author: SNEED, Circuit Judge: TRASK, Circuit Judge

text:
    ATLAS ASSURANCE COMPANY, LTD., Plaintiff-Appellant, v. HARPER, ROBINSON SHIPPING CO. et al., Defendants, Portland Stevedoring Company; Schulte & Bruns and Sterling International; Third-Party-Defendants, Sterling International, Third-Party-Defendant-Appellee.
    No. 72-3141.
    United States Court of Appeals, Ninth Circuit.
    Jan. 7, 1975.

      Martin P. Detels, Jr., of Detels, Draper & Marinkovich, Seattle, Wash., for plaintiff-appellant.
    George W. McBroom of Shidler, McBroom, Gates & Baldwin,- Seattle, Wash., for third-party-defendant-appel-lee.
    Before: TRASK and SNEED, Circuit Judges, and JAMESON, District Judge.

       Honorable William J. Jameson, Senior United States District Judge, District of Montana, sitting by designation.

   OPINION

SNEED, Circuit Judge:

This case presents two interesting questions concerning marine cargo insurance. First, whether a shipper of goods who procures cargo insurance remains an Assured following his transfer of a certificate of insurance with the bill of lading to the consignees of the cargo pursuant to a CIF sale. Second, whether the insurer may be subrogated to the claims of the consignees against the carrier when the cargo damage was caused by stevedores and the cargo was shipped on an FIO basis by the shipper who had procured the insurance. The case was tried on stipulated facts which may be summarized as follows.

The principal parties are plaintiff-appellant Atlas Assurance Company, Ltd., a British insurance company; third party defendant-appellee Sterling International, the shipper; and defendant Cargill, Inc., the carrier.

On March 19, 1968, Cargill time-char-' tered the M/S Ilse Schulte from its owner Schulte and Bruns. On March 20, 1968, Cargill as disponent owner (time charterer) sub-chartered the vessel (space charter) to Sterling International as shipper, on an FIO (“Free In and Out”) basis.

On April 4, 1968, Sterling delivered to the vessel at Longview, Washington, a cargo of Kraft linerboard for carriage to Rotterdam and Hamburg. Bills of lading were issued in identical form by agents for the master to Sterling; the bills were negotiable, order bills.

Plaintiff Atlas Assurance Company, Ltd. insured the cargo under its Marine Open Policy No. 658; the policy insured “Sterling International, for the account of whom it may concern, loss, if any, payable to the Assured or order.”

The goods insured included “Kraft Paper” and extended to the perils “of the sea, fire, rovers, assailing thieves” etc. and “all other like perils, losses and misfortunes, that have or shall come to the hurt, detriment or damage of the aforesaid subject matter of this insurance or any part thereof.” The policy contained no provision for liability coverage to Sterling and there is nothing in the record to show that Atlas had notice of Sterling’s FIO contract with Cargill.

Certificates of insurance in identical form were executed under this policy for each bill of lading. The insurance certificates similarly insured Sterling “to be insured, for account of whom it may concern” and extended “Against all risks of physical loss or damage . . .” but did not provide Sterling with any liability coverage.

Thereafter, the Ilse Schulte sailed from Longview and arrived at Rotterdam and Hamburg, there discharging the cargo of Kraft linerboard. Following discharge damage to the cargo was noted by surveyors representing cargo’s interests and attributed by them to improper handling by the loading and/or discharging stevedores.

While the vessel was in transit, Sterling negotiated the bills of lading, and insurance certificates on a CIF basis through normal commercial channels for payment against letters of credit held by collecting banks. The letters of credit were honored by consignees’ banks and the documents (order bills and insurance certificates) released to the consignees. The insurance certificates provided that loss was payable on surrender of the policies “and, on the payment being made, liability under this insurance shall thereby be discharged.” The consignees presented the bills of lading and the cargo was delivered to them at the ports of discharge.

Upon receipt of the goods the consignees made claims against Atlas on the insurance certificates for the cargo damage. Atlas paid the consignees and received a written subrogation assignment from each consignee in identical form. The consignees delivered to Atlas the original bills of lading and the insurance certificates upon payment by Atlas of the consignees’ claims.

Thereafter Atlas commenced suit as subrogee of the consignees against Car-gill as time charterer and Schulte and Bruns as shipowner for the cargo damage. Cargill and Schulte and Bruns im-pleaded Portland Stevedoring Co. for causing the damage and Cargill later im-pleaded Sterling to recover indemnity based upon its FIO contract for any liability for cargo damage. Sterling thereupon filed a cross claim against Atlas for indemnity contending that Atlas had insured Sterling for any damages sustained.

Following discovery and the entry of an order denying Cargill’s motion for summary judgment against Atlas, the parties entered into a stipulation for judgment by the terms of which Atlas was to recover judgment as subrogee of the consignees from Cargill for cargo damage for Cargill’s obligations under its bill of lading; the judgment was to be in the amount of $5,500 with interest to commence on February 15, 1972. Car-gill was to recover indemnity from Sterling (without attorney’s fees) based upon the contract between Cargill and Sterling, specifically the FIO provision, and the issues between Atlas and Sterling were reserved. The stipulation provided for dismissal with prejudice of Portland Stevedoring and Schulte and Bruns upon their contribution of $500 and $250 respectively, that Sterling could “contest the relevancy of the ‘FIO’ provision,” and that Sterling and Atlas were to stipulate as to the facts on issues between them. On July 7, 1972, judgment on consent was entered on this stipulation.

Sterling and Atlas entered into further stipulations of fact and then argued the issues between them concerning Sterling’s claim for indemnity from Atlas. Judgment was entered by the District Court vacating the judgment on consent and dismissing the complaint of Atlas. The judgment of October 2, 1972, states in pertinent part:

[T]he doctrine of subrogation should not be applied herein in favor of Atlas against Cargill and if so applied, should result in judgment over in favor of Sterling against Atlas for any sums recovered by Cargill from Sterling.

It is from this judgment that this appeal is taken.

The basic question then is who must' seek recovery against the stevedores because, as stipulated, the negligence was theirs. Atlas, having paid the claim of the consignees, prefers to sue Cargill. Cargill would then be indemnified by Sterling on the PIO agreement, leaving the burden of suing the stevedores on Sterling if Atlas is correct in its contention that it is free from liability derived from the PIO agreement. Sterling’s position is that a suit against Cargill is really a suit against Sterling and that Sterling, as an Assured party, cannot be sued by Atlas. This would force Atlas to seek recovery against the stevedores.

Based on our understanding of the terms and purposes of the policy of insurance here in question we decline to grant the equity of subrogation to Atlas and permit suit against Cargill. Such a suit is effectively a suit against Sterling whom we find to be an Assured party. We therefore affirm the judgment below.

Assured Parties

We can not accept the contention of Atlas that Sterling is not an Assured under the policy. Sterling is the only named Assured:

ASSURED 1. The ATLAS ASSURANCE COMPANY, LIMITED, in consideration of premium at the rate or rates hereinafter stated, does insure
STERLING INTERNATIONAL
2. For account of whom it may concern.
3. Loss, if any, payable to the Assured or order.
4. Upon lawful goods and merchandise of every kind and description consisting principally of Kraft Paper

The phrase “for account of whom it may concern” does not alter the status of Sterling as an Assured. The Supreme Court has thoroughly discussed the broad coverage which use of this phrase imparts:

We concur in the view that by virtue of the language contained in the policy, ‘on account of whom it may concern,’ it is not necessary that the person who takes out such a policy should have at that time any specific individual in mind. If he intended the policy should cover the interest of any person to whom he might sell the entire or any part of the interest insured, that would be enough. In Hooper v. Robinson, 98 U.S. 528, 25 L.Ed. 219, it was said that a policy upon a cargo in the name of A, on account of whom it may concern, will inure to the interest of the party for whom it was intended by A, provided he at the time of effecting the insurance had the requisite authority from such party or the latter subsequently adopted it. The facts in that case differ materially from those presented by this record, but the meaning of the language ‘on account of whom it may concern’ is stated in the opinion of the court, and authorities are therein cited which show that it is not necessary that at the time of effecting the insurance the person taking it out should intend it for the benefit of some then known and particular individual, but that it would cover the case of one having an insurable interest at the time of the happening of the loss, and who was intended to be protected at the time the party took out the insurance.

In 1 Phillips, Insurance, it is stated: Sec. 385. The rule, that an insurance ‘for whom it may concern’ will avail in behalf of the party for whom it is intended, does not mean that any specific individual must be intended. But he may intend it for whatever party shall prove to have an insurable interest in the specified subject, in which case it will be applicable to the interest of any person subsequently ascertained to have such an insurable interest, who adopts the insurance.
Sec. 388. One may become a party to the insurance effected in his behalf, in terms applicable to his interest, without any previous authority from him, by adopting it, either before or after a loss has taken place and is known to him, though the loss may have happened before the insuurance was made.

In 2 Duer, Marine Insurance, p. 28, it is stated as follows:

In England, the policy in its usual and almost invariable form contains a general clause, the terms of which are sufficiently comprehensive to embrace all persons who have an insurable interest in the property, and a lawful right to be insured. The insurance is expressed to be ‘in the name of A. B. (the person effecting the policy), as well in his own name as for and in the name and names (without specification) of all and every other person and persons to whom the same (the property insured) doth, may, or shall appertain, in part or in all.’ In the United States, as on the continent of Europe, the general clause is framed in various forms of expression, and the construction necessarily varies, as the terms used are more or less extensive in their application. In some cases the insurance is expressed to be ‘on account of the owners.’ In some, on ‘account of a person or persons, to be thereafter named;’ but its most usual form is, ‘on account of whom it may concern.’ An insurance on account of the ‘owners,’ is probably limited to those who have a legal interest in the subject insured. But the words, ‘on account of whom it may concern,’ are coextensive in their possible application with the general clause of the London policy.

Hagan v. Scottish Union & Nat’l Ins. Co., 186 U.S. 423, 429-431, 22 S.Ct. 862, 46 L.Ed. 1229 (1902).

There is nothing in the record which would suggest that Sterling did not intend to protect itself as well as other parties that might come to have an interest in the goods. Atlas has never contended that Sterling did not have an insurable interest. Nor does it appear that it could make such a claim for “any person has an insurable interest in property, by the existence of which he will gain an advantage, or by the destruction of which he will suffer a loss, whether he has or has not any title in, or lien upon, or possession of the property itself.” Harrison v. Fortlage, 161 U.S. 57, 65, 16 S.Ct. 488, 490, 40 L.Ed. 616 (1896). See Groban v. S.S. Pegu, 331 F.Supp. 883, 894 (S.D.N.Y., 1971), aff’d, 456 F.2d 685 (2d Cir., 1972). Sterling had an interest in insuring against the possibility that the consignee, as here, would accept the goods and sue for damages by reason of an injury arising during loading or unloading. It also ran the risk that the purchaser would rightfully reject the goods by reason of an injury arising pri- or to loading. See II Arnould, Marine Insurance, 171 n. 13; Cf. The Astri, 151 F.2d 5, 1945 A.M.C. 1064, 1070 (2d Cir.). Furthermore, it is stipulated that Sterling did not negotiate the bills of lading until the vessel was in transit and we note that the cargo damage might have occurred during the loading of the vessel. We can not believe that Sterling did not intend to protect these interests when it purchased the policy of insurance.

The certificate of insurance which accompanied the bill of lading in the CIF sale did not change the status of Sterling as an Assured. A certificate of insurance is not a substitution of parties. It “is not, and does not purport to be, a policy, but states that a policy covering the goods is in existence, and gives details of the vessel, voyage, subject-matter and refers to the terms and conditions of the underlying policy.” I Arnould, Marine Insurance, 138. The underlying policy here was issued to Sterling as Assured. But, even if the certificate were regarded as a separate policy, it repeats the words of the Open Policy, naming Sterling as the Assured “for account of whom it may concern Loss, if any, payable to the Assured or order.”

Wager v. Providence Ins. Co., 150 U.S. 99, 14 S.Ct. 55, 37 L.Ed. 1013 (1893) is similar to the present case and supports our finding that Sterling is an Assured. In Wager an owner of grain (Armour) engaged a carrier (Morse) who contracted with a shipowner (Wager). Morse obtained a policy of insurance and, pursuant to the policy, a certificate of insurance covering the grain was issued to Morse, “loss (if any) payable to assured or order.” Morse endorsed the certificate in blank, attached it to the bill of lading for the grain, and delivered it to the agent of Armour. The cargo was damaged when the vessel ran aground. The insurer paid Armour and attempted to bring suit against Morse and Wager as subrogee of Armour’s claim. The Supreme Court denied subrogation of the claim against Morse, finding that Morse was an Assured;

The facts in the present case were that the open policy declared that it was issued on account of H. Morse & Co. for whom it may concern, and that it insured the several persons, whose names should be thereafter indorsed thereon as owner, advancee, or common carrier on goods, wares, merchandise, or country produce, on his own boat, or boats belonging to others, loaded on commission or chartered.
Under this open policy Morse & Co. applied to the insurance companies, stating that insurance was wanted by H. Morse & Co., on wheat valued at $9875, from Buffalo to New York. Loss, if any, to be payable to Morse & Co., or order. Upon this application, the insurance companies issued what is termed an insurance certificate to H. Morse & Co., setting forth that, subject to the conditions of policy No. 772, H. Morse & Co. insured, in the sum of $9875, the inboard cargo of boat “William Worden;” the loss, if any, to be payable to assured or order, and return of this certificate. The premium was paid by H. Morse & Co.
Clearly, under this state of facts, H. Morse & Co. were, nominally at least, the parties insured, and came within the terms of the policy, and, upon a loss, were entitled to receive the amount of the policy, and, of course in that event, the insurers could not, after having paid H. Morse & Co. the amount of the loss, recover it back from them under the principle of equitable subrogation. The question then arises whether a different conclusion should be reached because of the fact that H. Morse & Co., when they delivered the bill of lading to Meadows as agent for Armour, Plankinton & Co., attached thereto the insurance certificate indorsed by them in blank.
So far as the insurance companies were concerned, H. Morse & Co. were under no obligation to transfer the policy to Armour, Plankinton & Co., nor to make it payable to them in case of loss. That was a matter entirely between H. Morse & Co., as carriers, and Armour, Plankington & Co., as consignees and owners of the cargo.
When, subsequently, the insurance companies paid to Armour, Plankinton & Co. the amount of the loss, they did so, not by virtue of any contract between themselves and the consignees, but of the contract between themselves and H. Morse & Co., whereby they had agreed to pay the loss to the latter or order.
We think, therefore, that the circuit court was right in dismissing the libel against H. Morse & Co., and its decree to that effect should be affirmed.

Merchants’ & Miners’ Transp. Co. v. Robinson-Baxter-Dissosway Towing and Transp. Co., 191 F. 769 (1st Cir., 1911), cert. denied 225 U.S. 704, 32 S.Ct. 837, 56 L.Ed. 1265 (1912), is the only other case which we have found that bears a significant similarity to the one before us. There a towing company procured an open marine policy “for the account of whom it may concern” covering the lawful goods on barges operated by the towing company. Pursuant to the policy, the company procured a certificate of insurance on the cargo of one barge, “loss if any payable only to the order of” the owner of such cargo. The towing company paid the premium on the certificate and added it to the cost of the freight under an agreement with the cargo owners. While in tow the barge was sunk in a collision. The court permitted the cargo owners to sue the towing company on behalf of the insurer which was subrogated to the cargo owners’ claims.

Although Merchants’ & Miners’ Transp. Co., allows subrogation, it is not necessarily in conflict with our decision. The certificate of insurance before the court there provided, “loss if any payable only to the order of the General Chemical Company [the cargo owners].” 191 F. at 773. It might therefore be reasonable to conclude that the parties intended that the cargo owners would be the only assured and that the towing company was not an assured. We can not, however, agree with part of the reasoning used by the court in reaching that result:

Bearing in mind that the owners of the tug held the open policy, while the owners of the cargo were protected only by the certificate accompanying the same, and that the insurance was effected through the hand of the owners of the tug, it might not be absurd to suppose that the owners of the tug intended to protect themselves against claims of the class involved here; but, under the circumstances, it is plain that they did not so protect themselves. They paid no premium out of their own pockets, and they are not entitled to claim the benefit of insurance for which they did not pay or agree to pay.

191 F. at 775.

We cannot give such great weight to the question of which party ultimately bears the cost of insurance. Sterling had an insurable interest to protect and there is nothing in the policy or certificate procured by it which would indicate an intention not to protect this interest. The fact that Sterling successfully passed the cost of insurance on in a CIF sale reflects commercial practice rather than an intention to lose the protection of insurance. As stated in an analogous case where the carrier was the named Assured:

Nor does the fact that the cost of insurance was included in the carrier’s rate affect the question. The rate would properly cover all the reasonable expenses incident to the transportation, , and when the carrier assumed liability to the cargo owners for damages and losses caused by marine perils, there was nothing unreasonable in the carrier’s protecting itself against the risk by procuring insurance and covering the cost in its rate.

Great Lakes Transit Corp. v. Interstate Steamship Co., 301 U.S. 646, 653, 57 S.Ct. 915, 81 L.Ed. 1318 (1937).

Subrogation

Atlas further argues that, even if Sterling is the Assured, Atlas is asserting its claim against Cargill and not against Sterling. We cannot blind ourselves to the fact that a suit against Cargill is effectively a suit against Sterling. The parties have stipulated that Cargill will be indemnified by Sterling due to the FIO agreement if Cargill is found liable to Atlas through the subrogated claims of the consignees. Atlas is clearly attempting to sue its Assured, albeit in a circuitous manner, and the equity of subrogation will be denied to Atlas under the familiar doctrine that subrogation does not invest the underwriter with a right to override its obligation to its Assured. Great Lakes Transit Corp., supra, 654, 57 S.Ct. 915, 81 L.Ed. 1318; Phoenix Ins. Co. v. Erie Trans. Co., 117 U.S. 312, 6 S.Ct. 772, 29 L.Ed. 923 (1886).

We do not accept the argument that the equities nevertheless favor subrogation because Sterling has acted to prejudice the claims against Cargill by shipping the cargo FIO. While equity does give recognition to the effect of prejudicial acts, this doctrine has principally developed in cases where the assured has acted to diminish a matured claim against third parties by release or laches. See West of England Fire Ins. Co. v. Issacs, 2 Q.B. 377 (1896), aff’d, 1 Q.B. 226 (C.A.1897); II Arnould, Marine Insurance, 1208; Annotations, 80 L.Ed. 374, 38 A.L.R.2d 1095.

The equitable doctrine of subrogation passes to the insurer only those rights which the assured has and, if the rights of the assured have been limited by lawful contract, the rights of the insurer are likewise limited. Phoenix Ins. Co., supra. The assured can not, however, act to materially alter the risk to the insurer or procure the policy by fraudulent concealment or misrepresentation. See Phoenix Ins. Co., supra; Tate and Sons v. Hyslop, 15 Q.B.D. 368 (1885).

The shipment of the cargo FIO did not materially alter the risk assumed by Atlas under the policy. The FIO agreement was not a contract of indemnity and did not relieve Cargill of responsibility for its own acts. It did no more than place the costs and responsibility for loading and discharging on Sterling, the shipper. Although the consequence of this is to deprive Atlas of the COGSA bill of lading presumptions against Cargill this is only to say that Cargill is not liable for what it has not done, viz., the stevedoring. See Carriage, of Goods by Sea Act, 46 U.S.C.A. § 1300 et seq.

Atlas can not complain of prejudice since it insured Sterling from “warehouse to warehouse” and against “all perils.” In none of the exclusions to this broad policy coverage is the Assured prohibited from undertaking the stevedoring responsibility pursuant to FIO terms. Ambiguities are to be resolved against the insurer. Great Lakes Transit Corp., supra, 653, 57 S.Ct. 915, 81 L.Ed. 1318. Nor can Atlas complain of unfair surprise at the common and commercially acceptable practice of FIO shipments. Atlas assumed the risk that the goods would be shipped FIO and that the stevedoring would be done by the servants of its Assured. No provision of its policy even faintly suggests otherwise. It cannot invoke the equity of subrogation to avoid this obligation to Sterling. To permit it to do so would require the shipper of goods to acquire additional coverage from the insurer when an FIO contract with the carrier was contemplated notwithstanding the fact that the initial contract of insurance appears to protect all, including the shipper, “warehouse to warehouse”. We believe that the exclusion of the shipper from a portion of this coverage because of a commercially reasonable FIO contract must be achieved through the language of the policy and not through sub-rogation. The judgment is therefore

Affirmed.

TRASK, Circuit Judge

(dissenting):

I respectfully disagree with the majority. The basic position of the trial court was that subrogation may not be allowed the insurer where to permit it would result ultimately in a judgment over against the shipper who was the original named insured in the policy. Thus, the theory goes, that the case falls within the principle that an insurer may not recover its loss from its own insured. The majority accepts this as the rationale of its position. It holds:

“. . . we decline to grant the equity of subrogation to Atlas and permit suit against Cargill. Such a suit is effectively a suit against Sterling whom we find to be an Assured party.”

First of all, Atlas, the insurer, is not exercising its right of subrogation to assert an action against Sterling, the original shipper and the named insured of Atlas, either “effectively” or any other way. The policy was purchased by Sterling, “for the account of whom it may concern: loss, if any, payable to the Assured or order.” It insured goods shipped by sea under specific bills of lading with a certificate of insurance covering the goods under each of a number of bills of lading, each certificate executed pursuant to the original policy. The goods represented by this documentation were sold to various consignees on a regular CIF basis. When the goods arrived in a damaged condition the purchasers had a cause of action against those who caused the damage. (It was agreed that the damage was caused by stevedores in the course of loading and unloading). But they were not required to pursue this course. They called upon Atlas as their insurer to pay for the damage. Atlas did and became subrogated to the position of the consignees under their bill of lading. Luckenbach v. McCahan Sugar Co., 248 U.S. 139, 149, 39 S.Ct. 53, 63 L.Ed. 170 (1918). As such subrogee it could probably have sued the stevedores directly. It chose to sue the carrier, Car-gill, under the Carriage of Goods by. Sea Act, 46 U.S.C. § 1300 et seq.

This it was clearly entitled to do. Fabbri Co. v. Universal Shipping Corp., 310 F.Supp. 964 (S.D.N.Y.1969). At this point, Atlas, as insurer standing in the shoes of its consignees, should have been accorded the right to a judgment against Cargill, the carrier. It is at this point, however, that the logic of the trial court and the majority becomes derailed. They assert that subrogation cannot be permitted because Cargill in turn seeks third party indemnification against Sterling, the shipper, for payment of the amount Atlas has recovered. This, contends the majority, would be full-circle recovery by Atlas, the insurer, against Sterling, its original insured.

The fallacy is that the indemnification sought by Cargill, carrier, against Sterling, the shipper, does not arise out of any subrogation rights of Atlas on payment of consignees. Cargill is entitled to indemnification against Sterling, if at all, because Sterling in an entirely separate contract (the FIO provision) had agreed to pay any damage which Cargill might be liable for resulting from loading and unloading by the stevedores. Atlas, the insurer, was not a party to this agreement and knew nothing about it; neither did the consignees. Thus, the majority in their statement that “. we decline to grant the equity of subro-gation to Atlas and permit suit against Cargill. Such a suit is effectively a suit against Sterling whom we find to be an Assured party”, is incorrect. The only action available against Sterling is one by Cargill not Atlas. The cause of action is not based upon subrogation, it is based upon the PIO contract entirely between Sterling and Cargill. Then in a final Parthian shot at the by now completely bewildered Atlas, the majority blithely says: “Nor can Atlas complain of unfair surprise at the common and commercially acceptable practice of FIO shipments. Atlas assumed the risk that the goods would be shipped FIO and that the stevedoring would be done by servants of the Assured.” No authorities are cited.

The other facet of the case with which I cannot agree with my Brethren is that which holds that Sterling, after it had sold the cargo to the consignees remained an Assured party so that the subrogation rights of Atlas should be denied lest the insurer be suing its own insured. Heavy reliance is placed upon Hagan v. Scottish Union & National Insurance Co., 186 U.S. 423, 429-431, 22 S.Ct. 862, 46 L.Ed. 1229 (1902), which is quoted from at length. That was a situation where the Court examined the legal significance of the phrase “for account of whom it may concern” in a policy of marine insurance covering a tugboat. It concluded that the reach of the phrase clearly extended beyond the then owner to “whatever party shall prove to have an insurable interest in the specified subject” (quoting from 1 Phillips Insurance, section 385). In Hagan v. Scottish Union & National Insurance Co., supra, the named insured had sold a half interest in the tugboat to one Martin who held that interest at the time of the loss. That case would have been apposite had Atlas refused to pay the consignees who had purchased the bills of lading and thus the cargo. There was no question raised about such coverage. Atlas did pay those consignees. The majority also relies upon a very broad generalization defining the term “insurable interest” as stated by the District Court in Groban v. S.S. Pegu, 331 F.Supp. 883, 894 (S.D.N.Y.1971). That case relies in turn upon Hagan, supra, and is similar on the facts. The named insured and consignor had bought the tractor parts and had resold them to one of the plaintiffs. The principle to be applied as stated by the court was:

“If an assured has a contract under which the title of a cargo would accrue to him upon delivery and he would suffer from loss of the goods prior to the delivery, an insurable interest exists, . . . ” Groban v. S.S. Pegu at 894.

At the time of the loss here, Sterling, the shipper, had no interest in the goods either present or prospective and liability is not asserted by Cargill based upon the contract of insurance either directly or indirectly but upon the FIO contract to which Atlas was a stranger. Nor is there the slightest evidence in the record that Atlas intended to provide insurance for this unrelated risk.

I would reverse and direct that the judgment entered upon stipulation of the parties be reinstated.

      . Under C.I.F. terms in the contract of sale and purchase of goods carried by sea, the deal is consummated not by the delivery of possession of goods, but by the delivery of a bundle of documents, of which three are the essential basis. First, the seller’s invoice, (or bill of sale), which describes the goods as to quality, quantity, date and place of shipment, and other commercial facts and representations and warranties, this being called the COST and represented by the letter C. Next the insurance policy, relating to the marine risk by transport by sea, and sometimes also on land for getting to the ship and on land for leaving the ship, which is called the ‘warehouse to warehouse coverage,’ this being called the INSURANCE and represented by the letter I. Thirdly, the bill of lading which as a receipt recites that the goods have been tallied into the ship, and by its date shows when that happened, and which is a contract of carriage and shows that the freight is a certain agreed sum, and how it is to be paid, and that the goods will be carried from the named port of loading to the named port of destination, with the names of the shipper and the consignee or ‘order notify’ party, this being called FREIGHT, and represented by the letter F.
      Knauth, Ocean Bills of Lading (1953). Although Knauth speaks of an insurance “policy,” the commercial practice is to provide a certificate of insurance which evidences the underlying policy. I Arnould, Marine Insurance, 138.

        . The International Maritime Dictionary, p. 281, defines “FIO” (Free In and Out) as a term by which the owner who charters the ship is responsible for all the costs of ship management with the exception of loading and discharging cargo. This definition would place the responsibility for loading and discharging cargo on the shipper. St. Ioannis Shipping Corp. v. Zidell Explorations, Inc., 222 F.Supp. 299, 305 (D.Ore.1963), aff’d, 336 F.2d 194 (9th Cir., 1964).

      . Section 38 of the policy discusses certificates of insurance:
      38. In order that the Assured may be able to furnish without delay evidence of the fact that insurance has been effected upon shipments covered by this Open Policy, this Company will deliver to the Assured in the state where this Policy is issued and countersigned special policies and/or certificates issued subject to and in accordance with the terms and conditions of this Policy and such other terms and conditions as may be agreed upon between the Assured and this Company; and provided copies of such special policies and/or certificates of insurance are mailed to this Company as soon as practicable, the Assured by endorsement thereon may assign and transfer such special policies and/or certificates of insurance covering any shipment insured hereunder, which assignment or transfer shall convey all the rights of the Assured provided in and by this Open Policy to collect from this Company for any loss, damage or claim with respect to shipments therein described. The assignment and transfer of such special policies and/or certificates are actually done by the Assured for his own benefit and shall not constitute the Assured an agent of this Company for the effecting or procuring of insurance or otherwise, (emphasis added).
      This section indicates that, at the most, the certificates constituted an assignment of the Assured’s (Sterling’s) “rights ... to collect ... for any loss, damage or claim.” Section 38 does not, however, indicate in any way that the certificates caused a change in the status of Sterling as an Assured. In fact it indicates the contrary by referring to the certificates as “evidence” of the policy between Atlas and Sterling.

      . Paragraph 13 of the policy provides:
      This insurance attaches from the time the goods leave the warehouse and/or Store at the place named in the policy for the commencement of the transit and continues during the ordinary course of transit, including customary transhipment if any, until the goods are discharged overside from the overseas vessel at the final port. Thereafter the insurance continues whilst the goods are in transit and/or awaiting transit until delivered to final warehouse at the destination named in the policy or until the expiry of 15 days (or 30 days if the destination to which the goods are insured is outside the limits of the port) whichever shall first occur. The time limits referred to above to be reckoned from midnight of the day on which the discharge overside of the goods hereby insured from the overseas vessel is completed. Held covered at a premium to be arranged in the event of transhipment, if any, other than as above and/or in the event of delay in excess of the above time limits arising from circumstances beyond the control of the Assured.

      . One cannot help but wonder how an insurer of goods under a CIF contract would calculate its risk and fix its premium under such an “assumption.”


source: Caselaw Access Project

author: AINSWORTH, Circuit Judge:

license: Public Domain

text:
    Charles Edward PAYNE, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
    No. 74-1388.
    United States Court of Appeals, Fifth Circuit.
    March 5, 1975.

      Molly Bartholow, Dallas, Tex. (Court-appointed), for petitioner-appellant.
    Frank D. McCown, U. S. Atty., Fort Worth, Tex., William F. Sanderson, Jr., Asst. U. S. Atty., Dallas, Tex., for respondent-appellee.

      Before BELL, AINSWORTH and RO-NEY, Circuit Judges.
   AINSWORTH, Circuit Judge:

Charles Edward Payne was convicted of two counts of possessing stolen property of a value exceeding one hundred dollars; in violation of 18 U.S.C. § 659. The first count dealt with Haggar slacks; the second count with a Philco television. He was sentenced to seven years for each count to run concurrently, and his conviction was affirmed. See 467 F.2d 828 (1972), cert. denied, 410 U.S. 912, 93 S.Ct. 975, 35 L.Ed.2d 275 (1973).

His present suit, based on 28 U.S.C. § 2255, alleges three principal grounds of error: (1) that the affidavit which formed the basis of the search warrant was insufficient to establish probable cause; (2) that a search warrant executed in the absence of the occupant of the premises was invalid under the Fourth Amendment; and (3) that the television set which was discovered in the first search and seized at a later time, was the product of an illegal search because it was not specifically described in the warrant.

We find no merit in the first contention. When-viewed in a common sense and realistic manner, the affidavit sets out facts sufficient to enable an impartial magistrate to conclude probable cause existed. Evidence of the reliability of the informant was contained in the recitation of his prior cooperation which resulted in five convictions. Furthermore, this information was corroborated by the affiant’s first-hand knowledge and examination of stolen slacks.

The second ground of error pertaining to execution of a search warrant on premises while the occupant was absent involves a new legal issue in this circuit. However, the Third Circuit in United States v. Gervato, 474 F.2d 40, cert. denied, 414 U.S. 864, 94 S.Ct. 39, 38 L.Ed.2d 84 (1973), dealing with identical facts, upheld the validity of a search and seizure with a warrant of unoccupied premises. Petitioner contends, however, that the search and seizure violated 18 U.S.C. § 3109, which requires announcement of authority and purpose and refusal prior to forcible entry and also violated his right of privacy under the Fourth Amendment.

Section 3109 has no application to the situation of an unoccupied dwelling. The three interests which are protected by requiring announcement and refusal prior to breakin are: (1) the prevention of violence and physical injury to the police and the occupants; (2) the unexpected exposure of the private activities of the occupants; (3) the property damage resulting from forced entry. Only the third and least significant in terms of individual privacy can possibly be involved when the occupant is absent from the premises. It is futile to require1 the police to wait for refusal of admittance to a dwelling when no one is home. Logically, therefore, section 3109 is applicable to cases where someone is present at the time the agents knock and announce their authority and purpose.

Nor did the police breakin violate the Fourth Amendment prohibiting an “unreasonable search and seizure.” Historically, the Fourth Amendment is a codification of early English common law and was designed primarily to combat the evils of general warrants or writs of assistance so hated by American colonists. In this ease the issue is whether the execution of a warrant by forcible entry in the absence of the occupant is unreasonable. We hold that it is not. The Fourth Amendment guarantees must be balanced with the efficient operation of the criminal justice system. See Texas v. Gonzales, 5 Cir., 1968, 388 F.2d 145. A homeowner has no right to prevent officers armed with a warrant from entering his home. United States v. Bustamante-Gamez, 9 Cir., 1957, 488 F.2d 4. A holding that police cannot enter unoccupied premises even with a warrant would greatly hamper their legitimate activities for the occupant could avoid search by merely leaving the premises on approach of the police or could permanently defeat the warrant by staying away from the premises. See United States v. Gervato, E.D.Pa., 1972, 340 F.Supp. 454, 463. The statutory requirements of judicial supervision based on probable cause, the requisites of specificity in describing the premises and the items to be seized, and the delivery of a written inventory of the items taken to the occupant or other competent person provide adequate safeguards against potential abuse and sufficiently limit police discretion.

These considerations outweigh the possible evils enumerated by petitioner, which are predicated solely on the assumption of police misconduct. Therefore, we hold that forcible entry pursuant to a search warrant of unoccupied premises is not per se a violation of the Fourth Amendment.

Furthermore, the present facts do not disclose any unreasonable activity or police misconduct nor any violation of Fourth Amendment rights. On the contrary, the officers having knowledge of Payne’s absence complied with the procedural announcement requirements of section 3109; also, there is no evidence of pilfering. In fact, Payne returned before the completion of the search and was advised of his rights and given an inventory of the goods seized. Based on the totality of the circumstances, we find the instant search and seizure was reasonable and valid.

Although we find no merit in petitioner’s third contention concerning the inadmissibility of the television as not “particularly described in the warrant,” we point out that the concurrent sentence doctrine disposes of this issue. Benton v. Maryland, 395 U.S. 784, 791, 89 S.Ct. 2056, 23 L.Ed.2d 707 (1969); United States v. Varner, 5 Cir., 1971, 437 F.2d 1195; United States v. Bigham, 5 Cir., 1970, 421 F.2d 1344; United States v. Barsaloux, 5 Cir., 1969, 419 F.2d 1299; Rogers v. Wainwright, 5 Cir., 1968, 394 F.2d 492.

Affirmed.

      . United States v. Harris, 403 U.S. 573, 577, 91 S.Ct. 2075, 2079, 29 L.Ed.2d 723 (1971); United States v. Ventresca, 380 U.S. 102, 85 S.Ct. 741, 13 L.Ed.2d 684 (1965).

      . The magistrate’s “determination of probable cause should be paid great deference by reviewing courts.” Spinelli v. United States, 393 U.S. 410, 419, 89 S.Ct. 584, 591, 21 L.Ed.2d 637 (1969); United States v. Hill, 5 Cir., 1974, 500 F.2d 315, 319. This circuit adheres to the conclusiveness rule in the absence of arbitrariness. Bastida v. Henderson, 5 Cir., 1973, 487 F.2d 860, 863, citing Castle v. United States, 5 Cir., 1961, 287 F.2d 657.

      . See Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509 (1964). See also United States v. Me-lancon, 5 Cir., 1972, 462 F.2d 82, in which information was relayed from another agent to the affiant. The recent case of United States v. Acosta, 5 Cir., 1974, 501 F.2d 1330 (en banc rehearing granted December 18, 1974), is distinguishable from the instant suit because there the panel of this court held that the affidavit failed to contain adequate information concerning the reliability of the informant.

      . United States v. Gervato, E.D.Pa., 1972, 340 F.Supp. 454 and 3 Cir., 1973, 474 F.2d 40 (both give a detailed historical analysis of the section); United States v. Hawkins, E.D. Tenn., 1965, 243 F.Supp. 429; Annot., 21 A.L.R.Fed. 892-893 (1974); state court decisions dealing with similar statutory provisions have denied their applicability when premises were unoccupied. See, e. g., Jones v. State, 1912, 4 Ala.App. 159, 58 So. 1011; Hart v. Superior Court, County of San Mateo, 21 Cal.App.3d 496, 98 Cal.Rptr. 565 (1972); People v. Johnson, 231 N.Y.S.2d 689 (Ct.Gen.Sess.N.Y.Co., 1962); Collins v. State, Tenn., 1947, 199 S. W.2d 96.

      . See United States v. Bustamante-Gamez, 9 Cir., 1973, 488 F.2d 4, 9-12; Note, Police Practices and the Threatened Destruction of Tangible Evidence, 84 Harv.L.Rev. 1465, 1494 (1971).

      . For detailed history, see Marcus v. Search Warrants, 367 U.S. 717, 724-729, 81 S.Ct. 1708, 1712-1715, 6 L.Ed.2d 1127 (1961); Boyd v. United States, 116 U.S. 616, 625-629, 6 S.Ct. 524, 529-531, 29 L.Ed. 746 (1886). The Fourth Amendment provides:
      The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

      . See Rule 41(c) and (d), Fed.R.Crim.P.

      . The Third Circuit in Gervato, supra, 474 F.2d at 45, discusses these contentions and decides them adversely to the contentions of petitioner here.

      . Ker v. California, 374 U.S. 23, 33, 83 S.Ct. 1623, 1630, 10 L.Ed.2d 726 (1963); United States v. Rabinowitz, 339 U.S. 56, 63, 70 S.Ct. 430, 434, 94 L.Ed. 653 (1950).

      . The Government urges that petitioner has waived any contention relative to illegal search and seizure because that issue was not raised in the trial on the merits, or in the appeal to this court on the merits.

      . The TV was discovered with the stolen slacks (described in the warrant) but the NCIC check of the serial numbers originally yielded nothing. Later, when it was reported stolen, the police returned and, with Payne’s consent, conducted a search and seized the TV. This seizure can be justified on two theories: (1) the plain view rule, see Cady v. Dombrowski, 413 U.S. 433, 93 S.Ct. 2523, 2531-2532, 37 L.Ed.2d 706 (1973); Ker v. California, supra, or (2) the “nexus” theory, i. e., that the TV was related to Payne’s criminal activities as a fence for stolen goods. See Cady v. Dombrowski, supra; Louie v. United States, 9 Cir., 426 F.2d 1398, cert. denied, 400 U.S. 918, 91 S.Ct. 180, 27 L.Ed.2d 158 (1970); Aron v. United States, 8 Cir., 1967, 382 F.2d 965, 973-974.
      Petitioner’s contention relative to the inadmissibility of a typewriter which was found with the slacks but not described in the warrant is also unfounded based on the above-cited authorities. Additionally, Payne was not charged or convicted of the theft of the typewriter.


author: MATTHES, Senior Circuit Judge.

text:
    Wilbert MEYER, a/k/a W. F. Meyer, Plaintiff-Appellee, v. CHICAGO, ROCK ISLAND AND PACIFIC RAILROAD COMPANY, Defendant-Appellant.
    No. 74-1667.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 10, 1975.
    Decided Feb. 3, 1975.
    Charles A. Flinn, Jr., St. Paul, Minn., for appellant.

      Douglas E. Schmidt, Worthington, Minn., for appellee.
    Before MATTHES, Senior Circuit Judge, and STEPHENSON and WEBSTER, Circuit Judges.
   MATTHES, Senior Circuit Judge.

This tort action, filed and tried in the United States District Court for the District of Minnesota, arises from a collision between an automobile owned and operated by plaintiff-appellee and a switch engine owned and operated by the defendant-appellant railroad company. The collision occurred at a railroad crossing in the state of Iowa. Plaintiff sustained severe personal injuries and his automobile was damaged.

With admirable candor, counsel for the railroad company concedes that there is only one issue we are required to decide: “whether a federal district court sitting in Minnesota, and applying Minnesota conflict of laws rules, should apply Minnesota’s comparative negligence statute or Iowa’s contributory negligence standard to this case.”

Under Iowa law, a plaintiff is wholly barred from recovery if his contributory negligence was “a proximate cause of the injury or damage.” Iowa Code An-not. § 619.17 (Supp.1974). Under the Minnesota statute, a plaintiff may obtain at least partial recovery for his damages despite his contributory negligence, provided his negligence was not as great as the negligence of the person against whom recovery is sought. Minn.Stat.An-not. § 604.01 (Supp.1974).

Over objections by the company, Judge Lord submitted the Minnesota comparative negligence standard to the jury. By special verdict, the jury found both plaintiff and the company negligent, attributing 60% of the negligence to the company and 40% to plaintiff. The jury also found that the amount which would fairly compensate plaintiff for his personal injuries and damages was $139,775. Guided by its finding that the company was 60% negligent, the jury found that plaintiff was entitled to recover $83,865. Counsel stipulated that plaintiff was entitled to recover an additional $2,200 for damage to his automobile. Accordingly, judgment was entered for plaintiff in the total sum of $86,065.

It is well established that in a diversity action a federal district court must apply the choice of law rules of the state in which the court sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). See, e. g., General Dynamics Corp. v. Selb Mfg. Co., 481 F.2d 1204, 1216 (8th Cir. 1973), cert. denied, 414 U.S. 1162, 94 S.Ct. 926, 39 L.Ed.2d 116 (1974); Brooks v. Universal C.I.T. Credit Corp., 431 F.2d 238, 240 (8th Cir. 1970); Rose Barge Line, Inc. v. Hicks, 421 F.2d 163, 164 (8th Cir. 1970). Thus, the federal district court was required to apply the Minnesota comparative negligence statute if the Minnesota statute would have been applied had the case been tried in a Minnesota state court.

We conclude that this case is governed by Schwartz v. Consolidated Freightways Corp. of Delaware, Minn., 221 N.W.2d 665 (1974). In Schwartz, the Supreme Court of Minnesota stated:

In Milkovich v. Saari, supra [295 Minn. 155, 203 N.W.2d 408 (1973)], this court discussed in detail the recent changes in the choice-of-law rules of this and other jurisdictions. With reference to tort cases it was pointed out that the traditional rule of lex loci de-lecti has been replaced by the more rational choice-of-law methodology first enunciated by Professor Robert Leflar in his article entitled Choice-Influencing Considerations in Conflicts Law, 41 N.Y.U.L.Rev. 267, 279. Adoption of this methodology by this court in Milkovich has in effect replaced the traditional choice-of-law rules with a flexible approach which takes into account policy as well as factual considerations in arriving at a choice of law in a given situation.
As pointed out in Milkovich, only the last two items of Professor Lef-lar’s five-point methodology are relevant to tort cases. These two considerations are: (1) Advancement of the forum’s governmental interests and (2) application of the better rule of law.

221 N.W.2d at 668. The court in Schwartz went on to hold that the Minnesota comparative negligence statute applied to a truck collision which occurred in Indiana.

We do not believe that, a detailed analysis of the policy considerations set forth in Milkovich and Schwartz is necessary, for the governing facts in the present case are sufficiently similar to those in Schwartz that any policy analysis by us would track the opinion in Schwartz. Here, as in Schwartz, plaintiff was a lifelong resident of the state of Minnesota. On the occasion of the collision, plaintiff and his family were on a short trip into the state of Iowa. As in Schwartz, plaintiff here was operating a vehicle, his own, which was licensed, registered, garaged, maintained, and insured in Minnesota. As in Schwartz, plaintiff’c trip originated in Minnesota and was to terminate in that state. In fact, the collision occurred just three miles from the Iowa-Minnesota border. The railroad company is an Illinois corporation, authorized to do business in Minnesota and Iowa.

Because of the striking similarity between the facts and policy considerations in the present case and those in the Schwartz case, we are impelled to sustain the court’s application of the Minnesota comparative negligence statute. Indeed, counsel for the railroad company at oral argument tacitly conceded that, under Schwartz, there is no sound basis for reversal. Counsel’s disagreement with the reasoning of the Schwartz opinion is not a rational ground for us to decline to follow that decision. It is hardly necessary to observe that, whatever might be the reservations of counsel about the reasoning of the state choice of law rule, in a diversity case such as this we are mandated to apply the forum’s law on conflicts of law. See, e. g., Universal Underwriters Insur. Co. v. Wagner, 367 F.2d 866, 874 (8th Cir. 1966); Hawkeye-Security Insur. Co. v. Davis, 277 F.2d 765, 769 (8th Cir. 1960). The judgment is affirmed.

      . The Schwartz opinion was filed after this case had been tried. In Myers v. Government Employees Insurance Co., Minn., 225 N.W.2d 238 (1974), decided while this appeal was pending, the Supreme Court of Minnesota reaffirmed its intention to adopt the Leflar test.


author: THORNBERRY, Circuit Judge:

text:
    William BOND et al., etc., Plaintiffs-Appellants, v. Alton WHITE et al., etc., Defendants-Appellees. UNITED STATES of America, Plaintiff, v. TWIGGS COUNTY GEORGIA et al., etc., Defendants.
    No. 74-1973.
    United States Court of Appeals, Fifth Circuit.
    March 7, 1975.

      .John R. Myer, Elizabeth R. Rindskopf, Atlanta, Ga., Jack Greenberg, New York City, for plaintiffs-appellants.
    George C. Grant, Macon, Ga., Rabun Faulk, Jeffersonville, Ga., for defendants-appellees.
    William J. Schloth, U. S. Atty., Macon, Ga., David L. Norman, Asst. Atty. Gen., Jerry E. Keith, Atty., Civil Rights Div., Voting & Public Accommodations, Dept, of Justice, Washington, D. C., for United States.
    Before THORNBERRY, COLEMAN and ROSENN, Circuit Judges.

       Of the Third Circuit, sitting by designation.

   THORNBERRY, Circuit Judge:

A 1971 Georgia statute changed the election procedures in Twiggs County, Georgia. Ga.Laws 1971, p. 3546. The statute changed the county commissioner elections from a district basis to an at-large basis. On July 5, 1972 Twiggs County officials submitted the 1971 Act to the United States Attorney General for approval in accordance with § 5 of the Voting Rights Act of 1965, 42 U.S.C. § 1973c. The Attorney General filed written objections to the Twiggs County election plan on August 7, 1972, but Twiggs County’s August 8, 1972 primary election was conducted under the revised procedures. On November 6, 1972 five black residents and registered voters of Twiggs County, Georgia filed this action seeking a declaration that the 1971 statute was invalid, and an injunction to prevent Twiggs County from conducting the general election under its procedures. The district court orally denied the temporary restraining order. On January 24, 1973 the United States also challenged the Twiggs County election procedures. Chief Judge Brown ordered the United States’ suit consolidated with Bond’s, and a three-judge district court held a hearing on the two cases on January 30, 1973.

After the hearing, the three-judge district court entered a partial consent order on January 31, 1973. That order found the 1971 Georgia statute invalid, enjoined implementation of the at-large election system without compliance with Section 5, ordered new county commissioner elections in 1974, and reserved the question of the proper procedures for the 1974 elections. On October 29, 1973 the three-judge district court determined that the only issue remaining was the proper procedure to be used for conducting the 1974 and subsequent county commissioner elections. The three-judge court determined that a single judge district court could properly resolve that question and remanded the entire case to the initiating judge for further handling.

On January 7, 1974 the single-judge district court entered a final order requiring Twiggs County election officials to hold the 1974 general election on a district rather than a county wide basis. The district court then went on to consider Bond’s request for attorneys’ fees. The district judge denied the request for attorneys’ fees finding that “this is not a statutory scheme that depends solely on enforcement by private citizens and that, therefore, contemplates the award of attorneys’ fees to successful litigants to reimburse them for carrying their con-gressionally imposed enforcement burden.” (A. 57).

Bond’s appeal from the district court’s refusal to award attorneys’ fees presents two questions: whether the single-judge district court had jurisdiction to rule on the attorneys’ fees question; and whether the court properly decided that question. We hold that the district court had jurisdiction and that attorneys’ fees should have been awarded in this case. Therefore, we reverse and remand to the district court to determine the reasonable fee.

JURISDICTION OF THE SINGLE-JUDGE DISTRICT COURT

The three-judge court was convened under Section 5 of the Voting Rights Act, 42 U.S.C. § 1973c, rather than under the Three-Judge Court Act, 28 U.S.C. § 2281 et seq. Thus we focus primarily on the congressional intent in enacting Section 5.

The three-judge district court’s October 29, 1973 order effectively determined the Section 5 controversy. The January 31, 1973 and the October 29, 1973 orders taken together hold that White et al. had violated Section 5 when they implemented the new procedures. Once the three-judge .district court made that determination, it fulfilled the congressional intent behind Section 5’s three-judge court provision.

The Voting Rights Act of 1965 contained sweeping and innovative provisions designed to “banish the blight of racial discrimination in voting . . .” South Carolina v. Katzenbach, 383 U.S. 301, 308, 86 S.Ct. 803, 808, 15 L.Ed.2d 769 (1966). The statute reflects congressional recognition of the problems of federalism that the legislation posed. “In drafting § 5, Congress apparently concluded that if the governing authorities of a State differ with the Attorney General of the United States concerning the purpose or effect of a change in voting procedures, it is inappropriate to have that difference resolved by a single district judge. The clash between federal and state power and the potential disruption to state government are apparent. There is no less a clash and potential for disruption when a disagreement concerns whether a state enactment is subject to § 5. The result of both suits can be an injunction prohibiting the State from enforcing its election laws.” Allen v. State Board of Elections, 393 U.S. 544, 562-63, 89 S.Ct. 817, 830, 22 L.Ed.2d 1 (1969). Congress did not explicitly provide for a private cause of action under Section 5. But in Allen the Court implied a private right of action, noting that “[t]he guarantee of § 5 that no person shall be denied the right to vote for failure to comply with an unapproved new enactment subject to § 5, might well prove an empty promise unless the private citizen were allowed to seek judicial enforcement of the prohibition.” Id. at 557, 89 S.Ct. at 827. The Court found that the potential disruption of state election procedure warranted applying the three-judge court requirement to private suits under Section 5. Id. at 560-63, 89 S.Ct. 817.

But once the three-judge district court has determined that a violation of § 5 has occurred, and has issued the injunction, the congressional solution to the potentially disruptive effects of the federal-state conflict has been implemented. Under those circumstances, we think it proper for a three-judge district court constituted under § 5 to then remand the case to a single-judge district court to determine matters ancillary to the main proceeding. This procedural alternative minimizes the burden that the three-judge court requirement imposes on the federal judiciary.

We note that the Supreme Court has approved a similar practice under 28 U.S.C. § 2281. In Public Service Comm. v. Brashear Freight Lines, 312 U.S. 621, 61 S.Ct. 784, 85 L.Ed. 1083 (1941), seventy-six interstate common carriers challenged the constitutionality of the Missouri Bus and Truck Law. A three-judge district court heard the constitutional claim, and upheld the statute. The state officials counterclaimed for damages. The Supreme Court held that the damages action should have been heard by a single district judge, rather than the three-judge court. 312 U.S. at 624-25, 61 S.Ct. 784. The Court noted that once the constitutional claim has been determined, then the congressional purpose in requiring a three-judge court had been satisfied. The Brashear case spawned an exception to § 2281 three-judge court jurisdiction, allowing a single-judge court to enforce the judgment of a three-judge court. See Hamilton v. Nakai, 453 F.2d 152 (2d Cir. 1972), cert. denied, 406 U.S. 945, 92 S.Ct. 2044, 32 L.Ed.2d 332; W. Barron & Holtzoff, Federal Practice and Procedure, (Wright, Ed.) § 52. The three-judge district court in this case performed its function under § 5 of the Voting Rights Act when it determined that there had been a violation of § 5. It then properly exercised its discretion when it remanded the case to the district court for enforcement of its decree, and for determination of the attorneys’ fees question. This disposition effectuates congressional policy under § 5 yet minimizes the burden on the federal judiciary. See Gonzalez v. Automatic Employees Credit Union, 419 U.S. 90, 95 S.Ct. 289, 42 L.Ed.2d 249 (1974).

DENIAL OF ATTORNEYS’ FEES

An award of attorneys’ fees is the exception rather than the rule in the federal judicial system. Under the so-called “American Rule” attorneys’ fees are not ordinarily recoverable in the absence of a statute or enforceable contract providing for them. F. D. Rich Co. v. United States Industrial Lumber Co., 417 U.S. 116, 124, 94 S.Ct. 2157, 2163, 40 L.Ed.2d 703 (1974); Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 87 S.Ct. 1404, 18 L.Ed.2d 475 (1967). Three exceptions to the American Rule currently exist: (1) the “obdurate, obstinate” exception, Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973); Fairley v. Patterson, 493 F.2d 598 (5th Cir. 1974); (2) the common fund exception, Hall v. Cole, supra; Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970); and (3) the private attorneys general theory, Fairley v. Patterson, supra; Lee v. Southern Home Sites Corp., 444 F.2d 143 (5th Cir. 1971).

The district court considered the applicability of the private attorneys general exception in rejecting Bond’s claim for attorneys’ fees.

Plaintiffs also pray for the award of attorneys’ fees citing cases including Lee v. Southern Home Sites Corp., 444 F.2d 143 (5th Cir. 1971). As the presence of the United States as a party plaintiff demonstrates this is not a statutory scheme that depends solely on enforcement by private citizens and that therefore contemplates the award of attorneys’ fees to successful litigants to reimburse them for carrying their congressionally imposed enforcement burden. The Lee case, as well as other similar cited cases, does not therefore demand or permit attorneys’ fees to be awarded in this case.

The Supreme Court’s decision in Allen v. State Bd. of Elections, 393 U.S. 544, 89 S.Ct. 817, 22 L.Ed.2d 1 (1969) mandates a different conclusion.

In Allen the Supreme Court specifically addressed the question of private enforcement of the Voting Rights Act of 1965. In implying a private right of action under § 5, the Court stated:

The achievement of the Act’s laudable goal could be severely hampered, however, if each citizen were required to depend solely on litigation instituted at the discretion of the Attorney General. For example, the provisions of the Act extend to States and the subdivisions thereof. The Attorney General has a limited staff and often might be unable to uncover quickly new regulations and enactments passed at the varying levels of state government. It is consistent with the broad purpose of the Act to allow the individual citizen standing to insure that his city or county government complies with the § 5 approval requirements.

393 U.S. at 556-57, 89 S.Ct. at 827. The Court further stated:

The guarantee of § 5 that no person shall be denied the right to vote for failure to comply with an unapproved new enactment subject to § 5, might well prove an empty promise unless the private citizen were allowed to seek judicial enforcement of the prohibition.

Id. at 557, 89 S.Ct. at 827. The district court’s reasoning implies that in the absence of a specific provision for attorneys’'Tees, a statutory scheme must depend solely on private enforcement for the private attorneys general exception to apply. The statutory schemes where courts have applied the private attorneys general concept have provisions for governmental enforcement, but courts have concluded that private enforcement is necessary to effectuate the congressional purpose. See J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964) (Securities Exchange Act of 1934); Burke v. Compania Mexicana de Aviacion, 433 F.2d 1031 (9th Cir. 1970) (Railway Labor Act); Note, Implying Civil Remedies from Federal Regulatory Statutes, 77 Harv.L.Rev. 285 (1963).

The considerations that the Supreme Court relied upon to imply a private right of action in Allen are also relevant in determining the propriety of an award of attorneys’ fees under the private attorneys general exception. There is a need for private enforcement of Section 5, and awarding attorneys’ fees encourages private enforcement actions. This is particularly vital here since damages are not available. See Lee v. Southern Home Sites Corp., 444 F.2d 143, 147-48 (5th Cir. 1971).

Nor do we reach a different conclusion' because the Attorney General exercised his discretion and intervened in this particular suit. The Act’s enforcement provisions state that the Attorney General “may institute ... an action” or “may . . . file ... an application for an order”. 42 U.S.C.1 §§ 1973j(d) & (e). The plaintiffs below challenged the Twiggs County procedures over two months before the Attorney General decided to institute suit. They sought to enjoin an election that was clearly invalid since the Attorney General had objected to the Twiggs County procedure. See 42 U.S.C. § 1973c. Depriving them of attorneys’ fees in this case merely because the Attorney General decided to file suit just before the hearing on Bond’s claim would certainly discourage private enforcement actions in the future.

The appellees contend that attorneys’ fees should be denied in this case because they did not seriously contest the merits of Bond’s claim. We cannot agree. Any cooperation on the part of the appellees tends to reduce the amount of work required to prove a § 5 violation, thereby reducing the amount of the proper award.

Sierra Club v. Lynn, 502 F.2d 43 (5th Cir. 1974) is not inconsistent with the result we reach here. In that case, the Sierra Club sued the Secretary of the Department of Housing and Urban Development and the developers of the San Antonio Ranch project, charging violations of the National Environmental Policy Act of 1969, 42 U.S.C. § 4321 et seq. The district court there awarded attorneys’ fees, even though on the merits it exonerated the developer from any malfeasance. The court of appeals reversed, holding that the award of attorneys’ fees was improper where the developer had not breached any legal duty. 502 F.2d at 64 — 66. In this case, Bond demonstrated that White and the other defendants below had not complied with their legal duties under the Voting Rights Act of 1965. That breach of duty coupled with the need for private enforcement of Section 5 justifies awarding attorneys’ fees here. Therefore we reverse and remand this case to the district court' to determine the proper award.

Reversed and remanded.

      . § 1973c.
      “Whenever a State or political subdivision with respect to which the prohibitions set forth in section 1973b(a) of this title based upon determinations made under the first sentence of section 1973b(b) of this title are in effect shall enact or seek to administer any voting qualification or prerequisite to voting, or standard, practice, or procedure with respect to voting different from that in force or effect on November 1, 1964, or whenever a State or political subdivision with respect to which the prohibitions set forth in section 1973b(a) of this title based upon determinations made under the second sentence of section 1973b(b) of this title are in effect shall enact or seek to administer any voting qualification or prerequisite to voting, or standard, practice, or procedure with respect to voting different from that in force or effect on November 1, 1968, such State or subdivision may institute an action in the United States District Court for the District of Columbia for a declaratory judgment that such qualification, prerequisite, standard, practice, or procedure does not have the purpose and will not have the effect of denying or abridging the right to vote on account of race or color, and unless and until the court enters such judgment no person shall be denied the right to vote for failure to comply with such qualification, prerequisite, standard, practice, or procedure: Provided, That such qualification, prerequisite, standard, practice, or procedure may be enforced without such proceeding if the qualification, prerequisite, standard, practice, or procedure has been submitted by the chief legal officer or other appropriate official of such State or subdivision to the Attorney General and the Attorney General has not interposed an objection within sixty days after such submission, except that neither the Attorney General’s failure to object nor a declaratory judgment entered under this section shall bar a subsequent action to enjoin enforcement of such qualification, prerequisite, standard, practice, or procedure. Any action under this section shall be heard and determined by a court of three judges in accordance with the provisions of section 2284 of Title 28 and any appeal shall lie to the Supreme Court.”
      It has been determined that the prohibitions of the Act apply to the State of Georgia.

      . The court’s order properly recognized that Twiggs County officials could implement election changes if the United States Attorney General did not abject within 60 days after submission, or if the officials successfully sought a declaratory judgment of validity from the District Court for the District of Columbia.

      . § 14(b) of the Act, 42 U.S.C. § 19731, gives the District Court for the District of Columbia exclusive jurisdiction to issue a declaratory judgment under § 5. The Supreme Court held this was a valid exercise of congressional power under U.S.Const. Art. Ill, § 1 to “ordain and establish” inferior federal tribunals. South Carolina v. Katzenbach, 383 U.S. 301, 86 S.Ct. 803, 15 L.Ed.2d 769 (1966). But in Allen, the Court held that the § 14(b) restrictions do not apply to private suits under § 5. Thus, the action must be heard on the merits by a three-judge district court, but that court may be convened in any district where venue is proper. 393 U.S. at 557-563, 89 S.Ct. 817.


author: GOODWIN, Circuit Judge:

text:
    UNITED STATES of America, Appellee, v. Terrence Dean OAKS, Appellant.
    No. 74-1571.
    United States Court of Appeals, Ninth Circuit.
    Dec. 24, 1974.
    See also, D.C., 360 F.Supp. 855.

      John W. Hornbeck, Deputy Federal Public Defender (argued), Los Angeles, Cal., for appellant.
    Lawrence Campbell, Asst. U. S. Atty. (argued), Los Angeles, Cal., for appellee.
    Before WRIGHT and GOODWIN, Circuit Judges, and SCHWARTZ, District Judge.

       The Honorable Edward J. Schwartz, Chief Judge, United States District Court for the Southern District of California, sitting by designation.

   OPINION

GOODWIN, Circuit Judge:

Terrence Dean Oaks appeals from a conviction for willfully failing to file an income tax return for 1971 and willfully supplying a false withholding certificate in violation of 26 U.S.C. §§ 7203, 7205. We remand for an evidentiary hearing.

Oaks failed to file an income tax return for 1971 despite earnings of $7,890.24. On July 13, 1971, Oaks filed a withholding exemption certificate with his employer claiming 15 dependents even though he had,' as he later admitted, no such number of dependents.

Oaks attempted to justify his failure to comply with the revenue laws on the basis of an elaborate monetary theory. He allegedly believed that he had not earned “dollars,” since “dollars,” under the Constitution and certain Supreme Court decisions, could only mean paper currency fully redeemable in gold or silver.

Oaks sought to publicize his theory in the political arena. From February until June of 1972, he ran, unsuccessfully, in the Republican primary for the Fourth District of the California State Assembly. His platform was based on the issue of legal tender. He received publicity in the Los Angeles Times by paying his filing fee with 384 silver half-dollars.

Oaks contends that he was selected for prosecution solely because he protested publicly against federal tax policies. While we express no opinion upon this issue, the law in this circuit requires the district court, upon a proper offer of proof, to allow Oaks to present evidence, if any, that he has been singled out for discriminatory prosecution.

In United States v. Steele, 461 F.2d 1148 (9th Cir. 1972), we held that a policy of selective prosecution which purposefully discriminates against persons choosing to exercise their First Amendment rights is impermissible. The defendants in Steele were able to demonstrate such discrimination by showing that, while the government must have been aware of other violations, it chose to prosecute only those offenders who had publicized their opposition to the census laws. Compare Spillman v. United States, 413 F.2d 527, 530 (9th Cir.), cert. denied, 396 U.S. 930, 90 S.Ct. 265, 24 L.Ed.2d 228 (1969), where we held that mere deviation from prosecutorial “policy” could not justify acquittal.

Oaks argues that under this circuit’s Steele rationale he has alleged facts sufficient to require a hearing on his claim of discriminatory selective prosecution. Hearings on similar pretrial objections are usually in order when enough facts are alleged to take the question past the frivolous stage. See, e. g., Lawn v. United States, 355 U.S. 339, 346-350, 78 S.Ct. 311, 2 L.Ed.2d 321 (1958); Nardone v. United States, 308 U.S. 338, 342, 60 S.Ct. 266, 84 L.Ed. 307 (1939); United States v. Fujimoto, 102 F.Supp. 890, 893 (D.Hawaii 1952). We hold that Oaks has alleged enough facts to require an evidentiary hearing.

The government contends that Oaks waived the defense of discriminatory prosecution, if it is a defense, because he brought no formal motion pursuant to Fed.R.Crim.P. 12(b)(2) prior to trial. We agree with the major premise of this argument: the defense must be presented in accordance with the requirements of Rule 12(b)(2). See United States v. Berrigan, 482 F.2d 171, 175 (3d Cir. 1973). But we do not agree that the defense must necessarily be tendered in writing or formally denominated as a “Rule 12” motion in order to avoid waiver. In Davis v. United States, 411 U.S. 233, 243, 93 S.Ct. 1577, 36 L.Ed.2d 216 (1973), a defense covered by Rule 12(b)(2) was held to have been waived when not raised, even orally, before trial. But the Supreme Court in Fallen v. United States, 378 U.S. 139, 142, 84 S.Ct. 1689, 12 L.Ed.2d 760 (1964), cautioned against an overly rigid or formalistic interpretation of the federal criminal rules. The record before us reveals that the point was raised during the pretrial hearing on June 4, 1973. Counsel’s presentation, while not in writing, was sufficient to comply with Rule 12(b)(2). And even if a written motion were needed, the district court’s comment, “All right. The point is duly noted,” constituted “relief from * * * waiver” within the meaning of Rule 12(b)(2). There was no further discussion of the issue until trial, but Oaks’ counsel had attempted to introduce evidence at the motions hearing and had been rebuffed. He had made his record.

The district court appeared to be concerned about the possibility of disclosure of confidential Internal Revenue Service information. We note that the government will be able to make a claim of privilege at the hearing. See, e. g., Fed.R.Crim.P. 16(b). If the defendant makes an initial factual showing of impermissible discrimination, then the trial court may, in the exercise of its discretion, require disclosure of relevant privileged information. See United States v. Berrigan, 482 F.2d at 181. But even then the court can minimize the risk to the government by holding the proceedings in camera and issuing appropriate protective orders. Fed.R.Crim.P. 16(e).

Oaks has raised other points, but they are without merit.

The cause is remanded for a hearing on the issue of discriminatory prosecution. If the district court finds that there was impermissible discrimination, it should dismiss the indictment. If it does not find such discrimination, then the conviction shall stand.


author: PICKETT, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Ardis Jack BUMPHUS, Defendant-Appellant.
    No. 74-1212.
    United States Court of Appeals, Tenth Circuit.
    Argued Nov. 12, 1974.
    Decided Jan. 15, 1975.

      W. Irving Shaw, Asst. U. S. Atty., Wichita, Kan. (Robert J. Roth, U. S. Atty., Wichita, Kan., with him on the brief), for plaintiff-appellee.
    Victor N. Nilsen, Englewood, Colo., for defendant-appellant.
    Before PICKETT, BARRETT and DOYLE, Circuit Judges.
   PICKETT, Circuit Judge.

This is an appeal from a conviction for violating 18 U.S.C. App. § 1202(a), which prohibits the transportation, possession or receipt of firearms by a convicted felon affecting interstate commerce. The two counts of a four-count indictment upon which Ardis Jack Bumphus was convicted alleged that he unlawfully received in commerce and affecting commerce described firearms. The firearms were discovered in the home of Bumphus by law enforcement officers while executing a search warrant. The evidence established that the Smith and Wesson revolver was stolen from the owner’s automobile in Dallas, Texas, on February 23, 1973; that the Eig firearm was manufactured in Italy in 1967 and thereafter shipped to an importer in Miami, Florida, and then to a dealer in Wichita, Kansas, on January 11, 1968. This gun was stolen from a purchaser’s home in Wichita, Kansas, on October 9, 1972. There was no evidence that Bumphus was personally involved in the interstate movement of either of the guns.

The basic question presented is whether the evidence is sufficient to satisfy the interstate commerce provisions of the statute. The gist of the argument is that the prosecution must prove that the firearm was received by the accused in interstate commerce and that the proof of previous interstate transportation with which the accused had no connection is not adequate. In construing Section 1202(a), the Supreme Court, in United States v. Bass, 404 U.S. 336, 92 S.Ct. 515, 30 L.Ed.2d 488 (1971), held that a connection with interstate commerce is an essential element of the crime of possessing or receiving a firearm under the provisions of that statute. With reference to the necessary proof to establish the interstate commerce requirements, the Court said, 404 U.S. at page 350, 92 S.Ct. at page 524:

Having concluded that the commerce requirement in § 1202(a) must be read as part of the “possesses” and “receives” offenses, we add a final word about the nexus with interstate commerce that must be shown in individual cases. The Government can obviously meet its burden in a variety of ways. We note only some of these. For example, a person “possesses in commerce or affecting commerce” if at the time of the offense the gun was moving interstate or on an interstate facility, or if the possession affects commerce. Significantly broader in reach, however, is the offense of “receivpng] in commerce or affecting commerce,” for we conclude that the Government meets its burden here if it demonstrates that the firearm received has previously traveled in interstate commerce.

Following the Bass decision, the courts which have considered the requisite connection with interstate commerce in cases similar to the instant case have generally held that the interstate commerce provisions of Section 1202(a) are satisfied when it is shown that the firearm moved in interstate commerce prior to the time that an accused is charged with possession or receipt of the gun. It is the movement of the firearm which has the affect upon interstate commerce, and not the activity of the person in whose possession it is later found. United States v. Horton, 503 F.2d 810 (7th Cir. 1974); United States v. Haley, 500 F.2d 302 (8th Cir. 1974); United States v. Bush, 500 F.2d 19 (6th Cir. 1974); United States v. Rollings, 494 F.2d 344 (8th Cir. 1974); United States v. Walker, 489 F.2d 1353 (7th Cir. 1973), cert. denied, 415 U.S. 982, 94 S.Ct. 1574, 39 L.Ed.2d 879 (1974); United States v. Thomas, 485 F.2d 557 (5th Cir. 1973); United States v. Lupino, 480 F.2d 720 (8th Cir.), cert. denied, 414 U.S. 924, 94 S.Ct. 257, 38 L.Ed.2d 159 (1973); United States v. Mullins, 476 F.2d 664 (4th Cir.), cert. denied, 414 U.S. 839, 94 S.Ct. 91, 38 L.Ed.2d 75 (1973); United States v. Brown, 472 F.2d 1181 (6th Cir. 1973). Cf. United States v. Henry, supra, which upholds the constitutionality of Section 1202(a). We conclude that there was adequate evidence to sustain the conviction on the two counts of receiving the firearms by a convicted felon.

When the state officers made the search of the Bumphus premises the firearms in question were found in a drawer of a bedroom dresser. In its instructions to the jury the court explained the essential elements of the crime of receiving firearms in violation of Section 1202(a). The jury was told that to support the charge of receiving firearms it is necessary to prove actual or constructive possession by the accused. When found, the firearms were not on the person of Bumphus and the court undertook to explain circumstances which amount to possession, such as dominion and control, along with other conditions indicating possession. It is argued that these instructions relate to the offense of possession of firearms, which is a separate offense, and in effect permits the jury to rely on an unlawful presumption that possession amounts to receiving, citing Leary v. United States, 395 U.S. 6, 89 S.Ct. 1532, 23 L.Ed.2d 57 (1969); United States v. Romano, 382 U.S. 136, 86 S.Ct. 279, 15 L.Ed.2d 210 (1965); and Tot v. United States, 319 U.S. 463, 63 S.Ct. 1241, 87 L.Ed. 1519 (1943). Those cases were construing statutory presumptions. In the instant case a statutory presumption is not involved and there was evidence from which the interstate movement of the firearms could be inferred. The reference to possession in the instruction was for the purpose of assisting the jury in determining whether Bumphus, because of his possession, had actually received the firearms. Under the facts and circumstances of the case, the instructions as a whole fairly presented the issues to the jury.

Affirmed.

      . 18 U.S.C. App. § 1202(a) provides in part:
      Any person who—
      (1) has been convicted by a court of the United States or of a State or any political subdivision thereof of a felony, or
      and who receives, possesses, or transports in commerce or affecting commerce, after the date of enactment of this Act, any firearm shall be fined not more than $10,000 or imprisoned for not more than two years, or both.

      . Count II referred to a .38 caliber Smith and Wesson revolver, and Count III described a .38 caliber EIG revolver.

      . See United States v. Henry, 501 F.2d 1335 (10th Cir. 1974); United States v. Baker, 453 F.2d 880 (10th Cir. 1972); United States v. Fletcher, 453 F.2d 893 (10th Cir. 1972); United States v. Long, 453 F.2d 1331 (10th Cir. 1972).

      . The court instructed the jury that it was necessary for the prosecution to prove beyond a reasonable doubt the essential elements of the crime of receiving firearms, which were: First, that the defendant unlawfully received the firearms described in the indictment; second, that the receipt of the firearms was in interstate commerce or affected commerce; and third, that the defendant had previously been convicted in a federal or state court of a felony.