered in their reports of the two transactions are consistent with appellant’s physical appearance, that appellant has a tattoo they observed during the first transaction, that the other individual known as “Coon” is much shorter than appellant, that appellant is the registered owner of an automobile used during the transactions, and that appellant could not recall having loaned his automobile on those occasions.

In these circumstances we do not believe that disclosure would have been helpful to appellant’s defense or essential to a fair determination of his guilt. We are assuming of course that all material information is before this court and that the prosecution has complied with its Brady duties. That is, we are assuming that the informer would not materially contradict or impeach the agents. This assumption is appropriate inasmuch as appellant in the court below neither requested that the prosecution disclose exculpatory information nor questioned the prosecution’s compliance with its independent duty to make such disclosures. If appellant now doubts that Brady has been satisfied his recourse is under § 2255. We hasten to add, however, that nothing before this court suggests either that such misconduct has taken place or that appellant believes it has.'

Affirmed.

      . The relation to this ease of prosecutorial misconduct, either actual or alleged, is discussed in the concluding paragraph of this opinion.


author: THORNBERRY, Circuit Judge:

text:
    Walter A. GLAPION, Sr., Plaintiff-Appellant, v. The MS JOURNALIST, her engines, tackle, furniture and apparel, and Charente Steamship Co., Ltd., Defendants-Appellees.
    No. 72-3067.
    United States Court of Appeals, Fifth Circuit.
    Dec. 12, 1973.

      William S. Vincent, Jr., Clifton S. Carl, New Orleans, La., for plaintiff-appellant.
    M. D. Yager, Bert M. Cass, Jr., Frank A. Courtenay, Jr., New Orleans, La., for defendants-appellees.
    Before THORNBERRY, SIMPSON and CLARK, Circuit Judges.
   THORNBERRY, Circuit Judge:

Appellant Walter A. Glapion, a longshoreman, filed suit against the MS Journalist and her owner to recover damages for personal injuries sustained on board the vessel during loading of cargo at New Orleans. The United States District Court for the Eastern District of Louisiana found that the accident which caused appellant’s injury was proximately caused by the individual negligent acts of appellant’s fellow longshoremen and not by any unseaworthy condition of the ship, its equipment, or its crew.

On this appeal, appellant contends (1) that the trial court’s findings on proximate cause are clearly erroneous, and (2) that the vessel owner’s cargo loading operation violated certain safety regulations, thus rendering the vessel unsea-worthy as a matter of law. We hold that the district court’s findings on proximate cause are not clearly erroneous. Nevertheless, we vacate and remand to the district court for findings on the applicability and possible violation of 29 C.F.R. §§ 1918.81(c), 1918.-81(f), and 1918.82(a) as we more fully detail below.

The District Court’s Findings

The relevant facts are generally undisputed. On the day of the accident, Glapion and his fellow longshoremen were loading heavy aluminum ingots into two deep tanks of the vessel. The aluminum ingots were banded together in bundles about two feet wide and about two and one-half feet tall, weighing approximately 1,500 pounds. Each bundle was banded to a small skid.

Each draft, consisting of two bundles, one on top of the other, was lowered by a winch into the tank in a two-wire sling, with a wire under either side of the skid of the bottom bundle and around both bundles. Only the weight of the bundles held them in the sling; the bundles could come out of the sling when the weight slackened. In the normal operation, the draft was lowered to about eight to ten inches from the floor of the tank; there a lift truck took hold and moved the two bundles to their position of stow.

By the end of the day, the deep tank was so filled with bundles of ingots that the lift truck could no longer be operated. The truck was thus removed and a new loading operation was instituted. Pursuant to this new operation, the winch was used to lower the draft into the hold to a point where it would hang suspended eight or ten inches above the floor. Four longeshoremen would then guide the draft manually over to the area where it was to be stowed, at which point the winch would lower the draft until it was securely stowed.

By the time only two drafts of ingots remained to be loaded, the longshoremen were working on a floor composed almost entirely of bundles. This floor was not completely even since all the bundles were not of uniform size. After the next-to-last draft 'had been lowered to eight to ten inches above the floor of bundles but before the draft had been securely stowed — during the time the longshoremen were in manual contact with the draft — the top bundle came loose and began to roll forward. Gla-pion, standing in front of the draft, was injured when the bundle pinned his hand against one of the ship’s ribs.

The district judge concluded that none of the witnesses who testified could fully explain why the top bundle came loose. The court found that the top bundle slid either because two of appellant’s fellow longshoremen continued to push against it after the winch had set the draft down or because the men guided the draft so that it was lowered onto an uneven part of the floor, causing the whole draft to tilt and allowing the top bundle to slide. In either case, the court concluded, negligence on the part of the longshoremen rather than any unseawor-thy condition of the ship was the proximate cause of the injury. Appellant disputes the district court’s findings on proximate cause and contends that the uneven floor created by the bundles produced an unseaworthy condition which was a proximate cause of the accident and resulting injury.

We of course review challenged findings of fact under the “clearly erroneous” standard. F.R.Civ.P. 52(a); McAllister v. United States, 348 U.S. 19, 75 S.Ct. 6, 99 L.Ed. 20 (1954). Under this standard of review, “[t]he question is not simply whether the reviewing court would have found otherwise but whether the trial court could permissibly find as it did.” Movible Offshore, Inc. v. M/V Wilken A. Falgout, 5th Cir. 1973, 471 F.2d 268, 271; Brown v. Aggie & Millie, Inc., 5th Cir. 1973, 485. F.2d 1293. The reviewing court should upset a finding only when it “is convinced on the whole record that the finding does not reflect the truth and right of the case.” Wright, Federal Courts § 96, at 432. The record from the trial below is full of testimony indicating that an uneven floor was not a proximate cause of the accident. Consequently, this is not an appropriate case for reversal under the clearly erroneous standard, and we reject the suggestion that it is. Brown v. Lykes Brothers Steamship, Inc., et al., 5th Cir. 1973, 484 F.2d 61.

The Safety Regulations

But our disposition of appellant’s first contention in no way determines our answer to the second. At the trial below, appellant first raised the issue of safety regulation violation in his proposed findings of fact and conclusions of law, submitted after the evidentiary hearing had been concluded. The district judge made no mention of any safety regulations in his findings or conclusions. Thus the situation presented is nearly identical to the situation which we faced in Manning v. M/V ‘Sea Road,” 5th Cir. 1965, 358 F.2d 615, after remand, 1969, 417 F.2d 603, and in Seymour v. Oceanic Navigating Co., Ltd., 5th Cir. 1972, 453 F.2d 1185.

In Manning I, a safety regulation was called to the attention of the district court after the evidentiary hearing but prior to the entry of findings of fact and conclusions of law; and as in this case, there was no reference whatever to the regulation in findings and conclusions adopted by the district court. We vacated the district court’s decision denying recovery to a longshoreman who had suffered personal injury, and remanded so that the lower court could make findings and conclusions on the applicability of the safety regulation involved, whether it was violated, and if so, its relation, if any, to the proximate cause of the injury sustained by the longshoreman.

This court in Seymour, another personal injury action brought by a longshoreman against a shipowner, among others, had occasion to consider the same regulations which form the basis of this appeal, 29 C.F.R. §§ 1918.81 and 1918.82. In that case, the regulations apparently were never called to the attention of the trial court. We took judicial notice of the regulations for the first time on appeal, a procedure which was eminently proper. See 44 U.S.C. § 1507; 5 Moore’s Federal Practice § 43.09, at 1369 and cases cited therein; 9 Wright and Miller, Federal Practice and Procedure, § 2410, at 356 and cases cited therein; Seymour v. Oceanic Navigating Co., Ltd., supra, 453 F.2d at 1192, fn. 7. We remanded for clarification of findings, and for proper consideration of these safety regulations.

The regulations cited in appellant’s proposed findings and conclusions are 29 C.F.R. § 1918.81(f) and 29 C.F.R. § 1918.82(a), which deal respectively with the need for tag lines and the proper building of drafts. We note on our own that 29 C.F.R. § 1918.81(c), which deals with slinging, may also be quite pertinent.

Although this court could properly consider the relevance of these regulations, Seymour v. Oceanic Navigating Co., Ltd., supra, we deem it advisable, as a matter of proper judicial administration, to allow the district court to consider the regulations in the first instance. The district court should consider (1) whether any of the regulations is applicable, (2) whether any was violated, and (3) whether any violation of the regulations proximately caused the injury to Glapion. If the district judge feels that additional hearings are necessary to a full and fair consideration of the applicability or violation of these regulations, he should by all means hold such hearings. Seymour v. Oceanic Navigating Co., Ltd., supra; Manning I and II, supra.

The case is remanded to the district court for proceedings not inconsistent with this opinion.

      . The owner filed an answer denying liability and lodged a third-party complaint against Glapion’s employer, Atlantic & Gulf Stevedores, Inc. Subsequently, this third-party complaint was dismissed on joint motion of the ship owner and the employer.

      . These regulations appear in Title 29, Chapter XYII, entitled Occuptional Safety and Health Administration, Part 1918, entitled Safety and Health Regulations for Long-shoring. The above sections were transferred from Part 1504 of Chapter XIII. See 29 C.F.R. at 83.
      Subpart H — Handling Cargo
      § 1918.81 Slinging.
      (c) Drafts of lumber, pipe, dunnage and other pieces, the top layer of which is not bound by the sling, shall be slung in such a manner as to prevent sliders. Double slings shall be used on unstrapped dunnage, except when, due to the size of hatch or deep tank openings, it is impractical to use them.
      * * * * *
      (f) Loads requiring continuous manual guidance while in motion shall be provided with tag lines.

        % * s}« * SK
      § 1918.82 Building Drafts.
      (a) Drafts shall be so built or such means shall be taken as to prevent cargo from falling from the draft.

      . The district court also found that “the procedure used in loading the ingots, including the method of composing the drafts, were reasonable . . • . ” This finding, however, was evidently made without any consideration of the applicability of the safety regulations, which imposed stringent duties upon all employers of longshoring employees. A finding of reasonableness would be relevant only if those duties had been carefully considered by the finder of fact. We have noted before that these safety regulations are not designed to sanction customary industry practices. “[T]hey are geared directly to the safety of men, safety of working conditions, [and] elimination of hazards that have long made long-shoring one of industry’s most crippling vocations.” Manning v. M/V “Sea Road,” 5th Cir. 1969, 417 F.2d 603, 607.

      . On remand, the district court found that the safety regulation was inapplicable. This court reversed, found that the safety regulation had been violated, and that the violation was a proximate cause of the injury. We also noted that the negligent violation of a regulation simultaneously makes the vessel unseaworthy. Manning v. M/V “Sea Road,” supra, 417 F.2d 603.


author: WEICK, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Thomas L. KUBECK, Defendant-Appellant.
    No. 73-1200.
    United States Court of Appeals, Sixth Circuit.
    Argued Oct. 15, 1973.
    Decided Dec. 7, 1973.
    James F. Finn, Detroit, Mich., for defendant-appellant.
    John J. Conley, Detroit, Mich., for plaintiff-appellee; Ralph B. Guy, Jr., U. S. Atty., Detroit, Mich., on brief.
    Before WEICK, MILLER and LIVELY, Circuit Judges.
   WEICK, Circuit Judge.

Appellant Kubeck was indicted in the District Court on one count of a four-count indictment which charged him, along with Dennis Lukasik and William Hall, with concealing from the Department of Housing and Urban Development, a material fact in connection with an FHA mortgage-loan application, in violation of 18 U.S.C. § 1001. They were tried by a jury which returned a verdict of guilty against all three, Ku-beck, Lukasik and Hall. We consider here only the appeal of Kubeck from his judgment of conviction.

The fagts are substantially as follows: In June, 1970, Linda Avery and Judith Wirgau, both divorcees, who were living together with their children in a rented house, decided to purchase a home. They were both recipients of aid for dependent children (ADC). Mrs. Wirgau contacted her friend, a real estate salesman, Dennis Lukasik, to assist them. She told Lukasik that they would like to acquire a house located at St. Clair Shores, Michigan. Lukasik knew that these women had very little money and could not make very much of a down payment. Lukasik suggested to them that they should first acquire a property in Ferndale, Michigan, to be financed with an FHA mortgage Plan 221(d)(2), and then trade the Ferndale property for the house on St. Clair Shores at a later time. The women were shown only a photograph of the Ferndale property.

William Hall, who was a real estate broker operating a real estate business, owned a residence property located at St. Clair Shores. Hall had also arranged to purchase the Ferndale property from Mr. and Mrs. David Donald, the then owners, but he needed financing. Hall was not eligible for an FHA loan under Plan 221(d)(2).

In order to qualify for a Plan 221(d)(2) loan it is necessary that the mortgagor occupy the property after the date of closing, and that papers submitted to the Department of Housing and Urban Development after the closing verify such occupancy. A Housing Department employee identified a letter signed by the two women stating that they were sisters and that they would both reside at the Ferndale residence, and also another document signed by both women stating that one of them was the occupant of such premises.

The closing of the Ferndale property deal took place in October, 1970, at the offices of a title company. Jack Pome-roy, a real estate broker who was-present at the closing, testified that Ku-beck was present at the closing; that his (Pomeroy’s) files so indicated; and that Kubeck was representing Hall. Mr. and Mrs. David Donald, from whom the Halls were acquiring the Ferndale property, were present. Lukasik also was present.. The Halls had previously executed a deed conveying the Ferndale property to the two women. The two women were present at the closing, and signed a number of documents; they testified that an unidentified representative of Hall was present. They also testified that after the closing they left the building and went to Lukasik’s car, where they were introduced to Thomas Kubeck. Both women identified Kubeck as the man who was in the car.

Kubeck told the two-women that they were going to “sign off on the house” as part of the ^exchange deal. They signed the deed for the Ferndale house to William Hall and his wife, while they were in the automobile. The fact that both women were able to identify Kubeck as being the man in the car, but could not identify him as being at the closing, does not necessarily mean that he was not present at the closing. The women had displayed erratic memories as to certain events in the case, and the jury could have easily credited Pomeroy’s testimony and the notes in his file.

Kubeck was the agent of Hall. He took the acknowledgment of Mr. and Mrs. Hall as Notary Public, and witnessed their signatures on their deed to the two women. This deed necessarily was at the office of the title company at the closing and had to be filed for record in order to establish title in the two women so they could execute the FHA note and mortgage. Kubeck also witnessed the signatures and took the acknowledgments of the two women on their deed back to the Halls.

It was uncontroverted that the women never lived in the Ferndale property, and that they were not sisters.

Judith Wirgau testified that she made subsequent phone calls to Kubeck to find out when the property in St. Clair Shores would be ready for transfer to them. Kubeck informed her that the occupant of the house in St. Clair Shores, which Kubeck supposedly was trying to obtain for the women, would not respond to his messages. Patricia Dodge, the occupant of this particular house in St. Clair Shores (who was renting it from William Hall), testified that she was never notified by the owner of any intent to sell.

Mrs. Wirgau testified that Kubeck found another residence for them to rent, which residence was owned by Hall, and which was in a bad state of disrepair; and that they lived in that Hall property only two days.

At the close of the Government’s case Kubeek’s attorney moved for judgment of acquittal on the ground of insufficient evidence. This motion .was denied. Only character testimony was presented on behalf of Lukasik, who was represented by separate counsel. No testimony was offered in defense of Kubeck. When the other defendants rested Ku-beck did not renew his motion for judgment of acquittal.

Kubeck challenges the sufficiency of the evidence to sustain the conviction. He contends that the proof did not establish that he had knowledge of the fraud. The Government contends, first, that Kubeck waived his right to challenge the sufficiency of the evidence, since he did not renew his motion for a directed verdict at the close of the defendant’s case; and second, that the evidence, although circumstantial, is sufficient to sustain the conviction.

On the procedural point, the Government cited numerous cases to sustain its contention that a waiver of the right to challenge the sufficiency of the evidence has taken place because of the failure to renew the motion for acquittal at the close of defendant’s case. The Government relies on Rood v. United States, 340 F.2d 506 (8th Cir. 1965); Lucas v. United States, 325 F.2d 867 (9th Cir. 1963); United States v. George, 319 F.2d 77, 79 (6th Cir. 1963); and Gendron v. United States, 295 F.2d 897, 900 (8th Cir. 1961).

In all the cases cited by the Government, the defendant moved for acquittal at the close of the Government’s case, and after this motion was denied the defendants then either testified or offered other evidence. The rationale of these cases was that the presentation of a defense served as a withdrawal of the acquittal motion, and therefore, a new motion was required at the close of defendant’s case to preserve the eviden-tiary point as a ground of appeal. In our case, however, Kubeck offered no evidence after he had rested, and consequently he did not withdraw his original acquittal motion. Thus, Kubeck is not now barred from raising the sufficiency of the evidence point at this time.

The theory of the Government was that William Hall desired to obtain an FHA mortgage to finance the purchase of the Ferndale property which he wished to buy from the Donalds; however, Hall could not qualify for an FHA mortgage. It was the Government’s position that Hall had Lukasik and Ku-beck, both of whom were real estate salesmen, aid him in a scheme to secure these advantages, to which he (Hall) was not entitled. Lukasik was to persuade the two women to take title to the Ferndale property and to apply for the FHA loan. The women would execute the note and mortgage required in the FHA financing, and then would recon-vey the property to Hall.

The standard for review of a sufficiency of the evidence question, when a person has been convicted, was stated by this Court in United States v. Conti, 339 F.2d 10 (6th Cir. 1964).

In considering a contention by an appellant that the evidence is insufficient to support a judgment of conviction, an appellate court will reverse the judgment if it is not supported by substantial and competent evidence, but will not disturb a conviction supported by such evidence. Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680, rehearing denied, 315 U.S. 827, 62 S.Ct. 637, 86 L.Ed. 1222; United States v. Knight, 336 U.S. 505, 508, 69 S.Ct. 704, 93 L.Ed. 845; United States v. Decker, supra, 304 F.2d 702, 705, C.A. 6th. In making such a determination the Court must take that view of the evidence with inferences reasonably and justifiably to be drawn therefrom most favorable to the Government, without weighing the evidence or determining the credibility of the witnesses. Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Battjes v. United States, 172 F.2d 1, 5, C.A. 6th; Kowalchuk v. United States, 176 F.2d 873, 876, C.A. 6th; Apel v. United States, 247 F.2d 277, 279-280, C.A. 8th; N.L.R.B. v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300, 59 S.Ct. 501, 83 L.Ed. 660. (Id. at 13)

Applying this standard, the Court is of the opinion that ample evidence exists to support the jury’s finding that Kubeck had knowledge of, and either concealed or aided and abetted in concealing, false representations to the Department of Housing and Urban Development. First, there was some testimony that Kubeck was present at the closing, where the necessary papers were signed; second, there was undisputed testimony that Kubeck was- in Lukasik’s car immediately after the closing and persuaded the two women to reeonvey the Ferndale property to Hall. Thus, the women actually owned the Ferndale property for _a few minutes which at least was sufficient for them to execute the FHA mortgage. Kubeck clearly knew that the women had no intention of living in the house.

The Government introduced in evidence the deed from the' William Halls to the two women, and also the deed from the two women back to the Halls. The deeds reflected on their face the fact that Thomas Kubeck witnessed and acknowledged both documents.

There was uncontradicted testimony that the warranty deed from the women back to the Halls was signed by them on October 27, 1970; but the deed as recorded has a date, January 6, 1971, printed on top of the typed October 27, 1970-date. Kubeck’s Notary certificate at the bottom of this deed recited that the deed was signed before him on January 6, 1971. From this the jury could have concluded easily that Kubeck altered this deed and delayed the recording thereof to hinder FHA officials in discovering the fraud.

From the known facts the jury could have concluded that Kubeck was deeply involved in fraudulent activity. One does not leave the closing of a real estate transaction in the office of a title company and go immediately to the back seat of an automobile and there arrange to reconvey the property to the sellers, without thinking that something is wrong. Even the women testified that they asked Kubeck, while they were in the car, if what they were doing was illegal. Kubeck told them, “It’s done this way in the real estate business all the time.”

From Kubeck’s knowledge of real estate practices and his association with Hall, who was his employer, the jury could have found that Kubeck had knowledge of the existence of the representations contained in the application for the FHA mortgage. He also knew that the two women were not going to live in the Ferndale house.

The two women did not secure the home they desired at St. Clair Shores. They were able only to rent a dilapidated home owned by Hall, which they abandoned after two days because it was not a fit place in which to live.

In our opinion the District Court did not err in its denial of Kubeck’s motion for judgment of acquittal.

Affirmed.


text:
    William H. GORDON and Fern Gordon, his wife, Plaintiffs-Appellees-Cross Appellants, v. duPONT GLORE FORGAN INCORPORATED, Defendant-Appellant-Cross Appellee.
    No. 73-1382.
    United States Court of Appeals, Fifth Circuit.
    Dec. 10, 1973.
    Rehearing Denied Jan. 10,1974.
    Earl D. Waldin, Jr., Paul M. Stokes, Miami, Fla., for defendant-appellant.
    Richard B. Marx, Miami, Fla., for plaintiffs-appellees.
    Before THORNBERRY, SIMPSON and CLARK, Circuit Judges.
   THORNBERRY, Circuit Judge:

The court below awarded the Gordons $20,000 for damages resulting from defendant brokerage firm’s failure to notify them that their account was under-margined, a breach of its fiduciary duty. On appeal duPont contends that the Gor-dons’ knowledge of their account’s un-dermargined condition operates as ratification and a bar to this suit, and du-Pont is entitled to recover the deficiency remaining after it closed the Gordons’ account. On cross appeal the Gordons find error in the trial court’s dismissing their claim alleging a cause of action under the rules of the New York Stock Exchange. We reverse the judgment against duPont and deny its counterclaim and appellees’ cross appeal.

New York Stock Exchange Rule 431 sets the minimum permissible margin maintenance level at twenty-five percent. That is, if one chooses to trade on margin, he must always have equity in his margin account equal to at least twenty-five percent of his stock’s market value. Appellant set its own margin maintenance requirement at thirty percent, and its computer is programmed to give a warning when margin accounts fall below that level.

In this ease, however, duPont did not utilize the computer because it had granted the Gordons a special dispensation by lowering their margin requirement to twenty-five percent. The task of overseeing the Gordons’ margin status fell to Morton Frank, their broker. He inadvertently allowed their account to become undermargined on July 14, 1971, and they became aware of the un-dermargining a “reasonable period of time” afterwards. Frank finally discovered his error on November 22, 1971, and immediately asked Mr. Gordon for more margin. Gordon declined to meet this margin call, and negotiations ensued. When Frank made one last margin call on November 29, Gordon demurred, saying he would like to wait until 3:30 p. m. that day before making a decision. Unable to wait any longer, Frank liquidated the Gordons’ account. The sale fell $1550 short of satisfying the Gordons’ debt to duPont, and du-Pont’s counterclaim seeks to recover this deficit.

The trial court found that duPont breached its common law fiduciary duty to the Gordons when it failed to notify them promptly after their account became undermargined. The court awarded damages of $20,000, the account’s equity value when it first became under-margined on July 14, 1971. In other words, if duPont had liquidated the Gor-dons’ account on the day it first became undermargined, their debt to duPont would have been satisfied with $20,000 to spare.

In determining whether the Gordons are entitled to recover damages for duPont’s breach of its fiduciary duty we must remember that they knew their account’s true condition for several months while they waited silently for Frank to discover his mistake. The effect of such behavior on their right to recover is a state law question.

While no Florida case is directly in point, a Florida appellate court dealt with an analogous situation in Hayden, Stone, Inc. v. Brown, Fla.Ct.App.1969, 218 So.2d 230, cert. denied, 225 So.2d 539 (Sup.Ct.Fla.). In that case plaintiff charged that his stockbroker negligently recommended speculative, volatile stocks and failed to supervise his account properly. However, the evidence showed that plaintiff was aware of the nature of the stocks bought for him, and he approved each purchase. He received monthly statements showing the status of his account, and he never objected to the way his account was being handled. In light of that evidence the court adopted the view of the court in Carr v. Warner, D.Mass.1955, 137 F.Supp. 611.

Evén if there had been a breach of duty . . . plaintiff by repeatedly accepting confirmations and accounts, which fully disclosed all aspects of the transactions, elected not to rely upon that breach. Moreover, by failing seasonably to make complaints of facts of which she was informed, she would in any event be barred from her later assertion of wrong done unto her by the partnership or corporation. 137 F.Supp. at 615.

As we read Hayden, Stone, under Florida law a customer who knows of his broker’s breach of duty and takes no action will be barred from bringing suit. In the instant case Mr. Gordon knew “a reasonable period of time after July 14” that his account was undermargined and merely waited for his broker to discover the mistake. He did not rely upon the breach, and he did not seasonably complain. He knew of the breach of duty and he acquiesced. Such behavior must bar his recovery here.

In its counterclaim duPont seeks to recover the $1550 deficiency that remained after the Gordons’ account was closed. When the Gordons opened their account, they authorized duPont to sell all their securities if they failed to meet a margin call, and they agreed to be liable for any deficiency that remained after the sale.

While it is true that the Gordons had a contractual obligation to make up the $1550 deficit, it is also true that the deficit was at least partially the result of duPont’s failure to compute the margin status correctly and give prompt notice of the undermargining. We cannot allow duPont to recover indebtedness that resulted from its own breach of duty, and therefore we must reject its counterclaim. See Goldenberg v. Bache and Co., 5th Cir. 1959, 270 F.2d 675, 681.

Perhaps anticipating our negative ruling on their common law claim, the Gor-dons urge that we find an implied private right of action under N.Y.S.E. rules 431 and 432 governing margin maintenance and brokers’ record keeping. They acknowledge that no circuit court has found such a right of action under these particular rules, but they fashion a precedent for us by reading two circuit cases together.

The Seventh Circuit has said that other stock exchange rules will support a private right of action. Buttrey v. Merrill Lynch, Pierce, Fenner & Smith, 7th Cir. 1969, 410 F.2d 135, cert. denied, 396 U.S. 838, 90 S.Ct. 98, 24 L.Ed.2d 88 (Rule 405, the know-your-customer rule). And the Second Circuit has held that a private cause of action exists under the initial-purchase margin requirements set out in Regulation T, which implements section 7 of the Securities Exchange Act of 1934. Pearlstein v. Scudder & German, 2d Cir. 1970, 429 F. 2d 1136, cert. denied, 401 U.S. 1013, 91 S.Ct. 1250, 28 L.Ed.2d 550. Thus the way is clear, we are told, to synthesize these two holdings and imply a right of action under the stock exchange rules setting margin maintenance standards.

Even if we created a right of action under stock exchange rules, the problem of the Gordons’ prior knowledge remains. It is their apparent hope that such a new cause of action will treat them less harshly than did the common law. That theory is buttressed by Pearl-stein, supra, in which the court said a stockholder could recover from his broker even though he knew the broker had failed to comply with Regulation T’s initial-purchase margin requirements.

With all due deference to the Second Circuit, we must disagree with an approach that so unilaterally favors the stock purchaser at the expense of his broker. The case before us illustrates the inequitable results that can flow from such an approach. The broker inadvertently miscalculated the Gordons’ margin. The error did not cloak them in ignorance, however, because Gordon received periodic account statements from duPont and discovered the under-margining “a reasonable period of time” after it occurred. The broker’s error instead allowed Gordon to avoid bothersome margin calls while his equity dwindled. He could gamble that his stock would appreciate in value without having to bolster his margin account with resources he could employ elsewhere. And when his stock fell so low that his margin account had a deficit instead of equity he had no incentive at all to put up more margin, for he could simply let the broker sell him out and let duPont take part of the loss. In fact that is what he did.

But, it can be argued, if we give stock purchasers a broad right of action unencumbered by an in pari delicto defense, we will help enforce the stock exchange rules by deterring the brokers who might desire to violate them. This brings to mind the words of Judge Friendly:

Any deterrent effect of threatened liability on the broker may well be more than offset by the inducement to violations inherent in the prospect of a free ride for the customer who .is placed in the enviable position of “heads-I-win tails-you-lose.” Pearlstein v. Scudder & German, 2d Cir. 1970, 429 F.2d 1136, 1148 (Friendly, J., dissenting).

Thus we hold that under Rules 431 and 432 there is no right of action that will allow a recovery to investors who know their accounts are inadvertently undermargined, maintain their silence for a substantial period of time, and take no corrective action. We do not hold that it woulfl always be improper to impose civil liability under these two rules, nor do we say a right of action can never be implied under stock exchange rules generally. We simply express no opinion beyond the narrow holding of this case.

The judgment of the district court is reversed in part and affirmed in part. Each party will pay his own costs.

      . The rule provides, in pertinent part:
      (b) The margin which must be maintained in margin accounts of customers, whether members, allied members, member organizations or nonmembers, shall be (1) 25% of the market value of all securities “long” in the account; . . .

      . The Gordons’ attorney stipulated before trial that Mr. Gordon became aware that his account was undermargined at “a reasonable period of time after July 14th” and before November. Mr. Gordon received monthly account statements and examined them with care. Therefore we interpret this unusual, enigmatic stipulation to mean that he learned of the undermargining no later than the receipt of his first monthly statement following July 14, and we assume he was informed by mid-August.

      . Rule 432 provides, in pertinent part:
      (a) Each member organization carrying securities margin accounts for customers shall make each day a record of every case in which, pursuant to the rules of the Exchange or regulations of the Board of Governors of the Federal Reserve System, initial or additional margin must be obtained in a customer’s account because of the transactions effected in the account on that day. The record shall be preserved for at least twelve months, and shall show, for each account, the amount of margin so required and the time when and manner in which the margin is furnished or obtained. The record shall be maintained in a manner satisfactory to the Exchange.

      . 12 C.F.R. § 220.

      . 15 Ü.S.C.A. § 78g.


author: ROSS, Circuit Judge.

text:
    CHICAGO, BURLINGTON & QUINCY RAILROAD COMPANY, a corporation, Appellee, v. READY MIXED CONCRETE CO., a wholly owned subsidiary of Lyman-Richey Sand & Gravel Corporation, Appellant.
    No. 73-1228.
    United States Court of Appeals, Eighth Circuit.
    Submitted Oct. 16, 1973.
    Decided Dec. 3, 1973.

      William T. Oakes, Omaha, Neb., for appellant.
    Harry B. Otis, Omaha, Neb., for ap-pellee.
    Before HEANEY, ROSS and STEPHENSON, Circuit Judges.
   ROSS, Circuit Judge.

Chicago, Burlington and Quincy Railroad Company (hereinafter CBQ) brought this action against Ready Mixed Concrete Co. (hereinafter Concrete Co.) for unpaid switching charges pursuant to a tariff which had been approved by the Interstate Commerce Commission (hereinafter ICC). The switching charges in question were for the period of April, 1965, to November, 1966. The total switching charges pursuant to the tariff amounted to $21,467.91. The sum of $9,226.23 was paid to CBQ by the Concrete Co. on February 2, 1967, pursuant to an agreement between CBQ and the Concrete Co. whereby CBQ agreed to accept that sum as payment in full of switching charges accruing prior to the date of settlement.

As a part of the settlement the Concrete Co. agreed to support a change in the tariff by the ICC calling for an increase of five cents per ton of material hauled, and CBQ agreed that as of the effective date of the new tariff the switching cost would be reduced to $5.77 per car. CBQ agreed to petition the ICC for permission to waive switching charges over and above $5.77 per car for the period prior to the effective date of the new tariff. The revised tariff was approved by the ICC with an effective date of November 16, 1966.

For the period subsequent to November 16, 1966, the Concrete Co. paid switching charges of $5.77 per car and the increased hauling charge of five cents per ton. The only period with which we are concerned in this lawsuit is the period prior to the effective date of the change in tariff, November 16,

1966. Concrete Co. argues that the switching charges in excess of the $5.77 per car for the period prior to November 16, 1966, were cancelled in exchange for the additional hauling charges it agreed to pay and did pay for the period subsequent to November 16, 1966; or in the alternative that the failure of CBQ to file the special docket application es-tops CBQ from now collecting the full tariff.

The trial court awarded judgment to CBQ in the sum* of $12,241.73, the difference between the $21,467.96 in switching charges for the period prior to November 16, 1966, and the $9,226.23 paid to CBQ on February 3, 1967. We affirm the judgment of the trial court with directions to modify the amount of the judgment.

The Court notes first that this lawsuit lacks some of the ordinary elements of a true adversary proceeding. During oral argument it became apparent that CBQ brought this action only because it felt legally obligated to do so under the provisions of 49 U.S.C. § 6(7).

Oral argument also developed the fact that the stipulation of facts filed by the parties hereto in the district court contained an obviously incorrect statement upon which the trial court relied in regard to the payment of $9,226.23 on February 3, 1967. The exhibits which were attached to the stipulation of facts clearly indicate that the $9,226.23 represented payment for 1,599 cars at $5.77 per car. Of these 1,599 cars, 1,453 were switched prior to November 16, 1966, and 146 were apparently switched subsequent thereto. The proper credit for the period prior to November 16, 1966, is correctly shown by Exhibit No. 1 to be $8,383.81, which is 1,453 cars multiplied by $5.77 per car. The difference between the amount charged pursuant to the tariff ($21,467.96) for the period prior to November 16, 1966, and the' amount paid for that period ($8,383.81) is $13,084.15, the amount requested in the complaint filed by CBQ.

Freight Rate Discrimination

The purpose of 49 U.S.C. § 6(7), quoted supra at note 3, is to “have but one rate, open to all alike, and from which there could be no departure.” Boston & Maine R.R. v. Hooker, 233 U.S. 97, 112, 34 S.Ct. 526, 528, 58 L.Ed. 868 (1914). So strong is this anti-discrimination provision that the courts have generally refused to recognize an otherwise justifiable defense of estoppel. Thus, in Pittsburg, Cincinnati, Chicago & St. Louis R.R. v. Fink, 250 U.S. 577, 582, 40 S.Ct. 27, 63 L.Ed. 1151 (1919), the consignee of a shipment of goods paid the carrier $15 in freight charges —the amount specified on the bill of lading. It was later learned that the railroad had undercharged the consignee by $15. The Supreme Court held that: “Estoppel could not become the means of successfully avoiding the requirements of [49 U.S.C. § 6(7)] as to equal rates . . .” Id. at 583, 40 S.Ct. at 28. See also New York Central & Hudson River R.R. v. York & Whitney, 256 U.S. 406, 41 S.Ct. 509, 65 L.Ed. 1016 (1921). To put the matter succinctly, “equitable considerations may not serve to justify failure of carrier to collect, or retention by shipper-of, any part of lawful tariff charges.” Baldwin v. Scott County Milling Co., 307 U.S. 478, 485, 59 S.Ct. 943, 948, 83 L.Ed. 1409 (1939). Although such an approach may create harsh results in individual cases, “instances of individual hardship cannot change the policy which Congress has embodied in the statute in order to secure uniformity in charges for transportation.” Pittsburg, Cincinnati, Chicago & St. Louis R.R. v. Fink, supra, 250 U.S. at 582, 40 S.Ct. at 28.

This Court has recognized that the “crucial question ... is whether judicial recognition of [the] estoppel defense will'contravene the anti-discrimination purpose of § 6(7).” Southern Pacific Transportation Co. v. Campbell Soup Co., 455 F.2d 1219, 1222 (8th Cir. 1972). In that case, this Court held that where the railroad delivered shipments to the consignee under bills of lading which indicated that the freight charges were to be prepaid, and the consignee in reliance thereon, reimbursed the shipper in full for the freight charges, the consignee was entitled to raise the defense of estoppel against the railroad, after the railroad had unsuccessfully sought payment from the shipper.

The Court reasoned that no discrimination could take place, assuming the consignee had paid the full amount of the freight charges to the shipper. The Court concluded that its holding would:

not erode the purpose underlying § 6(7) as long as the grounds for estop-pel do not serve directly or indirectly as a cover for freight rate discrimination. Id. at 1222.

It seems clear that the anti-discrimination provisions of § 6(7) would not, in any way, be furthered by requiring a consignee to pay the freight charges twice. The difference between this case and Southern Pacific Transportation Co. v. Campbell Soup Co., supra, is that in Southern Pacific the consignee had paid the full amount of the existing tariff but to the wrong person. Here the full amount of the existing tariff has not been paid to the railroad or to anyone else.

The proper inquiry in this case is whether judicial recognition of the es-toppel defense will serve directly or indirectly as a cover for freight rate discrimination. In effect, Concrete Co. claims that it is entitled to a rate at less than the listed tariff because of the agreement heretofore described and because the railroad has failed to perfect a special docket application with ICC in order to seek permission to waive a portion of the tariff: Essentially, Concrete Co., by reference to a private agreement between the parties, seeks to lower the established tariff or attach a nonstatuto-ry condition to the collection thereof.

But as Mr. Justice Brandéis has said:

No contract of the carrier could reduce the amount legally payable; or release from liability a shipper who had assumed an obligation to pay the charges. Nor could any act or omission of the carrier (except the running of the statute of limitations) es-top or preclude it from enforcing payment of the full amount by a person liable therefor. . . . Louisville & Nashville R.R. v. Central Iron & Coal Co., 265 U.S. 59, 65, 44 S.Ct. 441, 442, 68 L.Ed. 900 (1924.).

Stated differently:

Until changed, tariffs bind both carriers and shippers with the force of law. Under Section 6 of the Interstate Commerce Act the carrier cannot deviate from the rate specified in the tariff for any service in connection with the transportation of property. . . . Lowden v. Simonds-Shields-Lonsdale Grain Co., 306 U.S. 516, 520, 59 S.Ct. 612, 614, 83 L.Ed. 953 (1939).

Concrete Co. places principal reliance on the case of Western Maryland R.R. v. Continental Grain Co., 219 F.Supp. 126 (S.D.N.Y.1963). In that case the railroad, which had a dispute with Continental and others with respect to the proper storage and detention charges, agreed with the shippers to abide by a decision in a lawsuit, presenting the same legal question, then pending in Maryland. The Maryland decision resulted in a decision favorable to the shippers. Subsequently, in another circuit, in a case involving different parties but the same legal issue, the Circuit Court held for the carrier, Western Maryland then sought to collect the tariffs, allegedly due, from Continental and others. The New York district court concluded that the stipulation of the parties to abide by the decision in the Maryland lawsuit was binding, and did not violate the provisions of 49 U.S.C. § 6(7).

Without deciding whether the Western Maryland decision was correctly decided, that case is distinguishable. Arguably no discrimination took place in that case, since the tariff had been, according to a federal district court, held to be inapplicable. The question implicitly presented in this case, but not in the Western Maryland, case, is the effect of such a private agreement prior to the time a ruling has been secured from a court or an administrative agency; that is, does an agreement providing for settlement and submission of the proposed revised tariff to the ICC prohibit collection of the tariff prior to submission? The clear answer to the question is that the parties may not attach a nonstatutory condition to the collection of the tariff: “Until changed, tariffs bind both carriers and shippers with the force of law.” Lowden v. Simonds-Shields-Lonsdale Grain Co., supra, 306 U.S. at 520, 59 S.Ct. at 614.

The result we reach is not changed by the fact that CBQ failed to file the special docket application as agréed. Under the statute courts may not permit the tariff to be changed or waived whether it be by agreement of the parties, failure to carry out that agreement, or even by stipulation in court.

We conclude that the full amount of the tariff must be paid by Concrete Co. to CBQ and that judgment was properly entered by the trial court on behalf of CBQ. However, because of the error of the parties in their stipulation, the amount of the judgment awarded was erroneous. The correct amount of the judgment should have been $13,084.15.

The judgment of the trial court is affirmed but with directions to modify the amount of the judgment to $13,084.15.

      . The switching charge was $13.56 per car from April, 1965, to August, 1965, and $14.92 per car from August, 1965, to November 16, 1966. The amount paid, $9,226.23, represented payment at $5.77 per car for 1,599 cars, 1,453 of which were switched prior to November 16, 1966, and 146 of which apparently were switched thereafter.

      . CBQ did not file a special docket application with the ICC as agreed. It did request the Western Trunk Line Committee for permission to file the special docket application, but was refused permission. CBQ then proposed to file an independent, notice with the Western Trunk Line Committee which would permit it to proceed with such special docket application irrespective of the Committee’s stand. Since the Chicago, Rock Island and Pacific Railroad Company was also involved in these movements, it was necessary to obtain its concurrence for publication of the independent notice. By letter dated May 27, 1971, the Rock Island declined CBQ’s request and, under established procedures of the ICC, CBQ was unable to pursue the special docket application with the ICC and so advised the ICC by letter dated July 30, 1971.
      By letter dated August 10, 1971, the ICC acknowledged receipt of CBQ’s July 30, 1971, letter and advised that the special docket file had been closed. A copy of this letter was also served upon Concrete Co., and it was advised of its rights under Rule 25(f) of the ICC’s Rules of Practice to initiate a formal Complaint proceeding. Although such advice was timely made, Concrete Co. failed to exercise this right. Concrete Co. acknowledges that these facts are essentially correct but claims that it was not advised that the special docket application had not been perfected until after the case had been submitted to the trial court.

      . 49 U.S.C. § 6(7) provides:
      No carrier, unless otherwise provided by this chapter, shall engage or participate in the transportation of passengers or property, as defined in this chapter, unless the rates, fares, and charges upon which the same are transported by said carrier have been filed and published in accordance with the provisions of this chapter; nor shall any carrier charge or demand or collect or receive a greater or less or differ ent compensation for such transportation of passengers or property, or for any service in connection therewith, between the points named in such tariffs than the rates, fares, and charges which are specified in the tariff filed and in effect at the time; nor shall any carrier refund or remit in any manner or by any device any portion of the rates, fares, and charges so specified, nor extend to any shipper or person any privileges or facilities in the transportation of passengers or property, except such as are specified in such tariffs.

      . Compare Central Warehouse Co. v. Chicago, Rock Island & Pacific R.R., 20 F.2d 828 (8th Cir. 1927).

      . Ordinarily this Court would not order a modification of the judgment in favor of the appellee in a case in which the appellee has not filed a cross appeal. See Hadfield v. Ryan Equipment Co., 456 F.2d 1218, 1222 (8th Cir. 1972). But in a case such as this wliere the appellee has brought this action only because t it was required to do so by statute, where the lawsuit lacks some of the ordinary elements of a true adversary proceeding and where the statute (49 U.S.C. § 6(7)) requires the appellee to collect the full amount of the shipping charges, we feel compelled to require this modification in order to carry out the intent of the statute. See 28 U.S.C. § 2106; 9 J. Moore, Moore’s Federal Practice ¶ 204.11 [5] at 948-949 n. 9 (1972).


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Dunham R. SELLERS and Jackie Sakiko Deki Sellers, Defendants-Appellants.
    No. 73-2942
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    Dec. 4, 1973.
    Rehearing Denied Jan. 2, 1974.

      Jeffrey H. Hubbard, Houston, Tex., for defendants-appellants.
    Anthony J. P. Farris, U. S. Atty., James R. Gough, Charles Wolfe, Asst. U.
    S. Attys., Houston, Tex., for plaintiff-appellee.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.

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

   THORNBERRY, Circuit Judge:

In this suit on a promissory note, the makers of which are the appellants Dun-ham and Jackie Sellers, the district court granted the government’s motion for summary judgment. The parties stipulated to the facts: The appellants executed a promissory note in the face amount of $30,000, which was delivered by them to the First National Bank of Baytown on June 25, 1965. The note was guaranteed by the Small Business Administration. Appellants defaulted on payments under the note beginning with the payment due June 25, 1966, and on September 13, 1966, the note was assigned in accordance with the guaranty agreement to the S.B.A., which then made payment to the bank of $13,563.97, or 50% of the unpaid balance of the note. Shortly before this assignment, appellant Dunham Sellers filed for a petition in bankruptcy, which was subsequently denied. In re Sellers, 295 F.Supp. 1354 (S.D.Tex.1968), aff’d, 5th Cir. 1969, 407 F.2d 402.

The government filed suit on April 4, 1972, seeking recovery of the full amount of the note less payments and offsets already received. Two questions of law were presented to the court below: (1) whether the United States is barred from asserting against the appellants that portion of its claim which it will ultimately repay to the bank under their guaranty agreement and the certificate of interest, since the state statute of limitations had run with respect to claims by the First National Bank of Baytown prior to the filing of this suit, although subsequent to the note’s assignment to the S.B.A., and (2) whether formal presentment to and written demand upon the maker of the note is a necessary predicate to recovery by the United States.

Not satisfied with the outcome below, appellants now present those same questions to us, hoping for a different answer. For them, however, there can be no different answer, and we affirm.

The Statute of Limitations

Where the government acquires a derivative claim, whether by assignment, subrogation, or by other means, and that claim is not then barred by the state statute of limitations, the state statute ceases to run against the government at the time of such acquisition. Weissinger v. United States, 5th Cir. 1968,. 423 F.2d 782, 784; United States v. Winter, 319 F.Supp. 520, 522 (E.D.La.1970); United States v. Sum-merlin, 310 U.S. 414, 60 S.Ct. 1019, 84 L.Ed. 1283 (1940); United States v. Taylor, 5th Cir. 1964, 333 F.2d 633, 640. Here the government acquired the bank’s claim well within the state statute of limitations.

Appellants’ contention that the government is merely a nominal party to the suit, since the bank still has claim to 50% of the proceeds, is without merit. Under Texas case law, the Texas Uniform Negotiable Instruments Law in effect at the execution of the note and at the time of default, and the Texas Business and Commerce Code adopted in 1967, the fact that the government did not own the entire equitable interest in the note did not prevent the government from maintaining suit on the note as its legal owner and holder. Neyland v. Lanier, 273 S.W. 1022, 1023 (Tex.Civ.App.—Waco 1925, writ dism’d); Tex. Vernon’s Rev.Civ.Stat.Ann. art. 5935, § 51; Tex.Bus. & Comm. Code Ann. §§ 3.-301, 3.603 (Tex. UCC1968), V.T.C.A.; City State Bank v. National Bank of Commerce, 261 S.W.2d 749 (Tex.Civ.App.—Forth Worth 1953, writ ref’d n. r. e.).

If the government is subject to any statute of limitations, it would be the six year period provided by Congress in 28 U.S.C. § 2415. And it is clear that the six year period had not run at the time this suit was brought. Thus we reject appellants’ first contention.

Formal Presentment and Demand

Appellants contend in abbreviated fashion that the United States may not recover on the note without first having made formal presentment to and written demand upon the maker. But even the cases which appellants cite in support of their contention hold that presentment and demand for payment are not ordinarily necessary to charge the maker or acceptor of a negotiable instrument. Dickson v. Dickson, 324 S.W.2d 422, 423 (Tex.Civ.App.—Houston 1959, no writ). Appellants appear to be relying on the exception recognized in Texas law “where the note is not payable at a specific place and the holder undertakes to declare the whole amount due on the maker’s failure to pay any installment.” Dickson v. Dickson, supra; Faulk v. Futch, 147 Tex. 253, 214 S.W.2d 614 (1948). But the predicate for their reliance is missing since the note specifically provided in its very first sentence that it was payable “at its [First National Bank of Baytown’s] banking house in the city of Baytown, State of Texas . . . ”

We also note that the Texas exception to the general rule has been invoked only where the holder attempted to accelerate an installment note prior to the time final payment was due. See Credit Exchange of Dallas, Inc. v. Bell, 427 S.W.2d 674, 675 (Tex.Civ.App.—Dallas 1968, no writ); Graham & Locke Investments v. Madison, 295 S.W.2d 234, 241-242 (Tex.Civ.App.—Dallas 1956, writ ref’d n. r. e.). No question of acceleration is present here since this suit was brought after all installments were due. Moreover, appellants admit that by the express terms of the note, they waived presentment and demand before acceleration in the event that a maker filed a petition in bankruptcy. See Whalen v. Etheridge, 428 S.W.2d 824, 827 (Tex.Civ.App.—San Antonio 1968, writ ref’d n. r. e.). It is undisputed that co-maker Dunham Sellers filed just such a petition in August 1966. - Thus even if the proper foundation existed to warrant application of the exception to the general rule, the express terms of the note would command us to reject appellants’ second contention.

In short, our answer is the same as that of the district court. The government was entitled to summary judgment.

Affirmed.

      . Title 28 U.S.C. § 2415 provides in part:
      (a) every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues . . .
      * * * * *
      (g) Any right of action subject to the-provisions of this section which accrued prior to the date of enactment of this Act shall, for purposes of this • section, be deemed to have accrued on the date of enactment of this Act.
      We need not decide here whether this action by the government as guarantor to recover a debt is a 28 U.S.C. § 2415 contract action or some other action for which there is no limitation period, for even if the six year period applies, it does not bar this action.
      This cause of action actually accrued on June 25, 1966, but the date of enactment of the above section was July 18, 1966. Thus the United States’ complaint of April 4, 1972 was filed within the period of the federal statute of limitations in any case.


author: MATTHES, Senior Circuit Judge.

text:
    UNITED STATES of America et al., Appellants, v. Edmond MATRAS, Appellee.
    No. 73-1108.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 14, 1973.
    Decided Nov. 29, 1973.

      Jane M. Edmisten, Atty., Tax Division, Dept. of Justice, Washington, D. C., for appellants.
    Lyle E. Strom, Omaha, Neb., for ap-pellee.
    Before MATTHES, Senior Circuit Judge, and LAY and ROSS, Circuit Judges.
   MATTHES, Senior Circuit Judge.

This is an appeal from an order of the district court denying a petition by the United States to secure enforcement of a summons issued by the Internal Revenue Service (IRS) under § 7602 of the Internal Revenue Code of 1954, 26 U.S.C. § 7602. The summons, dated June 9, 1972, directed Edmond Matras, manager of the tax division of Northern Natural Gas Company, to appear before a designated IRS agent at a fixed time and place and produce all 1969 and 1970 company-wide budgets of Northern and its subsidiary and affiliated companies as an aid to the IRS routine biennial investigation of the company’s consolidated income tax returns. Matras duly appeared before the agent but by letter “respectfully decline[d]” to produce the budgets on the ground “that the information requested * * * is neither relevant nor material to a determination of the tax liability of the companies or the correctness of any of their tax returns * *

Thereafter the IRS petitioned the United States District Court for the District of Nebraska under §§ 7402(b) and 7604(a) of the Internal Revenue Code of 1954, 26 U.S.C. §§ 7402(b), 7604(a), for enforcement of the summons.

Following a full hearing and submission of briefs, the district judge, in a memorandum opinion, found:

The budgets are only a projection of what the actual transactions would be. Once the transactions have occurred, it is the actual records of those transactions, not proposed budgets, that are relevant to a determination of the tax liability that flowed from the transactions. Moreover, the evidence indicates that the I.R.S. has been or will on request be furnished with the Work Order Budget Comparison ledger sheets, which compare the information in the budget with the actual transactions. The I.R.S. has failed to sustain its burden of showing relevancy and that it does not already have possession of the information as required by United States v. Powell [379 U.S. 48, 57-58 [85 S.Ct. 248, 13 L.Ed.2d 112] (1964)].

The government contends that 1) the district court applied a more restrictive standard of relevancy to the budgets than required by § 7602 and that 2) in any event the government sustained its burden of showing that the budgets might be relevant and that the information contained in the budgets was not already available to the IRS.

Section 7602 reads in pertinent part:

For the purpose of ascertaining the correctness of any return * * *, determining the liability of any person for any internal revenue tax * * ", or collecting any such liability, the Secretary or his delegate is authorized—
(1) To examine any books, papers, records, or other data which may be relevant or material to such inquiry;
(2) To summon the person liable for tax or required to perform the act, or any officer or employee of such' person, or any person having possession, custody, or care of books of account containing entries relating to the business of the person liable for tax or required to perform the act, or any other person the Secretary or his delegate may deem proper, to appear before the Secretary or his delegate at a time and place named in the summons and to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry * * *.

The government in disputing the district court’s finding that the budgets were not in fact relevant argues that the court erroneously applied an absolute standard of relevancy as opposed to the statutory “may be relevant” standard. The argument is unrealistic. The district court, in its memorandum opinion, plainly sets forth the government’s burden of proof for enforcement of a summons issued under § 7602, as defined by the United States Supreme Court in United States v. Powell, supra. That burden of proof included a showing that “the inquiry may be relevant to the purpose [of the investigation].” Confronted with materials that were, in his opinion, plainly irrelevant, the district judge implicitly found that the budgets lacked the potential relevancy required by the statute.

Whether the district court erred in so finding poses a harderquestion.

Alfred W. Peterson, Jr., Supervisory Internal Revenue Agent Case Manager, explained his reasons for wanting the budgets as follows:

My feeling * * * on the budget is that * * * it will give us a road map as to where we want to go. It’s where all the department plans are brought into one department. That is, you are talking about 87 or 90 different plant operations bring [ing] their requests into one department, namely the Budget Department, where it would be made available for us and the taxpayer to • determine what actually has gone on or what at least was planned for the year. Most of which is planned, I am sure, is accomplished.

Northern, on the other hand, asserts, and the district court agreed, that it is the records of the actual transactions, not proposed budgets, that are relevant to a determination of tax liability. All Northern records of actual transactions have been made available to the IRS. In fact, all information requested by the IRS has been furnished by Northern except for the subject budgets.

The power of the IRS to investigate the records and affairs of taxpayers has long been characterized as an inquisitorial power, analogous to that of a grand jury, and one which should be liberally construed. United States v. Schwartz, 469 F.2d 977 (5th Cir. 1972); United States v. Widelski, 452 F.2d 1 (6th Cir. 1971), cert. denied, 406 U.S. 918, 92 S.Ct. 1769, 32 L.Ed.2d 117 (1972); United States v. Giordano, 419 F.2d 564 (8th Cir. 1969), cert. denied, 397 U.S. 1037, 90 S.Ct. 1355, 25 L.Ed.2d 648 (1970); United States v. McKay, 372 F.2d 174 (5th Cir. 1967); DeMasters v. Arend, 313 F.2d 79 (9th Cir. 1963); Brownson v. United States, 32 F.2d 844 (8th Cir. 1929).

On the other hand, § 7605(b) of the Internal Revenue Code of 1954, 26 U.S. C. § 7605(b), prohibits “unnecessary examination or investigations * *

The United States Supreme Court has interpreted § 7605(b) and its companion statutes as requiring the IRS, in order to obtain judicial enforcement of an administrative summons, to show “that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the Commissioner’s possession, and that the administrative steps required by the Code have been followed * * Donaldson v. United States, 400 U.S. 517, 526, 91 S.Ct. 534, 540, 27 L.Ed.2d 580 (1971) ; United States v. Powell, supra.

The test of materiality and relevance under § 7602 has been defined by lower courts as whether the inspection sought might have thrown light upon the correctness of the taxpayer’s returns. United States v. Egenberg, 443 F.2d 512, 513 (3d Cir. 1971); United States v. Shlom, 420 F.2d 263, 265 (2d Cir. 1969), cert. denied, 397 U.S. 1074, 90 S.Ct. 1521, 25 L.Ed.2d 809 (1970); United States v. Acker, 325 F.Supp. 857, 862 (S.D.N.Y.1971).

v As posed by Chief Judge Lumbard in United States v. Harrington, 388 F.2d 520, 524 (2d Cir. 1968), “The question * * * is * * * whether the ‘might’ in the articulated, standard, ‘might throw light upon the correctness of the return,’ is in the particular circumstances an indication of a realistic expectation rather than an idle hope that something may be discovered.”

In urging that the budgets may be relevant, the government relies heavily on United States v. Acker, supra, 325 F.Supp. 857, in which the IRS sought production of minutes of Standard Oil of New Jersey board meetings. Standard refused production of the minutes on the ground that many were irrelevant to the tax investigation. Instead Standard proposed to hand over what it deemed to be the relevant portions. In a thorough and well-written opinion, Judge Frankel ordered Standard to produce all the minutes so that the IRS agents could separate for themselves the relevant materials from the irrelevant. Cf. Beatty v. United States, 227 F.2d 350 (8th Cir. 1955). Interestingly, the supposed irrelevant minutes were those concerning proposed projects and contracts. Acker, of course, can be distinguished from the present case on the ground that Northern has never conceded the relevancy of any portion of its budgets.

As the court observed in the Harrington case, supra, the question whether materials sought by summons may be relevant does not always lend itself easily to solution. Based on the rationale of the authorities cited herein, we recognize that given the proper factual setting a court could find that budgets are potentially relevant to a tax investigation. Obviously, that issue must be determined on an ad hoc basis. Certainly, a taxpayer should not erect roadblocks for the purpose of frustrating or preventing the IRS from a full-scale inquiry of the liability of the taxpayer. By the same token, the government should not, for the mere sake of its convenience, impose unnecessary burdens on a taxpayer in conducting an audit or investigation for tax liability, particularly where, as here, there is no indication of a purpose to escape any tax liability. The term “relevant” connotes and encompasses more than “convenience.” Consequently, we are not persuaded to fault the district judge for concluding that the government failed to sustain its burden of proof by alleging a general need for a “road map.” If we were to accede to the government’s view, it is difficult to imagine corporate materials that might not contribute to a more comprehensive understanding of the workings of the corporation, and thus, according to the government, be deemed relevant to the tax investigation.

Deciding the case as we do, there is no need to consider whether the government sustained its burden of showing that the information contained in the budgets was not already available to the IRS.

Affirmed.

      . Sections 7402(b) and 7604(a) provide for enforcement of the summons in the district court for the district in which the person summoned resides or is found. Northern’s principal office is located in Omaha, Nebraska.

      . Northern, according to its brief and oral argument, is contesting the potential relevancy of the budgets not merely on principle but also because of fears that the surrender of the budgets could lead to additional burdensome requests for useless information. The company-wide budgets contain total figures, and in order to break those figures down, it would be necessary to go behind the budget to the various departments or divisions and then further back to the origination of the various projects to develop ail of the information that ultimately ends up in the budgets. This would result in the reconstruction of the information on projects that may have never been started. The taxpayer would, thus, be required to reconstruct a budget to find out information which, when found out, would be irrelevant to an I.B..S. audit since it would only reflect the taxpayer’s hopes and expectations for projects which were never implemented, for projects which may have been implemented in an entirely different form, and for projects which are already a matter of historical record.
      We were informed by the government attorney at oral argument that the Northern tax investigation has been completed, subject to reopening upon receipt of the budgets.


author: PER CURIAM:

text:
    Beryl N. JONES et al., etc., Plainttffs-Appellees, United States of America, Intervenor-Appellee, v. CADDO PARISH SCHOOL BOARD et al., Defendants-Appellees, “FAIR” (Fairness to Anderson Island Residents) et al., Movants-Appellants.
    No. 73-3016.
    United States Court of Appeals, Fifth Circuit.
    Oct. 31, 1973.
    As Amended Dec. 19, 1973.

      Robert G. Pugh, Shreveport, La., for appellants.
    John R. Pleasant, Shreveport, La., for Caddo Parish School Bd.
    Murphy W. Bell, Baton Rouge, La., JeSse N. Stone, Jr., Arthur G. Thompson, Shreveport, La., for Beryl N. Jones and others.
    Donald E. Walter, U. S. Atty., J. Stanley Pottinger, Asst. U. S. Atty., Shreveport, La., Brian K. Landsberg, John R. Scott, Dept, of Justice, Washington, D. C., for the United States.
    Before BELL, AINSWORTH and GODBOLD, Circuit Judges.
   PER CURIAM:

In this desegregation ease involving the public schools of Caddo Parish, Louisiana, we are concerned with the appeal of “FAIR” (Fairness to Anderson Island Residents), an unincorporated association of that parish composed of a number of Shreve Island and Anderson Island residents who are dissatisfied with one aspect of the District Court’s decree in this matter entered on July 20, 1973.

Exercising prudence and understanding of a difficult racial problem, District Judge Scott on March 20, 1973 appointed a biraeial eleven-member Citizens Committee composed of five black leaders and five white leaders of the community plus a chairman who would vote only in event of a tie, to study the school desegregation problem in Caddo Parish and make recommendations to him for the establishment of a plan which would provide for implementation of a unitary school system. An extensive study was made in ten, weeks of investigation, with seven public hearings and twenty-one deliberative meetings. On June 1, 1973, the Citizens Committee’s report, unanimously concurred in by all members, was filed with the District Court. Fifteen days were given to the parties to file any responses to the recommended plan. All of the original parties to the litigation, plaintiffs, and Caddo Parish School Board, accepted the plan. Intervenor United States of America stated in writing in the record that it “interjects no objection to ordering implementation of this plan, as is more fully set out in its response filed herein.”

Appellants’ motion to intervene herein was denied and a consent decree approving the plan recommended by the biracial Citizens Committee was entered by Judge Scott on July 2, 1973 and has been implemented in the present school year. Eight years of litigation between the original parties has finally come to an end.

Appellants also approved the plan of the Citizens Committee except in one respect, namely, the closing of the Shreve Island Elementary School and assignment of its students to Stoner Hill and A. C. Steere Elementary Schools. On June 29, 1973, appellants filed a motion to intervene. In their motion appellants averred:

“Movants fully support the desegregation plan submitted to this Honorable Court by the court-appointed citizens committee, with one exception, which is the basis of this motion to intervene, namely that portion of the citizens desegregation plan which proposes to close Shreve Island Elementary School and assign the students to Stoner Hill and A. C. Steere, Plan, Page 21.”

Appellants contend that they should have been permitted to intervene in the proceedings, that they have an interest in the subject matter in that they are opposed to the closing of Shreve Island Elementary School, and that alternative plans which they suggest relative to this particular school will achieve a better racial balance.

On July 18, 1973, the District Judge denied appellants’ motion to intervene and said:

“. . . we find that these parties along with teachers, bus drivers, lunchroom personnel and students and parents of students in other schools in Caddo Parish, Louisiana, are properly and adequately represented by the Defendant Caddo Parish School Board; that all interested parties have received repeated public invitations and many have appeared before the Court’s committee and given it the benefit of their views, that it is inevitable that groups or segments of these parties will be offended by any plan which may be adopted, that all such parties will be and have been allowed to file opposition to the plan adopted by the committee, that the Court will and is considering opposition so filed and that therefore it is unnecessary and improper that these parties be allowed to intervene as parties defendant.
“It is Ordered therefore, that the motion to intervene filed FAIR, et al be and it is hereby denied and that memorandum attached to this said motion be received, filed and considered an Amicus Curiae brief.”

In Hines et al. v. Rapides Parish School Board et al., 5 Cir., 1973, 479 F.2d 762, we considered another motion of parents to intervene and said:

“The petition for intervention would bring to the attention of the district court the precise issues which the new group sought to represent and the ways in which the goal of a unitary system had allegedly been frustrated. The district court could then determine whether these matters had been previously raised and resolved and/or whether the issues sought to be presented by the new group were currently known to the court and parties in the initial suit. If the court determined that the issues these new plaintiffs sought to present had been previously determined or if it found that the parties in the original action were aware of these issues and completely competent to represent the interests of the new group, it could deny intervention.”

In our view the District Judge’s holding is agreeable to the Hines standards and did not constitute error or an abuse of discretion. The views of appellants were fully known to the District Court prior to entry of the consent decree, and ample opportunity was accorded all interested persons to appear before the Citizens Committee and express their views.

The Shreve Island Elementary School was a predominantly white school with 90 per cent white enrollment. The Citizens Committee’s plan adopted by the District Court’s consent decree, transferred Shreve Island’s students partly to Stoner Hill, an all-black school, and to A. C. Steere, a predominantly white school with black enrollment. Each of the schools to which Shreve Island’s students were transferred has sufficient capacity to take care of the increase in pupil enrollment, despite an inference to the contrary by appellants. Though it is regrettable that appellants are dissatisfied with the closing of Shreve Island Elementary School, and for reasons which are understandable, the consent decree has substantial support in the black and white community for the plan, as evidenced by the unanimity of the biracial committee, but this support was not unanimous. We agree with the School Board (Br. p. 7) that ". . . the Court must conclude that the closing of one predominantly white school in a school system the size of that in Caddo Parish could not be said to frustrate the goal of a unitary system in Caddo Parish.”

Affirmed.

      . The Shreve Island School is now being utilized for children in special education who require unusual attention and is fully integrated 'as a special education school, according to information furnished by counsel for the Caddo School Board.