author: LUMBARD, Circuit Judge:

text:
    FLUORO ELECTRIC CORPORATION, Plaintiff-Appellee, v. BRANFORD ASSOCIATES, Defendant-Appellant.
    No. 306, Docket 73-1837.
    United States Court of Appeals, Second Circuit.
    Submitted Sept. 19, 1973.
    Decided Dec. 28, 1973.

      Stuart Rodney Wolk, New York City, Albert M. Gross, New York City, of counsel, on the brief, for plaintiff-appel-lee.
    Stolz, Goldfine & Stolz, New York City, on the brief, for defendant-appellant.
    Before LUMBARD, HAYS and TIMBERS, Circuit Judges.
   LUMBARD, Circuit Judge:

Branford Associates appeals from an order of the district court for the Southern District (Gurfein, J.) dated April 30, 1973, granting the plaintiff Fluoro Electric Corporation’s motion under Rule 60, F.R.Civ.P., to substitute “Bran-ford Associates” for “Branford Associates, a corporation,” as the named defendant in this ease. We also consider in connection therewith, and more particularly with relation to another appeal in this same case decided adversely to the appellant, a motion by the plaintiffappellee under Rule 38, F.R.A.P., which asks damages and costs in the amount of $5098.70 for frivolousness in pressing the other appeal. For the reasons hereinafter stated, we affirm the decision of the district court granting the plaintiff’s motion under Rule 60, F.R.C.P., and we also grant its motion under Rule 38, F.R.A.P., for the full amount sought.

The plaintiff, Fluoro Electric Corporation, a New Jersey corporation, commenced this diversity suit on December 15, 1971, against “Branford Associates, a corporation.” The complaint sought damages in the sum of $110,722.67 on two causes of action for alleged breach of contract, based on an agreement, entered into between the plaintiff and the party asserted to be the defendant, for the performance by the plaintiff, in company with Goldberg Electric, Inc., of electrical work in the construction of the Branford Shopping Center in Branford, Connecticut.

The answer to the complaint, filed on February 10, 1972, by the “Defendant, Branford Developers, Inc. (sued herein as Branford Associates)” raised three affirmative defenses and also asserted a counterclaim for $500,000. Motions for judgment dismissing the complaint on the basis of the asserted defenses and for judgment on the counterclaim were denied by Judge Gurfein and the case proceeded to trial before a jury. After a five-day trial the jury rendered a verdict on October 30, 1972, in favor of the plaintiff for $45,000. The judgment in that amount was entered on the next day against the defendant “Branford Associates, a corporation.”

After entry of judgment, the party which had appeared at the trial as defendant filed a notice of appeal dated November 29, 1972, both from the judgment and from the trial court’s denial of one of the motions to dismiss, that made for lack of an indispensable party (asserted to be Goldberg Electric, Inc.).

Prior to any appeal being heard, however, the plaintiff in January, 1973, sought to levy execution of the judgment through the United States marshal. The marshal’s levy was against “Bran-ford Associates, a Corporation, a/k/a Branford Developers, Inc.,” and was part of a letter of demand against supposed assets of the defendant in the Security National Bank of New York. But the bank refused to transmit any sums, noting that it held an account in the name of “Branford Associates” (balance $20,381.32) and an account in the name of “Branford Developers, Inc.” (balance $697.75). The bank stated it could hold the latter amount, but requested clarification of the judgment before releasing any funds in the Branford Associates account.

Informed of this impasse, the plaintiff in February, 1973, moved the trial court under Rule 60 for an order substituting other named defendants as the true party or parties in interest, nunc pro tunc, listing the following: “Branford Associates,” “Branford Developers, Inc.,” “Branford Development Center, Inc.,” and “Estate of Abner Rosenberg.” This was the motion granted by the trial court on April 30, 1973, when it directed the clerk “to substitute ‘Branford Associates’ for ‘Branford Associates, a corporation,’ ” and directed “the Marshal . to levy execution in accordance therewith.” In the meantime, on February 20, 1973, this court had already dismissed the “defendant’s” original (“first”) appeal for lack of prosecution. (Second Circuit doc. no. 73-1138.)

Since the trial court’s order of April 30th, “Branford Associates” has sought by various manoeuvres to reopen all or part of the prior proceedings. On May 16, 1973, it filed a notice of appeal from the April 30th order (the “second” appeal). (Second Circuit doc. no. 73-1837.) A day later, on May 17th, in an order to show cause in the district court, it moved for a stay of the levy of execution pending appeal. On June 5th, despite the February dismissal, it again filed a notice of appeal (dated May 31, 1973) from the original October 31st judgment (the “third” appeal), but this time under the name of “Branford Associates” only. (Also doc. no. 73-1837.) At the same time it also moved this court, by order to show cause dated May 30th, to stay the levy of execution pending the new appeal of the October 31st judgment “as amended April 30.” The application for the stay was denied by this court. Two weeks later, it moved for an order extending time to transmit the record on appeal.

The plaintiff, in opposition, then moved this court, by order to show cause, (1) to dismiss the appeal dated May 31st (the third appeal) as frivolous, since it had already been dismissed in February sub nom. “Branford Associates, a corporation;” (2) for the awarding of damages under Rule 38, F. R.A.P.; and (3) for a denial of the “defendant’s” motion for an extension of time to transmit the record. On June 26, 1973, in open court, we denied the appellant’s motion for an extension of time, and we entered judgment dismissing the appeal dated May 31st. Our mandate on the dismissal issued July 17, 1973. We made no ruling with respect to the motion for damages. The second appeal from the order of April 30, 1973, was also still pending.

On July 24th, the plaintiff, as yet without satisfaction on the original judgment of the trial court, renewed his motion in this court for an award of costs and damages under Rule 38, now seeking specifically damages in the sum of 10% of the judgment (i. e. an additional $4500) and costs in the sum of $598.70. Branford Associates opposed the motion, arguing inter alia that the motion was premature because the second appeal remained to be heard and decided. (Branford Associates’ other arguments in opposition to the motion are discussed later in this opinion.)

Agreeing that the remaining appeal should be considered first, we refrained from deciding the plaintiff’s July 24th motion and awaited the filing of appellate briefs. These are now before us and we therefore proceed to the issue raised in what should be the final appeal in this case.

I.

Branford Associates’ contention on appeal, and the one which it has adhered to since April 30th, is that it was error for the trial court to have granted the plaintiff’s motion under Rule 60 for the correction of a misnamed party defendant. It claims that the plaintiff sought to sue, and did sue, a corporate defendant; that this defendant (misnamed “Branford Associates, a corporation,” by the plaintiff) appeared in the action by its proper name, “Branford Developers, Inc.”; that the jury’s verdict ran solely against that corporate defendant, however named; and that Rule 60 cannot be utilized thereafter, under the guise of correcting a misnomer, to substitute a new party defendant, a partnership, which was never a party to the contract in controversy with Fluoro Electric, which never was served in the action, and which never had its day in court. In short, Branford Associates contends it was “brought into the actions,” improperly, on April 30, 1973, as a result of the plaintiff’s discovery of the small assets of Branford Developers, Inc., and that any prior determinations of the plaintiff’s rights, or of the defendant corporation’s liabilities, are not binding as to it.

The plaintiff’s position is that it brought suit against the other party to the contract, regardless of its legal structure, corporate or partnership; that the party was in substance the same organization of individuals, regardless of name; that these individuals should not be permitted to escape payment of a lawful judgment through legal obfuscations of their own making; and that therefore the trial court’s granting of the Rule 60 motion was proper.

When these contentions were first joined in the hearing on the April 30th motion, the trial court agreed with the plaintiff, finding that the “other contracting party was, in fact, Branford Associates, the partnership.” The court explained further:

The failure of the “defendant” to speak up in the circumstances was “misconduct of an adverse party.” Rule 60(b)(3). The close relationship between the entity which was the object of suit makes this a proper correction of a “misnomer” rather than the substitution of a party.

In Branford Associates’ view, however, no misconduct should be attributed to it, since it claims never to have been before the court. “If Branford Associates, the partnership,” so it contends, “had originally been named in the summons and complaint in this action, it would not have admitted that it was the other party to the contract,” as supposedly Bran-ford Developers, Inc., did.

After a careful review of the record, we believe that the trial court was amply justified in granting the plaintiff’s motion, that the party now before us as “Branford Associates” was the party defendant at trial, and that since then it has only persisted in technical ma-noeuvres by which it might avoid a lawful judgment rendered against it.

To begin with, “Branford Associates, a corporation,” never existed. There was, at all times relevant, as the parties concede, a “Branford Associates,” a partnership. One of the partners of Branford Associates is Morton J. Rosenberg, who was personally served in the original suit. He is the son of Abner Rosenberg, the deceased founder of Branford Associates. Abner Rosenberg was also the founder of Branford Developers, Inc., a Connecticut corporation whose principal place of business is in New York. Morton Rosenberg is vice president and, since the death of his father, principal officer of Branford Developers, Inc. He has been the principal defense witness in all phases of this case. Moreover the attorneys for the company and for the partnership are one and the same, and have been throughout.

The original contract of June 1, 1970, was stated to be between “Branford Associates, 22 East 42nd St., N.Y., N.Y., 10017, the Contractor,” and “Fluoro Electric Co., 573 Ferry St., Newark, N. J., the Subcontractor.” It was signed by Irving Blum for the latter, and for the “Contractor” it was signed as follows:

Branford Shopping Center Developers, Inc. and Abner Rosenberg by /s/ Abner Rosenberg Abner Rosenberg by /s/ Abner Rosenberg Abner Rosenberg

The words “Shopping Center Developers, Inc.” had been written in over the crossed out word “Associates.” There was no such entity as “Branford Shopping Center Developers, Inc.”

Thereafter, whatever initial confusion existed was compounded. During the troubled construction of the Branford Shopping Center, Fluoro Electric’s invoices were consistently addressed to “Branford Associates.” These were accepted, but payment was customarily made by check of “Branford Developers, Inc.,” over the signature of Morton J. Rosenberg. However, when the contractor communicated with the plaintiff by mail and by telegram, as it frequently did, it did so in the name of “Branford Associates” or of Morton J. Rosenberg for “Branford Associates.”

Later, during trial, the confusion persisted. The defendant’s answer to the complaint has been noted: “Branford Developers, Inc. (sued herein as Bran-ford Associates).” The appellant asserts this put the plaintiff on clear notice that the defendant was the corporate entity. However, this was far from clear. The individuals representing the defendant at trial, whether officer, partner, or attorney, never moved to correct any misapprehensions on the part of the court, even though several opportunities were presented. Thus at one point the court asked Morton Rosenberg :

Q. Were you familiar with the contract that was entered into between Branford Associates and Fluoro Electric Company?

A. Yes I was.

Q. Had you ever seen that contract?

A. Yes. Similarly, when the court charged the jury to the effect that the defendant was “Branford Associates, Inc.,” no objection or request for modification was raised by the defense. In fact, it appears that there was never any objection in open court, or during the pretrial stages, to the repeated use of the phrase “Branford Associates” or “Branford Associates, Inc.” in references to the defendant by the court and by the plaintiff.

It is only in retrospect, therefore, that the appellant now attempts to claim that it and Branford Developers, Inc., are really two separate entities. Prior to the plaintiff’s motion granted on April 30th, that distinction was blurred beyond recognition, a situation permitted if not actively encouraged by the individuals who ran and represented both “defendant” organizations. To the plaintiff, to the trial judge, and to the jury it was plain that only one group of men had contracted with the plaintiff, a group known as Branford Associates. That this group was styled a corporation in the complaint and thereafter occasionally so referred to did not mean that the party sought to be charged by the plaintiff was a corporate defendant, regardless of name. On the contrary, under the circumstances, it is clear that it was Branford Associates which the plaintiff sought to hold liable, regardless of its legal status.

There was, therefore, no error in Judge Gurfein directing the clerk to delete the words “a corporation” from the defendant’s name in the judgment. Had this been corrected earlier, no other persons would have been served in the action. No others would have appeared before the court. It was properly the correction of a misnomer under Rule 60(a). See Anderson v. Brady, 6 F.R.D. 587 (E.D., Ky., 1947).

The order of the district court, granting the plaintiff’s motion under Rule 60 to substitute “Branford Associates” for “Branford Associates, a corporation,” as the named defendant in the action, is accordingly affirmed.

II.

We turn now to the plaintiff’s motion of July 24th under Rule 38, F.R.A.P., for the awarding of damages and costs in relation to the defendant’s third appeal, previously dismissed by this court as frivolous on June 26, 1973.

Appellant Branford Associates opposes this motion on two grounds in addition to its objection, already discussed, on the basis of prematurity. The two additional grounds are: (1) that this court’s silence on June 26th on the motion for damages made by the plaintiff at that time was equivalent to a denial of the motion, with the consequence that the relief cannot be sought again; and (2) that an awarding of costs is not permissible in the light of Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967). We find the appellant’s contentions without merit.

Our prior silence on the issue of damages and costs under Rule 38 is by no means a determination of that issue, and the plaintiff-appellee is in no way precluded from continuing to seek such relief until we have positively addressed the matter. See Rules of the Second Circuit, Supplementing the Federal Rules of Appellate Procedure, see. 27. Nor does the Fleischmann case limit our discretionary power under Rule 38. Fleischmann was a case of deliberate trademark infringement and dealt solely with the awarding of costs under the Lanham Act, 15 U.S.C. sees. 1051-1127. It has no relevance here.

The critical question is rather whether the situation here is one of those “highly unusual” instances which permit the imposition of sanctions under Rule 38 because of “a clear showing of bad faith.” West Virginia v. Pfizer, 440 F. 2d 1079, 1092 (2nd Cir.), cert. den. 404 U.S. 871, 92 S.Ct. 81, 30 L.Ed.2d 115 (1971). We hold that it is.

Rule 38 is not premised on a showing of delay in prosecuting an appeal (Advisory Committee’s Note to Rule 38; 9 Moore, Federal Practice 4251), although for a simple breach of contract case there has been inordinate delay here in satisfying the judgment. Rather the determination is one of doing justice between the parties, of penalizing a party for unnecessarily wasting the time and resources of the court. NLRB v. Smith & Wesson, 424 F.2d 1072 (1st Cir., 1970).

Here the defendant has prosecuted three appeals to this court, in addition to the numerous post-trial motions it has filed here and in the district court. In none of these appeals was there a pretense to any ground for appeal other than the claim that the judgment was against the wrong entity. Such an appeal was particularly unjustified in the case of the third appeal, in relation to which these damages are specifically sought. Rule 38 was designed to penalize litigants for just such tactics as these and to compensate those who have been put to the expense of answering such wholly frivolous appeals. NLRB v. Smith & Wesson, supra; Oscar Gruss & Son v. Lumbermens Mutual Casualty Co., 422 F.2d 1278 (2nd Cir., 1970); Griffin Wellpoint Corp. v. Munro-Langstroth, Inc., 269 F.2d 64 (1st Cir., 1959).

Pursuant to Rule 38, Federal Rules of Appellate Procedure, the plaintiff-appel-lee is awarded damages in the sum of $4500 and costs in the sum of $598.70.

      . The plaintiff, in his motion, suggested that the motion could also be granted under Rule
      15. The trial court found that Rule 15 was inappropriate for the relief sought and held that Rule 60 was the applicable provision, either under Rule 60(a) or Rule 60(b)(1). The pertinent portions of Rule 60 provide:
      (a) Clerical Mistakes. Clerical mistakes in judgments, orders or other parts of the record and errors therein arising from oversight or omission may be corrected by the court at any time of its own initiative or on the motion of any party and after such notice, if any, as the court orders.
      (b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud, etc. On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; The motion shall be made within a reasonable time, and for reasons (1), (2), and (3) not more than one year after the judgment, order, or proceeding was entered or taken. A motion under this subdivision (b) does not affect the finality of a judgment or suspend its operation. .

      . Rule 38, F.R.A.P., provides :

        Damages for Delay

      If a court of appeals shall determine that an appeal is frivolous, it may award just damages and single or double costs to the appellee.

      . Branford Associates also relies on the deposition of Morton Rosenberg taken by the plaintiff’s attorneys on May 2, 1972, in which the following occurred :
      Examination by Mr. Gross [plaintiff’s attorney] :
      * * * * *
      Q. Mr. Rosenberg, what position do you hold in the Defendant corporation?
      A. I am an officer of the company.

        Q. What position?
      A. Vice-President Branford Developers, Inc.
      Q. Branford Developers Inc., that is the name of the Defendant?
      A. That is correct.
      This exchange was not part of the evidence at trial, however. There, when a similar ex-ebange of questions and answers took place, the following occurred:
      [The Court.] Are you connected with the Branford Associates?
      [Mr. Rosenberg.] Yes, I am.
      Q. In what capacity?
      A. I am an officer of the defendant.
      Q. What office do you hold?
      A. Vice President of the defendant.

      . The distinction was previously suggested in the appellant’s affidavit in reply to the plaintiff’s motion for dismissal of the first appeal, which we granted on February 20, lt/io, nut it was not clarified in the proceedings held on that motion.


source: Caselaw Access Project

author: GURFEIN, District Judge.

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. Salvatore GIORDANO, Appellant.
    No. 496, Docket 73-2369.
    United States Court of Appeals, Second Circuit.
    Submitted Dec. 6, 1973.
    Decided Dec. 21, 1973.

      Robert A. Morse, U. S. Atty., E. D. N. Y. (L. Kevin Sheridan and James A. Pascarella, Asst. U. S. Attys., of counsel), for appellee.
    Evseroff, Newman & Sonenshine, Brooklyn, N. Y. (Gustave H. Newman, Brooklyn, N. Y., of counsel), for appellant.
    Before WATERMAN and FEINBERG, Circuit Judges, and GURFEIN, District Judge.

       Honorable Murray I. Gurfein, of the United" States District Court for the Southern District of New York, sitting by designation.

   GURFEIN, District Judge.

Salvatore Giordano appeals from a judgment of the United States District Court of the Eastern District of New York (Dooling, J.), entered on August 17, 1973, which convicted appellant, after a jury trial, of violations of 18 U.S.C. §§ 656 and 1004.

The defendant, with his two brothers, was tried by a jury on a superseding indictment which, at trial, consisted of two counts, the first count of conspiracy having been dismissed. Count two charged the defendants with causing employees of the Bankers Trust Company (“Bankers Trust”) to abstract and willfully misapply moneys, funds and credits of Bankers Trust in excess of $100 in violation of 18 U.S.C. § 656. The third count charged the defendants with causing an employee of Bankers Trust falsely to certify four checks, totalling $400,000, in violation of 18 U.S.C. § 1004. Salvatore Giordano was convicted on both counts. His brothers were acquitted, and Judge Dooling sentenced him to a prison term of one year and a day on each count, the sentences to run concurrently. Appellant contends that there was an insufficiency of evidence under either count, and that the Judge erred in the charge to the jury. We affirm.

Salvatore and Anthony Giordano, before the time specified in the indictment (January 1, 1967 to April 4, 1969), had opened regular checking accounts at Bankers Trust (Van Wyck branch) and National Bank of North America (“North America”) (Baisley Park branch). There were two accounts at Bankers Trust, one in the name of “Bay-wood Stables” and the other in the name of Salvatore Giordano. The checking account of concern in the instant case at North America was in the name of “Bay Auto Sales.” Salvatore and Anthony Giordano were the authorized signatories on these accounts.

The deposits in each account were composed of withdrawals (checks drawn) from the other account(s) at the other bank. That is, the deposits at Bankers Trust were made fairly equally into the Baywood Stables and Salvatore Giordano accounts and were composed of cheeks drawn on the Bay Auto Sales account at North America. The deposits into the Bay Auto Sales account were made up of checks drawn essentially equally on the Baywood Stables and Salvatore Giordano accounts. Occasionally, checks drawn on the various accounts were presented for cash over the counter.

Between January 1, 1967 and April 4, 1969, the above deposits and withdrawals were made on a daily basis by the brothers. The deposits in the two accounts at Bankers Trust and in the account at North America were substantially all uncollected checks drawn on the other bank. The process was one of “kiting checks.” “Kiting” occurs when accounts are maintained in different banks and checks are drawn on one account and deposited in the other when neither account has any substantial funds in it to pay the checks drawn on it. Since it takes several days to collect a check, each of the accounts will show substantial credits of uncollected checks, and those credits will continue so long as checks continue to be drawn every day in each bank and deposited in the other bank. If some checks are drawn to cash or to legitimate third parties, the checks that flow between the two banks have to be increased to maintain the “kiting” equilibrium.

Robert Kamsler and Martin Shaugh-nessy, respectively manager and assistant manager at the Van Wyck branch of Bankers Trust, the named co-conspirators in this indictment, testified on behalf of the Government. Both these individuals realized in early 1967 that a check “kite” was being worked with the two accounts at Bankers Trust and the Bay Auto Sales account at North America. Nonetheless, both, upon discovering this, let the situation continue. They observed the withdrawals and deposits snowballing from approximately $100,000 daily in 1967 to over $400,000 daily in early 1969. In addition, they were aware that the daily balances in the accounts remained fairly constant and relatively low in relation to the amount of activity. This indicated to them that a kiting situation was in existence. Further, Mr. Kamsler, the bank manager, was familiar with the business of the Giordanos and knew that the business did not “warrant” the amount of money involved in the activity of the accounts.

Mr. Shaughnessy, the assistant manager, permitted the checks presented by the Giordanos to be “treated as cash” and, in fact, authorized such treatment by initialling the checks presented. Appellant had requested that the checks be treated in this manner. Kamsler knew that Shaughnessy was giving such authorization to the Giordanos and did not act to stop it. While several other accounts at the branch had checks given “immediate credit” no other accounts had checks deposited treated as “cash.” The deposits were actually listed on the deposit slips under the column “cash” rather than the column for “checks”,, for reasons that will appear.

Shaughnessy at no time authorized a loan to any of the Giordanos and never told them the bank was lending them money. Nor did Kamsler ever authorize a loan, except for one installment loan to each of the Giordanos in 1966 in the amount of $3500.

Not all the checks drawn on the accounts in question were deposited in one bank or the other. A number of checks over this period of time (January 1967-April 1969) were made out to cash, to the Giordanos, to employees of the Gior-danos and to various individuals supplying the needs of the Giordanos’ business. The total amount of money claimed by the banks as owed to them is more than $880,000.

On March 28, 1969, the deposit slips for all cash deposits made at Bankers Trust that day were, for some unknown reason, not picked up and sent to the bank’s central accounting division as was the usual bank procedure, with results that will appear.

I

Cases in which customers of a bank are charged with aiding and abetting a bank officer willfully to misapply money or credit of the bank, 18 U.S.C. § 656, are generally troublesome. That is because an appellate court must weigh with care whether the facts proved are sufficient to prove the knowledge and intent required to support the guilty verdict. See, e. g., Logsdon v. United States, 253 F.2d 12, 14 (6 Cir. 1958); United States v. Docherty, 468 F.2d 989 (2 Cir. 1972); cf. United States v. Matot, 146 F.2d 197, 198 (2 Cir. 1944). The depositor, not being “connected in any capacity” with the bank cannot be guilty of violating 18 U. S.C. § 656 as a principal. See United States v. Weitzel, 246 U.S. 533, 38 S.Ct. 381, 62 L.Ed. 872 (1918); United States v. Tornabene, 222 F.2d 875, 877 (3 Cir. 1955). He can, however, be charged as an accessory under 18 U.S.C. § 2. He may not be convicted as an accessory, however, unless the bank officer, as a principal is himself guilty of violating Section 656. United States v. Torna-bene, supra, at 878. See United States v. Pyle, 279 F. 290, 293 (9 Cir. 1921). Even if the bank officer was guilty as a principal, there must also be proof that the defendant depositor had knowledge of the criminal activity of the bank officer (see United States v. Turnipseed, 272 F.2d 106, 107 (7 Cir. 1959), and more, encouraged or participated in it with a desire to forward it. United States v. Docherty, supra, 468 F.2d, at 992.

It is a judicial truism, moreover, that under Section 656, an intent to injure and defraud the bank is an essential element of the offense. See Evans v. United States, 153 U.S. 584, 592, 14 S.Ct. 934, 38 L.Ed. 830 (1894); United States v. Fortunato, 402 F.2d 79, 80 (2 Cir. 1968); Benchwick v. United States, 297 F.2d 330 (9 Cir. 1961); Seals v. United States, 221 F.2d 243 (8 Cir. 1955). See also United States v. Mullins, 355 F.2d 883 (7 Cir. 1966). Lastly, the mere existence of a “check kiting” scheme does not imply the intent required as a matter of law. Benchwick v. United States, supra, 297 F.2d, at 333, footnote 5; Dow v. United States, 82 F. 904, 908 (8 Cir. 1897). Specific intent must be proved in fact, but of course, circumstantial as well as direct evidence may be considered in determining whether the requisite intent has been proved.

We proceed to a brief analysis of the facts in the light of these applicable rules of law. Although there was no proof that the defendant or his brothers paid the Bankers Trust officers to commit the violations, there is sufficient evidence that when the officers discovered the kiting operation, one of them consulted appellant about it, stated that it was wrong, and then failed to report the matter to his superiors, but allowed it to go on. The natural consequence of the connivance of the bank officers in the wrong was to put the bank in jeopardy of loss. Whether there was an actual purpose to injure the bank or not, there certainly emerged an intent to defraud the bank by “willfully misapplying the funds and credit of the bank.” Without revealing the state of the Giordano ac-; counts to their superiors the bank officers allowed the continuance of a course of kiting checks which could lead, as indeed it did, to ultimate loss for the bank. Nor was the kiting operation, conducted in such volume, a mere legitimate extension of overdraft credit to the customer. The bank manager and his assistant had no power to grant credit in an amount above $10,000, and the temporary overdrafts were in the hundreds of thousands. When a subordinate officer makes an unauthorized loan, he misapplies the funds of the bank. See Robinson v. United States, 30 F.2d 25, 27 (6 Cir. 1929).

The method of execution of the scheme itself showed an intent to defraud the bank. The checks deposited in the Giordano accounts, drawn on North America, were not listed on the deposit slips as “checks,” but were regularly listed in the “cash” column of the deposit slip. The purpose of the misnomer was to conceal from the main office and the auditors that the kiting operation was going on. If the checks had been deposited as “checks” and their accounts credited immediately, they would have appeared on the Bankers Trust book balance of deposits, but would not have been reflected on the “collected balance” which shows funds actually collected. Since the deposited checks were treated as “cash” — a collected item, there was no discrepancy between the “book balance” and the collected balance. The auditors would be led to think that cash had actually been deposited.

Why the totalling of the actual cash deposited daily would not have caused suspicion we do not know. It appears at least that the lack of discrepancy in the Giordano accounts themselves was enough to fob off suspicion. The method used thus included acts of deception. On this record, intent to defraud is therefore as clear as the misapplication itself. See Robinson v. United States, supra.

Having concluded that there was sufficient evidence to establish the guilt of the bank officers, we turn to the knowledge and participation of Salvatore Giordano as an aider and abetter. It was he who opened the accounts. The deposits were made fairly equally into the Baywood Stables and Salvatore Giordano accounts. Deposits in the Bay Auto Sales account were made up of checks drawn fairly equally on the Baywood Stables and Salvatore Giordano accounts. The deposits and withdrawals were made continuously on a daily basis from January 1,1967 to April 4,1969.

Kamsler spoke to Salvatore Giordano about the account three times. The first time was when Kamsler discovered the unusual activity in the account in July 1967. He told Salvatore Giordano that “there was undue activity in the account which I felt was not justified . and it appeared that an illegal act was being committed, and as such that I should have reported it the minute I discovered it.” Salvatore replied that “sometime in the future the problem would be corrected and that nobody would be hurt, which included me.” Again in 1968, Kamsler complained that if the condition was not corrected soon, he might lose his job. Salvatore said the situation would be cleared up “eventually.” Late in 1968 or early 1969, Kamsler again warned Salvatore.

After each of these conversations, appellant continued to kite checks in large amounts, knowing that the bank official had told him that the practice was illegal and that the officer was likely to lose his job if it was discovered. The continued use of the method, in the light of the knowledge imparted, was an active participation in the willful misapplication by the bank officer. It could fairly be inferred that the cashing of checks, while the simultaneous deposits and withdrawals were going on, was to the detriment of the bank and was done with the improper connivance of the bank officer, who, knowing the circumstances, nevertheless gave his approval. The defense that appellant thought the procedure was routine is utterly inconsistent with Kamsler’s testimony which the jury could believe.

The activities of appellant when the scheme was exposed by the contretemps of March 28, 1969 are revealing. When on March 28, 1969, the deposit slips were not picked up for delivery to the bank’s central accounting division, the jig was up. The Giordanos had drawn checks against the deposited checks, but the deposits had not been reflected because of the error in a failure to deliver the deposit slips. When the checks drawn on North America in the amount of about $440,000 were presented to Bankers Trust for payment, the Gior-dano accounts lacked sufficient funds, because the day’s deposits had not been reflected in the accounts, and Bankers Trust accordingly refused to honor them. The checks were honored only after at least $440,000 of checks drawn on North America were deposited in Bankers Trust purportedly to cover. The cheeks were treated as “cash.”

North America, in the meantime, had sensed a danger signal, and the next time the Giordanos tried to deposit checks drawn on Bankers Trust, North America insisted that they be certified. On April 1, 1969, four cheeks, each in the sum of $110,000, signed by appellant and drawn on the Baywood Stables and Salvatore Giordano accounts at / Bankers Trust were presented for certification. Appellant knew that there were insufficient funds in-the accounts and that Shaughnessy knew it. Shaugh-nessy certified the checks, and on inquiry about the certification from North America, Kamsler told them that the cheeks had been certified, even though he knew there was no good money in the accounts.

We are convinced that this recital meets the sufficiency of evidence standard we have described above.

II

Appellant also contends that the evidence upon which the conviction of appellant depends was insufficient to prove a violation of 18 U.S.C. § 1004. Section 1004 is set forth in footnote two.

This section has apparently not been the subject of appellate review. The government contends that there is no requirement of specific intent to injure or defraud the bank to violate Section 1004, because it contains no words to that end. The government contrasts Section 1004 with Section 1005 which, in connection with false entries in books of a bank does require that the entry be made “with intent to injure or defraud such bank.” It argues that the omission was not legislative oversight. We agree.

The bank would be caused loss by the improper certification itself (3 U.C.C. 411; 12 U.S.C. § 501). The violation described, if willfully done, is, by definition, done with an intent to defraud. The act is a single act which, from its nature would be willfully committed only by a conscious wrongdoer. We think that proof of a willful certification with actual knowledge that funds are not in hand to meet the cheek is enough without independent proof of intent to defraud the bank.

Our review of the evidence convinces us further that appellant, as an aider and abetter, was essentially continuing his course of criminal conduct when he tendered the checks for certification in the hope that the scheme, on the most favorable view a scheme to obtain unauthorized loans without interest, would thus not be aborted.

Ill

Appellant next addresses himself to alleged errors in Judge Dooling’s charge.

Appellant attacks Judge Dooling’s charge on his asserted failure properly to define the elements of the crime. We think appellant is right when he points out that an essential element of the offense under Section 656 is an intent to injure or defraud the bank. United States v. Docherty, supra, 468 F.2d, at 994-995. We think he is wrong when he contends that Judge Dooling’s charge failed to embrace this element.

The judge charged with respect to the intent required for Kamsler and Shaughnessy’s willful misapplication of bank funds that “[either] or both of them knew that such application of the bank funds exposed it to the risk of losing the funds so applied and concealed the existence of the transaction by crediting uncollected Bay Auto Sales checks to the Giordano and Baywood Stables accounts in such a way that they appeared to be deposits of currency and not deposits of uncollected checks” (Emphasis supplied). He did not use the words “intent to injure or defraud the bank” in describing an essential element of the offense. It is common ground, as we have seen, that although since the recod-ification of 1948, the present Section 656 no longer contains the specific requirement of intent to defraud the bank, that requirement has nevertheless been imported into the present section by judicial construction. See United States v. Docherty, supra, 994-995. The question remains whether the paraphrase, of the trial judge equates the essential requirement. If the dominant purpose required for the offense is an actual intent to defraud the bank, as in embezzlement, then the instruction here may have fallen short. But if the element of intent in the willful misapplication of funds is satisfied by proving that the natural result of the unlawful act is likely to injure the bank, Judge Dooling’s phraseology is more than adequate. Simply to tell the jury that “intent to defraud the bank” is required is to leave unexplained this very distinction.

We think that the combination of elements in the instruction (1) that the bank officers knew that the misapplication exposed the bank to the risk of losing its funds and (2) that they concealed the misapplication, sufficiently explicates the intent required.

As Judge Friendly noted in Docherty, supra, convictions for willful misapplication have involved iniquity or “foreseeable loss.” (at 994). In Golden v. United States, 318 F.2d 357, 361 (1 Cir. 1963), in a prosecution under Section 656, the First Circuit sustained a charge that “[t]he intent to injure or defraud must not necessarily have been the purpose of the doing of the act, as long as the natural result of that conduct would be to injure or defraud the bank.” And the Sixth Circuit in Galbreath v. United States, 257 F. 648, 656 (1918), in a similar prosecution held that “[a] wrongful misapplication of funds, even if made in the hope or belief that the bank’s welfare would ultimately be promoted, is none the less a violation of the statute, if the necessary effect is or may be to injure or defraud the bank. Such is the well-settled law.”

The purpose of a jury instruction is to instruct. Sometimes the literal repetition of the words of statute or opinion tends to confuse rather than enlighten. Judge Dooling made the jury understand what we conceive to be the quintessence of the requirement of intent. He was under no duty to recite a formula which, without the very explanation given, might have misled the jurors.

We have examined the other objections to the charge and find them to be without merit.

Affirmed.

      . Section 656 reads in part:
      “656. Theft, embezzlement, or misapplication by bank officer or employee

      Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, national bank or insured bank, or a receiver of a national bank, or any agent or employee of the receiver, or a Federal Reserve Agent, or an agent or employee of a Federal Reserve Agent or of the Board of Governors of the Federal Reserve System, embezzles, abstracts, purloins or willfully misapplies any of the moneys, funds or credits of such bank or any moneys, funds, assets or seeurities intrusted to the custody or care of such bank, or to the custody or care of any such agent, officer, director, employee or receiver, shall be fined not more than $5,000 or imprisoned not more than five years, or both; but if the amount embezzled, abstracted, purloined or misapplied does not exceed $100, he shall be fined not more than $1,000 or imprisoned not more than one year, or both.”

      . Section 1004 reads :
      “1004. Certification of checks

      Whoever, being an officer, director, agent, or employee of any Federal Reserve bank or member bank of the Federal Reserve System, certifies a check before the amount thereof has been regularly deposited in the bank by the drawer thereof, or resorts to any device, or receives any fictitious obligation, directly or collaterally, in order to evade any of the provisions of law relating to certification of checks, shall be fined not more than $5,000 or imprisoned not more than five years, or both.”

      . The Giordanos owned a small used car business and several harness racehorses,

      . To show that appellant had a right to assume that the procedure followed was routine, appellant offered a deposit slip, dated October 17, 1966, Exhibit K, to show that immediate crediting of checks deposited was the practice even before any allegedly sinister conversation with a bank officer took place. The difficulty is that Exhibit K shows the deposit under the column “checks” and not under “cash”, which was the circumstance that tended to keep the nature of the transaction from detection by higher officials.

      . The predecessors of 18 U.S.C. § 1004 never contained language requiring “an intent to injure or defraud such bank” (Act of July 12, 1882, c. 290 § 13, 22 Stat. 166; Act of Sept. 26, 1918, c. 177 § 7, 40 Stat. 972; Act of Feb. 25, 1927, c. 191, § 12, 44 Stat. 1231), nor did the section as earlier codified, 12 U.S.C. § 591 (1940). Although the statute formerly required specifically that the bank employee violate the statute “willfully,” we take the same standard to be applicable to the present wording: “in order to evade any of the provisions of law relating to certification of checks,”


author: BUTZNER, Circuit Judge:

text:
    TENNECO INC., a corporation, and Texas Eastern Transmission Corporation, a corporation, Appellants, v. PUBLIC SERVICE COMMISSION OF WEST VIRGINIA et al., Appellees, National Association of Regulatory Commissioners, Intervenor Appellee, Independent Natural Gas Association of America, Amicus Curiae.
    No. 73-1294.
    United States Court of Appeals, Fourth Circuit.
    Argued Nov. 5, 1973.
    Decided Dec. 19, 1973.

      John O. Kizer, Charleston, W. Va. (David A. Faber, Campbell, Love, Woodrow & Kizer, Charleston, W. Va., on brief) for appellants.
    John E. Lee, Gen. Counsel, Charleston, W. Va. (Marian W. Louis, Asst. Gen. Counsel, and Cassius H. Toon, Charleston, W. Va., on brief) for Public Service Commission of W. Va.
    Sumner J. Katz, Washington, D. C. (Paul Rodgers, Gen. Counsel, and Ray M. Druley, Deputy Asst. Gen. Counsel, Washington, D. C., on brief) for Nat. Ass’n of Regulatory Utility Commrs.
    Jerome J. McGrath and Francis H. Caskin, Washington, D. C., on brief for Independent Natural Gas Ass’n of America.
    Before BUTZNER, FIELD, and WIDENER, Cii’cuit Judges.
   BUTZNER, Circuit Judge:

This appeal raises the narrow issue of whether the Natural Gas Pipeline Safety Act of 1968 has preempted the field of safety regulation of interstate gas pipelines to the extent that a state, which has qualified as an agent of the Department of Transportation, may not assess fees against the interstate lines to help defray the cost of administering the pipeline safety program. The district judge entered summary judgment upholding the imposition of a state license fee on interstate pipelines crossing West Virginia. Tenneeo, Inc. v. Public Service Comm, of West Virginia, 352 F. Supp. 719 (S.D.W.Va.1973). We affirm.

There is no dispute about the facts. Tenneeo, Inc., and Texas Eastern Transmission Corp. are engaged in the interstate transportation of natural gas by pipeline through West Virginia. Neither company conducts intrastate business there. Acting under authority of state law, the West Virginia Public Service Commission assessed special license fees in the amount of $2,375.33 and $1,077.44, respectively, against the companies based on the length of their adjusted interstate pipeline mileage. The fees, together with those collected from other interstate and intrastate pipeline companies, were levied for the purpose of paying the expenses of the Commission. On appeal, the companies make no contention that the fees unconstitutionally burden interstate commerce or that they are disproportionate to the state’s share of the cost of conducting safety surveillance of their interstate pipelines. Instead, relying on the fact that their transmission facilities are subject to the jurisdiction of the Federal Power Commission, and not to the West Virginia Public Service Commission, the companies contend that the assessments are invalid because the Natural Gas Pipeline Safety Act of 1968 has preempted the field of pipeline safety with respect to interstate transmission facilities.

The Natural Gas Pipeline Safety Act of 1968 directed the Secretary of Transportation to establish minimum federal safety standards for the design, installation, inspection, testing, construction, extension, operation, replacement, and maintenance of pipeline facilities used for the transportation of gas. The Act’s text, its legislative history, *administration implementation, and judicial interpretation, attest to federal preemption of the field of safety with respect to the establishment and enforcement of standards regulating the interstate transmission of gas by pipeline. The constitutional basis of preemption, in this instance, is the commerce clause, and the supremacy clause. In its brief, the Public Service Commission recognizes the restrictions which' the Act imposes, and we perceive no intention on the part of the Commission to infringe the federal government’s exclusive authority to prescribe the standards necessary for the safe interstate transmission of gas. But federal preemption of the major aspects of interstate gas pipeline safety-does not settle the controversy over the power of West Virginia to levy its statutory fee on the pipelines. Preemption of all phases of interstate gas pipeline safety cannot be inferred from the fact that Congress has occupied a part of the field. Huron Portland Cement Co. v. Detroit, 362 U.S. 440, 443, 80 S.Ct. 813, 4 L.Ed.2d 852 (1960). Federal regulation of an interstate carrier does not preclude state legislation affecting the same carrier unless (1) “the nature of the regulated subject matter permits no other conclusion,” or (2) “the Congress has unmistakably so ordained.” Florida Avocado Growers v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963).

The first test of preemption— whether the nature of the regulated subject matter permits no other conclusion but preemption — depends primarily on whether the state law under scrutiny obstructs the Congressional objectives. See Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941). The facts of this case demonstrate that West Virginia’s pipeline assessment law fosters state-federal cooperation. Confessing to a lack of staff, the federal government invited the states to act as agents of the Secretary of Transportation for the purpose of maintaining surveillance over the interstate pipelines, to assure compliance with federal regulations. More than a score of states, including West Virginia, accepted this responsibility. The complementary roles of the state and federal governments under the Act provide an opportunity for partnership that has been described as “unprecedented in federal utility regulation.” Thus, it is apparent that, instead of preempting every feature of interstate gas pipeline safety, the federal government has invited the states to participate in the program by voluntarily undertaking the indispensable task of inspection. The states, of course, must obtain funds to pay for this work. The West Virginia legislature chose as a matter of state policy to defray her costs by imposing license fees measured by adjusted pipeline mileage.

This record contains no proof that West Virginia’s levy unduly burdens interstate commerce, that it is discriminatory, that it is disproportionate to the state’s cost of participating in the safety program, or that it in any way prevents the companies from complying with the 1968 Act. Indeed, it is undisputed that the fees pay part of the cost of the surveillance that is designed to promote compliance with the federal standards. Thus, West Virginia’s method of financing its participation in the gas safety program does not obstruct or impair accomplishment of the congressional objective embodied in the Act — the safe interstate transmission of gas. We conclude, therefore, that West Virginia’s license fees are not invalidated by the first test of preemption.

We turn to the second test of preemption : has Congress unmistakably ordained that the states are barred from taxing interstate pipelines to help defray the cost of inspection? The companies urge that a 1972 amendment to the Act requires an affirmative answer to this question. The 1968 Act made no provision for reimbursing the states for the expenses they incurred as agents of the Secretary of Transportation. A number of states protested this omission and urged the enactment of legislation to correct it. In 1971, the National Association of Regulatory Utility Commissioners proposed that the states be awarded grants-in-aid to cover up to 50 per cent of their expenses, and that the states’ regulatory commissions be authorized to assess interstate pipelines to defray the costs of the states’ share of the safety program that was not available from other sources. Congress, however, did not adopt this solution to the problem. It provided grants-in-aid to the states of up to 50 per cent of their costs of participation in the interstate safety program, but it did not authorize state utility commissions to assess pipelines.

We find in the 1972 amendment and in its legislative history no unmistakable congressional intention to bar states from assessing pipelines to pay the remaining 50 per cent of the states’ expenses. The fact that Congress chose not to enact legislation that would authorize state regulatory commissions to assess interstate pipelines under federal law does not establish that Congress intended to prohibit such assessments under state law. To the contrary, the legislative history of the 1972 amendment indicates that Congress was willing to allow the states to select the most feasible means of financing the balance of their costs in light of their own tax structures and budgetary requirements. The Senate Report on the 1972 amendment discloses that Congress was aware that federal officials were administering the Act on the assumption that the states were not inhibited from assessing interstate pipelines to defray the expense of conducting safety surveillance as agents of the Secretary. With this information before it, Congress placed no limitation in the 1972 amendment on the power of the states to continue this method of funding their costs.

Finally, the companies argue that the Secretary has not delegated to the states that are acting as his agents authority to levy fees against interstate pipelines. This argument, based on a literal application of the law of agency, misconceives the source of the states’ taxing power. Concededly, the Secretary cannot authorize states to impose a tax on pipelines, but states possess inherent power to tax that can be exercised in the absence of constitutional prohibition or congressional preemption. Braniff Airways v. Nebraska State Board, 347 U.S. 590, 597, 74 S.Ct. 757, 98 L.Ed. 967 (1954). Here the companies do not invoke the Constitution, and the Secretary, acting through the Office of Pipeline Safety, recognizes that the Act does not preempt the states’ taxing power over interstate pipelines. Initially, the officials administering the Act expressed the opinion that states were not authorized to assess fees against interstate pipelines. However, recognizing that this stand was an impediment to cooperation between state and federal governments, the Office of Pipeline Safety changed its position. It now acknowledges that, considering the overall objectives of the Act, there is no “basis for implying an intent on the part of Congress to preempt the authority of States to tax, assess, or impose fees on interstate operators.” This administrative interpretation, while not controlling, is entitled to great weight. Zemel v. Rusk, 381 U.S. 1, 11, 85 S.Ct. 1271, 14 L.Ed.2d 179 (1965). We, therefore, conclude that West Virginia’s license fee survives the second test preemption.

The judgment of the district court is affirmed.

      . Title 49 U.S.O. §§ 1671-1684 (1970).

      . West Virginia Code Ann. § 24B-5-3(a) (1971) provides:
      “(a) Every pipeline company shall pay a special license fee in addition to those now required by law. The amount of such fees shall be fixed by the public service commission and levied by it upon each of such pipeline companies according to the number of three inch equivalent pipeline miles included in its pipeline facilities, and shall be apportioned among such pipeline companies upon the basis of the pipeline companies’ reports submitted to the commission in such form as the commission may prescribe, so as to produce a revenue of not more than ninety thousand dollars per annum, which fees shall be paid on or before the first day of July in each year.”

      . West Virginia Code Ann. § 24B-5-3(b) (1971) provides in part:
      “(b) Such sums collected under . . . subsection (a) of this section shall be paid into the state treasury and kept as a special fund, designated ‘public service commission gas pipeline safety fund,’ to be appropriated as provided by law for the purpose of paying the salaries of the commission, as fixed by this chapter, its expenses and salaries, compensation, costs and expenses of its employees. Any balance in said fund at the end of any fiscal year shall not revert to the treasury, but shall remain in said fund and may be appropriated as provided in this subsection.”

      . Title 49 U.S.C. § 1672(b) provides for the establishment of minimum federal safety standards for the transportation of gas. The section concludes:
      “Any State agency . . . may not adopt or continue in force after the minimum Federal safety standards referred to in this subsection become effective any such standards applicable to interstate transmission facilities.”

      . “The relationship of Federal-State regulatory authority created by this bill differs as between local pipelines and interstate transmission lines. In the latter area, the lines of a single transmission company may traverse a number of States and uniformity of regulation is a desirable objective. For this reason, section 3 provides for a Federal preemption in the case of interstate transmission lines.” H.R.Rep.No.1390, 90th Cong., 2d Sess. (1968); 3 U.S.Code Cong. & Admin. News, 90th Cong., 2d Sess. pp. 3223, 3241 (1968).

      . In 1973, the Secretary of Transportation reported to Congress that the Department of Transportation through its Office of Pipeline Safety exercised exclusive authority for safety regulation of interstate gas transmission lines. See Federal-State Relations in Gas Pipeline Safety 3, 7, 10 (1973).

      . “[T]he ‘Natural Gas Pipeline Safety Act of 1968’ . . . has entered the field of ‘design, installation, inspection, testing, construction, extension, operation, replacement and maintenance of pipeline facilities.’ . . . As applied to interstate transmission pipelines, the Safety Act must prevail over and pre-empt any state [law].” United Gas Pipeline Co. v. Terrebonne Parish Police Jury, 319 F.Supp. 1138, 1139 (E.D.La. (1970), aff’d 445 F.2d 301 (5th Cir. 1971).

      . U.S.Const., art. I, § 8.

      . U.S.Const., art. VI.

      . West Virginia’s Gas Pipeline Safety Act was carefully drafted to avoid infringing on federal regulatory power. W.Va.Code Ann. § 24B-2-1 (1971) provides in part:
      “The commission shall have power and authority to prescribe and enforce safety standards for pipeline facilities, and to regulate safety practices of persons engaged in the transportation of gas, to the extent permitted by the [Natural Gas Pipeline Safety] ‘Act of 1968’ and any amendments thereto.”

      . In 1971, the Office of Pipeline Safety had only two full time employees to enforce compliance with federal standards. S.Rep.No. 92-829, 92d Cong., 2d Sess. (1972); 2 U.S. Code Cong. & Admin.News, 92d Cong., 2d Sess., pp. 3049, 3050 (1972). This lack of personnel has persisted. Federal-State Relations in Gas Pipeline Safety 9 (1973).

      . 49 C.F.R. § 190.6(a) provides in part:
      “(a) Any State agency of any State having authority, under the laws of that State, to exercise safety jurisdiction over interstate transmission facilities and that desires to exercise that authority as an agent of the Secretary of Transportation, is hereby authorized to do so.”
      The scope of the states’ authority is .explained in 35 Fed.Reg. 13249-50 (1970) quoted in Federal-State Relations in Gas Pipeline Safety 10 (1973) :
      “The agency authority with respect to interstate pipelines authorizes the State to maintain surveillance over the operation to insure compliance with Federal regulations. State personnel should perform the same function that Federal field personnel perform, inspecting operations and giving informal opinions and approvals as to compliance with the regulations.
      “The agency authority does not create enforcement authority in the State. Enforcement actions, except those which the operator voluntarily accepts, will be taken at the Federal level.
      “The agency authority does not authorize a State to create new standards or to take any action which would substantively change the Federal standards. The Act requires that standards be prescribed by the Department in accordance with applicable rulemaking procedures.”

      . Federal-State Relations in Gas Pipeline Safety 28 (1973).

      . Federal-State Relations in Gas Pipeline Safety 3 (1973).

        . See note 2, supra.

      . See S.Rep.No.92-829, 92d Cong., 2d Sess. (1972); 2 U.S.Code Cong. & Admin.News, 92d Cong., 2d Sess. pp. 3049, 3052 (1972).

      . Title 49 U.S.C.A. § 1674(c) (Supp.1973), Act of August 22, 1972, Pub.L.No.92-401, § 2, 86 Stat. 616.

      . The Committee on Commerce found this proposal and others submitted by the National Association of Regulatory Utility Commissioners to be worthy of consideration, but it deferred action because of the delay that major changes in the Act would cause. S.Rep.92-829, 92d Cong., 2d Sess. (1972); 2 U.S.Code Cong. & Admin.News, 92d Cong., 2d Sess., pp. 3049, 3055 (1972).

      . “[The National Association of Regulatory Commissioners] criticized ... interference by the Office of Pipeline Safety in State efforts to fund safety inspections of interstate pipelines through assessment of those lines . . . The Office of Pipeline Safety has subsequently changed its position on the assessment issue, now interpreting the Act not to address State power to assess interstate pipelines . . . . ” S.Rep.No.92-829, 92d Cong., 2d Sess. (1972); 2 U.S.Code Cong. & Admin.News, 92d Cong., 2d Sess. pp. 3049, 3052 (1972).

      . Letter from Joseph C. Caldwell, Acting Director, Office of Pipeline Safety, to Paul Rogers, General Counsel, National Association of Regulatory Utility Commissioners, February 17, 1972; see also, note 19, supra.

      After reiterating that the Secretary could not delegate authority to a state commission to assess fees against interstate pipelines, the Acting Director wrote in his letter of February 17, 1972:
      “The second question was whether or not the Act either expressly or impliedly prohibits a State from assessing fees against interstate operators. Upon review of this question and a thorough analysis of the statutory language and legislative history of the Act, the Department’s General Counsel determined that the expressed preemption in Section 3 relates only to the establishment of safety standards and State actions necessarily associated with the establishment of safety standards. He concluded that this express preemption did not extend to other State activities such as taxation or assessments. He further indicated that considering the overall objectives of the Act, there was no basis for implying an intent on the part of Congress to preempt the authority of States to tax, assess, or impose fees on interstate operators. Based upon this interpretation, it is the Department’s position that in adopting the Act Congress did not either expressly or impliedly preempt the power of the States to raise funds.
      “The General Counsel did note that there may be other legal bases upon which State statutes could be found invalid, such as, for example, imposition of an unreasonable burden on interstate commerce or discriminatory taxation. However, these are not matters which hinge on his interpretation of the Act.”


author: VAN OOSTERHOUT, Senior Circuit Judge.

text:
    UNITED STATES of America, for the Use and Benefit of Phillip E. WARREN, Appellee, v. Alva E. KIMREY and St. Paul Fire and Marine Insurance Company, Appellants.
    No. 73-1515.
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 16, 1973.
    Decided Jan. 4, 1974.
    Rehearing and Rehearing En Banc Feb. 19, 1974.

      J. W. Dickey, Jr., Pine Bluff, Ark., for appellants.
    Carlton, Currie, Pine Bluff, Ark., for appellee.
    Before VAN OOSTERHOUT and MOORE, Senior Circuit Judges, and WEBSTER, Circuit Judge.

       Honorable Leonard P. Moore, Senior Circuit Judge, Second Circuit, sitting by designation.

   VAN OOSTERHOUT, Senior Circuit Judge.

This is a timely appeal by defendants Alva E. Kimrey and St. Paul Fire and Marine Insurance Company (St. Paul) from final judgment based on jury verdict in favor of plaintiff Warren. Kim-rey upon the basis of a competitive bid in response to the Government’s solicitation for bids purchased specified buildings from the Army at the Pine Bluff Arsenal for $17,137.13. The buildings were to be removed and demolished. The purchaser was required to fill in excavations and grade. The fill and grading work was subcontracted to Warren. Kimrey provided the Government with a performance bond with St. Paul as surety.

Warren, after entering into a contract with Kimrey, was fired. The present action with jurisdiction based on 40 U. S.C. § 270b and 28 U.S.C. § 1352 is brought against Kimrey and St. Paul on the performance bond. Liability was denied.

St. Paul by motion to dismiss and by motion for directed verdict, both of which were overruled, raised the issue that plaintiff’s claim is not covered by its performance bond.

The Surety’s Appeal.

We shall first consider St. Paul’s appeal. St. Paul urges that the trial court erred in denying its motion for directed verdict upon each of the following grounds:

A. In holding that the Miller Act applies to Kimrey’s purchase.

B. In holding that the performance bond provided the Government by St. Paul could be converted into a payment bond for the benefit of the plaintiff, whether or not the Miller Act applies.

Plaintiff’s theory, is that the transaction between the Government and Kim-rey is a transaction covered by the Miller Act; that the Miller Act requires both a performance bond for the benefit of the Government and a payment bond for the benefit of labor and material men, and that the bond issued should be liberally construed to include all coverage required by the Miller Act.

Forty U.S.C. § 270a provides in pertinent part:

(a) Before any contract, exceeding $2,000 in amount, for the construction, alteration, or repair of any public building or public work of the United States is awarded to any person, such person shall furnish to the United States the following bonds, which shall become binding upon the award of the contract to such person, who is hereinafter designated as “contractor” :

(1) A performance bond with a surety or sureties satisfactory to the officer awarding such contract, and in such amount as he shall deem adequate, for the protection of the United States.

(2) A payment bond with a surety or sureties satisfactory to such officer for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of each such person. * * *

The trial court erred in finding the transaction here involved between the Government and Kimrey falls within the provisions of the Miller Act. The contract does not involve “the construction, alteration, or repair of any public building or public work.” Instead, it represents a sale of surplus, unwanted Government buildings and equipment. This is clearly illustrated by the manner in which the Government handled the transaction. The heading of the notice and advertisement for sale reads in large letters: “Offering for Sale Chlorine-Caustic Soda Plant [Excluding Land].” The property offered is described in detail together with the terms of sale in a lengthy document. Bids are. solicited and the terms of the contract to be entered into with the successful bidder are set out. Kimrey’s bid was accepted by William D. Schwennsen, Chief, Management and Disposal Branch, Real Estate Division. Mr. Schwennsen as a witness testified as follows:

Q. You’re actually not a contracting officer, are you, as known in the Federal Government? A. No, sir.

Q. Would you explain the difference, please, sir, how you could sign as chief of this section and not as a contracting officer? A. Under delegation of authority from the District Engineer, I have been authorized to sign documents on the disposal of buildings for off site use, that is, surplus and excess buildings, improvements, and so on. I do that in the capacity of Chief of Management and Disposal Branch, not as a contracting officer, because a contracting officer, so far as the government is concerned, is to be bonded. No. 1, and, secondly, they are under the jurisdiction of the Armed Services Procurement Regulations which is, in a sense, a supply matter wherein the government pays for the services or materials that it purchases.

The offer of sale at paragraph “8” requires the successful bidder to provide a performance bond and further provides “Standard Form 25 * * * may be used for this purpose.” The performance bond provided by St. Paul was on Form 25. The bond runs to the Government as obligee and contains no provision for the protection of persons providing labor or material.

On October 19, 1972, after the buildings had been removed, and the ground had been graded, Mr. Schwennsen returned the performance bond to Kimrey, the letter of transmittal stating:

According to our records you completed all work required under the contract of 11 October 1972. Accordingly, there is inclosed for your disposition your St. Paul Fire and Marine Insurance Company Bond No. 400CY0727, which served as your performance guarantee under the contract.

We hold that the contract for sale of the Government property is not a contract covered by the Miller Act. The Miller Act appears to be unambiguous in this respect. If any ambiguity exists in § 270a, the practical construction of the statute by the Government agency in charge of the transaction is entitled to great weight. University of Southern California v. Cost of Living Council, 472 F.2d 1065, 1068 (Em.App.1972); Udall v. Tallman, 380 U.S. 1, 16, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). Moreover, .§ 270b, setting out the rights of persons furnishing labor or material, gives the unpaid provider of labor and material a right to sue therefor on the payment bond. No similar right is given on the performance bond which under the terms of § 270a is for the protection of the United States.

Plaintiff’s second contention that he is entitled to recover against the surety on the performance bond, whether or not the Miller Act applies, lacks merit. The contract between the Government and Kimrey, evidenced by the offer and acceptance as above set out, requires a performance bond only. The Government is the only obligee for such bond. No provision is made in the contract or the bond for the protection of persons furnishing labor or material.

The present case is distinguishable from American Casualty Co. v. Brezina Construction Co., 295 F.2d 603 (8th Cir. 1961). In that case the contract was covered by the Miller Act. The suit was brought by the surety of the general contractor who was the obligee on the bond, and it was determined upon the basis of the bond and the subcontract that the bond should be construed to cover labor and material claims incurred and unpaid by the subcontractor.

In National Union Fire Ins. Co. v. D & L Construction Co., 353 F.2d 169 (8th Cir. 1965), we adhered to our holding in Brezina upon the basis of the facts in that case, and went on to say:

Our holding is limited to the facts there presented and such case does not go to the extent of holding that a performance bond will under all circumstances cover all of the liabilities contemplated by a payment bond. [353 F.2d 169, 172-173.]

In United States v. Ardelt-Horn Construction Co., 316 F.Supp. 254 (D.Neb. 1970), suit was brought by a subcontractor on the contractor’s performance bond to recover for labor and materials. Judge Urbom, in a very well-reasoned opinion supported by respectable authority, under the heading of “Third Claim for Relief,” discusses Brezina and holds that the surety on a performance bond on a Government contract is not obligated to pay for labor and material furnished by a subcontractor. The basis of the decision is that there is no language in the contract or the bond showing any intention to make a subcontractor a third party beneficiary on the performance bond. We affirmed on this issue on the basis of Judge Urbom’s opinion. United States v. Ardelt-Horn Construction Co., 446 F.2d 820-821 (8th Cir. 1971), stating:

Plaintiff bases its right to recover on the performance bond upon the theory that it is a third party beneficiary, and upon the theory of equitable subrogation to the rights of the government on the performance bond. We affirm the dismissal of the third claim for relief upon the basis of the trial court’s well considered opinion.
We agree with the view of the trial court that the Miller Act by its clear language, which is fully supported by the legislative history, provides for a payment bond for protection of those providing labor and material on government projects and a performance bond for the protection of the United States, and that no basis exists for plaintiff’s claim as a third party beneficiary of the performance bond.

Similarly, in our present case plaintiff is not made an obligee on the performance bond and no legal or evidentiary basis exists for a determination that the parties to the bond intended to cover any right of the plaintiff subcontractor to recover the cost of labor or material as a third party beneficiary of such bond. The performance bond here involved as written unambiguously makes the Government the sole obligee and contains no provision for the protection of building or material men. There is no substantial evidence in the record to support extending the performance bond to the plaintiff under the facts in this case. The judgment against St. Paul is reversed. St. Paul is entitled to a dismissal of the action as to it.

Defendant Kimrey’s Appeal.

The only error urged in support of Kimrey’s appeal is a brief paragraph under the heading of conclusion which asserts Kimrey should be entitled to a new trial because he was prejudiced by the court’s reference in its instructions and verdict forms to St. Paul as the surety. Kimrey contends that this injected the issue of insurance in the case and that this had a prejudicial effect. The court’s reference to St. Paul as the surety was necessary because St. Paul was a joint defendant. The liability of Kimrey is established under his contract with the plaintiff. Kimrey has failed to set out the specific instructions and his objections to them, if any, as required by our rules, either in the appendix or in his brief and has failed to demonstrate that he had any real or valid defense to plaintiff’s claim. In any event, he has failed to show that any error that might have been committed is prejudicial. The judgment against Kimrey is affirmed.

Reversed on St. Paul’s appeal and remanded with direction to dismiss as to St. Paul. Affirmed on defendant Kim-rey’s appeal.

On Petition for Rehearing

On January 30, 1974, an order was entered denying petition of appellants for rehearing en banc and also denying the petition for rehearing. This order is now hereby set aside as being prematurely entered. This court having now considered petition for rehearing en banc filed by counsel for appellants it is hereby denied.

It is further ordered that appellants’ petition for rehearing is denied. With respect to ground 2 asserted by appellants in the petition for rehearing, which reads:

2. In the opinion of the petitioner, St. Paul, the Court has overlooked the fact that St. Paul’s indemnity company is the surety of the supersedeas bond of Kimrey, and therefore such surety exposure should be cancelled, along with the reversal of the judgment of St. Paul.

the court states that such issue is not properly before us. The record before us fails to show that such issue was raised in the trial court and such issue was not raised in appellants’ brief on appeal, and the record is incomplete upon such issue. Such issue has not been passed upon by this court.


author: JAMES HUNTER, III, Circuit Judge: SEITZ, Chief Judge WEIS, Circuit Judge

text:
    Ralph LEMONS, Appellant, v. UNITED STATES of America, Appellee.
    No. 73-1401.
    United States Court of Appeals, Third Circuit.
    Submitted Under Third Circuit Rule 12(6) Sept. 24, 1973.
    Decided Jan. 2, 1974.
    Seitz, Chief Judge, concurred in result with statement and Weis, Circuit Judge, concurred in result with statement.
    Ralph Lemons, pro se.
    Ralph F. Keil, U. S. Atty., Alan S. Yoffie, Asst. U. S. Atty., Willmington, Del., for appellee.

      Before SEITZ, Chief Judge, and HUNTER and WEIS, Circuit Judges.
   OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

Appellant Ralph Lemons was convicted for selling heroin in violation of 26 U.S.C. § 4705(a) and § 7237(b) (repealed subsequent to his conviction). Lemons thereafter appealed claiming entrapment and denial of his right to a speedy trial, but this court rejected those claims and upheld the conviction. United States v. Lemons, 470 F.2d 135 (3d Cir. 1972). Subsequently Lemons petitioned the district court pro se for relief under 28 U.S.C. § 2255 challenging the validity of the conviction under the due process clause of the Fifth Amendment because he was tried while allegedly wearing a prison uniform. The petition was dismissed and Lemons brought this appeal.

In denying Lemons’ petition, the district court held that it disagreed with other courts which have found it prejudicial for a defendant to be tried for a crime while dressed in a jail uniform; that it doubted anyone noticed that Lemons was wearing prison clothing; and that, in any event, it “suspected” that Lemons purposely chose to delay bringing his attire to the attention of the court until after the close of the trial.

I

Subsequent to the district court’s dismissal of Lemons’ petition, this court held that a defendant’s due process right to be presumed innocent until proven guilty is denied by trying him for a crime while dressed in prison clothing, unless it is found that the defendant willingly went to trial in such clothing and hence waived his right. Gaito v. Brierly, 485 F.2d 86 (3d Cir., filed Sept. 21, 1973). Since the district court proceeded from a contrary belief, we remand for a hearing and findings in light of the principles we enunciated in Gaito.

In remanding, we note that the district court should first ascertain whether Lemons wore clothes “reasonable identifiable” as prison clothing. Unlike Gaito wherein the defendant’s clothes were found not to have any distinctive markings, Lemons has alleged that the words “State Prison” were stenciled on the seat of his trousers and that the jury panel may have seen the stenciling on one occasion when he stood as the judge entered the courtroom. If it is found that the trousers worn by Lemons bear the alleged stenciling and that it was visible to the jurors who were selected to hear the case, we think prejudice will have been shown. Even if the district court should find that the alleged stenciling could not have been visible to the jury panel, it must still determine whether his attire, irrespective of any stenciling, could have been reasonably identified by the jury as prison clothing.

Assuming that the district court finds that at his trial Lemons wore clothing reasonably identifiable as prison clothing, reversal of his conviction would not follow automatically. We recognized in Gaito that a defendant may not complain that he has been denied his right to be presumed innocent until proven guilty, if he remained silent and willingly went to trial in prison clothing and thereafter claimed error. Each case must be considered in its own factual context, and, as with all rights which emanate from the Constitution, the government bears the burden of showing a voluntary waiver.

Lemons has raised the question of his willingness to appear in prison clothing by his allegations that “[t]he civilian clothing, brought to the Delaware correctional center by [his] wife had been refused by the authorities in the person of Captain Martin” and that “he was forced to present himself to the jury while dressed in a Georgia State Prison uniform.” On the other hand, the district court “suspected,” but without making a finding, that Lemons purposely refrained from informing the court of his attire until after the jury had been excused, presumably relying in part on an affidavit submitted by Lemons’ court-appointed attorney in which his attorney stated:

“The defendant [Lemons] told me that he was wearing prison garb and, in accordance with [Lemons’] request, after the jury had been excused following the return of a guilty verdict, I placed on the record the fact that [Lemons] was wearing prison clothing.”

While this may be pertinent to the question of a voluntary waiver, it is not clear at what point in time Lemons told this to his attorney or whether it was Lemons’ request that the court be informed of his attire only after the jury had been excused and the verdict rendered.

Finally, if the district court determines that Lemons was denied his due process right to a presumption of innocence by being tried in clothing reasonably identifiable as prison clothing, it must then determine whether this was error harmless beyond a reasonable doubt. Harrington v. California, 395 U.S. 250, 89 S.Ct. 1726, 23 L.Ed.2d 284 (1969); Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967); see Thomas v. Beto, 474 F.2d 981 (5th Cir. 1973).

II

After the district court had dismissed his petition, Lemons sought to file an amendment to his original petition, alleging deprivation of his Sixth Amendment right to counsel. On the basis of its disposition of Lemons’ original petition and its belief that appearing at trial in prison clothing was not inherently prejudicial, the district court dismissed Lemons’ subsequent petition as moot. In view of our decision today this question no longer is moot. In its evidentiary hearing on remand the district court should consider whether Lemons was denied the effective assistance of counsel guaranteed by the Sixth and Fourteenth Amendments.

The order of the district court of March 21, 1973 and paragraph 1 of the order of April 24, 1973, will be vacated, and the cause remanded for further proceedings not inconsistent with this opinion.

SEITZ, Chief Judge

(concurring).

I would have preferred to decide this case under our supervisory power. However, since this case arises under 28 U.S.C. § 2255, I do not believe we are free to invoke such power here. I therefore concur in the result reached by the court.

WEIS, Circuit Judge

(concurring).

I, too, would have preferred to decide this case under our supervisory power. I concur in the result because I am bound by Gaito v. Brierley, 485 F.2d 86 (3rd Cir. 1973), although I do not agree with that decision.

      . Gaito v. Brierly, supra at 88.

      . He also alleges that the same words were stenciled on the back of his shirt, although the district court concluded that an unmarked denim jacket worn over his shirt concealed the stenciling.

      . Presently before this court is Lemons’ motion to subpoena his prison uniform and ap-pellee’s motion to quash it. In view of our disposition of this case, and recognizing that the district court is the appropriate forum in which to introduce evidence, we decline to act on these motions. The parties, however, should be permitted to renew these motions before the district court.

      . Gaito v. Brierly, supra at 88 n. 3, citing Hernandez v. Beto, 443 F.2d 634, 637 (5th Cir. 1971) (emphasis added).

      . The Supreme Court lias always set high standards of proof for the waiver of constitutional rights. See, e. g., Schneckloth v. Bustamonte, 412 U.S. 218, 93 S.Ct. 1952, 36 L.Ed.2d 752 (1973); Brady v. United States, 397 U.S. 742, 90 S.Ct. 1463, 25 L.Ed.2d 747 (1970); Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966); Johnson v. Zerbst, 304 U.S. 458, 58 S.Ct. 1019, 82 L.Ed. 1089 (1938); cf. D. H. Overmyer Co. v. Frick Co., 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124 (1972) (civil action).

      . We suggested in Gaito that one manner in which a voluntary waiver might be proven is by showing that the defendant deliberately appeared in prison garb as part of a trial strategy. Gaito v. Brierly, supra at 88 n. 3, of 485 F.2d. See Garcia v. Beto, 452 F.2d 655 (5th Cir. 1972) (defense counsel’s strategy).

      . Traverse to Respondent’s Reply at 2 and 4.