author: LEVIN H. CAMPBELL, Circuit Judge.

text:
    UNITED STATES of America et al., Plaintiffs-Appellees, v. STATE TAX COMMISSION et al., Defendants-Appellants. UNITED STATES of America et al., Plaintiffs-Appellees, v. STATE TAX COMMISSION et al., Defendants-Appellees. First Federal Savings and Loan Association of Boston et al., Intervenors-Appellants.
    Nos. 72-1380, 72-1381.
    United States Court of Appeals, First Circuit.
    Argued March 8, 1973.
    Decided June 28, 1973.

      Terence P. O’Malley, Asst. Atty. Gen., with whom Robert H. Quinn, Atty. Gen., and Walter H. Mayo III, Asst. Atty. Gen., were on briefs, for the State Tax Commission.
    Daniel B. Bickford, Chester M. Howe, and Richard McCarthy, Boston, Mass., with whom Ely, Bartlett, Brown & Proctor, and Joseph W. Bartlett, Boston, Mass., were on briefs, for First Federal Savings and Loan Assn, of Boston, and others. „
    Charles E. Stratton, Atty., Tax Div., Dept, of Justice, with whom Fred B. Ugast, Acting Asst. Atty. Gen., with whom James N. Gabriel, U. S. Atty., Meyer Rothwacks, and Bennet N. Hollander, Attys., Tax Div., Dept, of Justice, were on brief, for United States.
    Before COFFIN, Chief Judge, Mc-ENTEE and CAMPBELL, Circuit Judges.
   LEVIN H. CAMPBELL, Circuit Judge.

These appeals question the validity of Massachusetts taxes on the deposits and income of federal savings and loan associations (hereinafter “federal associations”).

In No. 72-1380, the United States seeks a declaration that the deposits tax, § ll(a)(2)(ii) and (b)(2)(ii),. violates § 5(h) of the Home Owners’ Loan Act of 1933, 12 U.S.C. § 1464(h) The United States objects to the deduction for loans secured by mortage of out-of-state real estate “within a radius of fifty miles of the main offic'e” of a particular bank. M.G.L. c. 63 § 11(a) (2) (ii) and (b) (2) (ii). It contends that the 50-mile limitation causes a “greater” tax upon the federal associations than upon other similar state-chartered banks in violation of § 5(h) because the federal associations, unlike state banks, are empowered by controlling federal law to make out-of-state loans on real estate beyond a 50-mile radius and hence get no deduction for loans beyond that limit. We agree with the district court that the challenged deduction results in an illegal disparity of tax treatment between federal and local banks.

In No, 72-1381, six federal associations challenge the income tax, § 11(a)(1) and (b)(1) on grounds that it violates § 5(h) and various state and federal constitutional provisions. The United States has not joined in this challenge. We conclude, under equitable principles which federal courts normally apply to tax litigants other than the United States, that declaratory relief should have been denied without consideration of the merits.

1. No. 72-1380 (the Deposits Tax)

The United States, on behalf of the Federal Home Loan Bank Board, brought a complaint seeking a declaration that § 11(a) (2) (ii) and (b) (2) (ii) (the deposits tax) contravenes § 5(h) and the Supremacy Clause of the federal Constitution. Six federal associations were permitted to intervene and joined in the attack on the deposits tax, contending also that the deposits tax violates the Commerce Clause. They raised other issues, which are the subject of the appeal in No. 72-1381.

-On plaintiffs’ motions for summary judgment, the district court ruled that the deposits tax violates § 5(h) and. the Supremacy Clause because it

operates in a very real way to bring intense economic pressure, to bear on federally chartered banks which it does not bring to bear in any meaningful way on state chartered banks because of the fact that other state legislation severely restricts state chartered banks from making any substantial amount of loans in non-exempt areas.

The court also ruled that the deposits tax interferes with the federal associations’ ability to carry out congressional purpose and policies in the lending of money, and that it constitutes “an unreasonable burden on the circulation of loans for home improvements in interstate commerce.” United States v. State Tax Comm’n, 348 F.Supp. 397, 400 (D.Mass.1972). It rendered an amended judgment declaring invalid § 11(a)(2) and (b) (2). The Commonwealth has appealed.

M.G.L. c. 63, § 11(a) (2) (ii) and (b) (2) (ii), as inserted by St.1966, c. 14, § 11 and amended by St.1971, c. 555, § 26, is the latest in a series of taxes on the deposits of Massachusetts savings institutions going back to St.1862, c. 224, § 4. The original deposits tax, which before 1966 was imposed solely on non-federal institutions, was litigated extensively in the 1860’s; both the Massachusetts Supreme Judicial Court and the Supreme Court sustained its validity, the latter having stated that a deposits tax was,

better calculated to effect justice among the corporations required to contribute to the public burdens than any other which has been devised, as its tendency is to graduate the required contributions to the value of the privilege granted.

Society for Savings v. Coite, 6 Wall. 594, 608, 18 L.Ed. 897 (1867). A deduction for loans secured by mortgage of Massachusetts real estate taxable in the Commonwealth was enacted in 1881. St. 1881, c. 304, § 8. Its purpose was to avoid double taxation, Massachusetts property owners being subject to local real estate taxes at full, fair cash value. Lexington Savings Bank v. Commonwealth, 252 Mass. 180, 182, 147 N.E. 569, 570 (1925). See M.G.L. c. 59, § 38; Bennett v. Board of Assessors of Whitman, 354 Mass. 239, 240, 237 N.E.2d 7, 9 (1968).

In 1966 Massachusetts adopted substantially the present statute, extending the deposits tax to federal associations. For the first time, the deduction for loans upon Massachusetts real estate was supplemented by a deduction for loans within a 50-mile radius on real estate in contiguous states. It is that feature which the federal associations attack as resulting in a “greater” tax upon them. The statute provides for a tax of one-twentieth of one percent upon average deposits and share capital after deducting (i) the bank’s real estate used for banking purposes; (ii) the unpaid balances on loans secured by “mortgage of real estate taxable in this commonwealth, or . . . in a state contiguous . . . within a radius of fifty miles of the main office of such bank or association.” The deduction is further qualified by a “grandfather clause” deduction allowing a bank or association not previously subject to tax to deduct the unpaid balance on loans secured by real estate outside Massachusetts which were outstanding at the time the tax statute was enacted in 1966.

The federal associations are federally created banks. Cf. First Agricultural National Bank of Berkshire County v. State Tax Commission, 392 U.S. 339, 340, 88 S.Ct. 2173, 20 L.Ed.2d 1138 (1968). Chartered and regulated by the Federal Home Loan Board under authority conferred in the Federal Home Owners’ Loan Act, 12 U.S.C. § 1464, they serve the statutory purpose of providing “local mutual thrift institutions in which people may invest their funds and . . . for the financing of homes.” § 1464(a). The latter purpose, described more broadly as the “preservation of home owners and the promotion of a sound system of home mortgage,” has been said to affect the welfare of the nation as a whole. First Federal Savings and Loan Association v. Loomis, 97 F.2d 831, 840 (7th Cir. 1938), cert. granted, 305 U.S. 564, 59 S.Ct. 92, 83 L. Ed. 355 (1938); dismissed on motion of counsel for petitioners sub nom. Martin v. First Federal Savings & Loan Ass’n, 305 U.S. 666, 59 S.Ct. 363, 83 L.Ed. 432 (1938). See Fahey v. O’Melveny, 200 F.2d 420 (9th Cir. 1952), cert. denied sub nom. Willhoit v. Fahey et al., 345 U.S. 952, 73 S.Ct. 866, 97 L.Ed. 1374 (1953).

The federal associations are closely affiliated with their district federal home loan bank (there are twelve nationally), which may provide them credit. The chairman of the Home Loan Bank Board states in an affidavit that the 4500 savings and loan associations in the nation are “the major mortgage lenders on residential properties,” playing “the key role in the housing market” and providing “the largest, most stable source of funds for housing.” They hold “44% of all outstanding home mortgages” and serve to promote the national housing policy “to provide for the economical financing of home ownership ... by facilitating to the extent possible the inter-regional flow of mortgage funds from capital surplus areas to nationwide housing markets located in capital shortage areas.”

The federal associations are allowed to “lend their funds only on the security of their savings accounts or on the security of first liens upon real property within one hundred miles of their home office or within the State in which such home office is located. . . .” § 5(c). The area limit was so extended from 50 to 100 miles by the Housing Act of 1964, Title IX, Pub.L. 88-560, § 901(a), 78 Stat. 804. The accompanying House Committee report stated:

The present 50-mile limitation was placed in the statute more than 25 years ago. In the intervening years, the country has experienced a tremendous suburban expansion, the establishment of new road systems and mass transit so that the commuting distance and metropolitan areas have been constantly enlarged. In recognition of these changes, your committee feels that the statutory lending area . . . should be 100 miles. . . .

1964 U.S.Code Cong, and Adm.News, p. 3442. The federal associations are also allowed to make certain investments outside the prescribed geographical areas. See, e.g. § 5(h), 12 C.F.R. § 545.6-4.

The “similar local” Massachusetts institutions purportedly favored by the area limitation in the deduction provisions of M.G.L. c. 63, § 11 are the savings banks (c. 168), the co-operative banks (c. 170), the savings and loan associations (c. 93, § 34) and the credit unions (c. 171). Excepting the credit unions, the similarity of which is disputed, all are conceded to be “similar” to the federal associations. See Comm’r of Corporations and Taxation v. Flaherty, 306 Mass. 461, 28 N.E.2d 433 (1940) (co-operative banks similar).

Massachusetts banks are restricted to real estate loans within the state, and within' states contiguous to Massachusetts if such loans are not more than 50 miles from the home office in the case of savings banks, and 25 in that of cooperatives. Section 34 of M.G.L. c. 93 gives the commissioner of banks the same powers and duties over savings and loan associations as he has over savings banks; the district court inferred from this section that the same restrictions on lending area apply to both kinds of banks. The banks may loan upon security outside the restricted area if the loans are VA or FHA-insured. M.G.L. c. 168 § 35(11); c. 170 § 24A.

The district court found, and we concur, that the area limitation in the deduction provision of the deposits tax results in a violation of § 5(h). It also found a violation of the Supremacy Clause, and appellees further claim a violation of the Commerce Clause. We prefer, however, to rest our decision upon the statutory rather than the constitutional grounds.

It is true that the federal associations, being federal instrumentalities, are immune from state taxation by virtue of the Supremacy Clause, absent specific Congressional authorization. McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579 (1819); Agricultural Bank v. Tax Comm’n, supra, 392 U.S. 339, 88 S. Ct. 2173, 20 L.Ed.2d 1138. See Helvering v. Gerhardt, 304 U.S. 405, 411, 58 S.Ct. 649, 82 L.Ed. 1091 (1938). However, since § 5(h) permits states to tax federal associations, the question is not whether Massachusetts may tax but whether its tax conforms to the statute. Obviously, § 5(h) is to be read in light of the purposes of the Home Owners’ Loan Act, and with awareness of the objects of the Supremacy and Commerce Clauses; but we see the latter as providing more a frame of reference than as separate grounds for decision.

The Supreme Court has said that § 5(h) “unequivocally bars discriminatory state taxation of the Federal Savings and Loan Associations.” Laurens Federal Savings & Loan Ass’n v. South Carolina Tax Commission, et al., 365 U.S. 517, 523, 81 S.Ct. 719, 722, 5 L.Ed.2d 749 (1961). Otherwise the Court has not had occasion to interpret the clause. However, the Court has said that a similar clause, 12 U.S.C. § 548, permitting state taxation of national banks, is meant “ ‘to prohibit only those systems of state taxation which discriminate in practical operation against national banking associations or their shareholders as a class.’ ” Michigan Nat’l Bank v. Michigan, 365 U.S. 467, 473, 81 S.Ct. 659, 662, 5 L.Ed.2d 710 (1961), quoting Tradesmens Nat’l Bank v. Oklahoma Tax Comm’n, 309 U.S. 560, 567, 60 S.Ct. 688, 84 L.Ed. 947 (1940). In Michigan the Court also said that the states may not “create ‘an unequal and unfriendly competition’ with national banks,” and that “we are taught that in determining the burden of the tax — its discriminatory character — we look to its effect, not its rate.” 365 U.S. at 473, 475, 81 S.Ct. at 662, 663.

Figures stipulated in the district court show that the 50-mile deduction limit discriminates in “practical operation” and in “effect” against the federal associations. We are not persuaded by Massachusetts’ contrary marshalling of the figures. Massachusetts relies on the fact that from 1966-70 the total real estate loan deductions available to federal associations actually comprised a greater percentage of deposits than did deductions available to local institutions. But these figures do not separate out the impact of the “grandfather clause” deductions which are, of course, of diminishing and temporary benefit to the federal associations. (The latter characteristics are reflected in figures showing that the percentage of federal associations’ deposits not offset by a deduction has risen from 8.7% to 28.6% since 1966.) After allowance is made for the grandfather clause component, the percentage of deductions to deposits is significantly lower for the federal associations than for the local banks. The federal associations make about 44% of their loans on security of real property outside the 50-mile area. The local institutions make only about 15% of the loans on outside property. We conclude that but for the grandfather clause, the federal associations would have received a substantially lesser deduction against deposits in the 1966-70 period and would have paid a greater tax.

It can be argued that the federal banks are not required to loan on real estate beyond 50 miles. But this argument conflicts with the purposes of the Home Owners’ Loan Act as interpreted in light of the Supremacy and Commerce Clauses. The federal associations and their conferred powers are part of a Congressional scheme, national in scope, to provide a greater supply and flow of funds for home financing. The associations’ authority to lend on real estate within a 100-mile area is part of this distinctively federal answer to a national problem. The Congressional aim may not be stultified by state taxation penalizing federal associations at precisely the point they exercise the greater flexibility conferred by their federal franchise. While the local banks may think it fair to obtain relief from competition in areas foreclosed to them, the housing public is entitled to receive the untrammeled benefit of the wider powers. If the federal associations can achieve tax equality only by restricting their lending areas, the tax is discriminatory.

Moreover, the history of the Massachusetts tax statute suggests that the area limitation was designed to create “an unequal and unfriendly” competition. We perceive no reason — other than the impermissible one of sheltering local institutions — for adoption in 1966 of the 50-mile contiguous-state area limitation. It was then apparent that federal associations could loan more widely; indeed the grandfather clause reflected full awareness of the fact. Federal associations are entitled not to be singled out for special tax burdens; and it makes no difference whether the latter are expressly written into the statute or are tailored, as here, more subtly.

We hold that § 11(a) (2)(ii) and (b) (2) (ii) create a discriminatory deduction which results, within the meaning of § 5(h), in a “greater” tax upon the federal associations than upon “other similar” local institutions. We do not attempt to resolve the further argument, raised by the intervenors and rejected by the district court, that the tax also violates § 5(h) because not imposed upon credit unions, said to be “other similar” local institutions. The district court ruled that a credit union was not such a “ . . . similar local mutual or cooperative thrift and home financing institution” within § 5(h). See Man-Chester Federal Savings and Loan Ass’n v. State Tax Comm’n, 105 N.H. 17, 191 A.2d 529 (1963); First Fed. Sav. and Loan Ass’n v. Connelly, 142 Conn. 483, 115 A.2d 455 (1955); State v. Minnesota Fed. Sav. and Loan Ass’n, 218 Minn. 229, 15 N.W.2d 568 (1944). The credit union argument is not advanced by the United States; it is raised only by the intervenor federal associations. Apart from its being unnecessary to our ruling on the deposits tax, we decline to consider it for reasons set forth below in our discussion of the income tax.

The Commonwealth argues that, if we find the deductions provision invalid, we leave the tax undisturbed and strike only the deduction. The only question before us, however, is whether the deposits tax as it applies to the federal associations is invalid. To declare invalid only the deductions portion of the tax on the federal associations would result in an even greater discrimination upon them than now occurs.

The judgment of the district court, as presently worded, appears unnecessarily broad in that it would invalidate the deposits tax on local as well as federal institutions. We remand with instructions to the district court to modify paragraph (1) of its present judgment and decree to read as follows:

“Massachusetts General Laws, Chapter 63, Section 11(a)(2) and Section 11(b)(2) are invalid and unenforceable as applied to Federal Savings and Loan Associations because said tax provisions are in conflict with and violate the provisions of Title 12, Section 1464(h), of the United States Code.”

II. No. 72-1381 (the Income Tax)

The six federal associations appeal from the district court’s refusal to grant them declaratory relief against the income tax, § 11(a)(1) and (b)(1). After the United States filed its complaint, seeking a declaration against the deposits tax, the associations moved to intervene. Their complaint joined in the attack on the deposits tax; but it further prayed, separately, for declaratory relief against § 11(a)(1) and (b)(1) on grounds that the deduction for required additions to guaranty fund or surplus ((iii), formerly (iv), of the last paragraph) constitutes an unlawful delegation under Art. IV and XXX of the Massachusetts Constitution, and that the non-includability of interest on deposits in the deduction for “operating expenses” ((i) of last paragraph) is an unconstitutional burden on interstate commerce in violation of the Commerce Clause.

The Attorney General of Massachusetts opposed the motion to intervene, contending, among other matters, that the federal associations were barred by the Tax Injunction Act (commonly referred to as the Johnson Act), 28 U.S. C. § 1341, from relief in the federal court. The district court permitted intervention under F.R.C.P. 24(b). In answer to the intervenors’ complaint, the Attorney General raised the affirmative defense “that the intervenors have failed to pursue the remedies available to them through the state statutory abatement procedure, suit in the state courts for declaratory relief, or other state remedy.”

In its brief on motion for summary judgment, the intervenors raised two contentions not contained in the complaint : that the income tax is discriminatory in violation of § 5(h), and that the entire § 11 violates § 5(h) because if does not cover credit unions, which the intervenors contended, are “similar . . . institutions” within the meaning of § 5(h).

The district court did not rule on the state constitutional issue raised in intervenors’ complaint. It abstained from ruling on the question concerning the deduction of operating expenses because of a pending proceeding before the State Tax Commission. 348 F.Supp. at 401. The district court ruled that the deduction for reserve requirements does not violate § 5(h) because

[t]here is nothing to preclude the Federal Home Loan Bank Board from altering the minimum guaranty requirements of federal savings and loan associations so as to provide a greater tax shelter to the Federal Savings and Loan associations than is allowed by the application of state law. 348 F. Supp. at 401.

It also ruled that credit unions are not similar institutions within the meaning of § 5(h). 348 F.Supp. at 400.

Appellants raise all these issues and, in addition, new issues under state and federal constitutional law. Various considerations compel us to decline to consider the intervenors’ claims. Foremost is the policy against federal declaratory relief against state taxing statutes where taxpayers have adequate recourse to state courts for a determination of their claims. Great Lakes v. Huffman, 319 U.S. 293, 300-301, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943).

In Great Lakes the Supreme Court considered the applicability of the Johnson Act, 28 U.S.C. § 1341, to a suit for declaratory relief against a state tax. The taxpayers sought a declaration that the contribution to the state unemployment insurance fund required of them was unconstitutional. The district court held the tax constitutional, and was affirmed by the Court of Appeals, 43 F.Supp. 981 (E.D.La.1942), 134 F.2d 213 (5th Cir. 1943). The Supreme Court affirmed the judgment of dismissal, “but solely on the ground that, in the appropriate exercise of the court’s discretion, relief by way of a declaratory judgment should have been denied without consideration of the merits.” Great Lakes v. Huffman, supra, 319 U.S. at 301-302, 63 S.Ct. at 1074.

The Supreme Court did not hold that the Johnson Act itself barred declaratory judgments. Rather, its holding rested on cases antedating enactment of the Johnson Act requiring federal courts to withhold equitable relief in suits by taxpayers challenging the validity of state taxes. The Court said:

It is in the public interest that federal courts of equity should exercise their discretionary power to grant or withhold relief so as to avoid needless obstruction of the domestic policy of the states.
“The scrupulous regard for the rightful independence of state governments which should at all times actuate the federal courts, and a proper reluctance to interfere by injunction with their fiscal operations, require that such relief should be denied in every case where the asserted federal right may be preserved without it. Whenever the question has been presented, this Court has uniformly held that the mere illegality or unconstitutionality of a state or municipal tax is not in itself a ground for equitable relief in the courts of the United States. If the remedy at law is plain, adequate, and complete, the aggrieved party is left to that remedy in the state courts, from which the cause may be brought to this Court for review if any federal question be involved.” Matthews v. Rodgers, supra, 284 U.S. [521] 525, 526 [52 S.Ct. 214 at 219, 220] 76 L.Ed. 447.
The considerations which persuaded federal courts of equity not to grant relief against an allegedly unlawful state tax . . . are persuasive that relief by way of declaratory judgment may likewise be withheld in the sound discretion of the court. With due regard for these considerations, it is the court’s duty to withhold such relief when ... it appears that the state legislature has provided that on payment of any challenged tax to the appropriate state officer, the taxpayer may maintain a suit to recover it back. In such a suit he may assert his federal rights and secure a review of them by this Court. This affords an adequate remedy to the taxpayer, and at the same time leaves undisturbed the state’s administration of its tax. 319 U.S. at 298, 300-301, 63 S.Ct. at 1073, 1074.

The Johnson Act and Great Lakes reflect much the same policy respecting state tax collections as applies to federal tax collections. See 26 U.S.C. § 7421; Enochs v. Williams Packing Co., 370 U. S. 1, 6, 8, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962). In both instances, efficient tax collection requires that taxpayers not be able to withhold or cast doubt on taxes already or yet to be collected except through established channels. See Enochs v. Williams Packing Co., supra, 370 U.S. at 7, n. 6, 82 S.Ct. 1125. The policy is even stronger in dealing with state taxes, since the availability of broad declaratory or injunctive relief in federal courts would promote forum shopping, inconsistent interpretation of state laws, and confusion as to the effect of such judgment on taxes already collected.

In Samuels v. Mackell, 401 U.S. 66, 91 S.Ct. 764, 27 L.Ed.2d 688 (1971), the Supreme Court reaffirmed the validity of Great Lakes. There, the question was whether a federal court should declare a state criminal statute unconstitutional during the pendency of criminal proceedings. Again, the Court affirmed the lower court’s judgment dismissing the complaint, “but solely on the ground that, in the appropriate exercise of the court’s discretion, relief by way of declaratory judgment should have been denied without consideration of the merits.” 401 U.S. at 73, 91 S.Ct. at 768. The Court said :

The continuing validity of the Court’s holding in the Great Lakes case has been repeatedly recognized and reaffirmed by this Court. See e.g., Macauley v. Waterman S.S. Corp., 327 U.S. 540, 545, n. 4 [66 S.Ct. 712, 714] 90 L.Ed. 839 (1946); Ott v. Mississippi Barge Line, 336 U.S. 169, 175 [69 S.Ct. 432, 435] 93 L.Ed. 585 (1949) ; Public Serv. Comm’n v. Wycoff Co., 344 U.S. 237, 253 [73 S.Ct. 236, 245] 97 L.Ed. 291 (1952) (Douglas, J., dissenting) ; Allegheny County v. Mashuda Co., 360 U.S. 185, 189 [79 S.Ct. 1060, 1063] 3 L.Ed.2d 1163 (1959); Enochs v. Williams Packing Co., 370 U.S. 1, 8 [82 S.Ct. 1125, 1129] 8 L.Ed.2d 292 (1962). Although we have found no case in this Court dealing with the application of this doctrine to cases in which the relief sought affects state criminal prosecutions rather than state tax collections, we can perceive no relevant difference between the two situations with respect to the limited question whether, in cases where the criminal proceeding was begun prior to the federal civil suit, the propriety of declaratory and injunctive relief should be judged by essentially the same standards. In both situations deeply rooted and long-settled principles of equity have narrowly restricted the scope for federal intervention, and ordinarily a declaratory judgment will result in precisely the same interference with and disruption of state proceedings that the long-standing policy limiting injunctions was designed to avoid.
401 U.S. at 71-72, 91 S.Ct. at 767.

Thus, strong authority requires federal courts to withhold declaratory relief “without consideration of the merits” where taxpayers have a “plain, adequate and complete” remedy for their grievance in state courts. Such a remedy is available here. Abatement proceedings before the State Tax Commission may be initiated under M. G.L. c. 63 § 51, made applicable to § 11 taxpayers by § 18A. From there lies appeal to the Appellate Tax Board, M. G.L. c. 63 § 71, c. 58A, §§ 7, 7A, 8, and from there appeal to the Supreme Judicial Court, M.G.L. c. 58A § 13. If a decision from the Tax Commission is not forthcoming within three months of the filing of application for abatement, “it shall then be deemed to be denied and the taxpayer shall have the right at any time within three months thereafter, to ■take any appeal from such denial to which he may be entitled by law. . . . ” M. G.L. c. 58A § 6. In addition to the abatement remedy, a taxpayer may challenge a tax by a suit for declaratory relief. M.G.L. c. 231A §§ 1, 2. See Massachusetts Ass’n of Tob. Dist. v. State Tax Comm’n, 354 Mass. 85, 88, 235 N.E.2d 557, 559 (1968); Stow v. Comm’r of Corporations & Taxation, 336 Mass. 337, 339, 145 N.E.2d 720, 721 (1957). Amounts are abated with interest. M.G.L. c. 58A § 13.

We believe these procedures afford intervenors here a “plain, adequate and complete” means of resolving any issues, federal as well as state, they wish to raise. Great Lakes, supra, 319 U.S. at 297, 63 S.Ct. 1070; Helmsley v. Detroit, 320 F.2d 476, 478-480 (6th Cir. 1963); Houston v. Standard Triumph Motor Co., 347 F.2d 194, 199 (5th Cir. 1965), cert. denied, 382 U.S. 974, 86 S.Ct. 539, 15 L.Ed.2d 466 (1966); American Commuters Ass’n v. Levitt, 405 F.2d 1148, 1152 (2d Cir. 1969). Cf. Hillsborough v. Cromwell, 326 U.S. 620, 624, 626, 66 S.Ct. 445, 90 L.Ed. 358 (1946).

While the Commonwealth has not urged that we refrain from deciding the § 5(h) claim as it relates to the income tax, it has cited Great Lakes for more limited purposes both here and below; and its pleadings raised the question we now consider. In view of the Supreme Court’s statement that it is the “duty” of federal courts to withhold declaratory relief in appropriate situations, Great Lakes, supra, 319 U.S. at 300-301, 63 S. Ct. 1070, we do not regard the Commonwealth’s failure to press fully the issue here as a bar to our following the admonitions of Great Lakes and cases following. We are not confronted with a case which was exhaustively tried below, where our failure to act, besides disappointing litigants, might lead to a waste of judicial resources. The factual record on the income tax claims is nonexistent and, indeed, quite unsatisfactory for decision of the delicate questions raised. We have neither evidence, agreed facts, nor lower court findings showing the tangible impact and operation of the challenged tax.

That the federal associations have been permitted to intervene in the United States’ action, and that the United States’ claim has been sustained, do not alter the requirement that the consideration of intervenors’ claims regarding the income tax be withheld. They and the United States stand on different footing as litigants in federal courts seeking to interfere with state taxing schemes. The United States itself is not barred by the Johnson Act from obtaining relief against state taxes in the federal courts. Dept. of Employment v. United States, supra, 385 U.S. 355, 358, 87 S.Ct. 464, 17 L.Ed.2d 414 (1966); United States v. Arlington County, 326 F.2d 929, 931 (4th Cir. 1964). See also United States v. Bureau of Revenue of the State of New Mexico, 291 F.2d 677, 679 (10th Cir. 1961); United States v. Woodworth, 170 F.2d 1019 (2d Cir. 1948); City of Springfield v. United States, 99 F.2d 860, 862 (1st Cir. 1938), cert. denied 306 U.S. 650, 59 S.Ct. 592, 83 L.Ed. 1049 (1939); United States v. Livingston, 179 F.Supp. 9, 11-12 (E.D.S.C.1959), aff’d, 364 U.S. 281, 80 S.Ct. 1611, 4 L.Ed.2d 1719 (1960). These cases rest in part on the proposition that, absent a strong contrary legislative purpose, the Johnson Act should not bar the United States from access to its own courts of equity, when it seeks to assert its own interest or that of its own instrumentalities. See United States v. Livingston, supra, 179 F.Supp. at 11-12; United States v. Arlington County, supra, 326 F.2d at 931, 932-933. Likewise, the equitable doctrine of Great Lakes should not deny relief to the United States when it seeks to implement federal policy.

But the intervenors can get no benefit from the presence of the United States. It did not challenge the income tax, and has not joined in the intervenors’ complaint or appeal. They are in a different posture than the co-plaintiffs in Dept, of Employment v. United States and other cases cited supra, where the non-government party asserted the same claims as the United States. We have found only one ease where an instrumentality of the United States — an Indian tribe — suing without the aid of the United States has had its claims for relief considered, notwithstanding the Johnson Act. Agua Caliente Band of Mission Indians v. County of Riverside, 442 F.2d 1184, 1186 (9th Cir. 1971), cert. denied 405 U.S. 933, 92 S.Ct. 930, 30 L.Ed.2d 809 (1972). But that was not a case where the United States had clearly passed up the opportunity to challenge the particular state taxing scheme. Moreover, involving as it did a suit by a party having a unique place in federal law, we see no reason to extend it to all situations where an instrumentality brings a suit against a state or local taxing scheme independently of the United States. The 4500 federal associations, while entitled to wear the mantle of “federal instrumentalities”, have many of the characteristics of private corporations. They are at the bottom of a three-tiered arrangement headed by the Home Loan Bank Board. It is reasonable, as a prerequisite to by-passing normal state tax collection and litigation channels, that they persuade the Attorney General of the United States, acting on behalf of the Home Loan Bank Board, to join in their claim. We conclude that under the principles of Great Lakes intervenors may not obtain declaratory relief against the income tax.

Deciding on this broad ground, we need not rest on any other grounds relating more specifically to several, of the issues raised. Plainly, however, some of these claims would have to be dismissed, or not considered, even absent the Great Lakes policy discussed above. The federal and state constitutional claims raised for the first time here would not be considered by this Court. Talmanson v. United States, 386 F.2d 811, 812 (1st Cir. 1967), cert. denied 391 U.S. 907, 88 S.Ct. 1658, 20 L.Ed.2d 421 (1968); Securities & Exchange Comm’n v. Milner, 474 F.2d 163, 166 (1st Cir. 1973). The district court did not abuse its discretion in not exercising pendent jurisdiction over the state constitutional claims concerning the income . tax. While federal courts have power to determine state law claims joined with federal claims where the different claims “derive from a common nucleus of operative fact”, “[t]hat power need not be exercised in every case”. United Mine Workers of America v. Gibbs, 383 U.S. 715, 725-726, 86 S.Ct. 1130, 1139, 16 L. Ed.2d 218 (1966). In light of the strong federal policy against interference with state taxing schemes, this was a case where “[njeedless decisions of state law should be avoided . . . as a matter of comity.” Id. at 726, 86 S.Ct. at 1139. Similarly, the district court wisely abstained from determining the federal constitutional claim concerning the operating expenses aspect of the income tax, given the existence of pending state proceedings that might have mooted the constitutional claim. See Railroad Comm’n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941); Askew v. Hargrave, 401 U.S. 476, 91 S.Ct. 856, 28 L.Ed.2d 196 (1971).

The declaratory judgment entered by the district court on August 9, 1972, is set aside. A modified judgment is to be entered, clause (1) of which to be worded as set forth earlier in this opinion, and clause (2) of which is to be worded as follows:

(2) All additional relief sought by the intervening plaintiffs is denied without consideration of the merits.

So ordered. Costs for appellees in each case.

      . The taxes are imposed by M.G.L. o. 63, § 11, which reads as follows:
      “Every savings bank as defined in chapter one hundred and sixty-eight, every co-operative bank as defined in chapter one hundred and seventy and every state or federal savings and loan association located in the commonwealth shall pay to the commissioner an annual excise equal to the following:
      (a) on or before the twenty-fifth day of the seventh month of the taxable year, there shall be paid (1) one-half of one per cent of a reasonable estimate of its net operating income, as hereinafter defined, for the taxable year, and (2) one-twentieth of one per cent of the average amount of its deposits or of its savings accounts and share capital for the first six months of the taxable year, after deducting from such average amounts (i) its real estate used for banking purposes, valued at cost less reasonable depreciation, and (ii) the unpaid balances on its loans secured by the mortgage of real estate taxable in this commonwealth, or real estate situated in a state contiguous to the commonwealth, and within a radius of fifty miles of the main office of such bank or association, and in the case of a bank or association not previously subject to tax by this commonwealth the unpaid balances on such of its loans secured by the mortgage of real estate located outside of this commonwealth which are outstanding on March first, nineteen hundred and sixty-six, both as of the close of such sixth-month period; and
      (b) on or before the twenty-fifth day of the first month following the close of the taxable year, there shall be paid (1) one per cent of its net operating income, as hereinafter defined, for the taxable year, less the estimated amount previously paid with respect to such income, and (2) one-twentieth of one per cent of the average amounts of its deposits or of its savings accounts and share capital for the second six months of the taxable year, after deducting from such average amount (i) its real estate used for banking purposes, valued at cost less reasonable depreciation, and (ii) the unpaid balances on its loans secured by the mortgage of real estate taxable in this commonwealth, or real estate situated in a state contiguous to the commonwealth, and within a radius of fifty miles of the main office of such bank or association, and in the case of a bank or association not previously subject to tax by this commonwealth the unpaid balances on such of its loans secured by the mortgage of real estate located outside of this commonwealth which are outstanding on March first, nineteen hundred and sixty-six, both as of the close of the taxable year.
      For the purpose of this section, ‘net operating income’ shall mean gross income from all sources, without exclusion, for the taxable year, less (i) operating expenses, (ii) net losses upon assets sold, exchanged or charged off as uncollectible during the taxable year, and (iii) minimum additions during the taxable years to its guaranty fund or surplus required by law or the appropriate federal and state supervisory authorities; and ‘taxable year’ shall mean any fiscal or calendar year or period for which the bank is required to make a return to the federal government. Federal and state taxes paid or accrued during the taxable year shall not be deductible in computing ‘net operating income’.”

      . “No State, county, municipal, or local taxing authority shall impose any tax on such associations or their franchise, capital, reserves, surplus, loans, or income greater than that imposed by such authority on other similar local mutual or cooperative thrift and home financing institutions.” ^

      . Jurisdiction was founded on 28 U.S.C. § 1345. The United States has standing to sue on behalf of its instrumentalities. See United States v. Arlington County, 326 F.2d 929, 931 (4th Cir. 1964) ; Dept. of Employment v. United States, 385 U.S. 355, 87 S.Ct. 464, 17 L.Ed.2d 414 (1966). It is not disputed that the Home Loan Bank Board, established by Congress as an independent agency with responsibility for the savings and loan system, 12 U.S.C. §§ 1437, 1464, is a federal instrumentality.

      . Commonwealth v. The People’s Five Cents Savings Bank, 5 Allen 428 (1862) ; Commonwealth v. Provident Institution for Savings, 12 Allen 312 (1866). Provident Institution v. Massachusetts, 6 Wall. 611, 18 L.Ed. 907 (1867).

      . The federal associations’ out-of-state real estate loan area had been increased by Congress in 1964, two years before the present Massachusetts tax statute was enacted, from 50 to 100 miles, with no requirement that the real estate be in a “contiguous” state. See infra. The local institutions, in 1966 as now, could not loan on out-of-state real estate beyond, at most, 50 miles. See infra.

      . SAVINGS BANKS.
      “Any such corporation may make . . . loans upon real estate secured by first mortgages.” M.G.L. c. 168 § 34, first para.
      “Such first mortgages shall be on real estate located in the commonwealth, or in a city or town of a state contiguous to the commonwealth, provided, that such city or town is not more than fifty miles from the town in which the main office of such corporation is located. . .' .” §34(2).
      CO-OPERATIVE BANKS.
      “Any such corporation may make loans of the following types, upon real estate situated in the commonwealth or situated in a state contiguous to the commonwealth and within a radius of twenty-five miles of the main office of such corporation. . . .” M.G.L. c. 170 § 23.
      Formerly, Massachusetts banks could lend only within the state. See M.G.L. c. 168 § 54 (Ter. ed. 1932), c. 170 § 23 (Ter. ed. 1932). In the case of savings banks, the lending limit was first extended by St.1946, e. 256 § 1 to contiguous-state loans within 25 miles, and then by St. 1955, c. 432 § 34(2) to such loans within 50 miles. The co-operatives’ limit was extended to contiguous-state loans within 25 miles by St.1950, c. 371, § 23.

      . “(b) In the case of a tax on
      shares the tax imposed shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State coming into competition with the business of national banks:

      . The deposits of local institutions are not wholly offset by deductible loans since they may invest in VA and FHA-insured real estate loans outside the 50-mile area, and may make non-real estate loans.

      . If we assume the deduction on out-of-state loans was intended to avoid double taxation, thus placing Massachusetts banks on a parity with out-of-state banks in competing for out-of-state loans, the present tax imposes double taxation on home owners borrowing from the federal associations beyond the exempt areas. Again, the result points to discrimination rather than to promotion of some neutral object.

      . “The district court shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.”

      . A stipulation states: “There are pending before the Massachusetts State Tax Commission several applications for abatement filed by Massachusetts federal savings and loan associations raising the issue as to whether such deductions should be allowed.”

      . State courts have concurrent jurisdiction with the federal courts in the enforcement of federal law, absent a vesting of exclusive jurisdiction in the federal courts. Claflin v. Houseman, 93 U.S. 130, 136, 23 L.Ed. 833 (1876) ; see Testa v. Katt, 330 U.S. 386, 67 S.Ct. 810, 91 L.Ed. 967 (1947). Section 5(h) of the Home Owners’ Loan Act has already been ap- . plied once by the Massachusetts Supreme Judicial Court to hold invalid a state taxing scheme. Comm’r of Corporations and Taxation v. Flaherty, supra. See also Agricultural National Bank of Berkshire County v. State Tax Comm’n, 353 Mass. 172, 229 N.E.2d 245 (1967), rev’d, 392 U.S. 339, 88 S.Ct. 2173, 20 L.Ed.2d 1138 (1968).

      . In City of Houston, supra, Chief Judge Brown writing for the majority said that “it is inconceivable that the Supreme Court intended [in Great Lakes] to allow any discretion to grant declaratory relief where adequate state remedies were available.” 347 F.2d at 199. We do not, however, need to decide the question presented there, whether, despite the fact that the Great Lakes issue was not presented below, the Court of Appeals could properly vacate the judgment for taxpayers under the doctrine of that case. Here, the Attorney General did urge below that the court withhold relief on grounds that an adequate state court remedy existed.

      . In United States v. Arlington County, supra, 326 F.2d at 932-933, the court said:
      Here we find that the interest of the national government in the proper implementation of its policies and programs involving the national defense is such as to vest in it the non-statutory right to maintain this action. Under these circumstances the incapacity of the individual plaintiff to maintain his action is immaterial since he may find shelter under the Government’s umbrella.


source: Caselaw Access Project

author: GIBBONS, Circuit Judge. VAN DUSEN, Circuit Judge

license: Public Domain

text:
    UNITED STATES of America v. Alfred J. JASPER, Appellant.
    No. 72-1776.
    United States Court of Appeals, Third Circuit.
    Submitted Under Third Circuit Rule 12(6) March 8, 1973.
    Decided June 22, 1973.

      Robert E. J. Curran, U. S. Atty., Barton A. Hertzbach, James C. Sommar, Asst. U. S. Attys., Philadelphia, Pa., for appellee.
    Richard C. Glazer, Harry P. Begier, Jr., Orlofsky, Cozen & Begier, Philadelphia, Pa., for appellant.
    Before FORMAN, VAN DUSEN and GIBBONS, Circuit Judges.
   OPINION OF THE COURT

GIBBONS, Circuit Judge.

This is an appeal from an order of the district court which denied appellant Jasper’s motion pursuant to Fed.R. Crim.P. 32(d) to withdraw a guilty plea, and which denied his motion pursuant to 28 U.S.C. § 2255 to vacate a judgment of sentence.

On May 28, 1968 Jasper and two codefendants entered pleas of guilty to all three counts of an indictment charging violations of 18 U.S.C. §§ 2113(a), (b) and (d). On April 15, 1969 Jasper was sentenced to imprisonment of fifteen yehrs on each count, with the sentences on the second and third counts to run concurrently with that imposed on the first count. On December 16, 1969 Jasper filed a motion, pursuant to rule 35, for correction of sentence. He contended that multiple sentences on a single indictment growing out of a single bank robbery, even though concurrent, are illegal. See Prince v. United States, 352 U.S. 322, 77 S.Ct. 403, 1 L.Ed.2d 370 (1957). He also contended that the fifteen year sentence is illegal because it is in excess of the maximum sentence of ten years permissible under 18 U.S.C. § 2113(b), the larceny count. On February 9, 1970 the district court, without the defendant being present either in person or by counsel, entered an order:

“AND NOW . . . under Rule 35 of the Federal Rules of Criminal Procedure and in light of the ruling of the United States Court of Appeals for the Third Circuit in United States v. Conway, 415 F.2d 158 (1969), it is hereby ORDERED, ADJUDGED AND DECREED that the sentences imposed on Counts 1 and 2 of Indictment No. 23280 on April 21, 1969 [sic], are hereby vacated and the sentence corrected as follows:
‘It is adjudged that the defendant is hereby committed to the custody of the Attorney General or his authorized representative for a period of fifteen (15) years on Count 3 of the Indictment. Imposition of sentence on Counts 1 and 2 is hereby suspended.’ ”

In the applications now before us Jasper urges (1) that because the district court failed, at the time his guilty plea was accepted, to comply with Fed.R.Crim.P. 11 he should be permitted to retract that plea and plead anew; (2) that the district court’s failure to comply with rule 11 was compounded when the government attorney and the court at the hearing on his guilty plea gave him erroneous advice as to the possible maximum sentence which could be imposed if he were convicted on all counts of the indictment; (3) that the new sentence imposed was illegal when measured against the standard laid down in United States v. Corson, 449 F.2d 544 (3d Cir. 1971);. and (4) that he was entitled to be present at all stages of the criminal proceedings against him, including the February 9,1970 resentencing.

The district court, without conducting a hearing, evidentiary or otherwise, and without appointing counsel, rejected each of Jasper’s contentions. It did so on the basis of a report and recommendation of a United States Magistrate, based on the transcript of the May 28, 1968 hearing on entry of Jasper’s plea. The magistrate’s report states: “It would appear, and the Notes of Testimony indicate, that the Court complied with the provisions of Rule 11.” With respect to the advice about the possible maximum sentence the magistrate’s report states: “There is no indication from the record that the statements made by the Assistant United States Attorney or the Court were in error and Petitioner has failed to establish his burden of persuasion.” The report does not deal with Jasper’s contentions that the new sentence is not in compliance with United States v. Corson, supra, and that he should have been present at his resentencing.

Rule 11 is designed to assure that a defendant who pleads guilty does so voluntarily, knowingly and intelligently. In McCarthy v. United States, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969), the Court held that noncompliance by the court with the strict requirements of the Rule would be deemed automatically prejudicial. The remedy for such prejudice is permitting the defendant to plead anew. In Halliday v. United States, 394 U.S. 831, 89 S.Ct. 1498, 23 L.Ed.2d 16 (1969) (per curiam), however, the Court held that the per se rule of McCarthy v. United States, supra, need not be applied retroactively. The plea in this case was taken prior to April 2, 1969, the date of the McCarthy decision. In such eases if the court finds noncompliance with rule 11 a factual inquiry should be made to determine whether in fact the defendant’s plea was voluntarily, knowingly and intelligently entered. Cf. Fontaine v. United States, 411 U.S. 213, 93 S.Ct. 1461, 36 L.Ed.2d 169 (1973) (per curiam) . When a petitioner has shown noncompliance the burden, in that factual inquiry is, upon the Government. Halliday v. United States, supra; Woodward v. United States, 426 F.2d 959, 963 (3d Cir. 1970). See United States ex rel. Crosby v. Brierley, 404 F.2d 790, 795-796 (3d Cir. 1968); United States ex rel. McCloud v. Rundle, 402 F.2d 853, 857 (3d Cir. 1968), cert. denied, 398 U. S. 929, 90 S.Ct. 1822, 26 L.Ed.2d 92 (1970). In Woodward v. United States, supra, we held that the Government had, in an evidentiary hearing, met that burden. In this case the district court held no hearing. Thus the order appealed from may be sustained only if the record in the proceedings leading to the plea shows compliance with rule 11, or if it shows conclusively that the plea was voluntarily, knowingly and intelligently made. Short of these situations, a hearing is required.

Prince v. United States, supra, construed 18 U.S.C. § 2113 as not permitting the cumulation of sentences, although a single indictment may contain separate counts charging violations of each subsection. In United States v. Corson, supra, we considered what steps should be taken when a district court had in imposing sentence misapplied 18 U.S.C. § 2113 by imposing separate sentences on each count. We said:

“In this case, the trial court erroneously imposed separate sentences on all three robbery counts. It is impossible to say that certain of these sentences rather than others were ‘illegal’ under Rule 35. Rather, it was the cumulation of sentences, the sentencing in its entirety which was ‘illegal.’ It was therefore error for the district court merely to have vacated the sentences on counts II and III and to have left standing the sentence on count I. Thus, all the sentences originally imposed were invalid and ought to have been vacated in their entirety, so that the appellant could then be resentenced.

Corson explicitly directed that the re-sentencing be in conformity with Fed. R.Crim.P. 43, and that rule requires the defendant’s presence. Consequently the remedy for correction of a sentence illegal under Prince v. United States, supra, was not the vacation of the sentences on some of the counts, but a resentencing at which the defendant must be present.

Thus the law governing this appeal is settled. If a violation of the Prince rule took place in the original sentencing the defendant must be brought before the court for resentencing. If at the time of entry of the guilty plea the district court did not comply with rule 11 the Government must establish that the guilty plea was voluntarily, knowingly and intelligently made or the defendant must be permitted to plead anew.

Complicating Jasper’s resentence claim, however, is the fact that our decision in United States v. Corson, supra, with respect to the appropriate remedy for a Prince violation represented a change in the law from the remedy announced in United States v. Conway, 415 F.2d 158, 166 (3d Cir. 1969), cert. denied, 397 U.S. 994, 90 S.Ct. 1131, 25 L.Ed.2d 401 (1970). The district court, when it entered the February 9, 1970 order, acted in reliance on Conway, which had said;

“Under these circumstances, we will direct the District Court to reword the sentences to show that they are imposed only under Count 2 of the indictment, which count charges the offense under 18 U.S.C. § 2113(d).” Id. at 166.

The proximity in time between Jasper’s December 16, 1969 rule 35 motion and the district court’s February 9, 1970 order suggests, although the order does not say so, that this order was on Jasper’s motion. No appeal was taken from the February 9, 1970 order. The time for appeal expired before the filing of the moving papers now before us. To the extent that the order appealed from rejects a rule 35 motion identical to that on which the court acted on February 9, 1970, it is, on the ground of res adjudicata, correct. But the proceedings before us were brought not only pursuant to rule 35, but also pursuant to 28 U.S. C. § 2255. An attack upon the legality of a sentence may be made in a § 2255 proceeding, and principles of res ad judicata have only limited application to such proceedings. See Sanders v. United States, 373 U.S. 1, 83 S.Ct. 1068, 10 L.Ed.2d 148 (1963). The final paragraph of § 2255 applies. Here Jasper has applied to the district court for relief by motion and that court has denied him relief. The question then is whether “it also appears that the remedy by motion is inadequate or ineffective to test the legality of his detention.” 28 U.S.C. § 2255. In Sanders the Court held that the statutory form of res adjudicata set forth on § 2255 applied:

“only if (1) the same ground presented in the subsequent application was determined adversely to the applicant on the prior application, (2) the prior determination was on the merits, and (3) the ends of justice would not be served by reaching the merits of the subsequent application.” 373 U.S. at 15, 83 S.Ct. at 1077.

Equating the December 16, 1969 application to a prior application on the merits of the same sentence claim is difficult here, for while the illegality of the first sentence was presented, the illegality of resentencing in the absence of the defendant was not. Moreover, Sanders makes clear that because of the change in the law of remedies which took place between Conway and Corson the ends of justice would best be served by permitting a redetermination. The Court said:

“If purely legal questions are involved, the applicant may be entitled to a new hearing upon showing an intervening change in the law or some other justification for having failed to raise a crucial point or argument in the prior application.” 373 U.S. at 17, 83 S.Ct. at 1078.

We conclude, therefore, that relief with respect to the resentence claim is available under § 2255 despite the February 9, 1970 ruling on Jasper’s first rule 35 motion. Since that resentencing took place in his absence, at the least the order must be vacated and appellant brought before the district court for resentencing.

There remains the question whether he should also be permitted to retract his guilty plea and plead anew. We reject at the outset the magistrate’s finding, adopted by the district court, that the record shows compliance with rule 11. The transcript of the April 15, 1969 proceeding shows it to be deficient in several respects. The requirements of rule 11 were stated for us by Judge Van Dusen in Woodward v. United States, supra, 426 F.2d at 962:

“First, the court must satisfy itself that the defendant understands the nature of the charge. Routine questioning or a single response by the defendant that he understands the charge is insufficient. To satisfy itself that the defendant actually does comprehend the charges, the court must explain the meaning of the charge and what basic acts must be proved to establish guilt. Secondly, the court must assure itself that the defendant understands the possible consequences of his plea, including the maximum sentence that can be imposed together with any restriction on the availability of parole. . . Finally, the court must satisfy itself that a factual basis for the plea exists, although fulfillment of this requirement does not require interrogation by the court itself.” (footnotes omitted).

The application of these three requirements to a plea to a multicount indictment under 18 U.S.C. § 2113 is more complex than in other cases because of the peculiarity that the various subsections of § 2113 make criminal different kinds of conduct. Thus it is entirely possible that a defendant, having the elements of the offense defined in each subsection explained to him, would realize that his conduct only fell within one of the subsections. That realization could be quite significant, since not only the kinds of conduct but also the ranges of sentence differ between the subsections. In Jasper’s case, for example, he was indicted under §§ 2113(a), (b) and (d). The maximum term under § 2113(a) is twenty years; that under § 2113(b) ten years; and that under § 2113(d) twenty-five years.

The transcript of the May 28, 1968 proceeding shows, with respect to Jasper’s comprehension of the three charges, and with respect to the factual basis for a plea to all three charges, this single question and answer:

“THE COURT: Are you pleading guilty because of your guilt, and for no other reason?
MR. JASPER: Yes.” (Tr. 2)

There was no advice or inquiry respecting the separate factual elements covered by the separate counts. The same transcript shows, with respect to Jasper’s knowledge of the consequences of the plea:

“THE COURT: And do you realize that you are subject to a maximum penalty of $5,000.00 fine and/or 20 years imprisonment ?
MR. JASPER: I do.
THE COURT: Notwithstanding
that, you are prepared to enter a plea of guilty?
MR. JASPER: Yes, sir.
[The Assistant United States Attorney] : Your Honor. Excuse me, sir. If it please the Court, perhaps it might be pointed out to Mr. Jasper that he is being indicted in each of the three counts in the indictment, and for that reason he faces a possible maximum of, I believe, 55 years in prison.
THE COURT: Well, the Count One is $5000.00 and/or 20 years, Count Two is $5000.00 and/or ten years. Count Three is $10,000.00 and/or 25 years. Are you aware of that?
MR. JASPER: Yes, sir.” (Tr. 3-4)

Thus the court’s first advice gave too low a maximum, the statement by the Assistant United States Attorney assumed, contrary to Prince, that the sentence could be pyramided, and the court, while -finally stating the correct maximum on each count, did not correct the pyramiding misstatement. Jasper’s “yes, sir” response to the first and last question is hardly sufficient to indicate that he knew the real potential consequences of his plea. Later, as the transcript makes clear, the mistaken impression that the maximum sentence was 55 years was reiterated by the district judge while addressing a codefendant in Jasper’s presence. (Tr. 6) The record of the May 28, 1968 proceeding does not establish compliance with rule 11.

The Government urges that any defects in the rule 11 proceedings can be overlooked in this case because of the contents of the record at the time of Jasper’s sentencing on April 15, 1969. At that time Jasper pleaded guilty to and was sentenced on another offense. In the same hearing sentence on the bank robbery counts was imposed. The only reference in the April 15, 1969 transcript to the factual basis for the bank robbery plea is a single sentence by his attorney:

“This involved, the bank robbery involved the institution in South Philadelphia where the defendants were apprehended in the bank.” (Tr. 2)

It does not appear from his report that even this scanty record was before the magistrate. Had it been, however, it would not have sufficed to carry the Government’s burden of showing, where rule 11 has not been complied with, that the plea was voluntarily, knowingly and intelligently made. The sentencing proceeding does not establish, for example, whether Jasper knew that putting in fear is an essential element of an 18 U. S.C. § 2113(d) offense, or whether anyone was put in fear. Nor does it establish whether Jasper knew that carrying away more than $100 in money or value is an essential element of an 18 U.S.C. § 2113(b) offense, or whether any sum was carried away.

On appeal the Government also urges that because Jasper was represented by counsel at the time of his plea, that plea should, under the principles laid down in Brady v. United States, 397 U.S. 742, 90 S.Ct. 1463, 25 L.Ed. 2d 747 (1970), and McMann v. Richardson, 397 U.S. 759, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970), be insulated from collateral attack. Those cases deal, however, with the insulating effect of valid guilty pleas. They do not stand for the proposition that guilty pleas by counselled defendants are insulated from § 2255 challenge. For such challenges the governing authorities are Halliday v. United States, supra, and Woodward v. United States, supra.

We do not suggest that in all cases of guilty pleas accepted prior to April 2, 1969, the date of McCarthy v. United States, supra, and after July 1, 1966, the effective date of rule 11 as amended, where there was noncompliance with rule 11 the Government can meet the burden of establishing that the plea was voluntarily, knowingly and intelligently made only in an evidentiary hearing. There may well be cases where the record of the plea and the sentence establish the necessary facts quite conclusively. Moreover, in eases where the record is not conclusive the Government may be able, in a proceeding under 28 U.S.C. § 2255, to establish the facts by deposition. See Sanders v. United States, supra; Machibroda v. United States, 368 U.S. 487, 82 S.Ct. 510, 7 L.Ed.2d 473 (1962); Moorhead v. United States, 456 F.2d 992 (3d Cir. 1972). In this case, however, the record is not sufficient and has not been supplemented in any way.

The order denying Jasper’s motion for relief under 28 U.S.C. § 2255 will be reversed and the case will be remanded to the district court for the entry of an order directing that a hearing be held on Jasper’s application to withdraw a guilty plea. If in that hearing the court concludes that his plea was not voluntarily, knowingly and intelligently made he should be permitted to plead anew. If the court concludes that the plea was made voluntarily, knowingly and intelligently he should foe resentenced in accordance with United States v. Corson, supra.

VAN DUSEN, Circuit Judge

(dissenting).

I respectfully dissent from the majority opinion.

In United States v. Welty, 468 F.2d 594 (3d Cir. 1972), this court held that resentencing was not always required when sentences under counts charging crimes under various subdivisions of. 18 U.S.C. § 2113 had been amended, prior to our decision in United States v. Corson, 449 F.2d 544 (3d Cir. 1971), to accord with the basic principle of Prince v. United States, 352 U.S. 322, 77 S.Ct. 403, 1 L. Ed.2d 370 (1957), that penalties under such subdivisions may not be cumulated where a single bank robbery is the subject matter of all counts in this case, the amending sentence of February 9, 1970, was entered prior to Corson and was in effect a general sentence of 15 years on all counts. If, as I believe, such a sentence could have been validly imposed in 1970 on Count I of the indictment, I believe the case should be remanded so that the sentencing judge has the option of either amending the February 9, 1970, sentence to delete all words after “years” or to vacate that sentence and bring the defendant back before him for resentencing, in the discretion of such sentencing judge.

I believe that the record justified the district court’s finding and conclusion that the Government had met its burden of showing a voluntary and knowing plea to Count I of the indictment. As stated in Woodward v. United States, 426 F.2d 959, 963 (3d Cir. 1970), in regard to a plea entered prior to McCarthy v. United States, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969), “[a]n examination of the record discloses that substantial evidence supports the District Court's conclusion that the plea was entered voluntarily.” Also, defendant-appellant has made no allegation that would lead to a different result as to the plea to Count I.

The elements of the crime with which the defendant-appellant was charged in Count I are (1) knowingly and unlawfully entering the bank, and (2) such entry being with intent to commit larceny. At the sentencing in April 1969, appellant’s counsel conceded, in the presence of appellant, that he was representing the appellant at “this sentencing on the bank robbery. This involved the bank robbery, involved the institution in South Philadelphia where the defendants were apprehended in the bank” (page 2 of transcript of sentencing proceeding of April 15, 1969). The appellant has never contended that he did not enter the bank with intent to commit larceny or that he was not apprehended with his co-defendants in the bank. He relies solely on his contention that no one explained to him at the time of his plea the nature of the charge and the elements of the crime. In Woodward this court held that it was proper to consider a colloquy taking place, prior to the pronouncement of sentence and during the sentencing procedure, in determining whether a defendant-appellant had voluntarily and knowingly entered his plea with an understanding of the nature of the charge.

Appellant contends that since he was informed at the arraignment that he could be sentenced to 55 years (as opposed to the correct maximum term of 25 years), he was not adequately informed of the consequences of his plea. On the facts presented by this record, I would apply the holdings in the Fifth and Tenth Circuits that misinformation, given to a defendant at arraignment by a district judge, which indicates a possible longer sentence than the law permits does not invalidate a plea of guilty entered after receipt of such misinformation. United States v. Woodall, 438 F.2d 1317, 1329 (5th Cir. 1971); Murray v. United States, 419 F.2d 1076, 1079 (10th Cir. 1969). In United States v. Woodall the court said:

“Isolating all other factors that could influence a defendant in determining to enter a plea of guilty, the court is of the opinion that even if Woodall had been told the district judge could pyramid the maximum sentences under each of the separate counts of the two indictments to which he pled, this factor would not invalidate his plea. The probability such information would have influenced Woodall not to change his plea so far outweighs the possibility that the prospect of stiffer punishment may have caused the change that we refuse to consider the latter as relevant.”

Relying on Shutz v. United States, 432 F.2d 25, 29 (10th Cir. 1970), appellant contends that the conviction under Count I merged into Count II. After careful consideration, I reject this interpretation of Prince v. United States, 352 U.S. 322, 328, 77 S.Ct. 403, 1 L.Ed.2d 370 (1957). Judge Rosenn’s opinion in United States v. Corson, 449 F.2d 544, 551 (3d Cir. 1971), makes clear that “the only practicable way of implementing Prince is to impose a general sentence on all counts for a term not exceeding the maximum permissible sentence on that count which carried the greatest maximum sentence.” Since it is clear that the conviction on Count I for an offense providing for a 20-year maximum supports the 15-year sentence imposed by the district court, it is not necessary to consider defendant’s contention that the record does not support an explanation to the defendant at the time he entered his plea in May 1968 of the elements of the charges under Counts II and III. If a sentence does not exceed that which might have been imposed on any one valid count, the judgment and sentence remain in full force and effect, regardless of the disposition of other counts. See Glazerman v. United States, 421 F.2d 547 (10th Cir. 1970).

This court has held on a record virtually identical with the one now before the court that the plea of appellant’s codefendant Lindsey was entered knowingly, voluntarily and with understanding of the nature of the charges in the indictment. See Lindsey v. United States, 453 F.2d 867, 868-869 (3d Cir. 1972).

I would vacate that portion of the district court order from which this appeal is taken, which denies appellant’s motion to withdraw his guilty pleas to Counts II and III of the indictment, and direct the district court to set aside such pleas, but in all other respects I would affirm such order.

      “16. The remedy of resentencing is expressly required by Prince, 352 U.S. at 329, 77 S.Ct. 403, 1 L.Ed.2d 370; cf., United States v. Parker [143 U.S.App.D.C. 57] 442 F.2d 779 (D.C.Cir. 1971) ; Bryant v. United States, 135 U.S.App.D.C. 138, 417 F.2d 555 (1969). In addition, the resentencing alternative most fully protects the rights of the defendant. The defendant must be present at a resentencing just as if an original sentence were being imposed. Williamson v. United States, 265 F.2d 236, 239 (5th Cir. 1959) ; Fed.R.Crim. P. 43. Furthermore, in resentencing a defendant the district court is required to exercise its discretion anew in fixing the penalty and need not simply choose from among the sentences it originally imposed. ‘Its duty [is] to resentence rather than vacate one part and reinstate another part of the original sentence.’ Williamson v. United States, supra at 238.” 449 F.2d at 551-552 & n. 16.

      . In this case since the defendant must in any event be brought before the court for resentencing, an evidentiary hearing probably will be the most expeditious course.

      . It is noted that the author of the Corson opinion was a member of the panel which joined in the opinion in 'Welty, supra.

      . The three-count indictment, to which defendant-appellant entered guilty pleas to each count, charged, inter alia:

      Count I. “. . . on or about April 24, 1968, . . . ALFRED X JASPER, BERNARD HARRIS and MELVIN LINDSEY, did knowingly and unlawfully, enter the Citizens Bank and Trust Company, 1849 South Street, Philadelphia . . . , with intent to commit larceny; the deposits of said bank being insured by the [F.D.I.C.] . . . ,” in violation of 18 U.S.C. § 2113(a).
      Count II. “. . . ALFRED J. JASPER, BERNARD HARRIS and MELVIN LINDSEY, did knowingly and unlawfully take and carry away with intent to steal . . . $54,221.00, . belonging to and in the care . and possession of the Citizens Bank . . . ,” in violation of 18 U.S.C. § 2113(b).
      Count IH. “. . . on or about April 24, 1968 . . . ALFRED J. JASPER, BERNARD HARRIS and MELVIN LINDSEY, did knowingly and unlawfully put in jeopardy by the use of dangerous weapons, to wit: a shotgun in the possession of . ALFRED J. JASPER and a revolver in the possession of BERNARD HARRIS, the lives of employees and customers of the Citizens Bank . . . ,” in violation of 18 U.S.C. § 2113(d).

      . The sentence would then read:
      “It is adjudged that the defendant is hereby committed to the custody of the Attorney General or his authorized representative for a period of fifteen (15) years.”

      . Although we recognize that United States v. Corson, supra, 449 F.2d at 551-552, stated that resentencing is the better practice in most cases, it would exalt substance over form to require defendant to be brought halfway across the country from Leavenworth, Kansas, to Philadelphia, Pa., in order to have the sentence of February 1970 reworded to comply with Corson and delete any reference to counts in the sentence. I see no reason to require that defendant should have been present in February 1970 (prior to Cor-son) when that sentence was entered, reducing the sentence previously imposed in April 1969. See United States v. Welty, supra.

      . Count I of the indictment is based on 18 U.S.C. § 2113(a), which provides, inter alia: “Whoever enters . . . any bank . . . with intent to commit in such bank . . . any larceny shall be . . . imprisoned not more than twenty years. . . .” The indictment based on the above language is set forth in note 2 above.

      . Accepting appellant’s allegation (page 5 of Motion) that his counsel informed him in a conference a week before arraignment that “if he were to enter a plea of guilty that he probably would not receive a sentence in excess of ten (10) years” (emphasis supplied), the imposition of a 15-year sentence does not make the plea involuntary. See Brady v. United States, 397 U.S. 742, 90 S.Ct. 1463, 25 L.Ed.2d 747 (1969), The use of the word “probably” shows that counsel was only giving an estimate of the length of the sentence the district court might impose if a plea were entered. Furthermore, subsequent to the entry of a guilty plea to this indictment and prior to the April 15, 1969, sentencing, defendant had entered a guilty plea to a charge of escaping from the custody of an authorized representative of the U. S. Attorney General (Cr.No.23,320, E.D.Pa.), so that the sentencing judge was entitled to consider this additional crime in imposing sentence.

      . In the Woodall ease, the defendant was informed that the maximum term was 45 years, and in Murray he was informed that the maximum was 35 years (as opposed to the correct maximum of 25 years in both eases).

      . See footnote 4 above.

      . Prior to accepting appellant’s plea, the trial judge specifically pointed out to him the separate penalties provided for the crimes described in each count of the indictment, whereas this procedure was not followed in the trial judge’s colloquy with Lindsey.

      . As noted above at page 2, the district court has the option of vacating the entire sentence and providing for return of the defendant-appellant for resentencing in its discretion, if this is deemed necessary under all the circumstances, since part of the language in the February 1970 sentence can be construed as “illegal.” Of. F.R.Crim.P. 35 and 28 U.S.O. § 2255.


author: CHOY, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellant, v. LAZY FC RANCH et al., Defendants-Appellees.
    No. 71-2318.
    United States Court of Appeals, Ninth Circuit.
    July 13, 1973.

      Michael H. Stein (argued), L. Patrick Gray, III, Atty. Gen., Dept, of Justice, Washington, D. C., Sidney E. Smith, U. S. Atty., Boise, Idaho, Alan S. Rosenthal, Dept, of Justice, Washington, D. C., for plaintiff-appellant.
    Lloyd J. Walker (argued), of Walker & Depew, Twin Falls, Idaho, for defendants-appellees.
    Before BROWNING and CHOY, Circuit Judges, and KING, District Judge.

       The Honorable Samuel P. King, United States District Judge for the District of Hawaii, sitting by designation.

   CHOY, Circuit Judge:

The United States brought suit against the Lazy FC Ranch and four of its partners (the Ranch) under the False Claims Act, 31 U.S.C. § 231 to recover money paid by making false claims. In the alternative the government sought to recover for money erroneously paid by mistake of fact or law under 28 U.S.C. § 1345. The district court, 324 F.Supp. 698, granted judgment for the Ranch on both claims. On appeal, the United States contests only the denial of its alternate claim for recovery of money erroneously paid.

The significant facts are not in dispute and the case was submitted to the district court on the basis of briefs and without trial. The Ranch was a partnership organized in 1952 to acquire and operate agricultural and pasture land in Cassia County, Idaho. In 1957 certain of the partners met with Marlin Lind, then manager of the Cassia County Office of the Agricultural Stabilization and Conservation Service of the Department of Agriculture (ASCS), to determine whether the partnership lands could qualify under the Acreage Reserve and Conservation Reserve programs of the Soil Bank Act, 7 U.S.C. § 1801, et seq. Lind informed the partners that the partnership would be considered to be a single producer and therefore subject to a maximum payment limitation which would make its participation in the soil bank programs economically unprofitable.

However, Lind learned that the Ranch was set up so that some of the partners were responsible for specialized areas of production (i. e. one of the partners was responsible for the potato crop; one had prime responsibility for livestock, etc.). Accordingly, Lind and the County Committee determined that the partnership could qualify as several producers and thereby partially avoid the payment limitation. However, it was necessary to formalize this working relationship and, with the help of Lind, the partnership lands were divided into five parcels. One of the parcels was leased to each of the four partners and a fifth unit was retained by the partnership. The leases provided that the partnership would retain twenty per cent of the income from the leased lands as rent and that the individual lessees would receive the remaining eighty per cent.

Lind and the County Committee then approved Acreage Reserve and Conservation Reserve contracts between the United States and the individual partners and the partnership. These contracts were further approved by the program specialists from the State ASCS office. Although the contracts under both soil bank programs were to run for five years, the United States terminated the Acreage Reserve program after 1958. After the Acreage Reserve contracts were terminated, the partners requested termination of their Conservation Reserve contracts, but they were denied permission to do so by the ASCS County Committee. The Ranch was sold in its entirety in the fall of 1961, thereby terminating the remaining contracts at that time.

In December, 1961 the State Committee of the ASCS determined that the contracts of the partners were in violation of regulations which explicitly disapproved the leasing of partnership land by partners as a means of avoiding the Soil Bank maximum payment limitations. However, the regulations that were in effect at the time the contracts were entered into did not preclude this type of arrangement, so the State Committee determined that the partners had not engaged in a scheme or device to evade the payment limitations. The Committee recommended that the partnership be permitted to retain the funds received, and gave the partnership permission to apply for equitable relief under Section 128 of the Soil Bank Act, 7 U.S.C. § 1816. Section 128 provides an administrative procedure authorizing the Secretary of Agriculture, in order to provide fair and equitable treatment, to pay a producer compensation under these programs which he otherwise would not be entitled to receive because of irregularities in the contract or its performance caused by erroneous advice of an authorized representative of the Secretary. Application for relief was made by the partners, but for undisclosed reasons was denied by the Secretary.

The United States then instituted this suit. In the district court all parties conceded that the partners were paid money to which they were not entitled under the applicable regulations. The Ranch, however, contended that the government was estopped from maintaining the action as a matter of equity because of the erroneous advice given by its employees and relied on by the Ranch. The district court recognized the general rule that the United States cannot be es-topped by the unauthorized acts of its employees. Utah Power and Light Co. v. United States, 243 U.S. 389, 37 S.Ct. 387, 61 L.Ed. 791 (1917); Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947). But the court felt that the doctrine had since been undermined by recent appellate court decisions, notably United States v. Georgia-Pacific Co., 421 F.2d 92 (9th Cir. 1970) and Brandt v. Hickel, 427 F.2d 53 (9th Cir. 1970), which held that estoppel may be asserted against the government especially when the government acted in a proprietary capacity. The court felt that in this case the government was involved in ordinary contracts with individuals and therefore subject to the estoppel defense and not entitled to recover the improper payments. We affirm but base our decision on a different rationale.

Traditionally, estoppel against the government has not been favored. The leading case expressing the limitations of equitable estoppel against the government is Merrill, supra. In Merrill a partnership engaged in wheat farming applied to the Federal Crop Insurance Corp. (FCIC), a wholly owned government enterprise, for crop insurance. The local agent advised the Merrills that their entire crop was insurable, but after part of the crop was destroyed the FCIC refused to compensate them. The FCIC claimed that its regulations did not permit insurance on their type of wheat and the local agent’s advice was incorrect. The Merrills argued that the agency should be estopped from denying liability, but the Supreme Court ruled that the Merrills had constructive notice that the agency’s regulations did not permit insurance on their type of crop. The Court refused to estop the government because of the unauthorized statements made by the local agent.

Merrill undoubtedly stands for a restrictive notion of the applicability of the estoppel defense against the government. But we do not read the decision as completely foreclosing the use of the estoppel defense. It should be noted that in Merrill, the farmers had no alternate means of obtaining crop insurance since there were no private companies in that business and therefore, they did not rely to their detriment on the erroneous advice. Thus, although the case presents some hardship, the Merrills did not sustain a profound, unconscionable injury in relying on the local agent’s erroneous advice.

We think the estoppel doctrine is applicable to the United States where justice and fair play require it. The Supreme Court applied this rationale in Moser v. United States, 341 U.S. 41, 71 S.Ct. 553, 95 L.Ed. 729 (1951). In Moser a Swiss citizen who was registered in New York City under Selective Service asked the Swiss Legation concerning his deferment from military service in the United States Armed Forces. Moser was told that he could claim exemption under the Treaty of 1850 between the United States and Switzerland. Our State Department, the Selective Service Headquarters and the Swiss Legation arranged for Moser’s exemption under treaty and furnished him an application form on which had been deleted words expressly waiving citizenship when claiming exemption. Relying on the arrangement, Moser applied for the exemption. However, when he later applied for citizenship he was informed that Congress had specifically provided that anyone who took advantage of the military exemption was precluded from obtaining citizenship. The Court held that because of the misleading circumstances of the case Moser was not barred from citizenship since he did not knowingly waive his rights to citizenship. While the Court did not mention Merrill and said there was no need to consider estoppel, in effect the Court held, in the language of a leading commentator, that “the government was es-topped.” 2 K. Davis, Administrative Law Treatise, § 17.03, p. 504. The Court permitted the government to be estopped even though it was acting in its sovereign capacity because under the circumstances of the case, to do otherwise would violate notions of “elementary fairness.” Moser, supra, 341 U.S. at 47, 71 S.Ct. 553.

This court has also followed this rationale and permitted the estoppel defense against the government in cases where basic notions of fairness required us to do so. A leading example of the application of this principle is Schuster v. C. I. R., 312 F.2d 311 (9th Cir. 1962). In Schuster, the Commissioner originally determined that certain assets of an estate were not subject to taxation. Relying on this ruling, the trustee then distributed all the estate’s assets. A year later the Commissioner reversed his decision and sent the trustee and the beneficiary deficiency notices. On appeal, we held that the Commissioner was es-topped from asserting liability against the trustee, but that the beneficiary was liable for any tax deficiencies. We recognized the general principle that estoppel could not be asserted against the government, but ruled that the Commissioner could not always correct a legal mistake “regardless of the injustice which will result. It is conceivable that a person might sustain such a profound and unconscionable injury in reliance on the Commissioner’s action as to require, in accordance with any sense of justice and fair play, that the Commissioner not be allowed to inflict the injury.” Schuster, supra at 317.

Again in Brandt v. Hickel, supra, we permitted the estoppel defense to be asserted reasoning that “some forms of erroneous advice are so closely connected to the basic fairness of the administrative decision making process that the government may be estopped from disavowing the misstatement . . . The Secretary was understandably concerned that the estoppel doctrine can have a deleterious effect on administrative regularity. However, administrative regularity must sometimes yield to basic notions of fairness.” Brandt, supra, 427 F.2d at 56-57.

The Moser-Brandt-Schuster line of cases establish the proposition that estoppel is available as a defense against the government if the government’s wrongful conduct threatens to work a serious injustice and if the public’s interest would not be unduly damaged by the imposition of estoppel. Gestuvo v. District Dir. of I. N. S., 337 F.Supp. 1093 (C.D.Cal.1971). This proposition is true even if the government is acting in a capacity that has traditionally been described as sovereign (as distinguished from proprietai’y) although we may be more reluctant to estop the government when it is acting in this capacity. See Georgia-Pacific, supra.

In the case at bar, it would be a great injustice if the government were not held responsible for the advice it gave the Ranch. The partnership would not have entered into the soil bank program had it not been for the advice and assistance of agent Lind, as confirmed by both the County Committee and the state program specialists. At the time the partners entered into the contracts, even the agency’s published regulations arguably permitted this type of arrangement. Moreover, not only did the partners rely on the government’s approval of their .contracts but after 1958 the Ranch requested permission to terminate the contracts. At this time, the more complete regulations had been published and it was clear that the arrangement was improper, but the government never apprised the partnership of this, and in fact refused permission to terminate the agreements.

The United States received the full benefits of the contract and the partners lost at least as much profit from not farming as they received in government payments. We do not think that under these circumstances the public policy of the United States would be significantly frustrated by permitting the partners to retain the additional payments that were improper only because they exceeded the maximum payment regulations.

Affirmed.

      . Desxnte the leases the individual partners deposited all the proceeds from their government contracts into the general partnership account and all funds were treated as partnership income. The government contends that this factor should prevent us from granting equitable relief. We disagree. Mr. Lind testified that there was nothing improper in this action since ASCS was only concerned with operation of the crops. ASCS was not concerned about the partnership division of the profits. Moreover, the district court rejected the government’s argument that the leases were improper and we cannot say that he was clearly erroneous.

      . The regulations in effect after March 28, 1958 read in part:
      (c) Limitation on compensation. (1) The total of all acreage reserve payments for all commodities under the 1958 acreage reserve program to any producer with respect to any individual farm shall not exceed $3,000. In applying such limitation in cases where two or more individuals are interested in a farming operation as landowners, landlords, tenants or sharecroppers, the following rules shall be effective to determine whether such individuals are to be treated as one producer or as separate producers:
      (i) A partnership shall be considered as one producer and compensation to the partnership shall not exceed $3,000 per farm. Individual members of the partnership may be considered as separate producers on the same farm, or recognized in another capacity on the same farm, as landowners, landlords, tenants or sharecroppers, only if (a) the individual members operating in a separate capacity are not identical with the membership of the partnership, and (b) the individual members also operated as separate producers or in a separate capacity as producers on the farm during 1957 ... 23 Fed.Reg. 2070.
      The above regulations relate to the Acreage Reserve program but the regulations applicable to the Conservation Reserve Program are similar.

      . The regulation in effect at the time the contracts were executed read as follows:

        Limitation on payments. The total of all annual payments under the conservation reserve program to any producer for any year with respect to all farms in which he has an interest shall not exceed $5,000, except that with the approval of the Secretary the total annual payment limitation may be increased in any case where the entire eligible land on a farm is designated as conservation reserve or where the .erosion hazard is such that an increase in the limitation is warranted in order to more effectively accomplish the purposes of the program. 21 Fed.Reg. 6296 (August 22, 1956).
      This regulation relates to the Conservation Reserve program but the regulations applicable to the Acreage Reserve program are similar.

      . The district court also based its conclusion that the government was estopped on an alternate ground. The court ruled that because Congress had provided an administrative procedure for the forgiving of illegal overpayments under the Soil Bank Act, the United States had consented to be estopped. In light of our decision we need not reach this issue, but we doubt the soundness of this ground.

      . The district court ruled that the government was acting in a proprietary function in this case. On appeal the government contends that it was acting in its sovereign capacity in furthering the statutory aim of reducing excess agricultural production. As the court below recognized it is often difficult to determine the precise category of a particular governmental function. But we need not resolve this conflict because it is clear that in Moser, supra, and Sohuster, supra, the government was acting in a sovereign capacity. Thus, even when the government is acting in a sovereign capacity the estoppel defense may be asserted against it. When the government is acting in a proprietary capacity it is much more likely that the public’s interest will not be unduly damaged by the imposition of the estoppel defense. Pitner v. Federal Crop Insurance Corp., 94 Idaho 496, 491 P.2d 1268 (1971).

      . We think it important to note that the more responsible the individual giving the advice, the more reasonable the reliance and the greater the injustice in not permitting the application of the estoppel defense. This factor in part explains such decisions as United States v. Rossi, 342 F.2d 505 (9th Cir. 1965).