author: NICHOLS, Associate Judge:

text:
    In the Matter of James Lucius MANUEL, Bankrupt. ROBERTS FURNITURE CO., Appellant, v. Benjamin E. PIERCE, Jr., Trustee of Bankruptcy Estate of James Lucius Manuel, Appellee, James W. Head, Trustee for wage earners for the Southern District of Georgia, Intervenor-Appellee.
    No. 74-1706.
    United States Court of Appeals, Fifth Circuit.
    Feb. 10, 1975.

      Percy J. Blount, Augusta, Ga., for appellant.
    Benjamin Pierce, Jr., Jay M. Sawilow-sky, Augusta, Ga., for James W. Head.
    Before GEWIN and SIMPSON, Circuit Judges, and NICHOLS , Associate Judge.

      Of the U. S. Court of Claims, sitting by designation.

   NICHOLS, Associate Judge:

This ease originated in the bankruptcy of James Lucius Manuel. On December 7, 1972, he purchased certain household furniture from appellant Roberts Furniture Co. On February 13, 1973, he purchased a television set, also from appellant. The purchase money security agreement he then signed referred to an unpaid balance of $573.32 from the first purchase, deducted $116.03 for refunds, leaving a prior unpaid balance of $457.29 which was added to the unpaid balance on the TV set, $174.07, making a total balance owed of $631.36. This agreement was never filed for perfection as Georgia law required, nor was perfection obtained by retaining possession. The agreement also failed to indicate the order in which purchases were paid off, and the amounts still due on each item and secured by the paid-up items. The apparent purpose of Roberts Furniture was to ensure that title to nothing passed until title to all passed. The February 13 purchase money agreement provided:

“It is agreed that the contracts, whether one or more, heretofore entered into between Seller and Buyer, having an unpaid balance of $573.32 referred to as “prior balance” shall remain in full force and effect, that Seller’s security interest in the goods sold thereunder shall remain perfected, until full payment for said goods has been made, and that the contract evidenced by this instrument shall have no effect on the above mentioned existing contract except to modify the terms of payment thereof.
It is further agreed, however, that for the purposes of the payment of the said prior balance and total of payments on the contract evidenced by this instrument, that Buyer shall make one payment in the amount and for the period set forth below until the total of payments as set forth has been paid. Upon a default in the contract evidenced by this instrument the said existing contract shall also be deemed to be in default. Until all installment payments and all other amounts due hereunder, have been paid, Seller shall retain a security interest in the Goods and any and all equipment, parts, accessories, attachments, additions and other goods, and all replacements thereof, now or hereafter installed in, affixed to or used in connection with said Goods and, if Buyer sells or otherwise disposes of the Goods in violation of the terms of this agreement, in the proceeds of such sale or disposition. Goods may secure all present and future liabilities, debts and obligations of whatever nature of BUYER to SELLER or its assigns.” (Emphasis supplied.)

Manuel filed a voluntary bankruptcy petition on May 3, 1973. Roberts Furniture claimed reclamation in bankruptcy on the basis of priority of their “Purchase Money Security Interest.” The bankruptcy judge found that except for the TV set Roberts failed to acquire a Purchase Money Security Interest as defined by Georgia Code § 109A-9-107; that Roberts failed to perfect the security interest in any other manner provided by the Georgia and Uniform Commercial Codes; and that Section 70(c) of the Bankruptcy Act, 11 U.S.C. § 110, and Georgia Code § 109A-9-301(3) gave the bankruptcy trustee preference over Roberts’ unperfected security interests.

The District Judge would have denied reclamation for the TV set also, except that the point was not preserved by cross appeal. Appellee now stipulates, contrary to the impression of the court below, that the combined value of all the involved merchandise is not equal to the debt owed Roberts Furniture Co. Nevertheless, we affirm.

I

There is no dispute here as to jurisdiction or to the application of Georgia law. Lewis v. Manufacturers National Bank of Detroit, 364 U.S. 603, 81 S.Ct. 347, 5 L.Ed.2d 323 (1961), settled the question of whether state law applies in bankruptcy court to allocate priorities among creditors.

As the Bankruptcy Judge stated:
* * * Generally, a secured creditor is entitled to reclaim from the estate of a Bankrupt, or to foreclose against his security interest in, any property in possession of the Bankrupt or Trustee if the value of the security does not substantially exceed the debt to the particular creditor. To enjoy this right, the secured creditor must have, prior to the filing of the Bankruptcy, perfected his security interest in accordance with the law of the State which is to be applied by the Bankruptcy Court in its consideration of the issues.

The issue here is whether Georgia law would allow the arrangement below to be considered a Purchase Money Security Interest, which requires no filing for perfection. Georgia has enacted the Uniform Commercial Code. Georgia

Code § 109A-9-107 defines a Purchase Money Security Interest:

* * * A security interest is a “purchase money security interest” to the extent that it is
(a) taken or retained by the seller of the collateral to secure all or part of its price; or
(b) taken by a person who by making advances or incurring an obligation gives value to enable the debtor to acquire rights in or the use of collateral if such value is in fact so used. * * *

Georgia Code § 109A — 9-302 provides the exceptions where filing is not required for perfection. One of the exceptions is:

* * * * * *
(d) a purchase money security interest in consumer goods; * * *

There are other exceptions to the filing requirement, not here relevant. Otherwise, if not perfected by filing, under Georgia Code § 109A-9-301, the un-perfeeted security interest is subordinate to the rights of “(l)(b) * * * a lien creditor * * *;” which term includes “(3) * * * a trustee in bankruptcy * * * unless all the creditors had actual knowledge of the security interest, which is not contended here.

Roberts Furniture claims the exception for consumer goods. As the judges below noted, citing Allen v. Lokey, 307 F.2d 353 (5th Cir. 1962), and National Silver Co. v. Nichols, 205 F.2d 52 (5th Cir. 1953), the burden of proof to establish a security interest is upon the party seeking reclamation, and Roberts has not met that burden. The problem here begins with the fact that the security agreement filed with the court shows about $150 paid on about a $900 total debt, for 7 pieces of furniture and a TV set, with no clues as to what items are paid for and which are not, nor does any rule of first-bought, first-paid for appear.

A plain reading of the statutory requirements would indicate that they require the purchase money security interest to be in the item purchased, and that, as the judges below noted, the purchase money security interest cannot exceed the price of what is purchased in the transaction wherein the security interest is created, if the vendor is to be protected despite the absence of filing. Except as to the TV set, if at all, the interest here is not a “purchase money security interest” because it is not taken or retained by the seller of the collateral solely to secure all or part of its (emphasis supplied) price. Roberts attempted to make collateral secure debt other than its own price. The statutory exception does not reach the case.

The judges below drew their conclusion on the statutory language and on authority other than Georgia cases. Appellee has collected and cited to us a number of Georgia cases, which we have examined. We have no doubt that the Georgia courts will henceforward observe the express command of their legislature, but we find it unnecessary to analyze in detail cases which show no more than that they have hitherto done so, with respect to parts of the enactment here involved, other than those to be construed here. The District Judge refers to In re Simpson, 4 U.C.C.Rep. 243 (D.C.W.D.Mich.1966). This referee in bankruptcy’s opinion is well thought out, and documented with references to the Official Code Comment # 2, and to secondary authority. It was a case stronger for the vendor, than the one here, in that the farm machinery item in dispute was sold under the agreement which failed, in the referee’s view, to create a purchase money security interest without filing, only because it included a clause making the item security, not only for its own price, but also for future advances. The entire discussion may be regarded as dictum since the referee ends up by holding that the vendor saved its security interest after all by recovering possession before the bankruptcy, without fraud on the creditors. In view of the wide circulation of the referee’s opinion by the U.C.C. Reporting Service, the absence of contrary case authority, and its inherent reasonableness, we think our District Judge properly gave much weight to it.

The error of the belief below, that the value of the intended collateral exceeded the debt, is not fatal to the conclusion reached, though it does impair some of the reasoning, and prevents us from adopting the opinion below as our own.

We express no view as to whether a valid purchase money security interest was created with respect to the TV set. Nothing we say is to be taken as a holding as to that.

Affirmed.


source: Caselaw Access Project

license: Public Domain

text:
    Charles ROBERSON, Plaintiff-Appellant, v. N. V. STOOMVAART MAATSCHAP-PIJ, Defendant-Third Party Plaintiff-Appellee, v. STRACHAN SHIPPING COMPANY, Third Party Defendant-Appellee, American Mutual Liability Insurance Company, Intervenor.
    No. 74-1582.
    United States Court of Appeals, Fifth Circuit.
    Feb. 10, 1975.
    Rehearing Denied March 21, 1975.
    Darryl J. Tschirn, Gothard J. Reck, New Orleans, La., for plaintiff-appellant.
    William A. Ransom, III, New Orleans, La., for N. V. Stoomvaart.

      Stuart A. McClendon, Richard L. Greenland, Metairie, La., for Strachan & Am. Mut. Liability.
    Before GEWIN and SIMPSON, Circuit Judges, and NICHOLS, Associate Judge.

      Of the U. S. Court of Claims, sitting by designation.

   NICHOLS, Associate Judge:

This appeal presents the question whether a suit in admiralty, brought in a United States District Court on behalf of a longshoreman injured on board a vessel unloading at New Orleans, must be dismissed on motion under Louisiana Civil Code, Art. 2315, because counsel failed to move to substitute a living person within one year of the original plaintiff’s death. Our answer is in the negative and, accordingly, we reverse.

The injury occurred May 5, 1970. Plaintiff slipped and strained his back, allegedly because of spillage from cargo, making the cargo hold where he worked “unseaworthy.” On March 26, 1971, he sued. On March 15, 1972, he died. Plaintiff originally had sued Strachan Shipping Co., a stevedoring firm and his employer, but later he joined the shipowner also. A pre-trial order of March 2, 1973, states plaintiff would move to substitute a survivor for the deceased, but this has not been done. Strachan on October 9, 1973, moved to dismiss the suit, with prejudice, because of failure to make a proper substitution of parties within one year of death. Allowance of this motion terminated the preparations for trial and precipitated this appeal.

Strachan and the District Judge relied almost wholly on McManus v. Lykes Brothers Steamship Co., 275 F.Supp. 361 (E.D.La.1967). The facts in that case were virtually identical to those at bar. We may turn to this published opinion as a fuller statement of the reasoning of the District Judge herein, reasoning he has adopted as his own.

This reasoning is founded on The Harrisburg, 119 U.S. 199, 7 S.Ct. 140, 30 L.Ed. 358 (1886), and the Article of the Louisiana Civil Code, 2315, above mentioned. According to the former, as construed in McManus, it is only through the adoption of a state death act, in this case Art. 2315, that the failure of the maritime law to provide for “survival or wrongful death actions” is supplied, in cases outside Federal statutes such as the Jones Act (46 U.S.C. § 688), and the Death on the High Seas Act (46 U.S.C. §§ 761-768). This phraseology covers both actions for pain and suffering of the deceased while alive, and actions for injury to survivors by wrongful death strictly so-called. See infra. Turning therefore to state death acts, as the court must, “they must be accepted on their face and with whatever limitations are inherent in the right as granted by the state act.” McManus, supra, 275 F.Supp. at 363. Here, the state act, Art. 2315, required as a matter of substance, not mere procedure, that the substitution of the survivor in all cases must be effected within one year of death.

But this thinking was founded not on rock but on sand. Moragne v. States Marine Lines, 398 U.S. 375, 90 S.Ct. 1772, 26 L.Ed.2d 339 (1970), overrules The Harrisburg, supra, and all its progeny; Federal maritime law, even if judge made, now can operate to award damages for wrongful death or survivor-ship directly. No resort to state law is necessary and thus the restrictions the state had imposed on the survivors cease to be relevant. The structure of reasoning in McManus falls like a house of cards and the reasoning below falls with it.

This court has already treated claims for a decedent’s pain and suffering, before death, as having the same Moragne standing as a claim for wrongful death strictly so-called. Dennis v. Central Gulf Steamship Corp., 453 F.2d 137 (5th Cir.), cert. denied, 409 U.S. 948, 93 S.Ct. 286, 34 L.Ed.2d 218 (1972). Aec., Greene v. Vantage Steamship Corp., 466 F.2d 159 (4th Cir. 1972).

In Moragne, the Court by dictum speculates 398 U.S. at 406, 90 S.Ct. 1772, that where state statutes of limitations are now deprived of effect, and no Federal provision applies, the doctrine of laches may be the answer. The plaintiff has apparently not been outstandingly diligent here, and on remand, perhaps should justify the time expended with no move made to substitute a living plaintiff. Under F.R.C.P. 25(a), perhaps the failure to substitute can continue indefinitely until the adversary party files a formal suggestion of death. We need not decide that now.

The Distict Judges’ expertise in Louisiana law we assume, and since they say, as they do, that Art. 2315 is substantive, not procedural, it does not clash with Rule 25(a). What would happen in the event of such a clash is a moot question we need not consider, and many of the contentions of the parties can be passed over in silence accordingly. Art. 2315 is a rule of substantive law that a decedent’s own cause of action, and the causes of others for his wrongful death, survive if and only if another is substituted within one year of death, in case of a suit originally brought by the decedent himself. Such a limitation, under Moragne and absent Harrisburg, cannot apply to bar recovery for a maritime tort merely because it was committed in Louisiana coastal waters. Pope & Talbot, Inc. v. Hawn, 346 U.S. 406, 409—410, 74 S.Ct. 202, 98 L.Ed. 143 (1953). The United States Constitution and laws made under it, are supreme within their scope. Art. VI. Admiralty and maritime jurisdiction were placed in the Federal courts by Art. Ill, Sec. 2 of the Constitution as implemented by the Judiciary Act of 1789 (Ch. 20, 1 Stat. 77, Sept. 24, 1789).

Counsel stated to the court below that the death of Roberson was not due to the shipboard accident, and the action was therefore one for personal injury and not wrongful death. The court below disregarded this because Art. 2315, by its terms barred all actions on account of wrong to a decedent unless proper timely substitution was made. Whether or not this was a proper application of the Harrisburg doctrine need not detain us long. If it was not, appellant is assuredly not worse off than if it was. If counsel’s statement to the court below was right, the cause of action is technically a “survival” claim. Like one for wrongful death, it did not survive the death of the injured party at common law, and consistently with the Harrisburg, in case of a maritime tort, “survival” necessarily depended on state statutes to the same extent. See, Sea-Land Services, Inc. v. Gaudet, 414 U.S. 573 fn. 2 at 575, 94 S.Ct. 806, 39 L.Ed.2d 9 (1974). If the McManus court correctly applied Harrisburg to a “survival” situation, in logic the Moragne overruling likewise applies.

Accordingly, the decision below is reversed and the cause is remanded for further proceedings consistent with this opinion.

Reversed and remanded.


author: GOLDBERG, Circuit Judge:

text:
    PEACH STATE UNIFORM SERVICE, INC., Plaintiff-Appellant, v. The AMERICAN INSURANCE COMPANY, Defendant-Appellee.
    No. 73-3720.
    United States Court of Appeals, Fifth Circuit.
    Feb. 7, 1975.

      E. A. Simpson, Jr., Richard H. Sink-field, Atlanta, Ga., for plaintiff-appellant.
    Sam F. Lowe, Jr., Atlanta, Ga., for defendant-appellee.
    Before RIVES, GEWIN and GOLDBERG, Circuit Judges.
   GOLDBERG, Circuit Judge:

On the night of July 30, 1971, after heavy rains, part of the foundation of the Peach State Building in Atlanta, Georgia, gave way and a portion of the building collapsed. Peach State Uniform Company (Peach State), the tenant of the building and plaintiff in this diversity case, lost personal property in the disaster. In time Peach State brought this suit to recover its losses from defendant American Insurance Company (American), with whom it had an “all-risk” insurance policy covering the building.

Trial came on before a jury. American attempted to prove that the undermining and consequent tumble of the Peach State Building proximately resulted from the work of run-off water washing away uncompacted fill dirt from underneath its foundation. Accordingly, American argued, the loss came within exclusions in the “all-risk” policy coverage regarding losses resulting from certain earth movement or certain water damage. Peach State contradicted American’s position on both the law and the facts. First, Peach State urged the district court to hold as a matter of law that neither exclusion in the policy fits the loss as its cause was described by American. Second, Peach State sought to show that in any case the building collapse was caused not by the tear of run-off water, but by the caving in of a portion of the Orme Street Sewer which ran directly underneath the Peach State Building.

American prevailed at the trial. The district court refused to direct a verdict in favor of Peach State and declined to instruct the jury as Peach State had requested. In its turn, the jury concluded, in answer to special interrogatories, that the loss fit within both of the exclusions relied upon by American. So determining liability, the jury did not, unfortunately, determine the amount of damages. After the jury returned its verdict, the trial court denied Peach State’s motion for a judgment n. o. v., decreeing that while it was in ultimate agreement with Peach State’s argument that “there is no evidence to sustain the proposition that [Peach State’s] loss or damage constituted ‘water damage,’ within the meaning of the policy exclusion,” judgment would nevertheless be entered upon the verdict that American was excused from liability under the earth movement exclusion. Peach State appeals. We conclude that as a matter of law Peach State’s loss comes within neither policy exclusion; consequently, we reverse the judgment entered below and remand for a new trial on damages alone.

We think the district court was correct in its view that Peach State’s loss was not excluded from coverage as resulting from water damage as that term is used in the contract. While the term water damage may be used in the abstract to refer to any sort of damage worked by water or the motion of water, see, e. g., Pickering Construction Co. v. Liberty Mutual Fire Insurance Co., 1965, 111 Ga.App. 210, 141 S.E.2d 165, 166, here we must take the phrase in context, not in the abstract. The insurance contract between Peach State and American provides in relevant part:

PERILS EXCLUDED:
This policy does not insure against loss or damage resulting from:
(N) Water damage caused by, contributed to, or aggravated by any of the following:
(1) Flood, surface water, waves, tidal water or tidal wave, overflow of streams or other bodies of water, or spray from any of the foregoing
• * * J
(2) Water which backs up through sewers or drains,
(3) Water below the surface of the ground .... [emphasis added]

American would read exclusion (N) to refer to any sort of damage stemming from the enumerated water sources. This reading would effectively eliminate the adjective water, leaving an exclusion for any “loss or damage resulting from . damage caused by, contributed to, or aggravated by . . ' [f]lood, [w]ater which backs up [or] [w]ater below the surface of the ground. . . . ” A clause on this pattern is frequently threaded into insurance policies, but it is not the clause Peach State had here. We think it clear that the term water damage in this context constitutes a limitation on the sorts of damages from the enumerated waters which were excluded from coverage. Peach State suggests that for the term water damage to be given any meaning as such a limitation, clause (N) must be read as referring to such harms as staining, rusting, or other incidents of the chemical presence of water, and not to the strictly kinetic effects of moving water. The manifest reasonability of this reading of clause (N), attributing, as it does, some sense to each word, convinces us, as it did the district court, that the provision is at least ambiguous. We are bound by the Georgia law to resolve such ambiguity against the insurer. Accepting, therefore, the limiting construction put on the exclusion by Peach State, after a careful review of the record we affirm the district court’s conclusion that there was no evidence to show that Peach State’s loss fit within the water damage exclusion, properly construed.

We conclude that Peach State was also entitled to a judgment n. o. v. that its loss did not fall within exclusion

(B) of its contract with American. That clause provides:

PERILS EXCLUDED:
This policy does not insure against loss or damage resulting from:
(B) Earthquake, volcanic eruption, landslide or other earth movement

No reported Georgia decision has confronted this precise policy language. In accordance with the authority from other jurisdictions, however, we think the phrase other earth movement is ambiguous in its usage and application here and thus turn to the principle of ejusdem generis to facilitate construction of the exclusion. As the Court of Appeals of Georgia has articulated that doctrine in construing an exclusionary clause in an insurance policy:

“Where general words are followed by a description of specified subjects, the meaning of the general words ordinarily will be presumed to be limited to the enumerated special subjects, and to include only those things of the same nature as those specially enumerated, unless a clear manifestation of a contrary intent appears.” Jenkins v. Jones [1953], 209 Ga. 758, 761, 75 S.E.2d 815, 818; Beck v. Wade (1959), 100 Ga.App. 79, 82, 110 S.E.2d 43, 46.

State Farm Fire & Casualty Co. v. Rowland, 1965, 111 Ga.App. 743, 143 S.E.2d 193, 196-197. There is no clear manifestation here of an intent not to limit the general term other earth movement in this policy to events of the same nature as earthquakes, volcanoes, and landslides. Taking the phrase in its contractual context, then, and continuing to resolve ambiguity in favor of the insured, we read other earth movement as referring only to phenomena related to forces operating within the earth itself, and not to the merely superficial effects of external forces, such as erosion by run-off rainwater. There is no evidence on this record that Peach State’s loss might have resulted from hydrostatic pressures or other forces working within the earth itself. The construction of this ambiguous exclusion, like the water damage exclusion, was for the district court, and in view of the lack of evidence to show that Peach State’s loss resulted from earth movement, properly construed, Peach State was entitled as a matter of law to a judgment in its favor on the applicability of exclusions (B).

The inclusions and exclusions of an insurance policy do not always embroider a neat design. Our duty is to apply only enough judicial stitchery to the parties’ material to piece together a coherent pattern. In this role we do not construct a policy out of whole cloth, nor weave threads into the fabric which the parties themselves have not included. Where a stitch or two may have been dropped in executing the exclusionary trim, it goes against the tailor, the insurance company. The policy exclusions here do not fit every confluence of water and earth; the final fashion that emerges is not appropriate to every event. We determine simply that Peach State Building was well enough covered for the occasion.

We thus conclude that the district court erred in denying plaintiff Peach State’s motion for judgment n. o. v. on the issue of American’s liability. Accordingly, we reverse the judgment entered below, and remand the cause for a trial on the question of damages.

      . The policy provided in part:
      8. PERILS EXCLUDED:
      This policy does not insure against loss or damage resulting from:

        (B) Earthquake, volcanic eruption, landslide or other earth movement (This exclusion does not apply to property in transit);
      (N) Water damage caused by, contributed to, or aggravated by any of the following:
      (1) Flood, surface water, waves, tidal water or tidal wave, overflow of streams or other bodies of water, or spray from any of the foregoing; (this exclusion does not apply to property in transit),
      (2) Water which backs up through sewers or drains,
      (3) Water below the surface of the ground, including that which exerts pressure on or flows, seeps or leaks through sidewalks, driveways, foundations, walls, basement or other floors, or through doors, windows or any openings in any of the above.

      . Since our construction of the policy language resolves this case in favor of Peach State, we pretermit consideration of Peach State’s argument on concurrent causation.

      . See, e. g., Arjen Motor Hotel Corp. v. General Accident Fire & Life Assurance Corp., 5 Cir. 1967, 379 F.2d 265; American Insurance Co. v. Guest Printing Co., 1966, 114 Ga.App. 775, 152 S.E.2d 794, 795.

      . Ga.Code.Ann. § 20-704(5); State Mutual Life Assurance Co. v. Dorsey, 5 Cir. 1966, 357 F.2d 600, 602 (Georgia law); Davis v. United American Life Insurance Co., 1959, 215 Ga. 521, 111 S.E.2d 488, 492; Burke v. Life Insurance Co., 1961, 104 Ga.App. 865, 123 S.E.2d 426, 430.

      . American acknowledges that the burden was upon it to prove that Peach State’s loss fell within the policy exclusions.

      . Cf. Underwood v. United States Fidelity & Guaranty Co., 1968, 118 Ga.App. 847, 165 S.E.2d 874.

      . Accord, Gullett v. St. Paul Fire & Marine Insurance Co., 7 Cir. 1971, 446 F.2d 1100, 1103; see Souza v. Corvick, 1971, 142 U.S. App.D.C. 323, 441 F.2d 1013, 1021; Wyatt v. Northwestern Mutual Insurance Co., D.Minn. 1969, 304 F.Supp. 781; Anderson v. Indiana Lumbermens Mutual Insurance Co., La.App. 1961, 127 So.2d 304, 308; Government Employees Insurance Co. v. DeJames, 1970, 256 Md. 717, 261 A.2d 747, 752. As to the policy language in Underwood v. United States Fidelity & Guaranty Co., 1968, 118 Ga.App. 847, 165 S.E.2d 874 and Stewart v. Preferred Fire Insurance Co., 1970, 206 Kan. 247, 477 P.2d 966, see the discussion in Stewart, supra at 969, and compare Souza, supra; Wyatt, supra, and DeJames, supra.

      . See also Beavers v. LeSueur, 1939, 188 Ga. 393, 3 S.E.2d 667, 673; Hamlin v. Timberlake Grocery Co., 1974, 130 Ga.App. 648, 204 S.E.2d 442, 444.

      . Compare, e. g., the earth movement clause invoked in Olmstead v. Lumbermens Mutual Insurance Co., 1970, 22 Ohio St.2d 212, 259 N.E.2d 123, 125.

      . Accord, Souza v. Corvick, 1971, 142 U.S. App.D.C. 323, 441 F.2d 1013, 1021; see General Insurance Co. v. Lapidus, 9 Cir. 1963, 325 F.2d 287, 290; cf. Gullett v. St. Paul Fire & Marine Insurance Co., 7 Cir. 1971, 446 F.2d 1100, 1103-1104; Anderson v. Indiana Lum-bermens Mutual Insurance Co., La.App.1961, 127 So.2d 304, 308; Government Employees Insurance Company v. DeJames, 1970, 256 Md. 717, 261 A.2d 747, 752.

      . Cf, e. g., Gullett v. St. Paul Fire & Marine Insurance Co., 7 Cir. 1971, 446 F.2d 1100, 1103-1104.

        . See Goodwin, Inc. v. City of Lafayette, 5 cir 1969, 418 F.2d 698.


author: SIMPSON, Circuit Judge:

text:
    Thelma Jo LANGE, Plaintiff-Appellee, v. R. L. PHINNEY, District Director of Internal Revenue Service, and the United States of America, Defendants-Appellants.
    No. 73-3606.
    United States Court of Appeals, Fifth Circuit.
    Feb. 7, 1975.
    Rehearing and Rehearing En Banc Denied March 13, 1975.

      Scott P. Crampton, Asst. Atty. Gen., Tax Div., Dept, of Justice, Washington, D. C., Anthony J. P. Farris, U. S. Atty., Mary L. Sinderson, Asst. U. S. Atty., Houston, Tex., Meyer Rothwacks, Chief, Tax Div., Elmer J. Kelsey, Richard Far-ber, Attys., Tax Div., Dept, of Justice, Washington, D. C., for defendants-appellants.

      Joseph P. Kelly, Victoria, Tex., Moses Goldberg, San Antonio, Tex., for plaintiff-appellee.
    Before DYER, SIMPSON and CLARK, Circuit Judges.
   SIMPSON, Circuit Judge:

Thelma Jo Lange, (taxpayer) initiated this suit to restrain the assessment and collection of income taxes allegedly due for the taxable years 1960 and 1961 and to quash the tax liens and notice of federal income tax liens arising from such assessments. The district court, over the repeated objections by appellants, the District Director of the Internal Revenue Service and the United States, that it was without jurisdiction by virtue of Title 26, U.S.C., Sec. 7421(a) barring suits to enjoin the assessment and collection of taxes, determined that it did have jurisdiction and found in taxpayer’s favor, granting the requested injunctive relief. The sole issue before us is whether the district court correctly assumed jurisdiction. We find that the circumstances shown by the record do not bring taxpayer within the Enochs exception to Sec. 7421(a), Enochs v. Williams Packing and Navigation Co., 1962, 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292. Accordingly, we reverse, with directions to dismiss for lack of subject matter jurisdiction.

The operative facts are as follows. During 1960 and 1961, the taxable years in issue, taxpayer and her then husband, Harry Noe, were separated and living apart. Both were residents of Texas, a community property state. See 13 Vernon’s Tex.Ann.Civ.St., art. 4619, Sec. 1, repealed 1969 and recodified, Vernon’s Tex.Ann.Civ.St. Family Code Sec. 5.02 et seq. Noe, an attorney, did not contribute to taxpayer’s support. She was unaware of the amount of his income and did not exercise any control over' it. Taxpayer supported herself from her salary as a school teacher.

On January 2, 1962, taxpayer was granted a divorce. In connection with the divorce, and incorporated into the Texas divorce decree, the two entered into a property settlement agreement. Under its terms, taxpayer gave up any and all interest in Noe’s law practice. Each agreed to file separate income tax returns and to assume responsibility for the income tax liability as to their respective incomes. It is not disputed that the assumption of her income tax liability by Noe for the income he earned was a factor in taxpayer’s renouncing her interest in the law practice and in arriving at a division of community property.

Taxpayer did file tax returns on the income she earned as a teacher. Her former husband, however, failed to file tax returns for those years. In 1964, the IRS began a criminal investigation of Noe and later entered into a settlement agreement with him, under which he paid taxes on half of the entire community income for those years. The IRS then began its pursuit of taxpayer for the income taxes due on the other half of the community income for 1960 and 1961, culminating in the present suit. Statutory notices of deficiency were issued and assessments made after taxpayer failed to petition the tax court for a redetermination of her tax liability.

Taxpayer presented two arguments in the court below in support of her contention that she was not liable for the taxes. First, she argued that consents she signed extending the limitations period for the taxable years 1960 and 1961 were inoperative because obtained by misrepresentation of an IRS agent; and the assessment was therefore barred by the running of the statute of limitations. Second, she argued that the property settlement agreement incorporated into the Texas court decree divested her of any interest in Noe’s income for 1960 and 1961 and relieved her of all liability for taxes on that income. In support of equity jurisdiction, she relied on her inability to pay the tax and sue for a refund because of her lack of funds.

The district judge reached the merits and held that the assessment for 1960 was barred because the consent extending the limitations period was invalid, agreeing that it had been obtained through misrepresentation. He found that the 1961 assessment was not barred because of the operation of Title 26, U.S.C., See. 6501(e), providing a six-year statute of limitations where there is a 25% omission of gross income from an income tax return. He held, nevertheless, that taxpayer was still not liable because the compromise agreement between the IRS and Noe settled the entire unpaid income tax liability of both Noe and taxpayer.

The district court was in error in reaching the merits. Title 26, U.S.C., Sec. 7421(a) provides, in relevant part, that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court.” Its purpose, elaborated by the Supreme Court in Enochs, is to withdraw jurisdiction from state and federal courts to entertain suits seeking injunctive relief against the collection and assessment of taxes,

and to require that the legal right to the disputed sums be determined in a suit for refund. In this manner the United States is assured of prompt collection of its lawful revenue.

370 U.S. at 7, 82 S.Ct. at 1129, 8 L.Ed.2d at 296. The Supreme Court nevertheless fashioned an exception to Sec. 7421(a) which will allow suits for injunctive relief to proceed in circumstances which will not undermine the purpose of the anti-injunction statute:

[I]f it is clear that under no circumstances could the Government ultimately prevail, the central purpose of the Act is inapplicable and the attempted collection may be enjoined if equity jurisdiction otherwise exists. In such a situation, the exaction is merely in “the guise of a tax.” Id.

The Enochs test is twofold. Suits for injunctive relief can proceed if two conditions exist: (1) it is clear that under- no circumstances could the government ultimately prevail on the merits of its claim; and (2) equity jurisdiction otherwise exists. In approaching any case seeking injunctive relief from the assessment and collection of a tax, a federal court must follow the further strictures of Enochs:

[T]he question of whether the Government has a chance of ultimately prevailing is to be determined on the basis of the information available to it at the time of suit. Only if it is then apparent that, under the most liberal view of the law and the facts, the United States cannot establish its claim, may the suit for an injunction be maintained. Otherwise, the District Court is without jurisdiction, and the complaint must be dismissed. To require more than good faith on the part of the Government would unduly interfere with a collateral objective of the Act — protection of the collector from litigation pending a suit for refund. 370 U.S. at 7-8, 82 S.Ct. at 1129, 8 L.Ed.2d at 296-297.

It is unnecessary to reach the issue of whether equity jurisdiction otherwise exists because the government, at the time of suit, did have a chance of prevailing on the merits of its claim. We intimate no views, however, as to the ultimate merits.

We turn first to the issue of the validity of the consents, which the district court held barred the assessment for 1960. Taxpayer contended that she was misled into signing the consents extending the period of the statute of limitations. The alleged misrepresentation is contained in a letter sent to taxpayer on March 5, 1964, by Special Agent Stri-bling of the Internal Revenue Service during an investigation of taxpayer’s former husband’s criminal tax liability. The sentence which taxpayer allegedly relied upon in signing the consents is as follows:

I want to assure you that your interests will be respected, and we intend no involvement of you in the matter, but can no doubt save considerable time in our investigation by talking with you about it.

Taxpayer contended below that she was lulled into believing that her tax liability was not in issue, and that the actions of the agent in misleading her were intentional and coercive. When the consents were mailed to her, the first almost a year after she received the letter and the second and third well over a year later, indicating on their face that her tax liability was involved, she nevertheless believed that she was only cooperating in the investigation of her former husband. Further, she was in a state of severe anxiety which colored her ability to respond intelligently to the request that she sign the consents.

The government contended that there was no misrepresentation in the letter and that there was no reasonable reliance. It did not offer evidence by way of affidavits, however, at the hearing on the motion to dismiss, other than an affidavit that the consents were signed.

Taxpayer argues that evidence adduced at trial by the government may not be considered by us in ruling on the correctness of the district court’s decision to assume jurisdiction because it was not presented at the hearing on the motion to dismiss. It is not necessary to decide whether we are so limited because we are of the view that the evidence adduced by taxpayer at the hearing revealed issues of fact and law requiring dismissal.

The evidence before the district court when it considered the motion to dismiss consisted of the letter, the divorce decree, an affidavit by a trial attorney in the Tax Division of the Department of Justice attesting to the fact of execution of the consents, and an affidavit signed by taxpayer attesting that the letter led her to believe that she would not be involved in any tax liability other than that which related to her former husband’s.

Whether there is a misrepresentation contained within the letter, and such fraud in the procurement of the consents, as to render invalid the consents raises duly factual issues which may not be resolved initially in the district court, but may be addressed only in the Tax Court or in a suit for refund. See Heidelberg v. Martin, 5 Cir. 1968, 395 F.2d 988. The letter raises issues of reasonable interpretation. For example, it may mean that Mrs. Lange was not to be involved in any tax disputes or that she was not to be involved only with regard to her former husband’s tax investigation. Whether any misrepresentation was willful raises issues of fact requiring the presentation of evidence in support. That the consents related to Mrs. Lange’s tax liability and were received long after the letter from Special Agent Stribling also raises fact issues as to the existence and reasonableness of reliance.

Viewing this evidence alone, it is not clear that the government could not establish that the consents were not obtained by misrepresentation, or that, if misrepresentations existed there was no reasonable reliance. We need only quote from the letter brief of taxpayer’s attorney to the district judge on this issue: “It is clear from the case law cited by both parties and the fact situation presented here that the Court is faced with a duly factual question to be determined by the trier of facts. Therefore, the government’s motion to dismiss for lack of jurisdiction should not be granted.” To the exact contrary, in such circumstances the district court has no choice but to grant the government’s motion to dismiss.

Taxpayer next contended that the property settlement agreement incorporated into the Texas court decree relieved her of responsibility for the tax on her former husband’s income. She argued that the Texas court decree altered ownership rights in the income earned by her former husband during 1960 and 1961 and was an adjudication that she had no rights or interest in this income. Rather, she says, it shifted responsibility for payment of taxes on this income to Noe because she had, in effect, paid her share of the tax by having it deducted from the amount she received on divorce. Because Sec. 7421(a) does not prevent suits for an injunction brought by an individual whose property has been levied upon to pay the tax obligations of another, Campbell v. Bagley, 5 Cir. 1960, 276 F.2d 28, taxpayer urges that the district court did have jurisdiction.

Taxpayer’s reliance on Campbell is misplaced. In that case, the IRS assessed taxes against a son but levied upon property owned by his mother to satisfy the son’s tax debts. This exception to Sec. 7421(a) is applicable only where the property levied upon does not belong to the individual against whom the taxes were assessed. Here, in contrast, the tax liability at issue is asserted to be taxpayer’s own. She is the individual against whom the tax was assessed, and it is her property which has been levied upon. The validity of the assessment itself presents a different question, which we do not now consider on the merits but only to the extent necessary to determine whether the court below had jurisdiction.

The government’s position below was that the property settlement agreement endorsed by the Texas courts did not suffice to shift taxpayer’s federal income tax liability to her former husband, and that the IRS was not required thereby to collect the entire tax due from him but was free to assess each individually.

Texas is a community property state. Under its laws, a wife has a vested interest in and is owner of half of the community property. See 13 Vernon’s Tex.Ann.Civ.St. art. 4619, Sec. 1, repealed and recodified, Vernon’s Tex.Ann. Civ.St. Family Code Sec. 5.02 et seq.; Hopkins v. Bacon, 1930, 282 U.S. 122, 51 S.Ct. 62, 75 L.Ed. 249; Broday v. United States, 5 Cir. 1972, 455 F.2d 1097; Duncan v. Duncan, Tex.Civ.App.1964, 374 S.W.2d 800. She is liable for the federal income taxes on such a share. United States v. Mitchell, 1971, 403 U.S. 190, 91 S.Ct. 1763, 29 L.Ed.2d 406; Poe v. Seaborn, 1930, 282 U.S. 101, 51 S.Ct. 58, 75 L.Ed. 239; Hopkins v. Bacon, supra. Whether a property settlement agreement ratified by a state court serves to relieve a taxpayer of her federal tax liability in property in which she had a vested interest and alters the rule of liability presents an issue of law which cannot be resolved initially in a suit for injunctive relief. The government’s position is not so far-fetched as to call into question its good faith or open it to the challenge that the exaction is “ ‘in the guise of a tax.’ ” See United States v. Mitchell, supra, where the Supreme Court held that a state statute allowing renunciation of the community estate after a spouse’s interest vested did not serve to relieve the renouncing spouse of her federal income tax liability for the community income.

Under the most liberal view of the facts and law, it was not clear at the time of the hearing on the motion to dismiss that the government could not have ultimately prevailed on the merits, and the district court was in error in failing to dismiss the complaint.

While the district judge realized that the property settlement agreement “apparently” would not relieve taxpayer of her tax liability and acknowledged that the government’s position was “strong,” he held that the government’s settlement with Noe released the entire community estate, relying in great measure on his determination that the government agents who effected a settlement with Noe knew about the divorce decree and the property settlement agreement. In reaching his decision, he relied upon Harrold v. Commissioner, 9 Cir. 1956, 232 F.2d 527, where a divorced husband paid the entire tax liability of the community pursuant to a property settlement agreement and later sued for a refund of an amount representing his former wife’s share of the community property tax. The IRS was enjoined from collecting a protective assessment against the wife because the court determined that the wife had “in effect” paid and it was improper for the IRS to participate in the fraud against the wife by refunding the money. Similarly, the district court below found that a release of the community occurred because Mrs. Lange “in effect” paid her share of the taxes by way of the property settlement agreement and the IRS, aware of the agreement, participated, “certainly thoughtlessly, but, nevertheless, effectively, in the fraud Noe perpetrated against Petitioner.”

But in this case the government’s full knowledge of the property settlement agreement at the time of settlement with Noe was in dispute. Further, and more importantly, even if the government were aware of such an agreement, it was not clear at the time of suit that the IRS should nevertheless be forced to collect the entire amount from taxpayer’s former husband or forego collection of taxes due. See Mitchell, supra. Although it may have been able to collect from Noe on a third-party beneficiary theory, depending upon Texas contract law, whether it must do so although not a party to the agreement between husband and wife presents a different question. The situation, from the government’s point of view, is distinguishable from that in Harrold because in Harrold the tax had actually been paid. The district judge failed to view the facts and law in a light most favorable to the government, as he was required to do. The situation revealed by the record before us will not support a finding of a lack of good faith sufficient to come within the Enochs exception.

Reversed, with directions to dismiss the complaint.

      . The property settlement agreement provided:
      It is further agreed that the parties shall file separate income tax for the years 1960 and 1961 upon the amounts and monies which they have each received by their separate endeavors, and that each of said parties shall assume the payment of the income taxes for their respective incomes for the years 1960 and 1961.

      . Taxpayer filed her 1960 tax return on September 1, 1961, reporting gross income of $6,934.99. She filed her 1961 tax return on July 18, 1963, reporting gross income of $4,463.52.

      . The IRS determined that taxpayer’s gross income, as augmented by Noe’s income, was $36,107.81 for 1960 and $34,222.01 for 1961.

      . On March 2, 1965, taxpayer executed a Form 872 consent, extending the period of limitations for 1961 to December 31, 1966. Additional consents, signed on September 9, 1966, extended the period of limitations as to 1960 and 1961 until December 31, 1968.

      . See footnote 4, supra.

      . At trial, Special Agent Stribling testified that he had not intended to deceive, that there was no need to in any event because taxpayer had voluntarily cooperated earlier, and that he was merely trying to allay her apprehensions that her ex-husband would discover that she was aiding the investigators. Further, he was concerned only with a criminal investigation of Mr. Noe and had nothing to do with the civil audit of taxpayer and the procuring of the consents.

      . Taxpayer also argued that income earned by a husband separated and living apart from his spouse is not taxable to the wife, relying upon Ramos v. C. I. R., 5 Cir. 1970, 429 F.2d 487, where this court held that a wife could not be taxed on income earned by a husband who had deserted her. Ramos however, as this court pointed out in Broday v. United States, 5 Cir. 1972, 455 F.2d 1097, was effectively overruled by United States v. Mitchell, 1971, 403 U.S. 190, 91 S.Ct. 1763, 29 L.Ed.2d 406. In any event, a “liberal” reading of Ramos in the light of Mitchell would require dismissal on this ground.

      . Information as to the IRS settlement with Noe was not before the district court at the hearing on the motion to dismiss and is arguably not before us on this appeal. See footnote 6 and accompanying text, supra. We consider it, nevertheless, noting that it strengthens taxpayer’s argument in support of jurisdiction.


author: RONEY, Circuit Judge:

text:
    E. R. REDMOND d/b/a Areola Food Market, Plaintiff-Appellant, v. UNITED STATES of America and United States Department of Agriculture, Defendants-Appellees.
    No. 74-1709.
    United States Court of Appeals, Fifth Circuit.
    Feb. 7, 1975.
    Rehearing and Rehearing En Banc Denied March 6, 1975.
    Martin A. Kilpatrick, Greenville, Miss., for plaintiff-appellant.
    Norman L. Gillespie, Asst. U. S. Atty., H. M. Ray, U. S. Atty., Oxford, Miss., Robert E. Kopp, Richard A. Olderman, Attys., Dept, of Justice, Washington, D. C., for defendants-appellees.
    Before COLEMAN, CLARK and RO-NEY, Circuit Judges.
   RONEY, Circuit Judge:

E. R. Redmond, d/b/a Areola Food Market, brought the instant action in the district court to review a final determination of the United States Department of Agriculture disqualifying Redmond from participating in the federal food stamp program for a period of one year. Redmond was suspended for permitting food stamps to be used to pay for credit sales and to purchase items not justified under the program. Under 7 U.S.C.A. § 2022, a review in the district court shall be “ . a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue.” The central question on this appeal involves the nature of this statutory trial de novo and whether the aggrieved food store or the Department of Agriculture has the burden of proof at the trial. The United States District Court for the Northern District of Mississippi held that, under 7 U.S.C.A. § 2022, the aggrieved food store has the burden of establishing the invalidity of the administrative action. Concluding after trial that Redmond had failed to sustain this burden, the district court dismissed his complaint. We affirm.

The Store

Redmond, a twenty-seven year old, resident of Areola, Mississippi, is the proprietor of a retail grocery store which he operates under the trade name, “Areola Food Market.” Redmond acquired this business in July, 1969, and, during the same month, the United States Department of Agriculture (USDA) authorized Redmond to participate in the Food Stamp Program which is administered by the Food and Nutrition Service (FNS). Redmond was familiar with this program as he had previously worked in a grocery which was authorized to accept food stamps.

The Areola Food Market serves the 2000 -3000 residents of Areola, as well as individuals living within an approximate eight to ten mile radius of the town. In 1971, the year in question, over 90 percent of Redmond’s customers participated in the Food Stamp Program.

At the Areola Food Market, Redmond sells groceries, dry goods, hardware, beer and tobacco products. Approximately 75 percent of Redmond’s inventory is food; 25 percent is nonfood. Under the Food Stamp Program, Redmond is authorized to redeem stamps for “eligible food.” According to Food Stamp Regulations, specifically 7 C.F.R. 270.2(s), “eligible food” means essentially food for human consumption, excluding certain items such as alcoholic beverages and tobacco products.

Redmond offers his customers the opportunity to make purchases on credit although food stamps cannot be used for credit transactions. 7 C.F.R. 272.2(g) provides that

Coupons shall not be accepted by an authorized retail food store or nonprofit meal delivery service in payment for any eligible foods sold or delivered by such firm prior to the time at which the coupons are tendered in payment for eligible foods.

Redmond keeps no records of credit transactions and is not required by law to do so. Redmond, however, does keep records of gross sales upon which he pays Mississippi state sales tax and federal income tax.

The Investigation and Administrative Determination

In April of 1971, the officer-in-charge of the Greenwood, Mississippi, field office of FNS, which administers the Food Stamp Program in fifteen Mississippi counties, concluded that an investigation of the Areola Food Market was warranted. This conclusion was based on the fact that the ratio of food stamp redemption to the store’s average monthly food sales exceeded the average redemption ratio of the other stores in the same area. During 1971, USDA representatives made two visits to the Areola Food Market to discuss the high redemption ratio with Redmond. In February of 1972, FNS sent Redmond a letter telling him to take “special care” to prevent violations of the food stamp regulations and to review the regulations periodically-

Prompted by a complaint that Redmond had accepted food stamps in payment of credit accounts, a USDA representative revisited the Areola Food Market on April 14, 1972. At this meeting, the representative learned from Redmond’s state sales tax returns that the total gross sales for the Areola Food Market amounted to $150,693 during 1971. Redmond told the representative that 75 percent of this figure was attributable to food sales and that 30 percent of the food sales was allocable to credit sales. Using simple arithmetic, the representative later determined that, in 1971, $113,019 of Redmond’s total sales were food sales (75 percent of $150,693). Of this sum, $33,905 were credit sales (30 percent of $113,019). Thus, the total sales in 1971 eligible for food stamp redemption amounted to $79,114 ($113,019 less $33,905). The USDA records indicated, however, that Redmond had redeemed $100,192 in food stamps during 1971.

On May 9, 1972, FNS sent Redmond a letter stating that FNS had reason to believe that he had violated the provisions of the Food Stamp Act and requested an explanation. Redmond responded that his food stamp redemptions for 1971 were less than $100,192 and submitted his 1971 income tax return, which showed his annual gross sales of $143,-612.73, or $7,000 less than he reported on his Mississippi state sales tax returns.

On September 13, 1972, FNS notified Redmond that he had been disqualified from participation in the Food Stamp Program for a period of one year.

On September 15, 1972, Redmond submitted a written request for review and, on January 24, 1973, Redmond met with a Food Stamp Review Officer. At that meeting, Redmond claimed that he had overstated his 1971 credit sales and that, in fact, such sales amount to less than $25,000. Assuming that credit sales amounted to $25,000 in 1971, Redmond’s eligible food sales figure, now $88,019 ($113,019 minus $25,000), was still less than the $100,192 in food stamps which, according to USDA records, Redmond redeemed in 1971. Therefore, the Food Stamp Review Officer concluded that Redmond had accepted food stamps for credit sales in violation of 7 C.F.R. 272.2 and that the one year suspension of Redmond was warranted. Under 7 C.F.R. 273.8, this determination constituted the final order of the agency.

The Trial De Novo

Pursuant to 7 U.S.C.A. § 2022, Redmond filed the instant suit against the United States and USD A to set aside the administrative action and to stay the period of disqualification pending hearing on the merits. The district court stayed the period of disqualification pendente lite.

Prior to trial, the district court ruled that under 7 U.S.C.A. § 2022 Redmond had the burden of proof to establish the invalidity of the administrative action. At trial, Redmond testified that, although he reported gross sales on his 1971 federal income tax return as $143,-612 and reported gross sales on his 1971 sales tax return as $150,693, his actual gross sales for 1971 were between $162,-000 and $165,000. Redmond also testified that his actual credit sales in 1971 amounted to less than $9,000.

At the conclusion of the evidence, the district court found that Redmond’s gross sales for 1971 were $150,693 as he had reported on his Mississippi state sales tax returns. The court further found that 75% of his gross sales were food sales ($113,019) and that 20% of the food sales were sales on credit ($22,604). By subtracting the credit sales from the food sales, the court determined that Redmond’s eligible food sales for 1971 totalled $90,415, a figure some $9,777 less than the $100,192 worth of food stamps which Redmond redeemed in 1971. On the basis of these figures, the court concluded that Redmond had failed to prove the invalidity of the agency’s determination of disqualification. The court dismissed Redmond’s complaint and vacated the stay of the period of disqualification.

On appeal, Redmond argues that the district court committed reversible error by placing the burden of proof on him to establish the invalidity of the administrative action in question. Redmond contends that, in the trial de novo, the agency had to prove the facts necessary to justify its actions. In the alternative, Redmond asserts that he proved by the preponderance of the evidence that the determination of disqualification was invalid. We granted a stay of the enforcement of the period of disqualification pending the final outcome of this cause on appeal.

Burden of Proof

The Food Stamp Act, specifically 7 U.S.C.A. § 2022, provides for judicial review of the agency’s final determination of disqualification:

If the store or concern feels aggrieved by such final determination he may obtain judicial review thereof by filing a complaint against the United States in the United States district court for the district in which he resides or is engaged in business, or in any court of record of the State having competent jurisdiction, within thirty days after the date of delivery or service of the final notice of determination upon him, requesting the court to set aside such determination. . . . The suit in the United States district court or State court shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue.

This language is not common in the federal statutes providing for judicial review of administrative decisions, and hence there is little authority to guide the determination as to just what is supposed to happen in the district court. Redmond cites several cases, both federal and state, which define a trial de novo as a trial anew in which the plaintiff below retains the burden of proving every essential element of a cause of action. Spano v. Western Fruit Growers, 83 F.2d 150 (10th Cir. 1936); Barner v. Boggiano, 32 Tenn.App. 351, 222 S.W.2d 672 (1948); Deshler Broom Factory v. Kinney, 140 Neb. 889, 2 N.W.2d 332 (1942); Stillman v. Slifer Savings Bank, 216 Iowa 957, 249 N.W. 230 (1933); Krause v. Spurgeon, 221 Mo.App. 26, 297 S.W. 434 (1927). Redmond contends that the USD A is in effect the plaintiff seeking to disqualify him from the Food Stamp Program and that it must prove in court every fact necessary to accomplish this result. In order words, Redmond would have the district court proceed as if no agency action had been taken. Under Redmond’s argument, the USD A would carry the burden of proof and, if it failed to prove in the district court those facts necessary to suspend Redmond from the program at the administrative level, the agency action could not stand.

This argument misconstrues the statutory language and the obvious purpose of the legislative scheme devised by Congress for agency action and judicial review. The normal review of administrative determinations under the Administrative Procedures Act requires the application of the substantial evidence test. 5 U.S.C.A. § 706(2)(E). Under the substantial evidence test, a reviewing court is bound by the findings of the administrative agency if those findings are supported by substantial evidence on the administrative record as a whole. Evidence cannot be submitted in the reviewing court and the parties are bound by the evidence in the administrative record. By rejecting the substantial evidence standard of review in the Food Stamp Program and permitting a trial de novo, Congress intended nothing more than that the district court would not be bound by the administrative record. But by requiring the aggrieved store to file a complaint in the district court requesting the court to set aside the agency determination, the Act casts the burden of being the plaintiff on the aggrieved store with all of the usual responsibilities of a plaintiff in obtaining relief from a court, including the burden of proving facts to show that he is entitled to relief. In other words, the agency action stands, unless the plaintiff proves that it should be set aside. He may offer any relevant evidence available to support his case, whether or not it has been previously submitted to the agency, and the agency itself may offer any evidence available to support its action, whether or not in the administrative record. But unless proven to be invalid, the agency action prevails.

This construction of the judicial review provision of the Act is logically consistent with the statutory methods by which the USD A may initiate disqualification proceedings against a food store and by which the store may resist the proposed disqualification. We have recounted in detail the administrative proceedings in the case at bar to illustrate what occurs at the administrative level prior to judicial review. As we have seen, the preliminary agency action is extensive but neither the Act nor the regulations promulgated thereunder provide for a full adversary hearing or formal record at the administrative level. By according the administrative action in question a presumption of validity, the statute recognizes the initial investigation and determination of the agency. By providing the aggrieved food store with a new trial where the store may introduce evidence outside the administrative record, the statute also protects the rights and interests of the store against final adverse action without the opportunity for an adversary hearing.

In ruling that Redmond had the burden of proving the invalidity of the administrative action in question, the district court considered the effect of placing the burden of proof upon the government at the trial de novo. Stating that the aggrieved store under 7 U.S.C.A. § 2022 may. not proceed as if agency determination had never occurred, the district court reasoned,

Now, as you come into this Court, as I see it, you are coming in with an administrative record made, but you are not bound by it, you are free to show where it is erroneous. But you are not free to take the position that it is entitled to no weight. That seems to me to be the only simple construction of these words. Because otherwise you are imputing to Congress a terrible intention — the intention that in the administration of this act, even though the administrators have gone through this procedure and you have had an administrative review, still, all of that means nothing, it really means nothing, it is just simply a roadblock to get to the District Court, where you are going to have a free shot as if nothing ever happened before.
It is an ineptly-worded statute, but it seems to me like the Court cannot say this administrative record is entitled to no weight whatever. It is entitled to some weight. You are free to rebut it, you are free to overcome it, but if you put on no evidence, then the record would be enough to justify the Court in upholding an administrative action.

We agree with the reasoning of the district court and, accordingly, we affirm the decision of the district court that the burden of proof under 7 U.S.C.A. § 2022 is upon the aggrieved food store to establish the invalidity of the administrative action in issue by the preponderance of the evidence. Accord, J. L. Saunders, Inc. v. United States, 52 F.R.D. 570 (E.D. Va.1971).

Evidence

As his second argument on appeal, Redmond asserts that he established, by the preponderance of the evidence, the invalidity of the agency’s determination of disqualification. The only evidence which Redmond introduced at the trial before the district court was his own unsubstantiated testimony that his gross sales for 1971 were between $162,000 and $165,000 and that his credit sales for the same year were less than $9,000. These figures were in direct conflict with the figures which Redmond previously had reported to the FNS inspector in April of 1972 and to the Food Stamp Review Officer in January of 1973.

Faced with the obvious inconsistencies in Redmond’s several statements, the district court found as a matter of fact that Redmond’s gross sales for 1971 were $150,693, the amount reflected on his 1971 Mississippi sales tax returns; that his food sales equalled 75% of this figure, or $113,019; and that his credit sales amounted to 20% of his food sales, or $22,604. These findings are supported by substantial evidence, are not clearly erroneous, and contrary to proving the plaintiff’s case, furnish ample basis for the suspension of Redmond from the Food Stamp Program. The district court was correct in refusing to set aside the determination of the USD A.

The stay of the period of disqualification pending the outcome of this appeal is vacated.

Affirmed.

      . 7 C.F.R. 273.8 provides,
      (a) The Food Stamp Review Officer shall make a determination based upon:
      (1) The information submitted by the Director, Food Stamp Division, FNS;
      (2) Information submitted by the firm in support of its position; and
      (3) Such additional information, in writing, as may be obtained by such Officer from any other person having relevant information.
      (b) In the case of a request for review of a denial of an application to participate in the program, the determination of the Food Stamp Review Officer shall sustain the action under review or shall direct that the firm be approved for participation.
      (c) In the case of a request for review of action disqualifying a firm from participation in the program, the determination of the Food Stamp Review Officer shall sustain the action under review or specify a shorter period of disqualification, direct that an official warning letter be issued to
      the firm in lieu of any period of disqualification, or direct that no administrative action be taken in the case.
      (d) In the case of a request for review of a denial of all or any part of a claim of a firm, the determination of the Food Stamp Review Officer shall sustain the action under review or shall specify the amount of the claim to be paid by FNS.
      (e) The Food Stamp Review Officer shall notify the firm of his determination by certified mail. Such notification shall be sent to the representative of the firm who filed the request for review.
      (f) The Food Stamp Review Officer shall send a copy of his notification to the firm to the Director, Food Stamp Division, FNS, who shall undertake such action as may be necessary to comply with the determination of such Officer.
      (g) The determination of the Food Stamp Review Officer shall take effect 15 days after the date of delivery of such determination to the firm.

      . 7 U.S.C.A. § 2022 reads as follows:
      Whenever—
      (a) an application of a retail food store or wholesale food concern to participate in the food stamp program is denied,
      (b) a retail food store or a wholesale food concern is disqualified under the provisions of section 2020 of this title, or
      (c) all or part of any claim of a retail food store or wholesale food concern is denied under the provisions of section 2021 of this title, notice of such administrative action shall be issued to the retail food store or wholesale food concern involved. Such notice shall be delivered by certified mail or personal service. If such store or concern is aggrieved by such action, it may, in accordance with regulations promulgated under this chapter, within ten days of the date of delivery of such notice, file a written request for an opportunity to submit information in support of its position to such person or persons as the regulations may designate. If such a request is not made or if such store or concern fails to submit information in support of its position after filing a request, the administrative determination shall be final. If such a request is made by such store or concern, such information as may be submitted by the store or concern, as well as such other information as may be available, shall be reviewed by the person or persons designated, who shall, subject to the right of judicial review hereinafter provided, make a determination which shall be final and which shall take effect fifteen days after the date of the delivery or service of such final notice of determination. If the store or concern feels aggrieved by such final determination he may obtain judicial review thereof by filing a complaint against the United States in the United States district court for the district in which he resides or is engaged in business, or in any court of record of the State having competent jurisdiction, within thirty days after the date of delivery or service of the final notice of determination upon him, requesting the court to set aside such determination. The copy of the summons and complaint required to be delivered to the official or agency whose order is being attacked shall be sent to the Secretary or such person or persons as he may designate to receive service of process. The suit in the United States district court or State court shall be a trial de novo by the court in which the court shall determine the validity of the questioned administrative action in issue. If the court determines that such administrative action is invalid it shall enter such judgment or order as it determines is in accordance with the law and the evidence. During the pendency of such judicial review, or any appeal therefrom, the administrative action under review shall be and remain in full force and effect, unless an application to the court on not less than ten days’ notice, and after hearing thereon and a showing of irreparable injury, the court temporarily stays such administrative action pending disposition of such trial or appeal.


author: RIVES, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Robert GRAY, Defendant-Appellant.
    Nos. 74-2282, 74-2283.
    United States Court of Appeals, Fifth Circuit.
    Feb. 7, 1975.
    Rehearing Denied March 3, 1975.

      Sydney B. Nelson, Shreveport, La., for defendant-appellant.
    L. Edwin Greer, Asst. U. S. Atty., Donald E. Walter, U. S. Atty., Joseph S. Cage, Jr., Asst. U. S. Atty., Shreveport, La., for plaintiff-appellee.
    Before RIVES, WISDOM and COLEMAN, Circuit Judges.
   RIVES, Circuit Judge:

After a six-day trial by jury, Robert Gray was convicted of income tax evasion in violation of 26 U.S.C. § 7201 and of filing a false and fraudulent income tax return in violation of 26 U.S.C. § 7206(1). The calendar years 1967 and 1968 constitute the period covered. Two judgments of conviction were entered with sentences totaling six months’ imprisonment to serve, five years on probation, and a requirement that, within twenty-four months, he pay taxes due with penalties and interest.

On appeal, Gray makes no claim of insufficiency of the evidence to support the jury’s verdict, but contends that in the course of his trial the district court committed reversible errors. We find no reversible error and hence affirm.

THE FACTS

Gray had some school training as an accountant. He had been employed as bookkeeper for a construction company, then for nine years as comptroller of an independent oil drilling company. In 1966 he had formed a self-owned corporation, Tennky Petroleum Company. He testified that, “I drilled twelve or fifteen wells myself” (App. 427). He also testified to “quite a bit” of activity in the stock market. In 1968 his purchases and sales had amounted to $206,747.72 (App. 485).

For the calendar year 1967 he reported the taxable income of himself and his wife as $9,499.19, a figure less than half of their true taxable income. For 1968 he reported taxable income of $14,125.16, when it was actually nearly four times that amount. The discrepancies were accounted for by items of income not reported and deductions reported to which he was not entitled. He admitted making profits in the stock market which he forgot to report (App. 580, 581). He admitted also that in 1968 he had received from Southwest Production Company a salary totaling $9,750.00 which he forgot to report (App. 507). That $9,750.00 was paid by thirteen checks for $750.00 each. At Gray’s request Southwestern made those checks payable to his corporation, Tennky Petroleum Company. Gray testified that he picked up a check twice a month, deposited it to the Tennky account and then wrote a check to himself “presumably the same day” and deposited that check to his personal account. He reported as income from Southwest only the amount received on its W-2 tax form (App. 512). Tennky in turn issued no 1099 tax form in the name of Robert Gray (App. 513).

“Q. Nothing at all went to the Government to indicate Robert Gray received $9,750.00, did it?
“A. That is correct.” (R. 513.)
Gray testified that he filed an amended return on September 2, 1969, and paid the tax due on the $9,750.00, but he could not recall whether the Examining Agent had discussed that with him prior to his filing the amended return. He testified further on cross-examination:
“Q. You are saying you do not recall today whether Agent Farrar had discussed these omitted checks with you prior to filing that amended return?
“A. No, sir, I don’t.
“Q. You said you did hear Agent Caldwell say you admitted that to him?
“A. That is correct. I don’t remember admitting it to him. I remember him testifying about it.
“Q. Your interview with him was January 8, 1970, wasn’t it?
“A. Somewhere in there.” (R. 516.) It was after the foregoing part of the cross-examination of Gray that counsel for the government received permission to approach the bench.
“(Whereupon there was a discussion at the bench between the Court and counsel out of the hearing of the jury).
“MR. GREER [Government Counsel]: Your Honor, I intend to introduce evidence and cross examine the defendant on additional items of income which he received and did not report on his tax returns for the years 1967 and 1968. These are both relevant and admissible inasmuch as it is very much a part of this trial. These are similar acts and they are the identical crime for which the defendant is on trial here today.
“THE COURT: Mr. Nelson objects,
I suppose, because they are not alleged in the indictments. Since they are similar crimes the ruling is they are admissible to show intent.” (R. 523.)

Mr. Nelson, counsel for Gray, did indeed most strenuously object but the court adhered to its ruling with the caveat:

“I will have to charge the jury this is admissible only to show criminal intent. In other words, if they are not to convict him on this as a separate crime mentioned in the indictment, but they are allowed to consider it.” (R. 525.)

The court did adequately so instruct the jury. Nonetheless, the ensuing vigorous cross-examination was, in all probability, extremely prejudicial to the defendant Gray. The result of the trial really turned on criminal intent vel non.

Restriction on Number of Character Witnesses

At the beginning of the trial the government submitted to the court a brief containing the following paragraph:

“The Government anticipates that the defendant will offer the testimony of character witnesses in his behalf. Courts in the past have been faced with the problem of where to draw the line on limiting the number of character witnesses. A limitation of character witnesses to three (3) has most frequently been found appropriate and has been approved by the Courts of Appeal. See United States v. Squella-Avendano [478] F.2d [433] (C.A.5th, April 13, 1973); United States v. Jacobs, 451 F.2d 530 (C.A.5th, 1971), cer-tiorari denied, 405 U.S. 955 [92 S.Ct. 1170, 31 L.Ed.2d 231]. The limitation of character witnesses is, of course, in the Court’s discretion.”

After Gray’s third character witness had testified, a colloquy between Gray’s counsel and the court occurred.

“MR. NELSON: If it please the Court, we have several other character witnesses—
“THE COURT: It has been the unvarying rule of this Court long before my time and upheld by the Fifth Circuit Court of Appeals that character witnesses are limited to three. We apply that rule here.
“MR. NELSON: For the record, because the character and reputation is of such importance in the type of crime charged here, we respectfully object to the Court’s ruling.” (R. 403.)

On appeal, Gray insists that the district court applied no discretion but arbitrarily used a fixed and unvarying rule. Since the leading case on “character evidence,” Michelson v. United States, 1948, 335 U.S. 469, 69 S.Ct. 213, 93 L.Ed. 168, it has been well settled that trial courts are vested “with discretion to limit the number of such witnesses and control cross-examination.” 335 U.S. at 480, 69 S.Ct. at 220. See also 6 Wigmore on Evidence, 3d ed. § 1908(2), pp. 580, 581; 2 Wright Federal Practice & Procedure, Criminal § 409. However, this Court has not upheld any “unvarying rule” and we agree with the annotation in 17 A.L.R.3d 327, at 335, that,

“The number of witnesses allowed to testify should not be arbitrary or unreasonably restrictive, and prejudicial error in those respects will entitle the injured party to relief. A general rule of limitation applicable to all cases without regard to the particular circumstances has been held to exclude discretion and to be, therefore, unreasonable and unlawful.” (Footnotes omitted.)

Professor Wigmore calls attention that the limitation of the number of witnesses applies not only to reputation or character but may be enforced “upon any point whatever” (emphasis in text). 6 Wigmore on Evidence, 3d ed. § 1908(3), p. 581. Especially pertinent to this case are Professor Wigmore’s further remarks:

“It is sometimes required that the trial Court (with or without the parties’ motion) announce before any witnesses on the point are offered, that a limitation of the witnesses upon the particular fact will be enforced, and a failure to do this is said to prevent the enforcement of any limitation; on the theory that, unless the party is thus advised of the intended limit, he may be obliged to omit his most valuable witnesses through not having known of the necessity of choosing the best of the lot at his disposal. This requirement has a plausible fairness in it, and is usually proper when feasible. But it is not always feasible, because the judge may not know of the party’s intention as to number of witnesses; and it is not always proper for the judge to commit himself to such a fixed limit before hearing any of the witnesses. The trial Court’s discretion should be left to determine whether such a prior notice was feasible and desirable under the circumstances.” (Emphasis in text.) (Footnote omitted.)

At pp. 585, 586. We think it clear that the district judge meant no more than to recognize such a long-standing practice which should “apply here”; that in fact he exercised a sound and reasonable discretion in this particular case.

Permitting a Revenue Agent to Testify as a Summary Witness and Introducing a Summary Chart or Schedule of his Calculations

In his opening statement to the jury, counsel for the government called attention to the necessity of introducing many documents and corporate records, and further said:

“The law recognizes in this case no juror can be expected to retain all this information and put it in the proper slot. For that reason, the government is entitled to bring in an expert to testify in the case. The law permits the expert to listen to the testimony, examine the documents and testify to his expert opinion as to what these documents mean and what tax, if any, should have been paid by the defendant.
“You, as jurors, are entitled to give that expert’s opinion the weight you believe it deserves. What I am saying is for you to bear with us because a tax case is like a jigsaw puzzle and at the end we will put it all together.” (R. 7-8.)

In accord with that announced strategy, the government called as its last witness a revenue agent for the purpose of summarizing the evidence and making the resulting tax computations. Similarly, the defendant called as his last witness a certified public accountant who testified at length as to his qualifications and as to a schedule summarizing the evidence.

The propriety of that practice in income tax cases was clearly established by the Supreme Court in United States v. Johnson, 1943, 319 U.S. 503, 519, 63 S.Ct. 1233, 87 L.Ed. 1546. Since Johnson, the practice has'been accepted and followed in cases too numerous to mention, some of which are listed in the margin. The opinions in many of those cases quote from the opinion in Johnson, supra, written by Mr. Justice Frankfurter:

“ * * * The worth of our jury system is constantly and properly extolled, but an argument such as that which we are rejecting tacitly assumes that juries are too stupid to see the drift of evidence. The jury in this case could not possibly have been misled into the notion that they must accept the calculations of the government expert any more than that they were bound by the calculations made by the defense’s expert based on the defendants’ assumptions of the case. So long as proper guidance by a trial court leaves the jury free to exercise its untrammeled judgment upon the worth and weight of testimony, and nothing is done to impair its freedom to bring in its verdict and not someone else’s we ought not be too finicky or fearful in allowing some discretion to trial judges in the conduct of a trial and in the appropriate submission of evidence within the general framework of familiar exclusionary rules.”

319 U.S. at 519-520, 63 S.Ct. at 1241.

On the trial, defendant avoided making a frontal attack upon a practice so well settled. Instead, his first insistence was that a summary witness was not needed in a case no more complicated than this, that “there is an extreme in our case,” and “a real danger of a person who purports to be an expert invading the province of the jury.” (R. 291.) The district court disagreed, recounted the many exhibits and expressed its view that “the jury could not possibly understand or correlate them without the assistance of an expert.” (R. 291.) The judge stated further that the evidence would be admitted, “ * * * we think in the proper exercise of our discretion and in order to assist the jury, but with a cautionary instruction, conclusions reached by the expert as to whether or not there was a deliberate, willful understatement of income is the function of the jury rather than the expert.” (R. 291.) Defendant’s counsel then stated: “[W]e would like to point out the defendant is not by and large disputing the fact that he earned the income asserted by the government. It is a matter of intent and willfulness almost solely. The cases indicate there is a little danger that the jury in hearing an expert testify will conclude by the expert saying there is tax due that there is guilt.” (R. 291, 292.)

After further colloquy, the jury was excused from the courtroom pending a voir dire examination of the witness, Malcolm L. Johnson. He had 17V2 years’ experience as a revenue agent with the Internal Revenue Service, and had testified in two other criminal tax evasion cases. He was not a graduate accountant, had little experience in oil and gas law, and was not familiar with a “carried” working interest in an oil well, nor with three Fifth Circuit cases dealing with the income tax effects of a “carried” interest, viz., C. I. R. v. J. S. Abercrombie Co., 1947, 162 F.2d 338; Prater v. C. I. R., 1959, 273 F.2d 124; United States v. Cocke (en banc), 1968, 399 F.2d 433. The court was recessed overnight to permit Mr. Johnson to read those three opinions and also for the Judge to study and analyze those cases.

The importance of those cases to Gray’s defense was claimed because of the terms of his employment by Southwest. Under a letter agreement dated August 15, 1967, Gray was employed by Southwest Production Company. The agreement provides:

“My beginning salary shall be $1500 per month, payable on the 1st and 15th days of each month. In addition I shall receive 5% of the economic interest retained by Southwest Production Corporation and the related companies in all oil and gas properties acquired after August 15, 1967, plus 5% of the economic interest retained by those companies in any leases presently owned on which leases wells are drilled in the future. Economic interest is defined to include working interest, overriding royalty, oil payment, production payment, etc.
“After November 15, 1967, either party wishing to terminate this agreement may do so on 90 days written notice.” .

(Gov’t Exh. 22.) In practice, Southwest and Gray were in accord that Gray’s “economic interest” was free and clear of any liability for intangible drilling expenses. As to current operating expenses of a producing well, Southwest contended that Gray should pay a proportionate share, while Gray claimed that he did not owe any such costs. No drilling costs or operating costs were actually paid by Gray.

After the overnight recess for consideration of the three cases (Abercrombie, Prater and Cocke), the district judge stated to counsel his analysis of those cases and his conclusion that they were inapplicable to the case on trial, except for their possible bearing on the question of Gray’s good faith in taking deductions for intangible drilling costs and for depreciation upon the equipment necessary for production. We agree.

The district court did not err in overruling the defendant’s objection to the competency of Johnson as an expert summary witness. Nor did the court err in allowing Johnson’s testimony to be introduced with the court’s caveat to the jury: in effect, that Johnson’s opinions were not binding upon the jury but were meant to be helpful and were entitled to such weight as the jury might see fit to accord them; that the jury was bound by the judge’s instructions as to the law, while the questions of criminal intent, willfulness, good faith and other questions of fact were left for the jury to determine. We find no reversible error in the district court’s rulings on the testimony of the government’s expert summary witness.

Cross-examination of Defendant

On trial, as has been stated, Gray’s main defense was that he acted in good faith and had no criminal intent. In refuting that defense, the government could properly cross-examine Gray as to similar acts of attempted income tax evasion committed during the calendar years of 1967 and 1968, in addition to the acts charged in the indictments. United States v. Jernigan, 5 Cir. 1969, 411 F.2d 471; United States v. Waller, 5 Cir. 1972, 468 F.2d 327; accord Ahrens v. United States, 5 Cir. 1959, 265 F.2d 514; Wright Federal Practice & Procedure, Criminal § 410.

We find no reversible error committed in the cross-examination of the defendant. His cross-examination was thorough and vigorous but nonetheless fair.

The Court’s Instructions to the Jury

The court properly refused defendant’s requested jury instruction No. 10, which concluded:

“Under court decisions by the United States Court of Appeals for the Fifth Circuit, which includes Louisiana, a carried party could, between the years 1947 and 1968, deduct his proportionate share of the cost of development and operation of the well even though he did not spend any of his own funds to pay for these costs. Commissioner of Internal Revenue v. [J. S.] Abercrombie Co., 162 F.2d 338 (5th Cir., 1947); Prater v. Commissioner of Internal Revenue, 273 F.2d 124 (5th Cir., 1959); United States v. Cocke, 399 F.2d 433 (5th Cir., 1968).”

As has been developed, the cited cases had no relevance to Gray’s tax liability. They might possibly bear upon the question of whether he acted in good faith and without criminal intent.

The court refused also defendant’s requested jury instruction No. 7 concerning willfulness and particularly charging:

“There must be specific wrongful intent to conceal an obligation known to exist as compared to a genuine misunderstanding of what the law required.”

The court’s general charge included an instruction to the same effect (R. 740). The court fully and properly instructed the jury that Gray could not be convicted because of mistake, inadvertence or other innocent reason, but that willfulness and specific criminal intent must be proved.

Finding no reversible error, the judgment is •

Affirmed.

      . Cave v. United States, 8 Cir. 1947, 159 F.2d 464, 468; United States v. Daisart Sportswear, 2 Cir. 1948, 169 F.2d 856, 863; Kirsch v. United States, 8 Cir. 1949, 174 F.2d 595, 601; Graves v. United States, 10 Cir. 1951, 191 F.2d 579, 584; Gross v. United States, 9 Cir. 1953, 201 F.2d 780, 787; Wardlaw v. United States, 5 Cir. 1953, 203 F.2d 884, 885; Banks v. United States, 8 Cir. 1953, 204 F.2d 666, 670; Beaty v. United States, 4 Cir. 1954, 213 F.2d 712, 720; White v. United States, 5 Cir. 1954, 216 F.2d 1, 5; Steele v. United States, 5 Cir. 1955, 222 F.2d 628, 629-630; Smith v. United States, 6 Cir. 1956, 239 F.2d 168; Blackwell v. United States, 8 Cir. 1957, 244 F.2d 423, 431; United States v. Kiamie, 2 Cir. 1958, 258 F.2d 924, 933; Barber v. United States, 6 Cir. 1959, 271 F.2d 265; United States v. Willis, 3 Cir. 1963, 322 F.2d 548, 551; Wirtz v. Turner, 7 Cir. 1964, 330 F.2d 11, 14; Barsky v. United States, 9 Cir. 1964, 339 F.2d 180; United States v. Mackey, 7 Cir. 1965, 345 F.2d 499, 507.

      . On appeal, counsel does not seriously argue that Gray was entitled to the deduction of $8,700.00 shown on his 1967 Tax Returns as “intangible drilling and dry hole expenses.” Gray’s good faith vel non in claiming that deduction was left to the jury.