author: BY THE COURT:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Helen CRABTREE, et al., Defendants-Appellants.
    No. 71-2809.
    United States Court of Appeals, Fifth Circuit.
    March 7, 1973.

      Nicholas J. Capuano, Miami, Fla., for Crabtree.
    Max Lurie, Miami, Fla., for Laff.
    E. David Rosen, Miami, Fla., for Yunes.
    Louis Vernell, Miami Beach, Fla., for Nardone.
    Robert W. Rust, U. S. Atty., Gary L. Betz, Atty., U. S. Dept, of Justice, Miami, Fla., John Robinson, Dept, of Justice, Washington, D. C., for plaintiffappellee.
    Before PHILLIPS, THORNBERRY and RONEY, Circuit Judges.

       Hon. Orie L. Phillips, of the Tenth Circuit, sitting by designation.

   BY THE COURT:

This cause is hereby remanded to the District Court for an expedited evidentiary hearing to determine whether the wiretap applications in this case were properly authorized under 18 U.S.C.A. §§ 2510-2520.

Although appellants’ previous motion to remand was denied by a panel of this Court, we think that the renewed motion must be granted on the authority of United States of America v. Robinson, 472 F.2d 973 (5th Cir. 1973). As we understand the en banc decision of this Court in Robinson, where there is an issue of fact as to the procedure followed in a wiretap authorization, that issue must first be resolved by the District Court, and this Court will not attempt to determine the facts on affidavits. Such an issue is present in this case.

As in Robinson, the regularity of the procedure for authorization of the interception applications within the Department of Justice was not challenged by appellants until this appeal was pending. The Government argues that this case differs from Robinson because here, the affidavits of John N. Mitchell and Sol Lindenbaum filed with this Court establish the fact that the application for the wire interceptions in this case had been personally approved by then Attorney General John N. Mitchell. Our difficulty, however, stems from the response filed by appellants which challenges the factual accuracy and interpretation of the affidavits. We understand Robinson to control this exact situation. Where the resolution of the legal sufficiency of a wiretap authorization depends upon a court determination of the facts which support the application, those facts cannot be proved by an affidavit filed for the first time with the appellate court, where the issue has not been raised, litigated or decided in the trial court. We need not determine the disposition that we would give to the case were the facts before us stipulated or unchallenged.

We understand that as a result of Robinson, the trial court in that case and in other pending cases which involve similar and related issues has issued subpoenae for former Attorney General John N. Mitchell, and Executive Assistant Attorney General Sol Lindenbaum, both of whose affidavits have been filed with us in this case, and for former Assistant Attorney General Will Wilson, and Assistant Attorney General Henry E. Petersen, all returnable on March 19, 1973. We agree with appellants that judicial economy and the convenience of these witnesses importune a remand of this case so that the parties may be permitted to participate in the evidentiary hearings scheduled for the other cases.

As reflected in Robinson, the unusual importance of the issue compels us to follow this procedure, although normally litigants would be expected to raise factual issues in the trial court prior to appeal or run the risk that they would be foreclosed from attacking the factual basis of a wiretap interception at the appellate level.

The District Court will make findings of fact and conclusions of law which, with the complete record, will be forthwith transmitted to this Court. All other issues raised by either party are reserved.

Remanded with directions.


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Joseph Stanley TODD, Defendant-Appellant.
    No. 72-3234
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 19, 1973.

      Edward J. Winter, Jr., Miami, Fla. (Court-Appointed, but not under Act), for defendant-appellant.
    Robert W. Rust, U. S. Atty., Charles Farrar, Asst. U. S. Atty., Miami, Fla., for plaintiff-appellee.
    Before JOHN R. BROWN, Chief Judge and DYER and SIMPSON, Circuit Judges.

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

   PER CURIAM:

The appellant with two other persons was charged by a three count indictment with three offenses involving a Schedule II controlled substance, approximately 3970 amphetamine tablets, under Title 21, U.S.Code, Sections 846 and 841(a)(1), such sections being embodied in Public Law 91-513, October 27, 1970, 84 Stat. 1242, known as the Controlled Substances Act.

One defendant plead guilty prior to trial and Todd went to trial before a jury with the other of his codefendants. After several witnesses had testified the two defendants on trial were permitted by the court to withdraw their pleas of not guilty and to enter pleas of guilty to Count III of the indictment, the count charging knowing and intentional distribution of the Schedule II controlled substance.

After receiving the guilty pleas to Count III the trial judge deferred sentence pending pre-sentence investigation and report. Todd’s sentence, imposed some weeks later, was to confinement in the custody of the Attorney General for two years, plus a special parole term of two years.

The sole issues raised by appellant which are even arguably appealable are concerned with the sentence imposed by the trial court and with whether or not appellant's motions for post-trial relief and for medical rehabilitation and treatment at a federal treatment center should have been granted. We hold that these questions were addressed to. the trial court’s discretion and will not be disturbed by us on appeal. Withrow v. United States, 5 Cir. 1969, 420 F.2d 1220; Sullivan v. United States, 5 Cir. 1963, 317 F.2d 101; Beitel v. United States, 5 Cir. 1962, 306 F.2d 665. In addition, we note with approval the trial court’s patient attempts — by setting further hearings and by reserving further rulings — to give full opportunity for appellant’s counsel to develop facts warranting a commitment or a recommendation for treatment at Lexington, Kentucky, or a similar center for the treatment of drug addiction. Defense counsel simply never furnished any testimony, affidavits, or any indication of the defendant’s addiction other than counsel’s hearsay statements to the court, despite the trial court’s repeated offer to hear further testimony in this respect. We view this appeal as bordering on the frivolous.

The judgment appealed from is in all respects

Affirmed.

      . Count I of the indictment charged conspiracy under Title 21 U.S.C., § 846 to violate Section 841(a)(1): Count II charged knowing and intentional possession of a Schedule II controlled substance, 3970 amphetamine tablets, with intent to distribute, in violation of Title 21, U.S.C., § 841(a)(1) and Title 18, U.S.C., § 2; and Count III charged knowingly and intentionally distributing the same Schedule II controlled substance, 3970 amphetamine tablets, in violation of Title 21, U.S.C., § 841(a) (1) and Title 18, U.S.C., §2.
      Since the contentions on appeal are addressed to the trial court’s sentencing discretion we cite from Title 21, U.S.C., § 841(b)(1)(B), the penalty provisions of the Controlled Substances Act in the case of a controlled substance which is not a narcotic drug. Under the conspiracy charge, Count I, as well as under each of the substantive offenses, Counts II and III, since the appellant was not shown to have a similar prior conviction, the maximum punishment for each count was a term of imprisonment of not more than five years, a fine of not more than $15,000, or both. The statute also requires as an adjunct of any sentence imposing a term of imprisonment a special parole term of at least two years in addition to the term of imprisonment. Thus at the time of the change of plea, Todd’s possible exposure in the event of conviction under Counts I, II and III was to 15 years imprisonment, $45,000 in fines, with at least six years' of special parole time to follow.

      . Counts I and II of the indictment were dismissed on the date of sentence as to Todd.

      . An additional question raised which we decline to consider, is the adequacy of the fee allowed appellant’s counsel as court-appointed attorney by the trial judge as compensation under Title 18, U.S.C., § 3006A(b), Criminal Justice Act. This appeal is not the appropriate vehicle for consideration of appointed counsel’s financial complaints. See United States v. Sullivan, 5 Cir. 1972, 456 F.2d 1273, 1275.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Curtis Leroy OWENS, Defendant-Appellant.
    No. 72-2567.
    United States Court of Appeals, Fifth Circuit.
    March 30, 1973.

      John B. McAdams, Dallas,'Tex., court appointed, for defendant-appellant.
    William S. Sessions, U. S. Atty., Joel D. Conant, Asst. U. S. Atty., San Antonio, Tex., Ronald F. Ederer, Asst. U. S. Atty., El Paso, Tex., for plaintiff-appellee.
    Before WISDOM, GEWIN and COLEMAN, Circuit Judges.
   PER CURIAM:

The defendant, Owens, appeals from his non-jury conviction for possession of heroin in violation of 21 U.S.C. § 844(a).

There is no reason to explore the dimensions of “probable cause” in airport, arrests and searches. Here Owens voluntarily agreed to accompany Customs Security Officer Harris to the office of Customs Patrol Officer Castro. Apparently Owens panicked, knocked down Castro, put a cellophane package in his mouth, and began to run away. At this point there was probable cause to arrest Owens and remove the package from his mouth. It was heroin.

Owens cannot complain that his rights were violated by his being taken to a hospital where a stomach pump was used to extract heroin. At the time he appeared to be unconscious or semi-conscious and the officers acted in good faith to prevent further harm to him. This case bears no resemblance to Rochin v, California, 1952, 342 U.S. 165, 72 S.Ct. 205, 96 L.Ed. 183.

We hold, therefore, that the district court did not err in overruling the defendant’s motion to suppress the evidence. See Rener v. Beto, 5 Cir. 1971, 447 F.2d 20.

The judgment is affirmed.


text:
    Ottis Mayo JONES, Petitioner-Appellant, v. J. D. RIGGSBY, Associate Warden, United States Penitentiary, Atlanta, Ga. Respondent-Appellee.
    No. 73-1180.
    Summary Calendar
    United States Court of Appeals, Fifth Circuit.
    March 20, 1973.

      Ottis Mayo Jones, pro se.
    John W. Stokes, Jr., U. S. Atty., Beverly B. Bates, Asst. U. S. Atty., Atlanta, Ga., for respondent-appellee.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.
   PER CURIAM:

Appellant is a federal prisoner who has complained, inter alia, that prison officials in the United States Penitentiary at Atlanta have prevented his free exercise of religion in connection with a group which he founded, styled the Equity Counselling Services, also known as the Church of Equity.

The district court denied relief relative to this claim; but deferred ruling on certain other claims set out in the appellant’s complaint. The court did not, however, make the certification authorized by Rule 54(b), F.R.Civ.P., that the ruling on the religious issue was final and appealable. Such a certificate is “a jurisdictional prerequisite for an appeal of less than all of the claims in an action.” United States v. Crow, Pope and Land Enterprises, Inc., 5th Cir. 1973, 474 F.2d 200; Fallis v. United States, 5th Cir. 1973, 476 F.2d 619. For lack of a final appealable order this appeal must be and is hereby dismissed.

Appeal dismissed.

      . It is appropriate to dispose of this pro se case summarily, pursuant to this Court’s local Rule 9(c) (2), appellant having failed to file a brief within the time fixed by Rule 31, Federal Rules of Appellate Procedure. Kimbrough v. Beto, Director, 5th Cir. 1969, 412 F.2d 981.


author: PER CURIAM.

text:
    Anthony D. DUKE, Plaintiff-Appellant, v. Joel HOCH et al., Defendants, Home Indemnity Company, Garnishee-Appellee.
    No. 71-2223.
    United States Court of Appeals, Fifth Circuit.
    Feb. 20, 1972.

      Marvin H. Gillman, Miami, Fla., for plaintiff-appellant.
    William M. Hoeveler, Miami, Fla., for garnishee-appellee.
    Before BELL, AINSWORTH and GODBOLD, Circuit Judges. .
   PER CURIAM.

By our decision in Duke v. Hoch, et al., 468 F.2d 973 (5th Cir., 1972) we reversed a judgment entered for the insurer-garnishee and remanded for further proceedings. Counsel for the appellant has filed a motion for allowance of attorney fees for his services on appeal, pursuant to Florida Statute 627.428, F.S.A. The motion is denied without prejudice to application in the trial court for fees allowable under § 627.428, for services on appeal, should the appellant ultimately “prevail.” “While he has won a round in this bout, the cause is not yet concluded in his favor, and we think that he has not yet ‘prevailed’ in the statutory sense.” Segelstrom v. Blue Shield of Florida, Inc., 233 So.2d 645, 646 (Fla.App.1970). As in Segelstrom, “should final judgment be entered for [appellant] the trial judge may then evaluate the briefs filed in aid of this appeal and determine appropriate compensation.” Id. at 646.

      . Formerly § 627.0127.


text:
    Willie Lee JOHNSON, alias Will Johnson, No. 18914-149, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 72-3669
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 23, 1973.

      Bishop W. J. Johnson, pro se.
    Donald E. Walter, U. S. Atty., Shreveport, La., for respondent-appellee.
    Before WISDOM, AINSWORTH and CLARK, Circuit Judges.

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

   PER CURIAM:

Willie Lee Johnson appeals from the district court’s denial of his motion under 28 U.S.C. § 2255 to vacate his conviction and sentence. We dismiss the appeal as not timely filed.

On July 24, 1972, the district court denied Johnson’s motion for relief under § 2255. The appellant did not file a notice of appeal or similar document until October 24, 1972, when this Court received his “petition of appeal.” This petition was later filed in the district court on November 3, 1972, as a notice of appeal. The appeal proceeded forthwith without further authorization. See Rule 24(a), F.R.A.P.

Rule 4(a), F.R.A.P., requires that notice of appeal in a case in which the United States is a party be filed within 60 days after the date of entry of the judgment or order sought to be appealed. The Rule further provides, in part, that “Upon a showing of excusable neglect, the district court may extend the time for filing the notice of appeal by any party for a period not to exceed 30 days from the expiration of the time otherwise prescribed by this subdivision.”

Johnson’s “petition for appeal” was not received by this Court until two days after the 90-day maximum period for filing a notice of appeal had elapsed. This Coiirt, therefore, has no jurisdiction to entertain Johnson’s appeal, and it must be dismissed. Tribbitt v. Wainwright, 5 Cir. 1972, 462 F.2d 600; Dunn v. Henderson, 5 Cir. 1971, 446 F.2d 1398; Bean v. Wainwright, 5 Cir. 1971, 437 F.2d 112.

Appeal dismissed.

      . The appellant has not alleged, nor does the record suggest, that his delay resulted from his “excusable neglect” or from any cause beyond his control. Cf. Tribbitt v. Wainwright, 5 Cir. 1972, 462 F.2d 600.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Richard Herman LORD, Defendant-Appellant.
    No. 72-2914.
    United States Court of Appeals, Ninth Circuit.
    March 19, 1973.
    Robert I. Deutscher (argued), Tacoma, Wash., for defendant-appellant.

      Irwin Schwartz, Asst. U. S. Atty. (argued), Thomas P. Giere, Asst. U. S. Atty., Stan Pitkin, U. S. Atty., Seattle, Wash., for plaintiff-appellee.
    Before CHAMBERS and TRASK, Circuit Judges, and SCHNACKE, District Judge.

       Honorable Robert H. Scbnaeke, United States District Judge for the Northern District of California, sitting by designation.

   PER CURIAM:

Defendant was convicted of narcotics violations. We affirm.

The evidence on entrapment being in conflict, the issue was properly submitted to the jury. United States v. Griffin, 434 F.2d 978 (9th Cir., 1970), certiorari denied sub nom. Andrews v. United States, 402 U.S. 995, 91 S.Ct. 2170, 29 L.Ed.2d 160 (1971). We decline to add to the prosecution’s burden by holding that absence of entrapment is an element of the offense charged, rather than a defense to be overcome by the prosecution like other defenses, once it is established as a legitimate issue. Cf. Pulido v. United States, 425 F.2d 1391 (9th Cir., 1970).

The trial judge’s comments to the jury, while not a model, did not, when taken as a whole constitute reversible error.

Defendant’s remaining point, pre-indictment delay, is equally without merit, United States v. Marion, 404 U.S. 307, 92 S.Ct. 455, 30 L.Ed.2d 468 (1971), even if preserved for appeal, United States v. Garcia, 422 F.2d 1301 (9th Cir., 1970).

Affirmed.

      . We cannot approve, for example, the judge’s statement, that he found defendant’s story incredible and did not believe it.


text:
    William J. LYNCH, Plaintiff-Appellant, v. PAN AMERICAN WORLD AIRWAYS, INC., Defendant-Appellee.
    No. 72-3782
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 22, 1973.

      Arthur Massey, Miami, Fla., Jon D. Caminez, Tallahassee, Fla., for plaintiff-appellant.
    Hervey Yancey, Miami, Fla., Smathers & Thompson, Miami, Fla., for defendant-appellee.
    Before JOHN R. BROWN, Chief Judge and DYER and SIMPSON, Circuit Judges.

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

   PER CURIAM:

The sole issue presented by Plaintiff-Appellant in this appeal is that the trial court erred in granting the Defendant’s motion to strike Plaintiff’s motion for a jury trial. Plaintiff contended that he was discriminatorily discharged by his employer because of his race. Shunning the support of Title VII, 42 U.S.C.A. § 2000e, Plaintiff cast his complaint under 42 U.S.C.A. § 1981. He sought essentially reinstatement with backpay plus compensatory and punitive damages. The trial court found that the gist of the complaint was equitable, and, accordingly, denied Plaintiff’s request for a jury trial. We affirm.

A claim for reinstatement is equitable in nature. The imposition of monetary damages to make the employee whole for lost backpay does not change the character of the proceeding and thereby mandate a jury trial. Harkless v. Sweeny Independent School District, 5 Cir., 1970, 427 F.2d 319; Johnson v. Georgia Highway Express, Inc., 5 Cir., 1969, 417 F.2d 1122; Smith v. Hampton Training School for Nurses, 4 Cir., 1966, 360 F.2d 577; Williams v. Travenol Laboratories, Inc., N.D.Miss., 1972, 344 F.Supp. 163. Neither may the Plaintiff —by framing his prayer under § 1981 or by making unsupported allegations for compensatory and punitive damages —unilaterally alter the genre of the proceeding.

Affirmed.


text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. NASHUA PRE-CAST CORPORATION, Respondent.
    No. 72-1339.
    United States Court of Appeals, First Circuit.
    Argued March 6, 1973.
    Decided March 16, 1973.
    Edward N. Bomsey, Attorney, Washington, D. C., with whom Peter G. Nash, General Counsel, Patrick Hardin, Associate General Counsel, Marcel MalletPrevost, Asst. General Counsel, and Leonard M. Wagman, Attorney, Los Angeles, Cal., were on brief, for petitioner.

      Julius Kirie, Boston, Mass., for respondent.
    Before COFFIN, Chief Judge, AlDRICH and McENTEE, Circuit Judges.
   PER CURIAM.

The basic question presented on this petition for enforcement is whether there was substantial evidence to support the Board’s findings. Without in any way departing from our rule that the burden of producing evidence, as distinguished from speculation, is on the Board, e. g., NLRB v. Millard Metal Service Center, Inc., 1 Cir., 1973, 472 F.2d 647; Cross Baking Co. v. NLRB, 1 Cir., 1971, 453 F.2d 1346, respondent’s criticism of the Board’s decision, 198 N.L.R.B. No. 30 (1972), cannot be viewed as of that nature. Respondent’s over-extensive briefing recites evidence which might have warranted a different result, but it does not require us to reject the evidence on which the Board relied, or the inferences it reasonably drew therefrom.

The order will be enforced.


text:
    R. L. RENKEN et al., Plaintiffs-Appellees, v. HARVEY ALUMINUM (INCORPORATED), Defendant-Appellant.
    No. 72-2564.
    United States Court of Appeals, Ninth Circuit.
    March 27, 1973.
    See also D.C., 347 F.Supp. 55.
    Arden E. Shenker (argued), Lamar Tooze, Jr., Robert M. Kerr, Portland, Ore., for defendant-appellant.
    Douglas M. Ragen (argued), Frederic A. Yerke, of Miller, Anderson, Nash, Yerke & Wiener, Portland, Ore., for plaintiff s-appellees.
    Before BARNES, MERRILL, and HUFSTEDLER, Circuit Judges.
   PER CURIAM.

This is an appeal by the defendant from an Order of the United States District Court for the District of Oregon, confirming the arbitrator’s award for the plaintiffs, after the entry of a consent decree. Error is charged against the District Court’s Order confirming the award, made on June 14, 1972, in two respects: (a) respondent’s alleged error in failure to give adequate notice; and (b) an alleged fraud in presentation of an earlier claim by a respondent.

We find no merit in this appeal, and we find it a frivolous appeal. Rule 38, Federal Rules of Appellate Procedure.

While the factual basis is not as flagrant as that in Lowe v. Willacy, 239 F.2d 179 (9th Cir. 1956), and Furbee v. Vantage Press, Inc., 150 U.S.App.D.C. 326, 464 F.2d 835, 837-838 (1972), we hold a penalty is proper against appellant.

The District Court’s Order is affirmed and the case is remanded to the District Court for the assessment of double costs to the appellees.


text:
    Glen GAFFORD, Plaintiff-Appellant, v. STAR FISH & OYSTER COMPANY, Defendant-Appellee.
    No. 72-3638
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 22, 1973.
    R. C. Edwins, Baton Rouge, La., for plaintiff-appellant.
    Robert H. Smith, Mobile, Ala., for defendant-appellee.
    Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

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

   PER CURIAM:

Plaintiff challenges the manner in which trial court required him to exercise his peremptory challenges in this civil suit. The crux of his argument is that he was forced to exercise his challenges first, and that the Defendant was allowed to exercise his challenges thereafter with full knowledge of the Plaintiff’s choices.

The manner in which peremptory challenges are to be exercised is committed to the sound discretion of the trial Judge. 28 U.S.C.A. § 1870. See Nehring v. Empresa Lineas Maritimas Argentinas, 5 Cir., 1968, 401 F.2d 767; Carey v. Lykes Brothers Steamship Company, Inc., 5 Cir., 1972, 455 F.2d 1192; Moore v. South African Marine Corporation, Ltd., 5 Cir., 1972, 469 F.2d 280. Cf. United States v. Franklin, 5 Cir., [1973], 471 F.2d 1299; United States v. Williams, 5 Cir., 1971, 447 F.2d 894, 896-897; United States v. Sams, 5 Cir., 1972, 470 F.2d 751 [1972]. Upon an examination of the record in this case we find that it does not support a conclusion that the trial court’s practice was an abuse of that discretion or resulted in any harm. We would think it better practice to require a simultaneous or alternating exercise of peremptory challenges, but we cannot say that the practice here resulted in any substantial prejudice. Of course United States v. Sams reflects that there are situations in which the procedure is wrong and merits reversal. This is not one of those situations.

Affirmed.


text:
    Mrs. Linda NEWMON, Plaintiff-Appellant, v. DELTA AIR LINES, INC., Defendant-Appellee.
    No. 72-2966.
    United States Court of Appeals, Fifth Circuit.
    March 5, 1973.
    Howard Moore, Jr., Elizabeth R. Rindskopf, Atlanta, Ga., Jack Greenberg, New York City, for plaintiff-appellant.
    Dean Booth, Michael C. Murphy, Atlanta, Ga., Sidney F. Davis, Legal Div. Delta Air Lines, Inc., Atlanta, Ga., for defendant-appellee.
    Rita Page Reuss, Cleveland, Ohio, Vivian T. Kelsey, Berea, Ohio, for Women’s Law Fund, Inc., amicus curiae..
    Before JOHN R. BROWN, Chief Judge, and WISDOM and AINSWORTH, Circuit Judges.
   PER CURIAM:

This is an appeal from the denial of a preliminary injunction in which Mrs. Newmon alleges that Delta Air Lines’ maternity leave policy violates Title VII of the Civil Rights Act of 1964 [42 U.S. C.A. § 2000e], and that as a result of that policy she suffered a loss of employee benefits including the right to reinstatement in her job at the end of the prescribed period subsequent to the birth of her child.

The record reflects that the trial court considered the importance of this question in light of the medical and industrial factors involved and concluded that the relief should await hearing on the merits. Upon applying the usual standard, we find no abuse of discretion. Johnson v. Radford, 5 Cir., 1971, 449 F.2d 115; Southern Petroleum Corp. v. Harper, 5 Cir., 1960, 73 F.2d 715.

As this is a recurring problem of great importance, we feel that the case should be remanded forthwith for trial without delay under a high priority.

Affirmed.


text:
    Herbert J. TURNER, Plaintiff-Appellant, v. Walter E. CRAVEN, Warden, Defendant-Appellee.
    No. 72-2691.
    United States Court of Appeals, Ninth Circuit.
    March 12, 1973.
    Marvin W. Friedman, San Francisco, Cal., Lonnie R. Springer, Santa Barbara, Cal., for plaintiff-appellant.
    Evelle J. Younger, Atty. Gen., Edward A. Hinz, Jr., Chief Asst. Atty. Gen., Doris H. Maier, Asst. Atty. Gen., Mark L. Christiansen, Joseph M. Cavanagh, Deputy Attys. Gen., San Diego, Cal., for defendant-appellee.
    Before CHAMBERS, HAMLEY and MERRILL, Circuit Judges.
   PER CURIAM:

Turner is a California state prisoner. He was convicted by a California state jury of felonious assault, robbery and burglary. The district court denied Turner’s petition for a writ of habeas corpus, and Turner appeals.

The victim of Turner’s crime was an elderly woman. She testified at the preliminary hearing and was subject to cross-examination. By the time of trial, however, her doctor testified and the court found that her mental and physical state made her unavailable as a witness. The transcript of her testimony at the preliminary hearing was introduced to fill the gap of her absence.

We have approved such a practice in properly limited circumstances. United States v. Harless, 464 F.2d 953 (9th Cir. 1972). Here, Turner challenges the unavailability of the witness. The finding of the state court on this issue is presumptively correct. 28 U.S.C. § 2254(d). We agree with the district court that for all practical purposes the witness was unavailable. See United States v. Allen, 409 F.2d 611 (10th Cir. 1969). The state court made a careful inquiry on this issue, and we find no reason to upset its determination.

The order appealed from is affirmed.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. Anthony Nicholas CARRION, Defendant-Appellant.
    No. 73-1171.
    United States Court of Appeals, Ninth Circuit.
    March 9, 1973.
    Victor Sherman, Beverly Hills, Cal., pro se.
    Jan Lawrence Handzlik, Asst. U. S. Atty., for William D. Keller, U. S. Atty.

       The Honorable William G. East, Senior United States District Judge for the District of Oregon, sitting by designation.

   ORDER ASSESSING PENALTY

Before CHAMBERS and WRIGHT, Circuit Judges, and EAST, District Judge.

PER CURIAM:

For failure to prosecute the appeal with due diligence, Victor Sherman, counsel for appellant, is assessed a penalty of Two Hundred Dollars under Rule 46(e), Federal Rules of Appellate Procedure. The sum is to be paid into the registry of the Clerk of the United States District Court for the Central District of California within 14 days from the date of this order.


author: RICHARD H. CHAMBERS, Circuit J udge:

text:
    James T. SHIOSAKI, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
    No. 71-1909.
    United States Court of Appeals, Ninth Circuit.
    March 14, 1973.

      James T. Shiosaki, in pro per.
    Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Stephen Schwartz, William M. Brown, Attys., Dept, of Justice, Washington, D.C., K. ' Martin Worthy, Chief Counsel, I.R.S., Washington, D.C., for appellee.
    Before CHAMBERS, HAMLEY and MERRILL, Circuit Judges.
   RICHARD H. CHAMBERS, Circuit J udge:

Shiosaki is an electrical engineer in Southern California. He has had and still has an urge to shoot craps at the Sands Hotel and other places in Las Vegas, Nevada. He seems to have had the same employer of his engineering talents for a good many years. Obviously he knows more of electricity than he knows of craps. He had large winnings in 1959, so he started to make a study of craps so that he might be more proficient and win more. But his studies have produced no apparent good results.

Since 1959 he has lost usually each year at the crap table. Doggedly he pursues this sideline, only eating up his savings, which are a fair portion of his earnings as an engineer. He has become no burden to his friends, family or banker.

In 1967, he reported winnings from some 12 trips to Las Vegas in the amount of $1300. Then he deducted $1300 as losses at the crap table, although his losses were substantially higher, in fact, $6,700 higher. The law is clear that $1300 would be all he could deduct from losses at the table. 26 U.S.C. § 165(d). But Shiosaki spent $1230 on travel and hotel expense, which for 1967 he took as a deduction. The commissioner and the tax court have disallowed this, resulting in a tax deficiency of about $400.

Shiosaki is obviously very serious and sincere. His testimony was uncontradicted. It reads as that of a gentleman. But the tax court has held that the $1230 could not be deducted as an ordinary and necessary expense paid for the production of income. It said it does not qualify under § 212(1) of the Internal Revenue Code of 1954.

There is no aspect of illegal gambling whatsoever in this case. (Even in legal gambling the normal rule is that losses are not deductible to a greater extent than profits.) Were the amount of $1230 to be found under § 212(1), the government would still disallow it because it would call it a gambling loss against the winnings, in this case already used up by losses at the table. We need not reach the latter question because we affirm the holding that the expense was not a “business” expense. The tax court listened to Shiosaki testify at length. It obviously concluded that the true motive of the trips was not predominantly to make a profit, despite Shiosaki’s positive attestation that it was. We are in an area where we cannot revise the fact finder’s finding.

Decision affirmed.


text:
    Robert W. HANSON, Appellant, v. UNITED STATES of America, Appellee.
    No. 71-3024.
    United States Court of Appeals, Ninth Circuit.
    March 12, 1973.

      Lyle C. Cavin, Jr., of Sullivan, Johnson, Graham & Cavin, San Francisco, Cal., for appellant.
    James L. Browning, Jr., U. S. Atty., San Francisco, Cal., Lawrence F. Ledebur, Chief, Admiralty and Shipping Section, U. S. Dept, of Justice, Washington, D. C., Charles Craycroft, Norman B. Richards, of McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for appellee.
    Before CHAMBERS, HAMLEY, and BROWNING, Circuit Judges.
   PER CURIAM:

Hanson sued the United States for injuries sustained when he fell through a temporarily uncovered deck opening on the S.S. St. Anyuskinu Victory, a vessel owned by the government. Hanson was a crewman at the time of the incident.

This case presents issues of seaworthiness of the vessel, negligence of the crew, and Hanson’s contributory negligence. All these issues involve questions of fact which, in this case, could have been decided either way. The district court found for the government, however, and we are not to upset its findings unless we find that they are clearly erroneous. Gertz v. McCarty, 450 F.2d 1104 (9th Cir. 1971). The judge could reasonably infer that a “comealong” remained in place while a ship’s engineer made a brief trip to the machine shop to get some tools. The judge could also have found, as he did, that the crew was not negligent, and that Hanson was negligent in stepping backward into the opening of which he was aware.

The judgment is affirmed.


text:
    Martha J. COPLEY, Plaintiff-Appellant, v. Elliot RICHARDSON, Secretary, Health, Education and Welfare, Defendant-Appellee.
    No. 72-1704.
    United States Court of Appeals, Sixth Circuit.
    Argued Jan. 30, 1973.
    Decided March 20, 1973.

      Richard Carter Irvin, Columbus, Ohio, for plaintiff-appellant; Roy F. Martin, Donna Christy Baker, Legal Aid & Defender Society, Columbus, Ohio, on brief.
    Grayce Ruehlman, Asst. U. S. Atty., Cincinnati, Ohio, for defendant-appellee; William W. Milligan, U. S. Atty., W. Robinson Watters, Asst. U. S. Atty., Columbus, Ohio, on brief.
    Before EDWARDS, KENT and LIVELY, Circuit Judges.
   PER CURIAM.

Plaintiff-appellant appeals from an order entered by a District Judge affirming the Secretary of Health, Education and Welfare’s denial of child benefits under § 202(d)(1)(B) of the Social Security Act, 42 U.S.C. § 402(d) (1)(B) (1970), which provides benefits for a child (of an insured person) who is under a disability which began before the child attained the age of 18.

The Hearing Examiner, whose findings of fact were accepted by the appeals counsel and by the District Judge, summarized the disability record as follows:

The record shows that this claimant has had at least eight periods of hospitalization. She was first hospitalized for a period of six months in 1941, and, thereafter, was hospitalized from January to June 1942; for a period of time in 1947; for some time in 1956; from May to August 1959; from December 1960 to April 1963; from August to December 1968; and from May to October 1969. The diagnosis submitted by the Columbus State Hospital in December 1969 was chronic brain syndrome, non psychotic organic brain syndrome with epilepsy. The hospital record shows that she was subject to depression and suicidal ideas, and that she was prone to outbursts of temper and hostility.
The Hearing Examiner wishes to state, at this point, that this claimant has a significant problem, which had its onset prior to age 18.

Subsequent thereto, however, the Hearing Examiner found that over a period of seven years appellant had demonstrated “an ability to perform substantial gainful activity” by working part-time at a restaurant and by working as a part-time maid at the home of her employer “for all of which she is paid at the rate of $1.25 an hour and earns approximately $30 a week.”

These findings we hold to be unsupported by substantial evidence in this record. We note that appellant appeared alone before the Hearing Examiner, without benefit of legal counsel, and responded to questions which called for a description of the sorts of work she performed and the hourly rate she was paid therefor. The Hearing Examiner, however, made no inquiry as to her weekly, monthly, or yearly earnings, or the impact upon her earnings of the repeated periods of hospitalization, or the impact upon her employment of her seizures, depression, suicidal ideas and attempts, and outbursts of temper and hostility.

The concepts of justice and equality upon which this nation is founded do not suggest that a quasi-judicial officer of this government should undertake to employ expert questioning to write a record exclusively favorable to the government’s side of the case when he is on notice that the claimant for social security benefits is totally alone, mentally ill, and unrepresented by legal counsel. Particularly is this true when, as here, the hearing officer is also on notice that there are facts strongly favorable to her claim which he has not seen fit fully to explore.

The employment relied upon by the Hearing Examiner as evidence of claimant’s capacity for substantial gainful activity is clearly one where the employer would be required to file Social Security earning reports. Under these circumstances, we believe that Exhibit 9, which the Hearing Examiner had introduced in this record, takes on added significance. This Social Security “earnings certificate” shows that appellant earned a total of $1,943.58 between the years 1936 and 1969. In many of these years the report shows no earnings at all. It shows 1967 to have been claimant’s highest year of earnings, with $822. The next highest year was 16 years earlier, in the year 1951, when she earned $296.77.

Section 6403 of the Claims Manual of the Social Security Administration deals with substantial gainful activity (SGA). Subsection 6403(c), entitled “earnings of less than $90 per month,” reads:

Where average monthly earnings arc less than $90 a month, an assumption may be made that the work is not SGA in the absence of evidence to the contrary. This assumption may be made for both sheltered and nonsheltered employment.

We believe that the administrative record in this case, taken as a whole, demonstrates a lack of substantial evidence to support the findings of fact of the Secretary and impels a reversal and remand for the award of disability benefits.

Although not essential to that conclusion, the following questions and answers between the Hearing Examiner and the claimant help to illustrate the nature and extent of the underlying disability:

Q: Well now, Miss Copley, assume that you were offered full time employment as a domestic instead of working part time, what would be your difficulty?
A: Well, my main difficulty is my education in getting any regular work.
Q: I’m talking about work as a domestic employee like your’re doing now, except on a full time basis.
A: Well, people won’t hire me when they find out I’m an epileptic. You mention epileptic and they won’t hire you ’cause they are afraid of you, ’cause I have a grand-mal kind of epilepsy and I pass out and foam at the mouth and jerk, and I don’t remember. I sometimes come out fighting.
Q: Do you still have these epileptic seizures ?
A: Oh yes.
Q: How often do you have them?
A: Now, I’ve only had two in four years, but that's because the state hospital changed my medicine.
Q: So it’s pretty well controlled ?
A: It’s getting that way but the doctor thinks that I'm in the change of life, but they think that I might go mentally insane by the time I go through the change of life.
Q: Is this what they told you?
A: Uh huh, if I didn’t keep active, and since my family won’t have nothing to do with me, I raise birds.
Q: Why won’t your family have anything to do with you?
A: Well, they have been ashamed of me all my life. I’ve had one brother tried to choke me twice.
Q: What kind of birds do you raise ?
A: I’ve got a canary, paul parrot, finch, and a parakeet.
Q: You like raising birds?
A: Yes.
Q: Do you train them?
A: No, I just feed them and just love to hear them holler, because I don’t have anyone to talk to, and in the summer I’d take out walks in the woods, just to see the animals because people won’t have nothing to do with me.

The judgment of the District Court is reversed. The case is remanded to the District Court for the entry of an order awarding disability benefits claimed in this proceeding.


author: ANDERSON, Circuit Judge:

text:
    BRIARCUFF CANDY CORPORATION, (formerly Loft Candy Corporation), Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.
    No. 465, Docket 72-1755.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 13. 1972.
    Decided March 12, 1973.

      John J. Yurow, Washington, D. C. (John Harllee, Jr., and Arent, Fox, Kintner, Plotkin & Kahn, Washington, D. C., on the brief), for appellant.
    William S. Estabrook, III, Tax Division, Department of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, and Ernest J. Brown, Tax Division, Department of Justice, Washington, D. C., on the brief), for appellee.
    Before KAUFMAN, ANDERSON and OAKES, Circuit Judges.
   ANDERSON, Circuit Judge:

This is an appeal by Briarcliff Candy Corp. (taxpayer), formerly Loft Candy Corp. (Loft), from a decision of the Tax Court which held that substantial expenditures made by Loft in the tax year July 1, 1961 to June 30, 1962, in developing a market for the sale of its candy to wholesale customers were made to acquire a capital asset, 26 . U.S.C. § 263(a)(2), and not deductible as ordinary and necessary business expenses under 26 U.S.C. § 162(a).

The Loft Candy Corp. and its predecessors had, since late in the 19th century, engaged in the manufacture and sale of candy and confectionery products. More than 80% of its sales were made through its own retail stores, and the rest were through wholesale customers. Its retail stores were located in the thickly populated urban centers in the northeastern part of the country.

During the 1950's there began in this country, particularly in the northeast, a major demographic phenomenon in the form of a population shift of thousands of people from the urban centers to the suburbs. This gave and has continued to give rise to very serious problems for municipal, state and the federal governments, many of which still remain unresolved. The social and economic consequences have been far reaching; and urban centered businesses, large and small, have been compelled to take measures to meet the change, in the interest of survival.

In response to the effect of this exodus, the taxpayer at first sought to retain the numbers of its customers by opening retail candy stores in the suburbs but each such outlet could only attract a fraction of the sales volume achieved by the stores in the urban centers, which resulted in proportionately higher operating cost and a lower profit margin. Its operating profits for the fiscal years ending June 30, or thereabouts, of 1958 through 1961 were as follows:

In the latter part of 1961 taxpayer’s management instituted a program of soliciting independently operated retail outlets such as drugstores, card stores and the like, to include in their businesses the retail sale of Loft’s candies. Taxpayer, in its own organization, set up a separate “franchise” division headed by a vice president and staffed with a sales manager, several salesmen and clerical personnel. Its task was to persuade these storekeepers to take on the retail sale of Loft’s candies, to enter into agency or franchise contracts with them, specifying the terms under which candy would be furnished at wholesale by taxpayer and handled and sold by the retailer, and to see that the contracting stores were properly serviced and had a proper flow of merchandise. In each of these contracts the retail store proprietor agreed to set aside a space in the store for refrigerating display and storage counters at his own expense, to be exclusively devoted to the sale of Loft candies, and to use his best efforts to sell these candies to his customers. Taxpayer agreed to supply the retailer with its candies at a discount from retail prices and to assist the proprietor in setting up and operating the facility. It also agreed not to enfranchise a competing drugstore within a specified area. The contracts remained in operation for terms varying from one to five years and after the initial term, it was to continue from year to year unless terminated by one party giving 30 days notice to the other.

Beginning in the latter part of 1961, the franchise division of the taxpayer embarked upon an extensive advertising campaign. It advertised in drugstore trade journals and circularized proprietors by mail to interest them in becoming a retail outlet for taxpayer’s products. In the tax year ending June 30, 1962, it mailed circulars, with attached reply cards to 50,000 independent drugstores. The 2,000 response cards received were followed up by telephone calls and personal visits by salesmen. By June 30, 1962, 600 appointments were arranged and 159 contracts were entered into.

The net expenses incurred by the taxpayer in operating the franchise division for the taxable year ending June 30, 1962 were $332,869. The Commissioner divided the items making up this total into two categories of expenses which he labeled, “Promotional Expenses” and “Recurring Operational Expenses.” The promotional expenses aggregated $212,028, and these he disallowed as part of taxpayer’s claimed net operating loss carry back from the taxable year ended June 30, 1962 to the taxable year ended June 27, 1959. The Commissioner’s action was upheld by the Tax Court and the taxpayer has appealed. We reverse.

On May 3, 1971 the taxpayer sold its business to Barricini Stores Inc. The history of taxpayer’s franchise division between year ending June 30, 1962 and the date of the sale of the business is significant and of interest. The following shows the agencies opened and closed during each year through June 1968, and the number in operation at the end of each year through June, 1969:

Of the original 159 agencies in operation on June 30, 1962 about 120 were continuing to sell Loft’s candies on June 28, 1969. The taxpayer’s management, however, decided by January 1, 1969 that the returns from the franchise division were not sufficient to compensate for the administrative problems and particularly the restrictions (such as territorial restrictions) with which it was burdened under the agency contracts, and it therefore determined to terminate the agency contracts as soon as it could under their terms. The entire expenditures for and efforts of the franchise division made very little change in net sales. In the fiscal, years 1958 through 1970 the net sales were as follows:

NET SALES

As of the fiscal year ending June 28, 1969, Loft’s divisional sources of sales were as follows: 66% came from 250 company operated retail candy shops; 18% from 1,640 agency stores; 8% from 160 department stores and candy shops; and 8% from other outlets.

When the taxpayer sold its business to Barricini Stores Inc. it was paid $10,000 for a group of assets made up of trademarks and tradenames, usable inventories, customer lists, agency contracts, manufacturing formulae, standards, guidelines and other production know-how, and a portion of its plant equipment and machinery.

The Commissioner concluded that the taxpayer’s expenditures of $212,028 in 1962 were for capital assets “consisting of 159 valuable franchise contracts.” But in 1971, in the sale of the business, 179 of some of the same and similar franchise or agency contracts brought only a fraction of $10,000. The $212,-028 were only those described by the Commissioner as promotional expenses. The total expenses of the franchise division for 1962 amounted to $332,869. Nor was that the end of this kind of outlay. In subsequent full years through June 30, 1970, it was necessary to pay out an average in excess of twice what was spent in the half year ending June 30, 1962, in order to hold onto most of the contracting storekeepers and add new ones. The yearly totals were as follows:

Taxpayer’s management considered that these expenses were annually recurrent and did not result in the acquisition of permanent capital assets. In spite of these large expenditures the net sales, as noted above, remained about the same while the net income declined. '

The Commissioner regarded taxpayer’s effort to maintain its sales and profits by seeking to recapture its customers who had moved to the suburbs as creating, in the franchise division, a distribution system for its products involving the securing of valuable agency contracts with druggists and other storekeepers which were capital assets, and that therefore the expenditures made in acquiring them were not deductible as “ordinary and necessary expenses paid or incurred in the taxable year in carrying on any trade or business.”

The case principally relied upon by the Commissioner and the Tax Court is Houston Natural Gas Corp. v. Commissioner, 90 F.2d 814 (4 Cir.), cert. denied, 302 U.S. 722, 58 S.Ct. 43, 82 L.Ed. 557 (1937). Prior to 1927, Houston Gas & Fuel had a monopoly on the gas business in Houston. The taxpayer, Houston Natural Gas was engaged in the sale of gas in areas other than the City of Houston. Upon receiving permits for the construction of gas lines in Houston, Houston Natural Gas sold all its properties, except those in the suburbs of Houston and in Pasadena. Houston Natural Gas and Houston Gas & Fuel then began a prolonged and viciously fought battle for the gas business of Houston. One of Houston Natural Gas’ methods was the employment of armies of solicitors charged with the duty of keeping established customers happy while securing new ones. It also offered free installation of service lines between consumers’ residences and the company’s distribution system. The issue was the deductibility of the salaries and expenses of the solicitors, and the expenses incurred in installing the service lines.

The Court of Appeals affirmed the Commissioner’s and the Tax Court’s rulings that these had been capital expenditures because they constituted “[t]he acquirement of something of permanent use or value in the business,” 90 F.2d at 816, quoting Gauley Mountain Coal Co. v. Commissioner, 23 F.2d 574, 576 (4 Cir. 1928), which consisted of (1) new customers, (2) good will, and (3) elimination of competition. The Houston Natural Gas case is cited by the Commissioner as an example of the application of a long standing principle of the Tax Court that “. . . expenditures made for benefits which are to be enjoyed for a period extending beyond the year in which they are made should be capitalized.” The Commissioner recited this as the general rule governing the decision in the present case. He further asserts that this rule will transmute expenses which would otherwise be “ordinary” under § 162 and therefore deductible, into non-deductible capital expenditures. The Commissioner also cites the Houston Natural Gas case as establishing the proposition that “. . .an intensive campaign to get new customers at any time gives rise to capital expenditures,” which he asserts also applies to the present case.

The Government’s brief mentioned Mountain Paper Products Corp. v. United States, 287 F.2d 957 (2 Cir. 1961), as a decision which supports its concept of what a capital asset is. But that case concerned the acquisition of an entire business. There can be little doubt that Houston Natural Gas acquired a capital asset when it drove Houston Gas & Fuel Co. into receivership and took over the monopoly of the gas business in Houston. It is also well settled that where one company acquires another separate and distinct business entity, the cost of taking it over is a capital expenditure and not deductible under § 162. Similarly there is a capital expenditure where the taxpayer adds to its regular business of making and selling a product, a new branch or division designed to make and sell a different product. Of course, the tangible assets, such as buildings and equipment, newly put into such branch or addition, regardless of product, are capital additions. Also, a reasonable proportion of the wages and salaries of employees who spend some of their working hours laboring on the acquisition of the company’s new division, are allocable under Internal Revenue regulations to the new division, and therefore are chargeable to capital and not deductible. See 26 C.F. R. § 1.266-1 (e).

Where however, the contributing factor is intangible and it enhances an intangible capital asset of the new division of the same established company, the boundary line between a taxable capital asset and a deductible ordinary and necessary expense, incurred in carrying on a business, becomes imprecise.

In the present case the taxpayer used its sales personnel to solicit storekeepers, mainly druggists, as retail sellers of Loft candy. Though the sales group was called the “Franchise Division,” it was a part of the sales department of the company. The product sold was the same, it was also sold and for many years had been sold through the company-owned or leased retail outlets and through department stores and other business establishments. Loft was by long established policy both a wholesaler and retailer. It suffered a continuing loss of business when there was an exodus of many city dwellers to the suburbs; and it sought, through sales in the suburbs, to stem the flow of losses.

The Commissioner relies on what he describes as “valuable franchise contracts with druggists” which provided the taxpayer with a certain suburban market for the duration of the contracts. The lack of substance in this concept will be discussed later on. Every new idea and every change of method in making sales, even in promoting special sales or developing new sales territory, do not require that the expenses connected with the operation be non-deductible under § 162. While the quotation taken by the Commissioner from Houston Natural Gas that “an intensive campaign to get new customers at any time gives rise to capital expenditures” may be valid enough if confined to the facts of that case, it is not acceptable as an unqualified general rule. In fact, expenditures by an already established and going concern in developing a new sales territory are deductible under § 162. Rev.Rul. 56-181.

In reviewing the action of the Tax Court we have in mind that we said several years ago that “[t]he line between capital and current expenses is often a difficult one to draw, and Courts of Appeals should not overturn decisions of the Tax Court on this question unless they are manifestly wrong.” Seas Shipping Co. v. Commissioner, 371 F.2d 528 (2 Cir.), cert. denied, 387 U.S. 943, 87 S.Ct. 2076, 18 L.Ed.2d 1330 (1967). We are of the opinion, however, that manifest error was committed in this case. The Tax Court rests its decision squarely on the fact that some of the agency agreements continued in effect for terms exceeding a year, and that therefore the expenses connected with the procuring of the agreements were not “ordinary” but capital in nature and could not be deducted under § 162.

Prior to 1971 this was an often repeated and generally applied standard. The Supreme Court, however, in the case of Commissioner v. Lincoln Savings & Loan Ass’n, 403 U.S. 345, 354, 91 S.Ct. 1893, 1899, 29 L.Ed.2d 519 (1971), held,

“. . . [T]he presence of an ensuing benefit that may have some future aspect is not controlling; many expenses concededly deductible have prospectivé effect beyond the taxable year. What is important and controlling, we feel, is that the [premium] payment serves to create or enhance for [the taxpayer] what is essentially a separate and distinct additional asset

This has brought about a radical shift in emphasis and directs the inquiry in the present case to the question whether or not Loft, in advertising and soliciting drugstores and others to act as agents for the sale of its candies, and in making written agreements with them to function in that capacity, “created or enhanced for [itself] what [was] essentially a separate and distinct additional asset.” The Commissioner claims it did because the expenditures made, the deductibility of which is now at issue, resulted in the creation of “valuable franchise contracts which assured Loft of a certain suburban market for the terms of the agreements.” He also, in effect, claims that the ways and means adopted by Loft to bring about this result, in themselves, point to the creation of a capital asset; these are such things as Loft’s creation of a separate division to seek and procure sales outlets for its candies in the suburban area, the assertion that this was an intensive campaign to get new customers, the advertising addressed, not to ultimate consumers, but to the drugstore owners and other storekeepers, and the fact that Loft had suffered a decline in operating profits and was seeking to block the continuing erosion — a fact which, he asserts, brings the case within the prohibitions against deduction provided in § 263(a)(2).

Taking up first the foregoing ways and means which allegedly indicate the creation of a capital asset, the changes which Loft made in its own internal organization to spread its sales into a new territory were not comparable to the acquisition of a new additional branch or division to make and sell a new and different product. Loft, in spite of its own talk about an additional division and the entering into franchise contracts, was doing no more than stimulating its sales department to stem the downward course of sales by making Loft’s candy available in the suburbs to a class of customers who had moved there from the cities where they had been purchasers of. its candy. It was selling exactly the same products it had sold for decades.

Loft added some personnel to its sales force and advertised extensively. The Commissioner concluded that these measures constituted “an intensive campaign to get new customers” which, ipso facto, according to Houston Natural Gas, “give rise to capital expenditures.” With this we disagree. Every business entity, to remain viable, must continue to promote the sale of its product. The Tax Court, however, has enunciated as the law, a portion of Northwestern Yeast Co., 5 B. T.A. 232, 237 (1926), which says:

“There can be little doubt in the minds of reasonable men fairly acquainted with modern business that promotion expenditures like those before us have a significance similar to the investment in more tangible assets. They fertilize the field for new production. Generally and theoretically, therefore, it is safe to say that some part of the cost of a campaign or system of promotion may be of permanent significance and may be regarded as a capital investment rather than a deductible expense.”

If this is so, then it is incumbent on the legislative authorities making the statutes and the implementing regulations to furnish clear standards and guidelines as to what intangible assets are deductible under § 162 and what are not.

At present it is anybody’s guess. What for example is “an intensive campaign to get new customers”? If Loft had added a half a dozen salesmen to its sales department and sent them on a house-to-house canvass in a new territory, taking orders for candy, would that be an “intensive campaign” ? If not, would the addition of 100 new salesmen using house-to-house solicitation and a large amount of advance advertising in the new territory fulfill the term? If this is a matter of degree, as in many instances the rulings seem to indicate, at what point does the quality or quantity of new and perhaps different sales and promotional activity cease to be deductible under § 162 and become a capital expense?

The uncertainty concerning the allocation, and consequently the deductibility, of the intangible contribution of a salesmen’s wages or salary is illustrated by Revenue Rulings 68-561 and 69-331.

The first of these concerned the activities of a gas utility company in promoting the construction of “all gas” houses. Special salesmen were sent out to solicit construction companies; also cash allowances were offered to participating contractors, and these efforts were accompanied by an advertising campaign. The offering of cash allowances were held to be a capital expenditure, but the salaries of the salesmen and the cost of advertising were held to be deductible.

In the second of these rulings, 69-331, a gas utility gave bonuses and commissions to its own salesmen who were successful in soliciting consumers to lease gas-operated heaters. The same awards were given dealers and plumbing contractors for persuading consumers to lease the heaters. The bonuses and commissions were held non-deductible.

Why salaries for solicitors for “all gas” houses are deductible, but those of solicitors for gas water heaters are not, is not readily apparent.

The Commissioner attempted to shed some light on the distinction between the two rulings by explaining that “all gas” homes (and the advertising) were “less directly and significantly productive of assets having a value extending beyond the taxable year in which paid or incurred.” If further elucidation were possible, it would certainly be welcome.

The Tax Court says:

“The expenses incurred by petitioner in its drugstore solicitation program were not advertising directed at the promotion of its product but advertising directed at establishing new channels of distribution for that product and therefore would not be 'ordinary’ within the meaning of § 162(a).”

In effect, this would permit a retailer dealing with ultimate consumers to deduct its advertising and promotional expenses in seeking and acquiring new customers, but deny similar tax treatment to a wholesaler whose customers are retailers. This is plainly a most unjust and unequal interpretation of the law, unsupported by legislative, regulatory or judicial authority. All sellers, whether at a wholesale or retail level, must be treated alike — in the absence of the acquisition of a capital asset, their expenses for advertising and promotion should be deductible under § 162.

The Tax Court in its explanation of the kind of an “outlet” which is a capital asset, which it asserts Loft acquired through the so-called “franchise agreements”, said,

“In numerous cases we have' held that where a taxpayer purchases new outlets for the sale of its products, whether or not those outlets are acquired as a part of a going business, the asset acquired is a capital asset and the payment for acquiring the new outlets must be capitalized. See Manhattan Co. of Virginia, Inc., 50 T.C. 78 (1968). In the instant ease petitioner acquired new outlets through its own efforts as distinguished from acquiring these assets by purchase. The fact that a capital asset is built or developed through the taxpayer’s own efforts does not change the nature of the expenditures necessary to acquire the asset. See Ben Perlmutter, 44 T.C. 382 (1965), aff’d, 373 F.2d 45 (C.A. 10, 1967), in which we held a portion of overhead expenses, including officers salaries, other overhead salaries, depreciation, insurance, legal and audit expenses, office expenses, truck expenses, and costs of utilities to be allocable to the construction of shopping center buildings and required that the allocable portion of such expenses be capitalized.”

It is obvious that the court is talking about intangible contributions to tangible assets; not intangible contributions to intangible assets. It speaks in words such as “built or developed” and “construction of shopping center buildings”. In the foregoing discussion it is fully recognized that an intangible contribution to tangible assets, such as a company’s engineer’s supervision of the construction of a particular section of a new factory building, makes his salary, or a proportionate part of it, a capital expenditure connected with the building of the factory. If, however, the sales manager of an ongoing concern has contributed 25% of his time to devising a new or different method of attracting customers and selling candy, i. e. an intangible asset to his company, the deductibility or non-deductibility of that 25% of his salary turns upon the question of whether or not the new method is a capital asset and therefore non-deductible. It is a capital asset if at the time it is furnished to the company, it has an ascertainable and measurable value — that is, a value in money or a fair market value. It is not enough that it may have a favorable expectancy or that in the course of its use it increases sales and produces income.

Reverting to the Tax Court’s discussion of new outlets, it said,

“In the instant case petitioner acquired new outlets through its own efforts as distinguished from acquiring these assets by purchase. The fact that a capital asset is built or developed through the taxpayer’s own efforts does not change the nature of the expenditures necessary to acquire the asset.”

The claimed distinction between outlets which are “purchased” and those which are “acquired through the taxpayer’s own efforts” is practically meaningless. The phrase “acquired through the taxpayer’s own efforts” is not recognized in the law as descriptive of a particular set of legal relations or interests. It certainly could embrace a purchase. Supposedly Loft could have leased, for a term of several years, floor spaces in the drugstores together with the refrigerating display eases. These facilities would have been “outlets acquired by its own efforts,” but the rent under the leases would have clearly been deductible, 26 U.S.C. § 162(a)(3), and nothing about them would have been a capital asset, unless a lease was assigned to another at a profit. 4A Mertens, Law of Federal Income Taxation § 25.27 (1972).

The Commissioner also urges that the deductibility of the advertising and promotional expenses in this case are prohibited by § 263(a) because Loft, by undertaking “an ambitious new distribution program,” was seeking to make up for its drop in sales and the subsequent decline of operating profits. This section says,

“No deduction shall be allowed for any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made.”

The section is couched in terms which refer to tangible capital assets such as consumable resources or tools, structures, or machinery which wear out and for which depreciation has already been taken. It may also be applied to intangible assets provided they have an ascertainable and measurable value in money’s worth, so that they are no longer regarded as an expense but as a distinct and recognized property interest. Commissioner v. Lincoln Savings & Loan Ass’n, supra, 403 U.S. at 354-355, 91 S.Ct. 1893.

The interpretation and application of the statutes and regulations with regard to tangibles in deciding whether a particular expenditure is for repairs or for a capital addition of improvement are sometimes difficult, but guidelines have been established which give a taxpayer clues as to what is correct and what is not.

In the realm of intangibles, however, the rulings and decisions are in a state of hopeless confusion particularly where the issue concerns an intangible contribution (such as a salesman’s work-product) to an intangible asset (such as his company’s position in the market). Many decisions in this area rest upon administrative fiat, fortified by the requirement that the taxpayer show clear error. The Commissioner in the present case resorted to such nebulous phrases as “an intensive campaign to get new customers” and “an ambitious new distribution program” to define what a capital asset was in the circumstances of the case. But practically all businesses are constantly seeking new customers and pursuing a distribution program. When are the wages and salaries of its employees who take care of these things capital expenditures and non-deductible and when are they current expenses and deductible under § 162? The taxpayer, who may be exposed to interest and penalties for guessing wrong, is entitled to reasonably clear criteria or standards to let him know what his rights and duties are. As matters stand, the following quotation alluded to by a court of appeals of another circuit, which was wrestling with this general area of federal income tax law, is pertinent,

“This kind can come forth by nothing, but by prayer and fasting.”

The remaining point for discussion concerns the so-called “franchise agreements”. According to the Commissioner, Loft, by these instruments acquired capital assets, to wit: “159 new franchise outlets, innumerable new suburban customers, and the good will attendant to such acquisition, and assurance of a suburban market for at least the duration of the initial term of the contract.

The Tax Court decision and the claims of the Commissioner on this appeal rest principally on the fact that the franchise or agency agreements provided benefits which Loft would enjoy for a period extending beyond the year in which they were made, and that, even if the payments made by Loft were otherwise ordinary within the meaning of § 162, the fact that the agreements were effective for more than one year make them capital assets. The Supreme Court, however, in Lincoln Savings & Loan, supra, held that the factor that an ensuing benefit may have some future aspect is not controlling, as the Tax Court has made it in the present case. The Supreme Court said that what was important and controlling was that the expenditures served to create or enhance for the taxpayer what is. essentially a separate and distinct additional asset.

The Tax Court and the Commissioner argue that the franchise or agency agreements were in their nature valuable capital assets. We are of the opinion, however, that a review of the evidence, including an analysis of these agreements, does not furnish support for this conclusion. As there is no special statutory definition of “capital asset” which is applicable to their use in connection with §§ 162 and 263, the words must be taken in their usual and customary business sense as items of ownership of a permanent or fixed nature which are convertible into cash. In the first place the agreements gave Loft no property interest whatever in the small space occupied by the twelve foot display case or the storage area or the advertising features, or in the case itself. Title, possession and control remained in the store owner. Loft did not even have a leasehold interest. If it had acquired the stronger and more fixed attributes of a lease, it still would not have been a capital asset and the rent it paid would have been deductible under § 162. Where an outlet is procured through a lease or an agreement, such as those made here by Loft, the value of such limited use as Loft had in the outlet does not extend beyond the consideration which Loft, as the user, had to pay for it under the agreement. Loft paid by recognizing the store owner as a retailer for its candy, by giving him a commission on his retail sales, by according him the exclusive right (with a few minor exceptions) to carry on the retail sale of Loft’s candies within a specified area around his store, by providing the product and by giving necessary training and advice concerning sales and advertising.

In return Loft had the store owner’s promise to install at his own expense a certain type of refrigerating display case and storage area to show certain advertising material, to set aside an area of floor space for the case and advertising matter where no other candy but Loft’s could be sold, and to permit Loft to inspect the area and case and to control his advertising. He was also to use his best efforts in selling Loft’s products. The store owner did not agree not to sell similar candy products of other manufacturers in the remainder of the store. He did not agree to sell any minimum amount of candy nor did he guarantee any amount of sales.

There is nothing in the substance of these contracts which is distinguishable from a contract of employment for a term of a year or years. The store proprietors simply became retail sales, agents of Loft on a commission-paid basis. The expenditures at issue in the case are ordinary recruiting costs to enlist sales agents for a long established concern, and to seek sales agents for its usual and regular product. As such, they are deductible. See Queen City Printing Co. v. Commissioner, 6 B.T.A. 521 (1927); Hearing before Senate Finance Committee on the Deductibility of Travel and Entertainment Expenditures, 88th Cong. 1st Sess., p. 59 (1963) (Testimony of Mortimer Caplin, Commissioner of Internal Revenue).

The Commissioner claims that each of the so-called franchise or agency agreements produced capital assets of “innumerable new suburban customers, good will and assurance of a suburban market for at least the duration of the initial term of the contract.” But these results are no different from what a number of good commission-paid salesmen in the same territory would have achieved and such commissions are clearly deductible under § 162. Loft did not acquire any new separate and distinct additional asset in these agreements.

For these reasons we hold that the decision of the Tax Court was manifestly wrong. We also hold that the Tax Court erred in failing to consider and apply the governing principle of law.

By late 1961 and early 1962 it was reasonably clear to the Loft Candy Corporation that the population shift had brought about continuously declining sales and a progressively shrinking net income. In order to stem the downward flow, protect its investment and continue in business, Loft was compelled to increase its sales, and it sought to do so by making its product more readily available to those who had moved to the suburbs.

The facts of this case bring it squarely within the long recognized principle that expenditures for the protection of an existing investment or the continuation of an existing business or the preservation of existing income from loss or diminution, are ordinary and necessary within the meaning of § 162 and not capital in nature. Allen v. Commissioner, 283 F.2d 785, 790-791 (7 Cir. 1960); Lutz v. Commissioner, 282 F.2d 614, 617, 620 (5 Cir. 1960); Van Iderstine Co. v. Commissioner, 261 F.2d 211, 213 (2 Cir. 1958); Commissioner v. Surface Combustion Corp., 181 F.2d 444, 447 (6 Cir. 1950); United States v. E. L. Bruce Co., 180 F.2d 846, 848-849 (6 Cir. 1950); Lincoln Electric Co. v. Commissioner, 162 F.2d 379, 383 (6 Cir. 1947), reconsidered on other grounds, 176 F.2d 815 (6 Cir. 1949), cert. denied, 338 U.S. 949, 70 S.Ct. 488, 94 L.Ed. 586 (1950); Dunn & McCarthy v. Commissioner, 139 F.2d 242, 244 (2 Cir. 1943); Helvering v. Community Bond & Mortgage Corp., 74 F.2d 727, 728 (2 Cir. 1935); A. Harris & Co. v. Lucas, 48 F.2d 187, 189 (5 Cir. 1931); Snow, 31 T. C. 585, 593 (1958). See also, Young & Rubicam, Inc. v. United States, 410 F.2d 1233, 1243, 187 Ct.Cl. 635 (1969); Carl Reimers Co. v. Commissioner, 211 F.2d 66, 68 (2 Cir. 1954); Robertson v. Steele’s Mills, 172 F.2d 817, 821 (4 Cir.), cert. denied, 338 U.S. 848, 70 S.Ct. 86, 94 L.Ed. 519 (1949).

The decision of the Tax Court insofar as it holds that the $212,028 expended by taxpayer in the tax year 1962 was not deductible is reversed and the case is remanded for modification of the judgment accordingly.

      . Expenses of Loft’s franchise division for fiscal year 1962:

      . When the impact of inflation is removed from these figures, the decline of Loft’s non-franchise sales is even more clearly demonstrated: •
      NET SALES
      [Constant (1958) Dollars]

      . Loft Candy Corporation net income:

       Before Taxes and Extraordinary Items.

      . Payments made to a landlord or to the lessee of an existing lease, over and above the amounts stipulated as rent by one seeking to acquire a lease are, of course, capital expenditures. 4A Mertens, Law of Federal Income Taxation, § 25.27 (1972).

      . The meagerness of Loft’s rights under these contracts made them only marginally enforceable. At most, Loft could have sought to enforce a drugstore proprietor’s vague promise to use his “best efforts” in selling the candy, which might be satisfied simply by his keeping his store open during normal business hours and refraining from overtly criticizing Loft’s products. In effect, by these contracts Loft acquired little more than an expectation or hope of future sales. While the druggists’ promises to dedicate certain minimum space to their Loft candy departments created a degree of mutuality which is a step beyond that which existed in the contracts considered in Willard, Sutherland & Co. v. United States, 262 U.S. 489, 43 S.Ct. 592, 67 L.Ed. 1086 (1923) and Van Iderstine Co. v. Commissioner, 261 F.2d 211 (2 Cir. 1958), we do not believe this minor additional factor is sufficient to justify our concluding that Loft purchased some intangible capital assets by these contracts. See Van Iderstine Co. v. Commissioner, supra, 261 F.2d at 212-213.


text:
    H. E. JUELICH, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
    No. 72-3530
    Summary Calendar.

    United States Court of Appeals, Fifth Circuit.
    March 22, 1973.
    H. E. Juelich, pro se.
    Charles S. White-Spunner, U. S. Atty., Irwin W. Coleman, Jr., Asst. U. S. Atty., Mobile, Ala., for defendant-appellee.
    Before THORNBERRY, GOLDBERG and RONEY, Circuit Judges.

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

   PER CURIAM:

Petitioner, Herbert E. Juelich, appeals from the District Court’s denial of his motion to vacate sentence, brought pursuant to 28 U.S.C. § 2255. We find that' petitioner’s contention, that his constitutional right to due process was denied when evidence stemming directly from an “illegal” autopsy was admitted at his trial, was considered and ruled upon in 1963 at an evidentiary hearing held pursuant to an earlier § 2255 motion. At that time, the District Judge rejected petitioner’s contention, and we affirmed, Juelich v. United States, 5 Cir. 1965, 342 F.2d 29, 31. The District Court correctly rejected petitioner’s motion without holding an evidentiary hearing because petitioner is seeking relief previously sought under the provisions of 28 U.S.C. § 2255 on the same grounds previously raised and decided against him. Dryden v. United States, 5 Cir. 1972, 455 F.2d 491; Owens v. United States, 5 Cir. 1970, 430 F.2d 1173. We affirm.

Affirmed.

      . See the quotation from the transcript of the 1963 evidentiary hearing in Juelich v. United States, 5 Cir. 1968, 403 F.2d 523. 525.