author: MOORE, Circuit Judge:

text:
    Paul STANISH, Plaintiff-Appellee, v. POLISH ROMAN CATHOLIC UNION OF AMERICA, Defendant-Appellant.
    No. 72-1579.
    United States Court of Appeals, Seventh Circuit.
    Argued April 26, 1973.
    Decided July 30, 1973.
    Rehearings Denied Sept. 20, 1973.

      Keith F. Bode, Chicago, 111., for defendant-appellant.
    Peter C. Bomberger, Charles G. Bom-berger, Hammond, Ind., for plaintiff-ap-pellee.
    Before MOORE, CUMMINGS and PELL, Circuit Judges.

       Hon. Leonard P. Moore, Senior United States Circuit Judge, United States Court of Appeals for the Second Circuit, sitting by designation.

   MOORE, Circuit Judge:

I. Background of This Case

This diversity action comes to us on appeal from a judgment of the United States District Court for the Northern District of Indiana, George N. Beamer, Chief Judge, which awarded plaintiff-appellee, Paul Stanish (Stanish) an Indiana resident, damages in the amount of $707,000. This action was brought to recover sums allegedly lost (by Stanish) when defendant-appellant, Polish Roman Catholic Union (PRCU), an Illinois not-for-profit fraternal benefit society, refused to honor an alleged commitment to lend plaintiff-appellee $260,000, to be used to partially finance construction of a high-rise apartment building.

Early in 1966, Stanish began investigating the feasibility of building an apartment complex in Whiting, Indiana. He located an appropriate site on the shore of Lake Michigan. Stanish, his attorney, and several others then met with three members of the PRCU loan committee to discuss financing of part of the project. PRCU expressed interest in making a mortgage loan, indicated that they could lend only up to two-thirds of the appraised value of the real estate, and asked for an independent appraisal of the land for use in determining the amount PRCU could properly lend on the site.

Stanish then hired an appraiser whose appraisal stated that the land, approximately 8.341 acres, was valued at $1.00 per square foot, or $363,350 in its undeveloped condition, i. e., “as is”. The appraisal further stated, however, that with the “positive assurance” that an apartment complex of at least 250 units would be built on the site within two years, the land would have a value of nearly $1,000,000. In addition to the commitment to build a 250-unit apartment building on the site, the $1,000,000 appraisal was conditioned on nine further points including such items as appropriate rezoning to permit the construction of an apartment building, availability of city sewage and water connections at the site, and successful conclusion of tests to establish that the soil at the site could support the proposed building.

This appraisal was submitted to the PRCU loan committee, together with a request for a mortgage loan of $650,000 at 6% interest. On August 1, 1966, PRCU approved the requested loan.

By this time Stanish had reached an agreement to purchase the land for $291,935. PRCU informed Stanish that its funds were then committed and suggested that, if he needed funds to purchase the site immediately, he could take a “letter of commitment” from PRCU stating that it would lend him the money and use that letter to obtain interim financing elsewhere. Such interim financing was arranged at the Hoosier State Bank of Indiana (Hoosier).

The Letter of Commitment, dated August 11, 1966, provided that PRCU would make a $650,000 mortgage loan to Stanish on the 8+ acre site. It further provided that the site would be divided into five parcels and that the mortgage would include a clause permitting the mortgagor to effect release of any of these parcels upon payment of $666.67 per individual apartment unit to be constructed on that parcel. The letter further stated that Hoosier planned to lend $300,000 to Stanish, secured by a mortgage on the tract, that within six months PRCU would pay out $300,000 to liquidate this loan, and that with respect to this loan from Hoosier, no cancellation of the PRCU commitment to lend money to Stanish could be made. The Letter of Commitment included the statement that said Letter was irrevocable for six months.

On August 19, 1966, using the Letter of Commitment, Stanish borrowed $300,000 from Hoosier and purchased the site. Three months later Stanish requested a preliminary disbursement of $150,000 from PRCU. Stanish was informed that because of existing commitments, no disbursement could be made at that time, but that the full commitment would be honored by February 10, 1967.

On February 8, 1967, Stanish and his attorney met with officers of PRCU and executed and delivered five loan applications, each in the amount of $130,000 and each secured by a mortgage on one of the five parcels into which the building site had been divided, as provided in the Letter of Commitment. Later the same month the president of PRCU called Stanish’s attorney to say that the general counsel of PRCU had reviewed the appraisal and was having second thoughts about it. On March 1, 1967, Stanish finally received a loan from PRCU of $390,000, which funds were sufficient to enable him to repay the Hoosier loan and to cover his expenses up to that point. This loan was secured by a single mortgage on the entire site, not by separate mortgages on the five parcels which made up the site, as the parties had originally planned. This loan also involved several other variations from the arrangement described in the Letter of Commitment.

After securing this loan, Stanish obtained a commitment from Baird & Warner, Inc., Chicago mortgage brokers, to finance the $3,600,000 cost of the apartment building. This commitment was conditioned upon the agreement of the Federal Housing Administration (FHA) to insure the mortgage. Miscellaneous expenses not covered by the construction loan were to be met out of a $300,000 line of credit from the First National Bank of Chicago. This credit was also conditioned upon FHA mortgage insurance.

Stanish was ultimately successful in securing tentative FHA approval for mortgage insurance. The FHA, however, conditioned its insurance on a scaling down of the project from 250 to 180 units and on the establishment of a $150,000 loss reserve. In November, 1967, the FHA informed Stanish that it was ready to approve his application for insurance, but that he would first have to establish the loss reserve and secure clear title to the parcel on which the building would be built. Stanish then sought to borrow the $260,000 remaining on PRCU’s $650,000 loan commitment. In accordance with the terms of the Letter of Commitment, Stanish proposed to pay back to PRCU $120,000 of this additional loan so that he could secure title to one of the parcels.

PRCU refused to advance further funds to Stanish until construction had begun. Stanish responded that no construction could begin until he had title to the parcel of land on which the building was to be built and the FHA had issued its mortgage insurance. PRCU refused to lend the additional funds; Baird & Warner thereupon withdrew from the project.

Stanish’s later attempts to secure financing for his project were unsuccessful. PRCU has since instituted foreclosure proceedings to secure repayment of the $390,000 loan.

The district court held that defendant-appellant PRCU had breached a contract to lend plaintiff-appellee Stanish a total of $'650,000 and to release the parcel upon which Stanish planned to build. The court found that Stanish could have built the apartment with the financing he had arranged and could have sold the building for $400,000 more than the mortgage. The court further found that the remaining parcels comprising the site also could have been sold for $280,000 above the mortgage they secured, and that Stanish’s potential indebtedness to PRCU (on the $390,000 mortgage loan) was $27,000 more than the value of the land. Totalling these items, the district court concluded that Stanish had been damaged in the amount of $707,000 by PRCU’s failure to lend the $260,000, and that PRCU was liable for these damages.

For the reasons discussed below, we reverse the decision of the court below and remand for further proceedings.

II. The Legality of the Contract to Lend

PRCU appeals the award of $707,000 damages to Stanish because it claims the loan commitment under which he recovered was illegal under the laws of Indiana and Illinois and in violation of PRCU regulations. PRCU is an Illinois corporation licensed to do business in Indiana. Indiana law provides that, as a fraternal benefit society, PRCU may legally invest its funds in accordance with Indiana law or in accordance with the laws, of the state of its incorporation. An Illinois statute restricts PRCU investments in land to loans secured by first mortgages on sites which are improved by permanent buildings or which produce income. The statute also limits the amount of such an investment to 75% of the fair market value of the real estate. In addition, PRCU’s internal rules, of which both Stanish and his attorney admitted knowledge, limited PRCU mortgages to 66%% of the value of the real estate.

The foundation of PRCU’s illegality argument is that the appraiser whom Stanish hired stated that the apartment site had a present value of $363,350 “as is”. PRCU attacks the appraiser’s alternative $1,000,000 valuation which was conditioned on positive assurance that a 250-unit apartment building would be built on the site within two years. PRCU says that no such “hypothetical” appraisal may be used to avoid the Illinois and PRCU percentage limitations on real estate investments. In addition, at the time it was to have made the loan, PRCU notes that the site was unimproved by permanent buildings and was not producing income. PRCU states that it cannot be held for breach of a contract to lend money on a mortgage which would have violated its own regulations and been illegal under both Illinois and Indiana law. Furthermore, PRCU argues, since the nine conditions of appraisal were never met, the land never was worth its hypothetical value of $1,000,000, which “value” would have brought a loan of $650,000 within the percentage limitations of the applicable state laws and of PRCU’s own regulations.

For his part Stanish claims that even if the land were not worth $1,000,000 (which he does not concede), the proposed loan was not illegal since there is an Illinois statute which authorizes PRCU to make “[a]ny investments of any kind, in the complete discretion of the company * * Stanish further argues that the contemplated loan was proper because the land was “improved” by an existing parking lot, which was “income producing property” as required by Illinois law; that all of the conditions of the $1,000,000 appraisal had been met when PRCU refused to lend the $260,000; and that, in any case, PRCU has waived any right to contest the issue of illegality by not affirmatively pleading and proving it in the proceedings below.

During the fourth and last day of the trial, PRCU offered to prove the illegality of the proposed loan under both the Illinois and Indiana statutes. After plaintiff’s attorney objected to this because there had been no pleading or other contention that the loan was unauthorized or illegal, the attorney for PRCU said:

Now, the statute may be somewhat irrelevant, but I think it bears on the general subject matter.
(Transcript at 452).

We seriously doubt whether PRCU would have agreed in its Letter of Commitment to make an “illegal” loan to Mr. Stanish, and we agree with the district court that, since this issue was not pleaded as an affirmative defense in accordance with Rule 8(c), F.R.Civ.P., and was not otherwise raised below by plaintiff’s proof or by consent, the offer of such proof, which PRCU conceded might be “somewhat irrelevant” at that stage of the proceedings, was properly refused by the court below as having been waived. See Radio Corp. of America v. Radio Station KYFM, Inc., 424 F. 2d 14, 17 (10th Cir. 1970); 2A J. Moore, Federal Practice [[8.27 [3],

We so hold for a number of reasons. First, the record reveals that PRCU’s officers and loan committee were fully informed as to the nature of the proposed construction site and well knew its value. Second, there can be no suggestion that PRCU was misled by Stanish into agreeing to a loan which it later discovered might violate their own internal regulations, or the laws of any state. Third, as the lender, before issuing its Letter of Commitment, PRCU could have insisted on whatever mortgage condition^ it felt necessary to protect its investment and could have kept the loan within whatever percentage guidelines it wished. Fourth, so far as the record shows, when PRCU refused to lend the $260,000 to Stanish, it did not suggest that it was doing so because it believed such loan to be “illegal.” Finally, this action was commenced on June 10, 1970. Trial was had in January and February, 1972, and yet the illegality of the requested loan was suggested only on the final day of trial. Given the length of time between commencement of this action and the trial, during which PRCU might have sought to raise the question of illegality, thus enabling this issue to be fully prepared and tried, and given the other factors discussed above, we think that PRCU has waived the right to raise this issue on appeal.

III. The “Contract” to Lend.

The district court found that by its Letter of Commitment defendant

had “committed” itself to make a $650,000.00 mortgage loan to [Stanish] * * *. [This letter] contained no mention of any conditions precedent * * *. Specifically, the commitment was not made contingent upon fulfillment of any of the nine conditions set forth in the appraisal. The letter concluded with the representation that “[t]his commitment is irrevocable for a six months period from date.”
(Finding of Fact 10).

The court further found that defendant’s commitment was irrevocable as to plaintiff for a period of six months following the date of its execution. (Finding of Fact 12).

The basis for the court’s latter finding is not clear. The court apparently believed either that PRCU was bound to its Letter of Commitment because both Hoosier State Bank and Stanish had relied on this letter (Findings of Fact 13, 14), or that PRCU’s offer to lend to Stanish was accepted by him before it was withdrawn.

It is clear that Stanish gave no consideration in exchange for the PRCU promise contained in its Letter of Commitment; that promise, therefore, was not “irrevocable” despite language to the contrary in the Letter.

The Restatement of Contracts describes what is often called “promissory estoppel” as follows:

A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the prom-isee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
Restatement of Contracts § 90 (1932);
Restatement (Second) of Contracts § 90 (Tent. Draft Nos. 1-7 (1973)).

There can be no dispute that the elements of this definition have been met with respect to the Hoosier Bank. The Letter of Commitment was deliberately written at PRCU’s suggestion to induce Hoosier to extend to Stanish the interim financing necessary for the purchase of the site, and it so stated. Hoosier’s reliance on PRCU’s “irrevocable” Letter of Commitment was reasonable and substantial, and was, in fact, induced by that Letter. As to Hoosier, then, the promise to lend Stanish money sufficient to cover the Hoosier loan was binding on PRCU. And this promise was honored by PRCU. As the district court found in describing the events of February, 1967, when $390,000 was advanced to Stanish:

Initially [PRCU] was reluctant to advance any funds at all; but when plaintiff’s counsel advised [PRCU] that the inevitable result would be a lawsuit by the [Hoosier] Bank, [PRCU] suggested the possibility of a partial payment, sufficient to retire the Hoosier loan and pay plaintiff's other current expenses * * *. (Finding of Fact 18).

Stanish agreed to accept this loan and did use it to retire his Hoosier loan and to pay his expenses to that point.

We do not find it necessary to consider whether by borrowing $300,000 from Hoosier and by purchasing the building site Stanish sufficiently “relied” upon PRCU's Letter of Commitment so that he, like Hoosier, would come within the doctrine of promissory estoppel. Regardless of whether the Letter of Commitment was irrevocable or not, it is undisputed that the offer contained in that Letter was not withdrawn by PRCU before it was accepted by Stanish. On February 8, 1967, Stanish formally applied for the $650,000 loan offered in the Letter of Commitment, thereby accepting its continuing offer. It was a week after this acceptance that PRCU first notified Stanish there were problems with the loan because it was then thought that the “appraisal was not right”. (Transcript at 48.) Thus, regardless of the revocability of the Letter of Commitment, no effort was made on behalf of PRCU to revoke that Letter and the offer contained therein before it was accepted by Stanish. It is elementary that once its offer had been accepted, PRCU could not withdraw it or vary its terms.

PRCU argues, however, that the loan actually made to Stanish on March 1, 1967, varied in many significant terms from that proposed by the Letter of Commitment and thus represented, not acceptance by Stanish of that offer, but rather a “substituted contract” or “novation” which relieved PRCU of any obligation which it may have had under the Letter of Commitment. Printing Mach. Maint., Inc. v. Carton Prods Co., 15 Ill.App.2d 543, 552, 147 N.E.2d 443, 448 (1957); Better Taste Popcorn Co. v. Peters, 124 Ind.App. 319, 323-324, 114 N.E.2d 817, 819-820 (1953). The $390,000 loan did differ in several important respects from that offered in the Letter of Commitment. The principal amount of the loan was $260,000 less than that specified in the Letter; Stan-' ish did not mortgage all of the site, but kept back 100 feet along the southern property line for “necessary purposes for the improvement of the * * * real estate;” and the mortgage contained no provision under which, by partial repayment of the loan, Stanish could gain release of any of the five parcels which comprised the mortgaged site.

At trial PRCU’s president testified that he had told Stanish that the $390,000 was the entire amount which PRCU would lend him. Stanish testified, and the district court found that the $390,000 was simply “an immediate partial payment * * * on the understanding that the remaining $260,000.00 would be forthcoming when [Stanish] needed it.” (Finding of Fact 19). The court concluded that

[t]he agreement reached between plaintiff and defendant in the latter part of February, 1967, was simply a modification of the payment schedule contemplated by the Letter of Commitment. It was not intended as a rescission, novation, or satisfaction of the original commitment, and did not release defendant from its obligation to loan defendant [sic] the full $650,000.00. (Finding of Fact 21).

On the question of whether the March 1, 1967, loan was a partial payout under a modified payment schedule or a substituted contract which replaced the originally contemplated loan, we believe that the critical issue is the intention of the parties in agreeing to that loan. We have examined this issue with especial care and have determined that the district court’s conclusion that there was no substituted contract is correct. In determining the intent of the parties here, the district court had an opportunity to weigh the testimony and evaluate the credibility of Stanish and his attorney in the matter and of the witnesses for PRCU. We have found nothing in the record or in the briefs on appeal which would lead us to differ with the court’s finding on this issue. F.R.Civ.P. 52(a) ; Mandell v. Miller, 14 Ill.App.2d 430, 441, 144 N.E.2d 791, 797 (1957).

Having found that there was no substituted contract and that the obligation of PRCU to lend Stanish the money was created when, on Feburary 8, 1967, Stanish accepted the offer contained in PRCU’s Letter of Commitment, we conclude that PRCU breached its agreement with Stanish when it refused to lend him the $260,000.

IV. Damages

In determining the amount of damages which is proper for a breach of contract, a Federal Court, of course, must determine and follow the law which the state of the forum would apply to the case. Erie R. R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

With respect to the question of remedies for breach of contract, Indiana courts would apply Indiana law. Paulausky v. Polish Roman Catholic Union, 219 Ind. 441, 457, 39 N.E.2d 440, 447 (1942). The Indiana rule governing damages for breach of a contract to lend money was stated in Lowe v. Turpie, 147 Ind. 652, 44 N.E. 25, 30, 32, 33, 47 N.E. 150 (1896):

When the person who contracted to make the loan neglects or refuses to do so, and the [borrower] is compelled to procure the money elsewhere, the measure of damages, is the difference, if any, between the interest he contracted to pay, and what he was compelled to pay to procure the money; * * * 44 N.E. at 32.

And in Indiana there is usually no abandonment of this rule simply because the borrower, like Stanish here, was unable to arrange a substitute loan elsewhere, even at a higher rate of interest.

In contemplation of law, money is always in the market, and procurable at the lawful rate of interest. Smith v. Parker, 148 Ind. 127, 45 N.E. 770, 772 (1897).

While there is an apparent exception to this rule where a borrower is not given sufficient notice to arrange an alternative loan, Lowe v. Turpie, 44 N.E. at 31, Stanish has made no claim that his damages were the result of the tardiness of PRCU’s notice to him that they would not lend him further funds. The fact that Stanish was not able to arrange alternative financing, perhaps because of his inexperience in real estate development and/or his lack of any substantial assets, does not change the fundamental Indiana rule that “money is always in the market, and procurable * * Id. at 33.

[T]he fact that [the borrower] cannot procure the money, on account of being in embarrassed circumstances, will not entitle him to recover more than nominal damages; for the reason that no party’s condition, in respect to the measure of damages, is any worse, for having failed in his engagement to a person whose affairs are embarrassed, than if the same result had occurred with one in prosperous circumstances. Id.

There is considerable authority outside Indiana for the proposition that a recovery for breach of a contract to lend money may include damages in addition to the higher interest rate of a substitute loan where such damages were reasonably within the contemplation of the parties. 11 Williston on Contracts § 1411; 5 Corbin on Contracts § 1078; Restatement of Contracts § 343 (1932). There is some Indiana authority for this rule in a case which involved the sufficiency of a pleading. Doddridge v. American Trust & Sav. Bank, 98 Ind.App. 334, 189 N.E. 165, 168 (Ind.App., en banc 1934). There it is suggested that the rule of Hadley v. Baxendale, 9 Exch. (Eng.) 341, 354 (1854) which set forth the rule of reasonably foreseeable damage for contracts generally, should be applied to breach of a contract to lend money. Although this is the only Indiana case we have found on this question, we believe that, when read together with the Indiana rule permitting damages in addition to higher interest costs when the borrower does not have enough time to arrange another loan, it is authority for us to hold PRCU liable for all damages it reasonably should have foreseen would result from its failure to advance Stanish the $260,000.

The district court’s award of $707,000 in damages was made up of three items: $400,000, which the court found Stanish would have realized upon sale of the completed apartment building; $280,000, which Stanish would have realized on the sale of the four parcels of land adjacent to that upon which the building was to have been built; and $27,000, the amount by which Stanish’s indebtedness to PRCU exceeded the value of the 8 acre site.

PRCU argues that this award of damages is improper for a number of reasons. Since there was no substitute loan, Stanish does not seek the usual measure of damages in this case — the increased cost of borrowing from another source. In fact, PRCU asserts, and it is not controverted, that all expenses incurred by Stanish in his attempts to arrange financing to build his planned apartments were fully covered out of the proceeds of the $390,000 loan. PRCU thus argues that all Stanish seeks is “lost profit” on this venture. PRCU points out that profits are generally awarded only for losses incurred by well-established companies which have proved their profitability; that no high-rise apartment building had ever been built in the area of Whiting, Indiana; and that Stanish, a beauty parlor operator and state senator, had no experience whatsoever in real estate development. In addition, claims PRCU, Section 90 of the Restatement of Contracts (1932) specifically limits holding promi-sors under the doctrine of promissory estoppel to cases in which

injustice can be avoided only by enforcement of the promise.

PRCU argues that the court did not avoid injustice when it awarded Stanish more in damages than the original amount of the proposed loan; and PRCU notes that on a loan of $260,000 for two years, it would have earned only' $36,400. Additionally, PRCU urges that only reliance damages are proper under the promissory estoppel doctrine, and that Stanish has not sought such damages. We have already concluded that, as to Stanish, the doctrine of promissory estoppel need not be applied, since PRCU’s offer of a $650,000 loan had not been withdrawn when it was accepted by Stanish. Furthermore, the apparently disproportionate size of the damage award is not, without more, sufficient reason for us to interfere with the award of the district court.

In this case, however, we believe that the damages actually awarded to Stanish go beyond those for which PRCU may properly be held liable.

When PRCU refused to lend Stanish the additional $260,000, it surely realized that there could be no FHA-insured construction on that site, since the FHA insisted that Stanish must have clear title to the property before it finally approved its mortgage insurance. Assuming that PRCU would have released such parcel on the terms provided in the Letter of Commitment if Stanish could have borrowed the money elsewhere, it is clear that PRCU must have known no lender would lend Stanish, a man with no substantial personal assets and no real estate experience, the required $120,000, when PRCU itself had a first mortgage on Stanish’s only significant asset, the building site. Thus, PRCU well knew, when it breached its contract to lend, that Stanish would not be able to construct his apartment building and would not be able to repay his $390,000 loan on the entire 8+ acre site. We therefore agree with the district court that Stanish should recover from PRCU the difference between the value of the entire site and the amount Stanish may still owe to PRCU on the $390,000 loan.

As to the remaining items of damage, Stanish’s loss on the sale of the completed apartment building and the adjacent parcels of land on the site, we find that these items are not ones which can fairly be deemed “reasonably foreseeable.”

The $400,000 which Stanish was awarded for his loss on the sale of the building was based upon successful completion of the building, 95% occupancy of the apartments therein, an estimated $40,000 net income from rents, and the estimate that investors in the area demanded a 10% return on their money. We cannot agree that the $400,000 gain upon the completion, successful leasing of its apartments, and sale of the building is a reasonably foreseeable result of PRCU’s breach of its contract.

Stanish here argues that while the fact of damage must be definitely established by a plaintiff, the extent or amount of such damage need not be shown with great exactitude for an award to be upheld. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562, 51 S.Ct. 248, 75 L.Ed. 544 (1931). Stanish asserts that while the figure of $400,000 may not have been determined with absolute precision, yet the fact of his damage was well established. Stanish believes that this case does not involve

pure profits from a going business * * * so much as increases in basic real property value, raw land and improvements, values that are dealt with by courts on a regular basis in measuring damages. (Brief at 43).

The case of St. Paul at Chase Corp. v. Manufacturers Life Ins. Co., 262 Md. 192, 278 A.2d 12, cert, denied, 404 U.S. 857, 92 S.Ct. 104, 30 L.Ed.2d 98 (1971) is instructive of this aspect of the damage issue here. In Chase a lender refused to lend money in accordance with a letter of commitment upon which plaintiff had relied. Plaintiff sought to recover reliance damages, equity in the property, and “loss of business” which was determined, as Stanish and the court below have done here, by computing the difference between the value of the property as developed into an operating business, and the mortgage on the building. 262 Md. at 203; 278 A.2d at 17. Chase involved a refusal to lend money after construction of a high-rise apartment was substantially completed. Despite this the court disallowed such damages by adopting the opinion of the trial court which had held :

Realization of profits from a new untried venture such as this depends on so many uncertainties that they cannot form a proper element of damage in a contract action, * * *. 262 Md. at 247; 278 A.2d at 38.

We believe that the court in Chase correctly stated the law. The $400,000 award for Stanish’s “loss” on the sale of the building is even more speculative than that which plaintiff in Chase sought. The award of this item of damages must be set aside.

Stanish’s “loss” on the projected sale of the four parcels of land adjacent to his proposed apartment building, which the district court found would have been “not less than $280,000.00 in excess of [the PRCU] mortgage” (Finding of Fact 40) must be set aside on similar grounds.

We remand this case to the district court for entry of a judgment which will insure that Stanish will recover from PRCU the amount, if any, by which he is indebted to PRCU after foreclosure proceedings, commenced when Stanish failed to repay the $390,000 loan, have been completed.

It is so ordered.

      . Originally, Ronald Foust was Stanish’s partner in this real estate development project. Foust later withdrew from the project and filed a partition suit against Stanish. The suit was settled on February 8, 1967, when Stanish bought Foust’s interest in the project for $15,000 cash and a note for $55,000.

      . The appraisal stated that with a 250-unit apartment building on the site, the property would have a value of $3.00 per square foot. The appraisal stated that the property, “as is”, was worth $1.00 per square foot, or $363,350. The added value of the land with the building on it was $2.00 per square foot or $726,676. Since the appraisal was based on “positive assurance” that the building would be completed within two years, the appraiser discounted the added value of $726,676 at 6% interest and 2% for taxes and arrived at a present value of the land with the building on it of $622,979. This figure added to the value of the land “as is” (which value was increased, without explanation in the appraisal, to $377,000) totalled $999,979, which was rounded off to $1,000,000.

      . The conditions to the appraisal in addition to the “positive assurance” that a 250-unit apartment building would be built on the site within two years were as follows:
      (1) That a city water supply ample for proposed improvements would be made available by the city at the southerly or easterly lot line.
      (2) That a sewage disposal line of capacity ample to serve proposed improvements would be brought to the southerly or easterly lot line at city expense.

        (3) That within two years from July 1st, 1966, the various governing bodies —Federal Government, State of Indiana, Lake County and City of Whiting will have accomxdished enactment and enforcement of legislation that would prohibit contamination of water in Lake Michigan that now makes the water unsafe for children’s I>lay and bathers on the Lake Beach.
      (4) That a masonry fence of suitable proportion between subject land and the railroad right-of-way southwest and adjoining and along the north line would be erected as a safeguard for children that might enter the railroad right-of-way, and as a sound barrier at ground level from train movement on the multiple railroads.
      (5) That zoning will be granted for the erection of multi-story apartment buildings.
      (6) That the nature of the soil under subject land is such that it will support foundations for buildings of a height ordinarily supported by natural soil. (Buildings of ten or more floors may require caissons to bedrock).
      (7) That title to the land includes Riparian Rights.
      (8) That a feasibility study will be made by some responsible agency, and that its findings will indicate. that enough tenantry is available, able to pay the required rental and indicating an interest as to reasonably expect occupancy of buildings as are planned to be erected on subject land, that may require a rental of $50.00 or more per room.
      (9) That title to the land includes Riparian Rights, and that title includes the north end of the section as it extends under water.

      . The Letter of Commitment read as follows:
      August 11, 1966
      LETTER OF COMMITMENT TO: Senator Paul Stanish,
      Mr. Ronald Kent Foust and Hoosier State Bank of Indiana, Hammond, Indiana
      This is to certify that the Polish Roman Catholic Union of America, through appropriate action of its executive loan committee on August 1, 1966, has committed itself to make a $650,000.00 mortgage loan unto Senator Paul Stanish and Mr. Ronald Kent Foust, or their nominee, on a certain parcel of real estate together with any increments or increase to the acreage by reason of land fill permissible under the rights granted by the statutes of the State of Indiana, as well as the riparian rights of the land thereunto appertaining ; said real estate being more particularly described as follows, to-wit: [detailed description of property]
      Said $650,000.00 loan is to be evidenced by a Note, secured by a two year mortgage with interest at 6% per annum payable in advance every three months, together with 1% commission per year, also payable in advance, and said mortgage is to grant unto the mortgagors an option for a one year extension for final payment.
      The parcel of land is to be divided into five separate parcels and survey made and submitted to the Polish Roman Catholic Union of America. The real estate mortgage is to contain a clause granting unto the mortgagors the right and privilege of prepayment to effect release of one or more parcels of land fi-om the mortgage upon payment of 66%% of $1,000.00 per apartment unit in the high rise constructed on each parcel of land.
      The Polish Roman Catholic Union of Amex-ica has been informed that the said Senator Paul Stanish and Ronald Kent Foust have applied to the Hoosier State Bank of Indiana, Hammond, Indiana for interim financing in the sum of $300,000.-00 to be evidenced by a Promissory Note secured by a real estate mortgage on the hereinabove described land and the Polish Roman Catholic Union of America commits itself to pay out the loan commitment of $650,000.00 in instalments, the first in the sum of $300,000.00 to be paid within one hundred and twenty (120) days and the balance to be paid out within six (6) months from date; further-, that said sum of $300,000.00 is to be made payable unto the said Senator Paul Stanish, Ronald Kent Foust, or their nominee, and the Hoosier State Bank of Indiana, so that their loan will be liquidated and the mortgage released.
      Further, the Polish Roman Catholic Union of America agrees that as far as the Hoosier State Bank of Indiana, Hammond, Indiana is concerned, on their loan of $300,000.00, there shall be no cancellation of the $650,000.00 commitment given by the Polish Roman Catholic Union of America unto Senator Paul Stanish and Ronald Kent Foust or their nominee to the extent of $300,000.00 nor can there be a withdrawal of the commitment by the Polish Roman Catholic Union of America by reason of any possible borrower’s concealment, misrepresentation, undue influence or change in borrower’s financial condition.
      Further, this Letter of Commitment is prepared and executed to induce the Hoosier State Bank of Indiana, Hammond, Indiana to make a loan of $300,000.00 unto the said Senator Paul Stanish and Ronald Kent Foust or their nominee, and that at the time of the first pay-out of $300,000.00, said sum shall be used to pay the obligation to the Hoosier State Bank of Indiana, first.
      This commitment is irrevocable for a six months period from date.
      Respectfully submitted Polish Roman Catholic Union of America By Joseph T. Pranica President
      Attest:

        Vincent M. Versen Vincent M. Versen Secretary General

      . Counsel informed us at oral argument on this appeal that in its foreclosure suit against Stanish, PRCU seeks more than $500,000 in damages.

      . Ind.Stats. 39-4409 (Burns 1965), IC 1971, 27-1-14-9.
      Every [fraternal benefit] society shall invest its funds only in securities permitted by the laws of this state for the investment of the assets of life insurance companies and such securities shall be valued according to the methods used in valuing similar securities held by life insurance companies: Provided, That any foreign society permitted or seeking to do business in this state, which invests its funds in accordance with the laws of the state in which it is incorporated, shall be held to meet the requirements of this act for the investment of funds.

      . Ill.Rev.Stats., ch. 73, § 737.15a (1971).
      [A domestic insurance company may acquire]
      Obligations for the payment of money secured by first mortgages on real estate situated within any state of the United States of America upon the following conditions:
      sjs * * *
      (c) The land to which the mortgage pertains must be (i) improved with permanent buildings, (ii) used for agriculture or pasture, or (iii) improved and income-producing, including, but not limited to, parking lots and leases,
      * *
      * * * S¡! *
      (e) The amount of each investment secured thereby does not exceed 75% of the fair market value of the real estate and such value is established and evidenced by the written appraisal of a qualified real estate appraiser who may be an employee of the company * * .

      . PRCU also argues that the application forms submitted by Stanish contain a number of false statements regarding the length of time Stanish had owned the land and its value. The district court did not give great weight to these false statements. Stanish claimed that PRCU had told him what figures were to be filled in on the forms. It is clear that PRCU was not misled by these statements' since they were familiar with the actual cost of the land to Stanish and the other facts which appear to be falsely described on the forms. In view of this knowledge we do not believe PRCU should be heard to argue that these statements, which the district court found PRCU had told Stanish to make (Finding of Fact 17), are grounds for it to avoid a contract to lend to Stanish.

      . Ill.Rev.Stats. ch. 73, § 737.22a (1971), provides as follows:
      [A domestic insurance company may acquire]
      Any investments of any kind, in the complete discretion of the company, without regard to any condition of, restriction in, or exclusion from Sections [736] to [737.22a], inclusive, and regardless of whether the same or a similar type of investment has been included in or omitted from any such Section, on the following condition:
      (a) A company shall not invest under this Section more than the lesser of (i) 5% of its admitted assets, or (ii) 50% of the amount by which its capital and surplus exceeds minimum capital and original surplus requirements applicable to the company when licensed.
      No direct evidence was received below on the question of what other loans PROU might have had outstanding under this section.

      . 1 Corbin on Contracts § 43 states:
      An offer can be made irrevocable in two ways, and probably only two; these are by contract and by statute. As lias already been seen, an ordinary offer between private individuals is revocable by the offeror. It is irrevocable only when he has promised not to revoke it, or has promised the offered exchange of performances on condition of acceptance within a period of time, and that promise is binding by reason of a seal, a consideration given in exchange, or subsequent action in reliance upon it. Such a binding promise is itself a contract, as that term is commonly defined. In such cases, also the offeree is said to have a “binding option.” (footnotes omitted).
      There are no statutes which would have made PRCU’s Letter of Commitment irrevocable.

      . PRCU claims that this 100 foot section amounted to 45% of the entire site and effectively blocked access to the remaining 55%.

      . See the formula described in the third paragraph of the Letter of Commitment, supra note 4.

      . After closing costs, proceeds of $369,-711.60 were paid to Stanish. Of this amount $310,684 was used to retire the Hoosier loan. After miscellaneous fees, $58,879.60 remained to be used by Stanish to cover his expenses associated with the project. Stanish has not claimed that there are additional expenses for which PRCU should be held liable.


source: Caselaw Access Project

author: PELL, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Leo PARENT et al., Defendants-Appellants.
    Nos. 72-1419, 72-1504, 72-1600.
    United States Court of Appeals, Seventh Circuit.
    Argued Jan. 26, 1973.
    Decided July 18, 1973.
    Rehearing Denied Sept. 20, 1973.

      Thomas D. Decker, Federal Defender Program, George C. Howard, Martin S. Gerber, Chicago, 111., for defendants-appellants.
    James R. Thompson, U. S. Atty., William T. Huyck, Ann P. Sheldon, Asst., U. S. Attys., Chicago, 111., for plaintiff-appellee.
    Before HASTINGS, Senior Circuit Judge, and KILEY and PELL, Circuit Judges.
   PELL, Circuit Judge.

Leo Parent, Robert Quagliato, and Miklos Polesti appeal from their convictions of conspiracy and willful and knowing possession of goods stolen from an interstate shipment, in violation of 18 U.S.C. §§ 371 and 659. On this appeal they contend that the goods at the time they were stolen had not yet become an “interstate shipment” as that term is used in 18 U.S.C. § 659 and that the evidence was insufficient either to show possession and knowledge of the theft of the goods or to support the conviction of conspiracy.

The case involves the theft of 250 mini-bikes from a shipment loaded by the manufacturer, Efenel Corporation, on a trailer order from the carrier, Carolina Freight Lines. Having received an order for the new mini-bikes from a North Carolina customer, the shipping clerk at Efenel called Carolina Freight Lines and ordered a 45-foot trailer to be spotted at the Chicago and North Western Team Track approximately a block from Efenel’s building. This procedure was required since bridge repairs prevented a semi-trailer from being brought to the building. Efenel’s employees then loaded the trailer with the mini-bikes, placed a seal on the door, and called Carolina to pick up the trailer. Approximately two hours later, Efe-nel’s shipping clerk went to see why the Carolina driver had not come to sign the bill of lading. He found the driver but the trailer had disappeared.

Appellants contend that since the goods had not left the possession or control of their owner at the time of the theft, and since no bailment had been constituted with the trucker, they had not become an “interstate shipment” for purposes of 18 U.S.C. § 659. Most cases affirming convictions under 18 U.S.C. § 659 have dealt with thefts of goods after they have left the control or possession of the owners, but for the reasons given hereinafter, we hold that the facts of this case support a conclusion that the jurisdictional element was satisfied.

Initially we must reject appellants’ reliance on Lowery v. United States, 271 F. 946 (7th Cir. 1921). There the Chicago, Burlington & Quincy Railroad had purchased in Herrin, Illinois, a load of coal. It had shipped the coal in one of its cars by what was called a slip bill to Christopher, Illinois. The employees in Herrin were to make out the bill of lading, allowing Christopher to take as much coal as needed. At one time the bill of lading was made out with Sioux City, Iowa, as the destination, but before it was sent by mail to Christopher, the destination was changed to Christopher itself. The coal was stolen while the car was on a siding in Christopher. This court rejected the Government’s contention that because the bill of lading at one time had an out-of-state destination, the shipment was an interstate one:

“The fact that a destination outside the state of Illinois was at one time written into the bill, even if wholly unexplained, does not overcome the facts with reference to actual carriage of the coal.” 271 F. at 947.

It is clear that the court in Lowery felt that the only time in which it could say that the coal was a “shipment” was when it was going from Herrin to Christopher; an interstate destination was contemplated only after the coal came to rest and no action was taken to implement that destination. Here, however, action was taken specifically to send the mini-bikes interstate. Moreover, Lowery’s facts are unique since there the individuals involved in the transportation of the coal were never informed of the Sioux City, Iowa, destination; that destination was changed to Christopher, Illinois, before the bill of lading was forwarded to Christopher.

Nor do we find persuasive appellants’ analogy to those cases concerned with the time at which goods enter interstate commerce so as to relieve them from local taxation. In Coe v. Town of Errol, 116 U.S. 517, 6 S.Ct. 475, 29 L.Ed. 715 (1886), the Court held that goods intended for exportation to another state are still taxable in the state of origin until they are actually started in the course of transportation to the state of destination or delivered to a common carrier for that purpose, and that the mere carrying of the goods to a depot for the purpose of transporting them was not in itself the start of that transportation. The Court emphasized that though the logs in the case were intended for export to Maine, they might never be sent into interstate commerce because the owner could change his mind and sell them within New Hampshire.

Two comments seem warranted with respect to Coe. First, as the court emphasized in United States v. Fox, 126 F.2d 237 (2d Cir. 1942), when considering the predecessor to 18 U.S.C. § 659, “the test of whether a state may tax the goods is not a safe one for deciding whether Congress has power to regulate them.” Second, the scope of Congress’ power to regulate under the commerce clause has undergone substantial judicial broadening since Coe was decided. Compare Champion v. Ames, 188 U.S. 321, 23 S.Ct. 321, 47 L.Ed. 492 (1903), and Hammer v. Dagenhart, 247 U.S. 251, 38 S.Ct. 529, 62 L.Ed. 1101 (1918), with Wickard v. Filburn, 317 U. S. Ill, 63 S.Ct. 82, 87 L.Ed. 122 (1942), and Katzenbach v. McClung, 379 U.S. 294, 85 S.Ct. 377, 13 L.Ed.2d 290 (1964). Furthermore, the facts in the present case point more clearly to the interstate character of the shipment than those in Coe since Efenel’s employees had loaded and sealed the Carolina trailer as the first step in interstate transportation became intrastate only by virtue of an intervening local asportation. We do not find Coe controlling.

The question remains, however, of whether or not the mini-bikes were, in the words of the statute, “moving as or which are a part of or which constitute an interstate or foreign shipment of freight . . . .” The statute serves an important role in protecting interstate commerce; therefore, “we must ... be mindful that Congress has here undertaken to protect and promote the flow of goods in interstate commerce, and that this undertaking is not to be hampered by technical legal conceptions.” United States v. Berger, 338 F.2d 485, 487 (2d Cir. 1964), cert, denied, 380 U.S. 923, 85 S.Ct. 925, 13 L. Ed.2d 809 (1965), quoted approvingly in Dunson v. United States, 404 F.2d 447, 449 (9th Cir. 1968), cert, denied, 393 U. S. 1111, 89 S.Ct. 925, 21 L.Ed.2d 808 (1969), and United States v. Cousins, 427 F.2d 382, 384-385 (9th Cir. 1970). This, of course, does not mean that we can ignore the language of the statute in an effort to protect all that Congress might have protected, but it does indicate the necessity of a common-sense analysis of the statutory language in light of the important statutory purpose. Thus, in United States v. Cousins, supra, the court found that a freight car that had been spotted on the consignee’s spur to await unloading had not yet lost its interstate character. “The determination of whether a shipment is in interstate commerce at a given time is essentially a practical one, depending upon the relationship between the consignee, consignor, and carrier, the indicia of interstate commerce at the time the theft occurs, and the preservation of the congressional intent.” 427 F.2d at 385. No single factor — such as the passage of risk of loss to the carrier or consignee —is conclusive in the determination.

Although most of the cases cited have found interstate character as soon as the goods have left the shipper’s possession, United States v. Berger, supra, United States v. Fox, 126 F.2d 237 (2d Cir. 1942), and Sharp v. United States, 280 F. 86 (5th Cir. 1922), cert, denied, 260 U.S. 730, 43 S.Ct. 92, 67 L.Ed. 485, this merely reflects the fact that most of the litigation has centered on whether the goods had to reach the interstate carrier before they entered interstate commerce. We do not conceive that these cases represent the sole acceptable interpretation of the statute. Rather, the facts of the present ease make it analogous to United States v. Sherman, 171 F.2d 619 (2d Cir. 1948), cert, denied, 337 U.S. 931, 69 S.Ct. 1484, 93 L.Ed. 1738 (1949), and United States v. Gollin, 176 F.2d 889 (3d Cir. 1949), cert, denied, 338 U.S. 848, 70 S.Ct. 89, 94 L.Ed. 519.

In Sherman, the goods, already la-belled with the names of consignees, had been given to a trucker who was under contract to take them to the docks. When he reached the dock he went aboard the steamship to get the bill of lading signed. It was at this point that the goods were stolen. The Second Circuit, speaking through Judge Learned Hand, held that the fact that the bill of lading had not yet been signed by the carrier was an irrelevant difference and that the previous decision of United States v. Fox, supra, controlled: “We then made it the test that the goods should leave the possession of the shipper, and come into the custody of someone who without more than inevitable pauses was to pass them along.” 171 F.2d at 622. Thus, the mere giving of the goods to a private contractor who was to take them to the common carrier is enough to invoke federal protection. Cf. United States v. Padilla, 457 F.2d 1403 (9th Cir. 1972). The question then becomes whether the loading of the common carrier’s truck at a point removed from the shipper’s warehouse is sufficient to obtain such protection.

In this respect the GoUin case is most helpful. The facts in that case reflect the problems engendered when the shipper is also the interstate carrier. The P. Ballantine & Son brewery in Newark, New Jersey, apparently had its own truck fleet for distributing beer in the metropolitan New York area. The truck had been loaded with beer and the trailer sealed. The loader got a bill of lading and signed it to release the truck from the dock. He then drove the truck two blocks down the street to the company’s garage where he parked it to await the driver. The driver was supposed to sign the bill of lading and then depart, but the truck was stolen before he left. The court held these facts sufficient to sustain a conviction for theft from interstate shipment. In reaching its decision the Third Circuit emphasized the use of the disjunctive “or” with the word “constitute” in the statutory definition, concluding that “[i]t follows that the stealing of property which ‘constitute’ an interstate shipment is as much an offense under the law as stealing goods actually in transit in interstate commerce.” 176 F.2d at 893.

Under this reading of the statute it would seem to make no difference that the beer had been loaded on the truck; all that would be necessary would be for the goods to be segregated for interstate commerce on the platform or at a terminal, Here, however, we are not required to reach such an interpretation of the statute in order to affirm the conviction before us, for as the court in Gollin noted,

“Assuming arguendo that the contention of the defendants that there must be an actual commencement of movement in interstate commerce is correct, nonetheless we are of the opinion that there is ample testimony in the record ... to support the conclusion that a transfer or movement in interstate commerce had actually been begun before the theft took place. The beer had in fact been moved from the loading platform and placed in the truck. The truck itself had been moved, after its contents had been sealed and the bill of lading had been made out, to a point on a public street about two blocks from the loading platform; that is to say, the truck and its contents had commenced the movement which had been designed ultimately to take them to North Tar-rytown.” 176 F.2d at 894.

As in Gollin, the fact that it was the loader of the truck who actually caused it to be located away from the warehouse seems to be immaterial. What is obvious is that movement had taken place under the rule set out in Sherman, and this is not undercut by the* fact that it was not an independent contractor who actually caused the transportation. Here, Efenel had ordered the trailer, the mini-bikes had been loaded on the common carrier’s trailer some distance from Efenel’s warehouse, and the bill of lading had been completed. Under these circumstances the jury was justified in concluding, as it apparently did, that interstate movement had actually commenced.

As a subsidiary point to their initial argument, appellants attack the second of the district court’s instructions on what constituted an interstate shipment:

“A shipment becomes a part of the interstate commerce the moment the shipment is sealed and a bill of lading for the shipment has been made out and the shipment has been segregated for pick up by a driver of the truck line hauling the shipment to another state.”

To the extent that the instruction might imply that the shipment could have entered interstate commerce even if no trailer had yet been ordered or the mini-bikes had not been loaded on the trailer — a question which we have found unnecessary to decide- — the instruction was not harmful. The undisputed facts as testified to by Mr. Yashinari, the shipping clerk at Efenel, were that the trailer was in fact ordered from Carolina and that it had been loaded with the mini-bikes and sealed. This testimony was never impeached.

Appellants’ second contention on appeal is that the evidence adduced against them was insufficient to prove either the necessary possession or the requisite knowledge of the stolen character of the goods. The evidence as to both elements of the crime was obtained from witnesses to the unloading of the Carolina trailer at a warehouse in Elk Grove Village, Illinois, space in which had been rented to store the bikes a day or so after their theft. This one episode was the sole evidence of the involvement of the defendants in the theft and possession of the mini-bikes. The testimony at trial included the identification of Quagliato by the warehouse’s shop foreman as the man who asked him to unlock the space in which the mini-bikes were stored and who helped unload the truck. The only other positive identification was that made by Thomas Sterba, an employee at the warehouse who spent four hours helping unload the -mini-bikes from the trailer using a warehouse fork lift truck. He identified Quagliato as the man who asked him if he would help unload the truck and how much it would cost. He also testified that Quagliato was one of the men who helped unload the truck. Sterba stated that Parent had been with Quagliato when he had arranged for his help, that Parent had helped unload the truck, and that it was Parent who had paid him for his help. Finally, Sterba identified Polesti as one of the three men who approached him to rent a lift truck and as being present when Quag-liato hired him to help unload the truck. Polesti was at the site during the unloading process, but did not actually assist in the physical unloading of the truck. Sterba also described a fourth man who did help unload the truck, but who was apparently never found or brought to trial. Further, it was stipulated that each of the defendants admitted knowing the other two defendants.

“Generally, it is held that possession is dependent upon the extent of the defendant’s dominion and control over the stolen property.” United States v. Nitti, 444 F.2d 1056, 1057 (7th Cir. 1971). That dominion must not be “a passing control, fleeting and shadowy in its nature,” but rather actual control. United States v. Wainer, 170 F.2d 603, 606 (7.th Cir. 1948). Actual possession may arise from proximity to the goods, but need not. Thus, in Wainer, the appellant, who was acting as an agent in the sale, had his conviction reversed since there was a lack of evidence that he ever actually “possessed” the stolen beer. And in Nitti, where the appellant was the passenger in a tractor pulling a stolen trailer, the court reversed, stating:

“There is not a scintilla of proof that defendant in this case, during the time he was a passenger in the tractor or previously, touched or saw or had any knowledge of the stolen property carried in the trailer. The tractor was operated, managed and controlled solely by Harty, with defendant as a passenger.” 444 F.2d at 1059.

Even a defendant’s presence alone in an apartment where stolen goods were being stored has, under specific facts explaining the presence, been found to be insufficient proof of “dominion and control” over the goods, United States v. Kearse, 444 F.2d 62 (2d Cir. 1971).

As to Quagliato and Parent, we think it clear that there was sufficient evidence of dominion and control to support a finding of possession. It was Quagliato who hired Sterba to help unload the mini-bikes, who himself helped unload the bikes, who backed the truck up to the loading dock, and who insisted that Sterba be paid in a “straight cash deal with no paper work included.” Parent was present when Quagliato negotiated for Sterba’s help; he was himself one of those who helped unload the trailer. Significantly, he told Sterba, in response to a question concerning the contents of the cartons, that he did not know, but that the cartons were being stored temporarily until they could be picked up again and taken to the “factory.” Finally, it was Parent who paid Sterba for his help in unloading the trailer. Both Quagliato and Parent exercised dominion and control over the cartons containing the mini-bikes during this episode.

Furthermore, we need not rely totally on the actual possession since the law is clear that “constructive possession” will suffice under the statute. Thus, the court in United States v. Casalinuovo, 350 F.2d 207, 209 (2d Cir. 1965), concluded:

“The crime in question is ‘possession’ of goods known to have been stolen fr<yn interstate commerce, and it cannot be assumed that Congress was intending to impose criminal liability only upon those persons caught red-handed holding goods they have seen stolen from an interstate truck or train. Accordingly, the courts have held the statute to reach ‘constructive’ possession as well as actual possession, i. e., such a nexus or relationship between the defendant and the goods that it is reasonable to treat the extent of the defendant’s dominion and control as if it were actual possession.”

See also United States v. Cousins, 427 F.2d 382, 384 (9th Cir. 1970). In three cases from this circuit, the court has upheld convictions for possession of goods stolen from an interstate shipment even though the defendants did less actual touching of the goods than Quagliato and Parent, United States v. Catalano, 450 F.2d 985 (7th Cir. 1971), cert, denied, 405 U.S. 928, 92 S.Ct. 980, 30 L.Ed.2d 802 (1972), United States v. Spatuzza, 331 F.2d 214 (7th Cir. 1964), cert, denied, 379 U.S. 829, 85 S.Ct. 58, 13 L.Ed.2d 38, and United States v. Williams, 194 F.2d 72 (7th Cir. 1952).

The evidence supporting the finding of possession by Polesti has less probative force than that pertaining to Quag-liato and Parent, but in our opinion it is sufficient in the factual context. Poles-ti, although apparently not a laborer in this particular vineyard, was identified by Sterba as one of the three men who approached him side by side to ask him if “they could rent a lift truck.” While Quagliato was the spokesman, the jury had ample reason for finding a joint venture in the unloading. Labor forces are not unknown to consist of supervisors as well as those who perform the chores. Polesti relies on United States v. Nitti, supra, to support his claim that Polesti’s inactivity constituted insufficient evidence of control and dominion. But in Nitti the court specifically noted that “[tjhere is not a scintilla of proof that defendant . . . touched or saw or had any knowledge of the stolen property . ” 444 F.2d at 1059. Polesti, on the other hand, was present during the unloading proceedings and Clearly “saw” the stolen goods.

The facts of the present case are much closer to those in United States v. Catalano, supra. In that case, four of the defendants had been previously detained by the police on suspicion but were ultimately released. Later three of the defendants were observed by the police in the vicinity of a stolen trailer. They cut the lock, looked in at cartons marked “Zenith Television,” and left “smiling.” Shortly thereafter, Cullotta and Moscatello arrived and with the other three defendants entered the yard and went to the rear of the trailer. They had not actually opened the trailer when the police arrested them. In affirming the convictions, Judge Kiley wrote for this court: “We think the jury could reasonably infer from this evidence that at that time the five appellants had joint domination and control over the trailer and its contents, so as to justify a finding of possession.” 450 F.2d at 991. See also United States v. Nalley, 455 F.2d 259, 262 (6th Cir. 1972).

Similarly, in rejecting one defendant’s claim of insufficient evidence, Chief Judge Swygert stated “[the defendant] had been in the garage where boxes were found containing goods that were part of the shipment in question. They participated in moving the van containing the other part of the stolen merchandise out of the garage.” United States v. Spatuzza, supra, 331 F.2d at 216.

Although these cases are factually distinguishable from the present one, we are convinced that the appellant Polesti’s challenge to the sufficiency of the evidence of possession was one that was properly for the jury. We cannot hold, as a matter of law, that his unexplained presence at the unloading of the stolen goods was insufficient to sustain the conviction. In Wainer and Kearse, both the courts emphasized that the appellants had rebutted the inference of possession drawn from the initial facts in the case by a compelling factual explanation. No such explanation was ever presented by any of the appellants herein. As Judge Stevens stated in United States v. Holmes, 452 F.2d 249, 255 (7th Cir. 1971), cert, denied, 405 U.S. 1016, 92 S.Ct. 1291, 31 L.Ed.2d 479 (1972), “The mere presence of a third party would strongly suggest that he was intended to perform a useful function in connection with the transaction.”

We are not unmindful of the requirement that the Government must prove its case and that a defendant’s exercise of the constitutional privilege of refraining from taking the witness stand is no part of that proof. Here the Government presented sufficient evidence to justify the jury in finding possession on the part of all three defendants. Explicatory negation of that apparent possession, if there was a legitimate explanation, need not be dependent upon the testimony of the defendants themselves. Bona fide business transactions customarily involve other persons. No such exculpatory witnesses appeared in the present case.

We turn next to the evidence relating to appellants’ knowledge that the goods were stolen. Essentially, appellants con-

tend that the normal inference of knowledge arising from the possession of recently stolen goods should not be applied to their case because in the cases affirming the inference there were additional incriminating facts of record. The cases approving the use of this inference are plentiful, most recently, Barnes v. United States, 412 U.S. 837, 93 S.Ct. 2357, 37 L.Ed.2d 380 (1973). Some of the lower court opinions are set out in United States v. Zemke, 457 F.2d 110, 114-15 (7th Cir. 1972), cert, denied, 406 U.S. 947, 92 S.Ct. 2051, 32 L.Ed.2d 335.

Appellants rely on Cherry v. United States, 78 F.2d 334 (7th Cir. 1935), and United States v. Anost, 356 F.2d 413 (7th Cir. 1966). In Cherry the court’s opinion seems to have relied on the fact that the defendant’s explanation of his possession was unchallenged and completely consistent with innocence. Thus, the presumption was overcome in Cherry. As we have observed hereinbefore, in the present case the appellants have adduced no explanation for their possession of the goods which is consistent with their innocence. In Anost, the court cited Cherry only for the general propositions that the presumption .may be overcome and that the question of fact can be reviewed by the appellate court. Here, since the presumption was not overcome by clear and convincing evidence, the matter was properly before the jury.

Finally, appellants contend that there was insufficient evidence to support the conviction for conspiracy. “Agreement is the primary element of a conspiracy. The formalities of an agreement are not necessary and are usually lacking since the mark of a successful conspiracy is secrecy.” United States v. Varelli, 407 F.2d 735, 741 (7th Cir. 1969). The overt acts alleged in the indictment were the rental of the lift truck and the unloading of cartons. The evidence, viewed in the light most favorable to the Government, reflects a joint endeavor to rent the lift truck. Quagliato and Parent unloaded the cartons, but it is not necessary that Polesti also have taken part in the second overt act or even any overt act as long as one of the conspirators did. Nassif v. United States, 370 F.2d 147, 151 (8th Cir. 1966). Also, as noted above, there was sufficient evidence to support the finding that all three of the appellants possessed the mini-bikes knowing that they were stolen from interstate commerce. That act would certainly be in furtherance of the conspiracy. On these facts, we hold that the appellants’ contention that the evidence was insufficient to support the conspiracy count is without merit.

For the reasons given hereinbefore, the judgment of conviction is affirmed.

Affirmed.

      . In a prior appeal, reversing the district court on other grounds, the Third Circuit had relied on narrower grounds for finding interstate commerce: “. the commerce begins when the transfer of the commodity to another state is actually commenced. The sealed shipment had in effect been turned over to the interstate driver . . . . Here the loader in delivering the sealed truck and the bill of lading to the interstate driver had started the truck on its interstate journey. The brewery thereafter, though the shipper, was functioning as its own interstate carrier.” United States v. Gollin, 166 F.2d 123, 124-125 (3d Cir. 1948), cert, denied, 333 U.S. 875.

      . In United States v. Zemke, supra, 457 F.2d at 114 — 115, we held that the use of the inference did not unconstitutionally burden the defendants’ Fifth Amendment rights.


author: SWYGERT, Chief Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Weldon Joel LEWIS, Defendant-Appellant.
    No. 72-1083.
    United States Court of Appeals, Seventh Circuit.
    Argued Dec. 6, 1972.
    Decided July 9, 1973.
    Rehearing Denied Aug. 6, 1973.
    Certiorari Denied Dec. 3, 1973.
    See 94 S.Ct. 582.

      Michael P. Toomin, Chicago, 111., for defendant-appellant.
    James R. Thompson, U. S. Atty., William T. Huyck and Glynna W. Freeman, Asst. U. S. Attys., Chicago, 111., for plaintiff-appellee.
    Before SWYGERT, Chief Judge, and PELL and STEVENS, Circuit Judges.
   SWYGERT, Chief Judge.

Weldon Joel Lewis appeals from his conviction on an indictment charging him with failure to report for induction in violation of 50 App. U.S.C. § 462. He argues that the trial court erred in failing to recognize that his local board de facto reopened his I-A classification during its consideration of a post-induction claim of conscientious objection, thereby nullifying his order to report. In addition, Lewis contends that one or more errors of procedure were committed by his board in connection with a claim for III-A status submitted by his father.

Lewis held a I-A classification on March 24, 1966, when ordered by his board to appear for a physical examination. After the examination, and in light of the fact that Lewis was then serving a sentence of probation on a conviction for criminal damage to property, the board reclassified him I-Y. Approximately three years later, on May 26, 1969, the -board ordered Lewis to take another examination after its receipt of a current information questionnaire indicating Lewis’ current employment as a salesman and his upcoming enrollment in college as a full-time student. A week prior to the date of this second examination, Lewis’ father, Reverend Ward V. Lewis, mailed to the board a request for an “appeal” from the I-Y classification of his son. The request, in the form of a four-page letter, was for all practical purposes a statement that Lewis was needed at home. The board made no immediate response to the plea, and Lewis apparently reported for his examination.

Some four months later, on November 4, 1970, the board minutes reveal that Lewis was sent a dependency questionnaire (Form 118). The fate of this document is unknown; neither his selective service file nor evidence adduced at trial indicate that Lewis or his father received the form or returned it to the board. On January 20, 1970, Lewis was deemed acceptable for induction and reclassified I-A, pursuant to which he received an order to report for induction on. April 29, 1970. He failed to report. Instead, on April 80, he filed a completed form for conscientious objection (Form 150), along with a request for a courtesy interview and a postponement of his induction date. A postponement was granted and Lewis appeared before the local board for an interview. After the meeting, the board rejected his claim, stating:

(1) The board feels that the registrant’s beliefs are based [upon] personal moral codes.
(2) Local board determines that there is no change in the registrant’s status resulting from circumstances over which he had no control.

Lewis was advised of this disposition the following week and ordered to report for induction on July 15, 1970. He reported as ordered, but refused to submit to induction by reason of his “moral belief as a conscientious objector to all wars.”

The instant prosecution followed. At trial, the sole defense presented was that Lewis was a valid conscientious objector. No mention was made of the letter sent by Reverend Lewis nor of the Form 118 returned in response by the board. Lewis was found guilty of having violated 50 App.U.S.C. § 462.

I

The primary contentions made before this court relate to the “appeal” letter sent to the board by Reverend Lewis, which the defendant characterizes as a request for a reopening of his classification. It is argued that the four-month lag between receipt of this document by the board and the subsequent mailing of the Form 118, together with the complete absence of any evidence in Lewis’ file that the board considered the claim, requires us to find that the board never saw the letter. This would constitute reversible error under United States v. Ford, 431 F.2d 1310 (1st Cir. 1970), and United States v. Prescott, 301 F.Supp. 1116 (D.N.H.1969). A second, alternative contention is that the board considered the request, but failed to state reasons for denying it in violation of 32 C. F.R. § 1625.4. Lastly, Lewis argues that the letter states a prima facie case for a III-A deferment, and that the board erred in failing to reopen his classification, thereby rendering Lewis’ conviction invalid under United States ex rel. Yaccarino v. Officer of the Day, 305 F.Supp. 732 (S.D.N.Y.1969).

We agree that the letter, though on its face termed an “appeal,” is in substance a request for a reopening of Lewis’ classification. United States v. Vin-celli, 215 F.2d 210, 212 (2d Cir. 1954); United States ex rel. Berman v. Craig, 207 F.2d 888, 891 (3d Cir. 1953). Yet we have difficulty in accepting most of his related contentions because Lewis failed to raise them before the trial court.

Rule 52(b) of the Federal Rules of Criminal Procedure provides: “Plain errors or defects affecting substantial rights may be noticed although they were not brought to the attention of the court.” In interpreting this provision, we have held it applicable to situations where counsel for the first time on appeal raises a defense which he failed to make below. United States v. Jones, 204 F.2d 745, 748 (7th Cir. 1953); see Tatum v. United States, 88 U.S.App. D.C. 386, 190 F.2d 612, 614-615 (1951). However, not all unraised contentions qualify for appraisal on appeal; absent unusual circumstances, only newly-raised questions of law untainted by factual ambiguity so qualify. Compare Alexander v. United States, 415 F.2d 1352 (7th Cir. 1969); United States v. Mill-pax, Inc., 313 F.2d 152 (7th Cir. 1963); and Glass v. United States, 277 F.2d 566 (7th Cir. 1960); with United States v. Lepinski, 460 F.2d 234 (10th Cir. 1972); United States v. Cassell, 452 F.2d 533 (7th Cir. 1971); United States v. Jones, 204 F.2d 745 (7th Cir. 1953).

Turning to the first and second of Lewis’ contentions, we hold that they cannot be raised here. No unusual circumstances militate in favor of exempting Lewis from the rule of preclusion adverted to above. See Altom v. United States, 454 F.2d 289, 292 (7th Cir. 1972) (“The defendant on appeal makes no claim that his representation at trial was inadequate. His counsel below presented a vigorous defense.”); Borroto v. United States, 338 F.2d 60 (5th Cir. 1964). Moreover, neither contention is free of unresolved questions of fact. The first contention, indeed, is entirely unproven; we cannot accept Lewis’ invitation to infer that his board’s four-month delay in sending Lewis a Form 118 is conclusive proof that the board clerk withheld the appeal letter from the board’s view. The second contention is similarly defective. We do not know whether Lewis or his father received the Form 118, and, if so, whether they reasonably failed to interpret its mailing as notice from the board that the father’s letter did not state a prima facie claim for deferment. On this limited record we decline to hold, as we otherwise might, that mailing of the Form 118 to Lewis and his father was sufficient compliance with the notification requirement of 32 C.F.R. § 1625.4.

We do, however, reach Lewis’ third contention. If his father’s letter presented a prima facie claim for a III— A deferment, then the board’s failure to reopen comprises error sufficient to require reversal of the instant conviction. There is no unresolved factual question relating to Lewis’ failure to exhaust administrative remedies; he had no right of appeal from the board’s decision not to reopen his case. Mulloy v. United States, 398 U.S. 410, 416, 90 S.Ct. 1766, 26 L.Ed.2d 362 (1970); United States v. Allen, 459 F.2d 563 (9th Cir., 1972); United States ex rel. Miller v. Eber-hardt, 324 F.Supp. 961 (N.D.Ga.1971). Nor is he likewise disabled by his apparent failure to complete the Form 118 and return it to his board. See United States ex rel. Kulka v. Gillen, 452 F.2d 611, 614 (7th Cir. 1971).

We thus confront the issue of whether the appeal letter states a case prima facie entitling Lewis to a III-A deferment. A statement so qualifies when it sets forth nonfrivolous allegations of facts which, if true, establish that the registrant’s induction would result in “extreme hardship” to his dependents, unless the truth of those facts is refuted by other reliable information in the file. United States v. McGee, 460 F.2d 1287 (7th Cir., 1972); see 32 C.F. R. § 1622.30(b)(2). Since Lewis’ file contains no material adverse to his III— A claim, we deal solely with the factual matter set out in the appeal letter.

The standards to be employed in assessing that letter were recently set forth by this court in United States v. McGee, supra:

Each case has its own facts and the ‘facts’ presented control the decision. Nevertheless, in determining whether a valid III-A prima facie extreme hardship claim is alleged, the following considerations are in order: the degree of need of the claimed dependent; the nature of the need; the extent of the registrant’s contribution to the need; the lack of a viable alternative source of contribution to the dependent’s support; and the degree of distress resulting to dependent from loss of registrant’s contribution.

Measured by these criteria, the allegations of the appeal letter fail to state a prima facie case of “extreme hardship.”

While we are in agreement that the Lewis’ letter should not be judged by the “strict standards medieval courts applied to pleadings of barristers,” United States v. Saunders, 467 F.2d 675 (4th Cir., 1972), we cannot fail to note that Reverend Lewis omits from his letter any reference to financial dependence upon his son by himself and his wife, much less an allegation that the induction of his son would result in extreme hardship to them. He points out merely that “Weldon helps us with [loan] payments,” and that Lewis “is handy doing necessary repairs and painting about the house so we don’t have to hire it done.” Compare United States v. Saunders, supra; United States ex rel. Kukla v. Gillen, supra. Furthermore, the facts cited in the letter permit no inference of extreme hardship.- Reverend Lewis refers to a monthly indebtedness of $320.00, excluding costs of board and transportation. Yet the income figures cited in the letter indicate a combined parental income of at least $500.00 monthly. Admittedly, Lewis’ avowed monthly contribution of $150.00 would increase this figure by thirty percent, but a deprivation of extra income fails to constitute extreme hardship if Lewis’ parents were otherwise able to meet their expenses. We do not understand United States ex rel. Vaccarino v. Officer of the Day, supra, to state a contrary position. The facts that both parents would eventually be “forced to retire,” and that Lewis’ mother may not have been “able to work much longer as she . . . [had] arthritis,” would have significance only upon the happening of the suggested contingency; the letter fails to allege that either event would likely occur during the pendency of Lewis’ term of service.

We conclude that the board was well within the proper limits of its discretion in refusing to reopen Lewis’ classification, and in insisting upon more detail in support of his III-A claim by mailing him a Form 118. This case is not comparable to United States v. Saunders, supra; United States v. Allen, supra; United States ex rel. Kukla v. Gillen, supra; United States v. Foster, 439 F.2d 29 (9th Cir. 1971); United States v. Grier, 415 F.2d 1098 (4th Cir. 1969); Petrie v. United States, 407 F.2d 267 (9th Cir. 1969); or Lewis v. Secretary, Dep’t of the Army, 402 F.2d 813 (9th Cir. 1968). Cases far closer on their facts are United States v. McGee, supra; Weissman v. Officer of the Day, 444 F.2d 1326 (2d Cir. 1971); Winfield v. Riebel, 438 F.2d 271 (6th Cir. 1970); United States ex rel. Rasmussen v. Commanding Officer, 430 F.2d 832 (8th Cir. 1970), and United States ex rel. Luster v. McBee, 422 F.2d 562 (7th Cir. 1970).

. II

We also reject Lewis’ argument that his local board de facto reopened his classification after considering and rejecting his post-induction claim of conscientious objection. In support of its disposition, the board reasoned that Lewis’ beliefs were “based [upon] personal moral codes,” and that Lewis’ change in status failed to emanate from factors beyond his control.

Analogous circumstances formed the1 basis of a similar claim in United States v. Jones, 447 F.2d 589 (7th Cir. 1971), where we ruled that Ehlert v. United States, 402 U.S. 99, 91 S.Ct. 1319, 28 L.Ed.2d 625 (1971), barred a board reopening where a registrant’s late claim of change in circumstance was found to result from factors within his control. See Wright v. Ingold, 445 F.2d 109 (7th Cir. 1971). Jones directly disposes of Lewis’ post-induction reopening claim.

The judgment of conviction is affirmed.

       Clerk
      Draft Board #107 Forest Park, 111.
      Dear Clerk,
      Our son, Weldon Lewis, is to appear the 25th of July for his physical. He is classified I-Y.
      We would like to make an appeal. He has an endebtedness to us of about $8000.-00 which he is paying back at a rate of $150.00 per month, more when he can. He has endeavored to go to college and complete his education. In order to do this, he has had to work days and go to school at night. He had to have a car, so we signed for him and he is paying us back. Tuition and books had to be paid in advance. He had to quit work for a while on account of a hernia operation. Insurance paid only part of this expense.
      In the meantime, we are still paying Doctor and funeral expenses for my wife’s mother. She was in the hospital and had an operation. Her insurance wasn’t enough to cover. We have paid up the hospital and have to still pay the Doctor and funeral expenses.
      Two older sons served in the Army and Navy. One son is married and cannot help us. The other son was nearly killed in an accident. He has hospital and specialist bills to pay.
      He was in Hines Hospital after he got out of the other hospital for a year. He still has to have plastic surgery. He has only recently been able to go to work, so he is unable to help us.
      My wife and I are both working, trying to meet our financial obligations. We have a mortgage payment on our home of $90.00 per month, a loan of $130.00 per month, loan for $40.00 per month, and a car payment of $60.00 per month — total $320.00. This is above currently monthly expense of runing a home — board and transportation expense.
      My wife and I are nearly 60 years old and must get these bills taken care of before we are forced to retire.
      My wife may not be able to work much longer as she has arthritis in both knees and can hardly walk. She has to go to the Doctor every month for shots.
      My income is net $90.00 per week and my wifes is $64.00 per week. I had to give up my church and go to work in order to make ends meet.
      Weldon helps us With these payments. He is handy doing necessary repairs and painting about the house so we don’t have to hire it done.
      Please give this your prompt consideration. Thanking you I am—
      Rev. Ward V. Lewis