author: MOORE, Circuit Judge:

text:
    STERLING NATIONAL BANK AND TRUST CO. OF NEW YORK, Plaintiff-Appellee, v. FIDELITY MORTGAGE INVESTORS, Defendant-Appellant.
    No. 58, Docket 74-1432.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 22, 1974.
    Decided Jan. 9, 1975.

      Harry Gurahian, New York City, for plaintiff-appellee.
    Michael J. Murphy, New York City (Lord, Day & Lord, R. Scott Greathead, New York City, of counsel), for defendant-appellant.
    Before MOORE, OAKES and TIMBERS, Circuit Judges.
   MOORE, Circuit Judge:

This case is an action brought by plaintiff-appellee Sterling National Bank and Trust Co. of New York (“Sterling”) against defendant-appellant Fidelity Mortgage Investors (“Fidelity”) to recover on a $2,000,000 promissory note dated August 17, 1973 and payable on November 7, 1973. The suit was commenced in the New York Supreme Court but removed to federal court on diversity grounds. The appeal is from an opinion and judgment of the United States District Court for the Southern District of New York denying Fidelity’s motion to dismiss for lack of in personam jurisdiction and granting Sterling’s motion for summary judgment. Since a determination that the district court erred in finding that it had personal jurisdiction over Fidelity would obviate consideration of the merits, we shall consider the jurisdictional issue first.

I.

The sole jurisdictional question is whether, with respect to the promissory note, Fidelity transacted any business in New York so as to bring it within the reach of New York’s long-arm statute, NYCPLR § 302(a)l (McKinney’s 1972), which provides in relevant part:

(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nondomiciliary, . . . who in person or
through an agent:
1. transacts any business within the state; .

The facts in this regard are undisputed.

Sterling is a bank organized under the laws of the United States, having its principal place of business in New York City. Fidelity is an unincorporated business trust organized under the laws of Massachusetts with its principal place of business in Boston. Fidelity has no office in New York. The business relationship between the parties commenced on March 2, 1972 when a Sterling representative in New York telephoned Kerry B. Fitzpatrick, Financial Vice President of Fidelity, stationed in Jacksonville, Florida, about the possibility of Fidelity having a line of credit at Sterling. In a subsequent telephone conversation on March 13 it was agreed that, subject to the approval of the bank executive committee, Sterling would extend a line of credit for $1,000,000. Fidelity in return would keep compensating balances of 10% of the line of credit and an additional 10% of actual borrowings in a non-interest bearing account at Sterling. Sterling’s executive committee did not act on the line of credit immediately, and on March 29, 1972, Fitzpatrick, who was in New York City on unrelated business, responded to an earlier invitation and dropped by Sterling’s office to get acquainted with some of the employees there. No negotiations took place during the visit, although someone from Sterling did mention that the executive committee would pass on the line of credit the following day.

The $1,000,000 line of credit was approved, and on April 6, 1972 Fidelity opened an account at Sterling containing the requisite $100,000 compensating balance. Some borrowing by Fidelity occurred thereafter, and on March 1, 1973 by mutual agreement the line of credit was increased to $2,000,000. Fitzpatrick was informed of the favorable action on the increase by Sterling’s executive committee when Sterling representatives dropped by a public meeting of Fidelity shareholders in New York City. This visit by Sterling representatives had not been arranged by Fitzpatrick, and other than the social call described earlier, it was the only time when he met in New York with people from Sterling. Balances in Fidelity’s account were increased to compensate' for the addition W the line of credit, and for a time Fidelity borrowed to the full extent of the line. On June 12, 1973, however, all debt owing from Fidelity to Sterling was paid, and the situation between the parties remained in this state for about two months.

Discussions concerning the $2,000,000 note here at issue began on August 14, 1973 when Fitzpatrick, while in Florida, received a call from Sterling requesting that Fidelity “draw down the entire line,” that is, borrow $2,000,000. As was customary, a $200,000 compensating balance would be left in a non-interest bearing account at Sterling. Fitzpatrick agreed, and his office immediately prepared the note in question and transmitted it to New York via mail. The note by its terms made the $2,000,000 face amount payable on November 7, 1973 at Sterling’s office in New York. The note was discounted at a rate of 9V4%, and the discount amount ($42,138.89) deducted from the proceeds, leaving net proceeds to Fidelity of $1,957,861.11. This amount was first credited to Fidelity’s account at Sterling, and then pursuant to Fidelity’s direction $1,757,861.11 (net proceeds less the $200,000 compensating balance) was bankwired to Morgan Guaranty Trust Company in New York for credit to Fidelity’s account there.

Whether the foregoing acts by Fidelity are sufficient to constitute the transaction of business in New York is a close question under any circumstances, and the inquiry is made more acute by the necessity of a federal tribunal having to predict what the New York courts would do in the same circumstances. American Eutectic Welding Alloys Sales Co. v. Dy-tron Alloys Corporation, 439 F.2d 428, 431 (2d Cir. 1971). We believe, however, that the district court was correct in exercising jurisdiction over Fidelity.

The proper inquiry in a case such as this is “whether looking at ‘the totality of the defendant’s activities within the forum’, purposeful acts have been performed in New York by the foreign corporation in relation to the contract, ‘albeit preliminary or subsequent to its execution.’ ” Galgay v. Bulletin Company, Inc., 504 F.2d 1062, 1064 (2d Cir. 1974), quoting Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 457 & n. 5, 261 N.Y.S.2d 8, 18, 209 N.E.2d 68, 75 (1965), cert. denied sub nom. Estwing Manufacturing Co., Inc. v. Singer, 382 U.S. 905, 86 S.Ct. 241, 15 L.Ed.2d 158 (1965). Relating this standard to the specific circumstances of this case, there is first the fact that the note, although prepared and executed by Fidelity in Florida, was expressly made payable in New York. Secondly, with respect to the making of the loan, the funds were not wired to Fidelity in Boston or Florida but first credited to Fidelity’s account at Sterling. Fidelity then directed that they be transferred by Sterling to another bank in New York. As a direct condition of the loan, Fidelity kept a compensating balance of $200,000 in an account at Sterling. Finally, on one occasion a representative of Fidelity voluntarily visited an office of Sterling in New York. These were all purposeful acts done by the defendant in connection with this promissory note.

Fidelity stresses that the New York courts have expressly held that the mere fact that a loan may be payable in New York does not render a non-resident borrower amenable to suit within the state. Hubbard, Westervelt & Mottelay, Inc. v. Harsh Building Co., 28 A.D.2d 295, 284 N.Y.S.2d 879 (1st Dept. 1967); Wirth v. Prenyl, S. A., 29 A.D.2d 373, 288 N.Y.S.2d 377 (1st Dept. 1968). But see G. Benedict Corp. v. Epstein, 47 Misc.2d 316, 262 N.Y.S.2d 726 (S.Ct. Albany Cty. 1965). Nor, Fidelity argues, is a brief presence in New York in the form of a short visit to Sterling’s office sufficient to constitute the transaction of business. Bankers Commercial Corp. v. Alto, Inc., 30 A.D.2d 517, 289 N.Y.S.2d 993 (1st Dept. 1968); see McKee Electric Co. v. Rauland-Borg Corp., 20 N.Y.2d 377, 382, 283 N.Y.S.2d 34, 37, 229 N.E.2d 604, 607 (1967).

We do not dispute these propositions, but the failure of the defendant to do a single act which might have by itself subjected Fidelity to suit in New York is not dispositive. Under Longines, supra, it is the totality of a defendant’s acts which is important. Furthermore, this is not a case in which the sole connection between a payor on a promissory note and New York is that the note is payable there. Not only where the borrowed funds first credited to Fidelity’s account in New York and then at Fidelity’s direction transferred to another New York bank, but they were also evidenced by substantial compensating balances in a New York account. The compensating balances were clearly not merely an accommodation to the lender, as Fidelity would have us believe, but an important part of the bargain. The situation is analogous to one where a loan is made by a bank to allow a non-resident to purchase stock in New York and then secured by the retention of the stock as collateral by the bank. See Irving Trust Co. v. Smith, 349 F.Supp. 146 (S.D.N.Y.1972).

These facts show sufficient purposeful activitiy in New York by Fidelity to constitute the transaction of business within the meaning of Section 302(a)l. Although the loan was first solicited by Sterling and the note executed in Florida, the transaction in its entirety had close connections with New York. Fidelity was not only fully aware of these contacts but also instrumental in creating them.

II.

Turning then to the merits of the case, Fidelity does not deny the existence of the obligation but argues that it has been discharged by fraudulent material alteration made on the note. This defense was not remotely available to Fidelity at the time the action was filed, and to understand this contention, a brief description of the course of the proceedings is required.

Sterling commenced this action in the Supreme Court of the State of New York on December 10, 1973 by service of a summons and notice of motion for summary judgment, as permitted by NYCPLR § 3213 (McKinney’s 1970) in actions on instruments for payment of money only. Fidelity removed the action to federal district court on January 9, 1974, and on January 17 Sterling made an ex parte application to the clerk of the district court for a default judgment on the ground that Fidelity had not responded within the time permitted by the Federal Rules of Civil Procedure. In addition to the principal amount owing on the note, Sterling requested interest of 9Vi% (the rate at which the note had been discounted) from November 7, 1973, the date of maturity, to January 17, 1974, the date of the application. The clerk entered a default judgment of this effect.

Upon receiving notice that a default judgment had been entered against it, Fidelity, through its attorneys, applied by order to show cause to have the default judgment set aside. In substance, Fidelity argued that it had complied with the requirement of the Federal Rules. Because of the large sum of money at stake, and without deciding the merits of Fidelity’s argument, Judge Frankel did reopen the judgment. He ordered Fidelity to treat Sterling’s motion for summary judgment originally filed in state court as an initial pleading and to respond to it. Fidelity’s answer then interposed the defense of fraudulent material alteration (in addition to the jurisdictional point already discussed), a theory which was repeated by Fidelity in opposition to Sterling’s ensuing motion for summary judgment.

Fidelity’s asserted defense has its roots in a notation “9V4” penciled on the face of the note. The notation was concededly not on the note when originally executed, and according to Fidelity was used to represent to the clerk of the district court that Sterling was entitled to post maturity interest at the rate of 9V4%. In fact, Fidelity argues, there was no agreement between the parties with respect to post-maturity interest, and under those circumstances the proper post-maturity rate was 6%, as provided by statute. And as used to obligate Fidelity to pay a higher rate of interest than would have otherwise been required by the terms of the note the “9V4” became a material alteration. Any material alteration, if fraudulently made, operates to discharge the obligation, and Fidelity argues that there is at least a factual issue over whether the requisite fraudulent intent existed.

We are mindful that as a general proposition summary judgment is inappropriate if issues of motive, intent and other subjective feelings are involved. Empire Electronics Co. v. United States, 311 F.2d 175, 180 (2d Cir. 1962); Cali v. Eastern Airlines, Inc., 442 F.2d 65, 71 (2d Cir. 1971). Furthermore, we are cognizant of the duty to draw all reasonable inferences in favor of the party against whom summary judgment is sought. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). But F.R.C.P. 56(c) permits summary judgment when there is no “genuine issue as to any material fact”, and this is a case in which only one inference — the utter absence of any sign of fraudulent intent — can reasonably be drawn from the facts. It is obvious that the “9V4” notation was made on the note by personnel in the Sterling’s loan department to record the rate at which the note was discounted. Such a notation was in accordance with standard bank practices. (Joint Appendix 86a-87a). And there was no deviousness in in trying to collect post-maturity interest at the rate of 9V4%. Nor could there have been, for Sterling was fully aware the Fidelity would learn of the judgment either through notification by the clerk or through attempted execution. Any attempted deception would then have been fully disclosed and rendered totally unavailing. The application for default judgment was made upon the belief that Sterling was legally entitled to interest at the same rate at which the note was discounted. Whether or not this belief was mistaken — a question we do not decide — it was surely not wholly without reasonable foundation. The only potential factual issue in this case was the proper rate of post-maturity interest. That question was resolved by Sterling’s agreement before the district court to accept 6%. Accordingly, the granting of summary judgment was proper, and the judgment of the district court is therefore affirmed.

Affirmed.

      . Total balances were of course required to be $400,000 — $200,000 for the line of credit and $200,000 for actual borrowings.

      . Fidelity would characterize the visit as social, but there can be no doubt that it was prompted by the existence of a budding business relationship. And although the visit took place well before the execution of the note involved in this case, it related directly to the establishment of Fidelity’s line of credit at Sterling and thus facilitated the subsequent loan agreement.

      . We are not unmindful of the fact that Epstein has been cited by the Appellate Division, First Department, as “not supported by the weight of authority.” Hubbard, Westervelt & Mottelay, Inc. v. Harsh Building Co., 28 A.D.2d 295, 298, 284 N.Y.S.2d 879, 882 (1st Dept. 1967). However, the New York Court of Appeals has more recently cited Epstein with apparent approval. Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 17, 308 N.Y.S.2d 337, 340, 256 N.E.2d 506, 508 (1970).

      . Uniform Commercial Code § 3-122(4) (McKinney’s 1964) provides:
      (4) Unless an instrument provides otherwise, interest runs at the rate provided by law for a judgment
      (b) . . from the date of accrual of the cause of action.
      NYCLPR §§ 5003, 5004 (McKinney’s 1963; Supp. 1974-75) provide that the interest rate on judgments is 6%. There is no New York decision construing UCC § 3-122(4), although prior case law indicates that interest after maturity runs at the legal rate even though the pre-maturity rate prescribed by the instrument may be different. Metropolitan Savings Bank v. Tuttle, 290 N.Y. 497, 49 N.E.2d 983 (1943).

      . Uniform Commercial Code § 3-407(1) (McKinney’s 1964) provides:
      (1) Any alteration of an instrument is material which changes the contract of any party thereto in any respect
      Under pre-UCC case law an alteration of a note affecting the rate of post-maturity interest is regarded as material. See, e. g., Weyerhauser v. Dun, 100 N.Y. 150, 156, 2 N.E. 274 (1885).

      . Uniform Commercial Code § 3-407(2)(a) (McKinney’s 1964).


source: Caselaw Access Project

author: SNEED, Circuit Judge:

license: Public Domain

text:
    ISHIZAKI KISEN COMPANY, LTD., Appellant, v. UNITED STATES of America, Appellee. ISHIZAKI KISEN COMPANY, LTD., Appellee, v. UNITED STATES of America, Appellant.
    Nos. 73-1248, 73-1249.
    United States Court of Appeals, Ninth Circuit.
    Feb. 3, 1975.

      Graydon S. Staring, Lillick, McHose, Wheat, Adams & Charles, San Francisco, Cal., for appellant.
    William E. Gwatkin, III, San Francisco, Cal., for appellee and cross-appellee.
    Before KOELSCH and SNEED, Circuit Judges, and FIRTH, District Judge.

       Honorable Robert Firth, United States District Judge, Central District of California, sitting by designation.

   OPINION

SNEED, Circuit Judge:

This admiralty case is the result of a collision between two vessels in the harbor at Kure, Japan. It raises a question concerning the application of the presumption of fault rule announced in The Pennsylvania, 86 U.S. (19 Wall.) 125, 22 L.Ed. 148 (1874), to collisions in foreign waters. Jurisdiction rests on 28 U.S.C. § 1292(b), 28 U.S.C. § 1333, and The Public Vessels Act, 46 U.S.C. § 781 et seq.

The vessels involved are the Kinsei-Go, a Japanese vessel owned and operated by Ishizaki Kisen Co., Ltd., and Army Vessel J — 3793, owned by the United States and operated by the Department of the Army. The Kinsei-Go is a hydrofoil-type vessel of 63.75 gross tons which is regularly engaged in passenger service between the cities of Hiroshima, Kure, and Matsuyama. The J — 3793 is a vessel of about 39 gross tons which is operated by the Army as personnel and cargo carrier in Kure harbor.

On the morning of December 21, 1967, in clear weather, both vessels were operating in their regular capacities on the waters of Kure harbor. The J — 3793 was making a speed of 13 knots when her master first sighted the Kinsei-Go on his vessel’s port bow, on a crossing course, at a distance of 1450 meters. The Kinsei-Go was making a speed of 31V2 knots when her captain first sighted the J— 3793 on his vessel’s starboard bow, on a crossing course, at a distance of 800 meters. The J — 3793 maintained her course and speed until she was at a distance of approximately 100 meters from the Kinsei-Go. At this point the master of the J — 3793 reversed the engines from ahead to full astern. Immediately thereafter he sounded three short blasts on the ship’s whistle to properly indicate that the engines were then full astern. The Kinsei-Go maintained her course and speed until she reached a point approximately 50 meters from the J-3793. At this point the captain of the Kinsei-Go ordered her engines stopped and the rudder put hard left.

Because of the slow turning reaction of the Kinsei-Go and her speed at the time her engine was ordered stopped, the Kinsei-Go continued to ride on her hydrofoils as she passed the stem of the J — 3793 which had by then come to a complete stop with her engine control in the neutral position. A collision resulted when the rear starboard hydrofoil of the Kinsei-Go made contact with the port bow of the J — 3793.

The owners of the Kinsei-Go filed this action for damages and the United States counter-claimed. The case was tried in admiralty solely on the issue of liability. The district court, applying Japanese law, held both vessels at fault and, pursuant to the International Convention with Respect to Collisions, 1910, to which Japan is a signatory but the United States is not, apportioned the fault and liability % to the Kinsei-Go and Vi to the J — 3793. An Interlocutory Judgment was entered and this appeal and cross-appeal followed. We affirm.

The United States appeals the apportionment of Vi of the fault to the J — 3793. This question will be treated below. The principal controversy is the apportionment of % of the fault to the Kinsei-Go. Under Rule 19 of the International Rules of the Road (Regulations for Preventing Collisions at Sea, 1960) the KinseiGo, having the J — 3793 on her starboard side was required to give way and failed to do so. However, this rule is modified by Japan Port Regulation 18 — 1 which states that “Miscellaneous Vessels must give way to vessels other than Miscellaneous Vessels in harbors.” The KinseiGo is not a Miscellaneous Vessel and therefore, if the J — 3793 were a Miscellaneous Vessel, the J — 3793 rather than the Kinsei-Go would be the vessel required to give way. The trial court found that the J — 3793 was not a Miscellaneous Vessel and this finding is not really in dispute. The dispute centers on the fact that the J-3793 was not flying her international call sign as required by Article 30.1 of the Japanese Port Regulations Law. This call sign is required to be flown by all vessels transiting Kure harbor which are not Miscellaneous Vessels. The argument is therefore raised that the failure of the J — 3793 to fly this call sign contributed to a mistaken belief of the captain of the Kinsei-Go that the J — 3793 was a Miscellaneous Vessel which was required to give way. The trial court made the following Findings of Fact which rebut such an argument:

22. At the time the J — 3793 came into view of the Kinsei-Go, the J-3793 was not flying her international call sign as required by Article 30.1 of the Japan Port Regulations Law. However, there was no evidence presented in this case which would support a conclusion that this failure to fly an international call sign affected the judgment of the captain of the KinseiGo in any way as to whether or not the J — 3793 was or was not a miscellaneous vessel.
23. The failure of the J — 3793 to fly her international call sign did not contribute in any way to the collision between the J-3793 and the Kinsei-Go.

These findings are not clearly erroneous and we will not disturb them on appeal. However, it is necessary to examine the method by which these findings were made. The trial court placed the burden on the plaintiff to prove that the violation of port rules by the J — 3793 had contributed to the collision. The plaintiff failed to meet this burden but contends that no such burden should have been placed upon it and that under the Pennsylvania Rule the burden should have been placed on the United States to show that the failure to fly the international call sign could not have been the cause of the collision. The Pennsylvania, 86 U.S. (19 Wall.) 125, 22 L.Ed. 148 (1874). The failure to meet this burden assert the plaintiffs, would require the apportionment to the J — 3793 of greater than Vi fault and liability. The United States asserts that the Pennsylvania Rule is not applicable to the facts of this case.

I.

The Pennsylvania Rule

There is no doubt that a collision in foreign territorial waters is governed by the law of the place of collision. Western Union Co. v. Brown, 234 U.S. 542, 34 S.Ct. 955, 58 L.Ed. 803 (1914); Slater v. Mexican Nat’l R.R., 194 U.S. 120, 24 S.Ct. 581, 48 L.Ed. 900 (1904); Smith v. Condry, 1 How. 28, 11 L.Ed. 35 (1843). This jurisdiction usually “has the most significant relationship to the occurrence and the parties.” The parties recognize this and have devoted much time in an attempt to determine the meaning of Article 6 of the International Convention with Respect to Collisions, 1910, which Japan has signed and which abolishes “legal presumptions of fault.” Both parties then frame the issue as whether or not this Convention abolishes the Pennsylvania Rule. This Rule stated more fully is as follows:

The liability for damages is upon the ship or ships whose fault caused the injury. But when, as in this case, a ship at the time of a collision is in actual violation of a statutory rule intended to prevent collisions, it is no more than a reasonable presumption that the fault, if not the sole cause, was at least a contributory cause of the disaster. In such a case the burden rests upon the ship of showing not merely that her fault might not have been one of the causes, or that it probably was not, but that it could not have been. Such a rule is necessary to enforce obedience to the mandate of the statute. The Pennsylvania, supra, at 135.

The parties in their briefs, although not in oral argument, overlooked the possibility that the Pennsylvania Rule is applicable either because it is a part of the procedural law of the forum or because the interests of the forum outweigh those of the place of the collision notwithstanding its possible non-existence under Japanese law.

To determine whether for either or both of these reasons the Pennsylvania Rule should be applied in this case it is necessary to examine the principal purposes of the Rule. There are two such purposes. The first is that it is designed to “enforce obedience to the mandate of the [safety] statute” violated. The Pennsylvania at 135. This is accomplished by imposing a burden on the violator that “is frequently extremely difficult, if not impossible, to discharge.” The Princess Sophia, 61 F.2d 339, 347 (9th Cir. 1932). Obedience, it is reasoned, will be considered by most as preferable to an impossible obstacle to exculpation. In all events, greater attention to such statutes by ship operators will result. The second is that the operation of the Rule simplifies the adjudication of collision cases when applied in conjunction with a system of admiralty law, such as is presently followed by the courts of the United States, in which there is an equal division of property damages when both vessels are at fault.

Neither of these purposes in our view is sufficiently compelling to require the application of the Pennsylvania Rule to these facts. Neither party suggests that the equal division of property damages presently required under American admiralty law is applicable to this case. All assume quite properly that the comparative fault system of Japanese law applies. To utilize the Pennsylvania Rule in conjunction with the Japanese system does nothing to simplify adjudication and, because of the difficulty in comparing the failure to discharge a frequently impossible burden with the fault of a different character of the other party to a collision, may frustrate the ends of the Japanese system by necessitating the resort to the arbitrary result that an equal division of damages provides.

It remains true, of course, that the application of the Pennsylvania Rule to the facts of this case would promote obedience to Article 30.1 of the Japanese Port Regulations Law. However, as will be pointed out below, there is no showing that Japanese maritime law ever contained a rule similar to the Pennsylvania Rule and, in any event, it is our view that any such rule would not have survived the Japanese adherence to the International Convention with Respect to Collisions, 1910. Under these circumstances utilization of the Pennsylvania Rule is unnecessary. The interests of the forum under the circumstances of this case do not outweigh those of the place of collision.

Nor should the Pennsylvania Rule here be considered a part of the procedural law of the forum. Were the Rule designed merely to shift to the violator of the statutory rule the burden of going forward with the evidence its characterization as “procedural” would be proper. § 134 Restatement Conflict of Laws 2d (1971). The Rule, however, does much more. Its effect has been described as follows:

The shift in burden resulting from application of the Pennsylvania Rule is two-fold. Not only must the violator meet the burden of producing evidence to counter the presumption of causation, but he must also persuade the trier of fact that his explanation should be adopted. In order to carry this burden of persuasion under the Rule as it was created, it appears that a statutory violator would have to demonstrate beyond all doubt that his violation did not cause the loss.

This is in accord with our own decisions which hold that the vessel guilty of a statutory violation has the burden “[to establish] that the violation could not reasonably be held to have been a proximate cause of the collision.” Pacific Tow Boat Co. v. State Marine Corp., 276 F.2d 745, 749 (9th Cir. 1960). Such an effect generally will impose upon the ship to a collision which violated the statutory rule a significant portion of the property damages for which otherwise it very likely would not have been responsible.

Under the currently prevailing view with respect to the distinction between substance and procedure in the conflict of laws setting, rules designed to affect the decision of a particular issue are classified as substantive. The Restatement, Conflict of Laws 2d (1971) puts it this way:

§ 134. Burden on Going Forward with The Evidence: Presumptions
The forum will apply its own local law in determining which party has the burden of going forward with the evidence on a particular issue unless the primary purpose of the relevant rule of the state of the otherwise applicable law is to affect decision of the issue rather than to regulate the conduct of the trial. In that event, the rule of the state of the otherwise applicable law will be applied.

As an example of a rule designed “to affect decision of the issue rather than to regulate the conduct of the trial” the Comment to § 134 cites a statute which provides that a person shall be deemed dead if nothing is heard of him for a fixed period of time in the absence of rebutting evidence. Another example cited is the familiar type of statute in which under certain circumstances there is a rebuttable presumption that two persons died simultaneously. Such rules are designed to provide an arbitrary solution to a problem where little or no evidence is available.

We conclude, therefore, that the Pennsylvania Rule is more akin to substantive law than to rules of procedure concerned primarily with judicial administration. The consequence is that it should not be applied to this case merely because it constitutes a part of the law of the forum. Under circumstances other than those presently before us it may be appropriate to apply the Rule because the interests of the forum may outweigh those of the place of the accident. This is not such a case, however.

Our conclusion is not in conflict with the rather sketchy existing case law. We have been cited to no case involving a collision in foreign territorial waters in which a finding of liability was necessarily predicated on application of the Pennsylvania Rule. Richelieu Navigation Co. v. Boston Marine Insurance Co., 136 U.S. 408, 10 S.Ct. 934, 34 L.Ed. 398 (1890) has at times been read as applying the Rule to the stranding of a vessel in foreign waters. See Director General of India Supply Mission v. S. S. Maru, 459 F.2d 1370, 1376 (2d Cir., 1972), cert. denied 409 U.S. 1115, 93 S.Ct. 898, 34 L.Ed.2d 699 (1973); The Lansdowne, 105 F. 436, 443 (E.D.Mich.1900); Flint & P.M.R. Co. v. Marine Ins. Co., 71 F. 210, 215 (E.D.Mich.1895), appeal dismissed, 76 F. 1005 (6th Cir. 1896). In Richelieu, a Canadian vessel stranded on an island in Canadian waters after failing to reduce its speed in fog and maintain a lookout as required by Canadian law. Although the Supreme Court discussed the Pennsylvania Rule in Richelieu a careful reading demonstrates that its finding of liability was based on a burden similar to the Pennsylvania Rule which was imposed by Canadian statute. See The Pennsylvania Rule: Charting a New Course for An Ancient Mariner, 54 Boston U.L.Rev. 78, 93 n. 91 (1974).

The question also arose in The Aakre, 122 F.2d 469 (2d Cir.), cert. denied 314 U.S. 690, 62 S.Ct. 360, 86 L.Ed. 552 (1941), which involved the stranding of a Norwegian vessel in the Bay of Fundy. The Aakre majority never reached the question, however, determining that even if the Rule applied in foreign waters, the owners of the vessel had met the burden of proof under the Rule and were free from liability. 122 F. 469, 474. In a dissenting opinion Judge Frank argued that the Pennsylvania Rule should be applied because “it is salutary that our courts should do what they can to see to it that legislation like the Norwegian statute is obeyed.” 122 F.2d at 476. This reasoning is not persuasive on the facts of this case for, as is evident from our previous discussion, the interests of Japan are not in accord with the Rule of The Pennsylvania.

U.

Japanese Law As Affected By the . International Convention

Turning to Japanese law, the law of the place of collision, it is necessary to determine whether the Pennsylvania Rule is a part of that law. We begin by observing that the parties have not established Japanese law beyond pointing out that Japan is a signatory nation to the International Convention with Respect to Collisions, 1910. It has not been proved, for example, that Japanese law at any time embodied the Pennsylvania Rule or its equivalent. Apparently the parties have assumed the Rule, or its equivalent, existed and have focused their attention on the effect on such a rule of Article 6 of the Convention. For the purpose of this opinion we also will assume that it existed.

Article 6 of the Convention can be translated from the French as follows: There shall be no legal presumptions of fault in regard to liability for collision.

There exists a difference of opinion with respect to whether this is a proper trans-. lation of the applicable official French language of the Convention. The expression “legal presumptions of fault” is an English translation of the French expression “présomptions légales de faute.” Benedict insists that the proper translation of the French is “statutory presumptions of fault” so that Article 6 properly translated would read:

There shall be no statutory presumptions of fault in regard to liability for collision.

See 4 Benedict on Admiralty, § 620 at 246 — 5 (1940). So translated a judge-made Japanese version of the Pennsylvania Rule would survive the Convention because it is not a statutory presumption but rather one created by judges to assist them in deciding cases. Benedict’s analysis is based upon the distinction in the Code Napoleon, §§ 1350, 1353 between a statutory presumption and non-statutory presumptions. Code Napoleon, § 1350 defines “La présomption légale” as one which is “affixed by a special statute.” This definition, argues Benedict, must be given to the same words when they appear in Article 6.

We believe that Article 6 is addressed to presumptions such as the Pennsylvania Rule without regard to whether they rest on judicial or legislative authority. Consistency-in the interpretation of Article 6 requires this result because such presumptions in some nations may be contained in statutes while in others in the opinions and judgments of courts. The Pennsylvania Rule, for example, is a judge-made rule in the United States while in the United Kingdom its equivalent was contained in The Merchant Shipping Act of 1894 which was repealed shortly after the United Kingdom signed the International Convention. To interpret the Convention to require the repeal of a statutory presumption, but not one different in substance, derived from case law, irrationally enhances the source of the presumption at the expense of uniformity in the understanding and application of the Convention.

It does not follow from this that Article 6 is intended to make inoperative all presumptions. Some, such as those which place upon a vessel the duty of going forward with the evidence, are not presumptions “in regard to liability for collision.” They do not affect liability in the strong and direct way that the Pennsylvania Rule does. Once more it is important to recognize that the Pennsylvania Rule more resembles a rule of substantive law than it does a mere procedural rule designed to expedite judicial proceedings. The latter rules survive Article 6. The Pennsylvania Rule, on the other hand, establishes an almost insurmountable burden of proof that virtually insures that some liability will be imposed upon the ship that is charged with such a burden. It strains reason to insist that it is not a legal presumption of fault “in regard to liability for collision.”

Because we believe Article 6 is not consistent with the continued existence of a Japanese version of the Pennsylvania Rule, we are prepared to hold that the law of the place of the collision, Japan, presently contains no such Rule, or its equivalent. We are further encouraged to believe this by the failure of the counsel for Kinsei-Go to offer any proof that Japanese law is to the contrary.

It follows that the trial court did not err in refusing to employ the Pennsylvania Rule.

III.

The Cross-Appeal of the United States

The United States has cross-appealed in this action and claims error in the apportionment of Vi of the fault and liability to the J — 3793. This apportionment was made on the basis of the following finding of fact:

9. The J — 3793 violated Rule 28(b) of the International Rules of the Road by failing to sound a danger signal, and this failure was a cause of the collision.

This finding is not clearly erroneous and the judgment of the district court is

Affirmed.

      . According to the district court, the fault of the J-3793 contributing to the collision consisted solely of the failure to sound a danger signal in accordance with Rule 28(b) of the International Rules of the Road (33 U.S.C.A. § 1090).

      . Rule 19 (33 U.S.C.A. § 1081).
      When two power-driven vessels are crossing, so as to involve risk of collision, the vessel which has the other on her own starboard side shall keep out of the way of the other.

      . Article 3 of the Japan Port Regulations Law defines Miscellaneous Vessels as referring to “launches, lighters, small boats, and all craft propelled wholly or primarily by oar.” The district court found that “the master of the Kinsei-Go was mistaken in his belief that the J-3793 was a ‘Miscellaneous Vessel’ . and there was no reasonable basis for the master of the Kinsei-Go to believe that the J-3793 was a ‘Miscellaneous Vessel.’ ”

      . Article 30.1. Vessels other than Miscellaneous Vessels shall not enter a port without hoisting their International Call Sign by signal hoist. This also applies to vessels who intend to transit a port area.

      . Cf. § 145 Restatement, Conflict of Laws 2d (1971).

      . See Reliable Transfer Co., Inc. v. United States, 497 F.2d 1036 (2d Cir.), cert. granted, 419 U.S. 1018, 95 S.Ct. 491, 42 L.Ed.2d 291 (1974).

      . The Pennsylvania Rule: Charting a New Course for An Ancient Mariner, 54 Boston U.L.Rev. 78, 80 (1974). (footnotes omitted).

      . In The Lansdowne, infra, the court stated that the Rule applied to a collision between a Canadian and an American vessel in Canadian waters. 105 F. at 443. However, the court also apparently found negligence without the aid of the Rule. “The navigation of the Lansdowne was fraught with so many sins against the Canadian statutes, the neglect of so many precautions required by the ordinary practice of seamen, that all doubts must be resolved against her.” 105 F. at 448.
      Flint & P.M.R. Co., infra, did not involve a collision but a stranding of an American vessel in Canadian waters. While the court stated that the Pennsylvania Rule applied, it was also indecisive in determining whether American or Canadian law governed the case. 71 F. at 214-16. Moreover, negligence was found without aid of the Rule as the court stated that the evidence “establishes incontestably the relation of cause and effect between the speed and the stranding of the steamer.” 71 F. at 216.

      . This Act read as follows:
      Sect. 419(4). Where in a case of collision it is proved to the court before whom the case is tried, that any of the collision regulations have been infringed, the ship by which the regulation has been infringed shall be deemed to be in fault, unless it is shown to the satisfaction of the court that the circumstances of the case made departure from the regulations necessary.

      . The repeal was accomplished by The Maritime Conventions Act, 1911. See Marsden, 4 British Shipping Laws: Collisions at Sea, § 634 (11th ed. 1961). The effect of the repeal has been described as follows:
      It means that the old statutory provision that the mere fact of a breach of the regulations, whether it did or did not in fact contribute to the collision, is not to be sufficient to render a vessel responsible for the collision as one of two wrongdoers is repealed, and the court is left to its own judgment and discretion in the case before it. The Enterprise [1912] P. 207, 211; 12 Aspinali 240, 244. Similar developments occurred in Canada, Newfoundland, Australia, and New Zealand. See Griffin, The American Law of Collision, § 25 (1949).

      . Rule 28 (33 U.S.C.A. § 1090):
      (b) Whenever a power-driven vessel which, under these Rules, is to keep her course and speed, is in sight of another vessel and is in doubt whether sufficient action is being taken by the other vessel to avert collision, she may indicate such doubt by giving at least five short and rapid blasts on the whistle. The giving of such a signal shall not relieve a vessel of her obligations under Rules 27 and 29 or any other Rule, or of her duty to indicate any action taken under these Rules by giving the appropriate sound signals laid down in this Rule.


author: LIVELY, Circuit Judge.

text:
    Theodore O. WENTWORTH and Shirley M. Wentworth, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 74-1482.
    United States Court of Appeals, Sixth Circuit.
    Feb. 12, 1975.

      Bart A. Brown, Jr., J. Neal Gardner, Dinsmore, Shohl, Coates & Deupree, Conrad Magrish, Magrish & Magrish, Cincinnati, Ohio, for petitioners-appellants.
    Scott P. Crampton, Richard Roberts, Asst. Atty. Gen., Meyer Rothwacks, Gilbert E. Andrews, Jr., Richard Farber, Joseph McManus, Tax Division-Dept. of Justice, Washington, D. C., Meade Whitaker, Chief Counsel, I. R. S., Washington, D. C., for respondent-appellee.
    Before MILLER and LIVELY, Circuit Judges, and McALLISTER, Senior Circuit Judge.
   LIVELY, Circuit Judge.

This appeal from the Tax Court involves questions of law only. The facts are set forth in the memorandum findings of fact and opinion of the Tax Court reported at 32 T.C.M. 925 (1973). Only those facts necessary to an understanding of this opinion are repeated. The minutes of a closely held corporation (Chemical) disclosed that the directors voted on November 30, 1965 to redeem all of the stock of T. O. Wentworth, a major shareholder (taxpayer). The stock of the shareholder was delivered to the corporation and cancelled. In return for the stock the corporation credited, and wiped out, an indebtedness from the shareholder to the corporation. The full redemption price was satisfied by the corporation’s further action of assuming the shareholder’s outstanding indebtedness to another related corporation (Vulcan). As of December 31, 1965, the last day of the tax year of both the taxpayer and the two corporations, the corporate records showed that the taxpayer owned no stock in Chemical and was not indebted to it or to Vulcan. On January 12, 1966 Chemical merged into Vulcan and the merger agreement which was filed with the Ohio Secretary of State did not list taxpayer as a stockholder of Chemical.

Sometime in early 1966 newly hired counsel advised taxpayer and’ Chemical that the redemption violated a statute which provides that an Ohio corporation may not “purchase or redeem its own shares if immediately thereafter its assets would be less than its liabilities plus stated capital . . .Ohio Revised Code, § 1701.35(B). This determination was based on a conclusion that Chemical had incurred losses in 1965 on several uncompleted contracts by making expenditures in excess of fixed contract prices. Though Chemical reported its income for tax purposes on a “completed contract” basis, in April 1966 a reserve for losses on uncompleted contracts was set up on the corporation’s books as of December 31, 1965. This entry had the effect of reducing the net worth of the corporation drastically. Prior to this entry, the books disclosed a net worth sufficient to permit redemption of taxpayer’s stock without violating § 1701.35(B).

The Tax Court Judge held that “[t]he fact that the redemption may have violated state law does not affect its Federal income tax consequences.” Having come to this conclusion, he made no finding as to whether Chemical actually violated Ohio law. There is no dispute that a redemption accomplished in the manner described herein would have resulted in a realization of gain for income tax purposes. It is the contention of the taxpayer that the transaction of November 30, 1965 was “void” under Ohio law and a complete nullity. He argues that no actual redemption took place and that the adjustments and entries made in the records and books of Chemical in April 1966 merely corrected the ones made earlier under the mistaken assumption that a redemption had taken place.

On appeal, taxpayer relies principally on cases which hold that state law defines the nature and extent of legal interests where federal tax liability is sought to be imposed. In Morgan v. Commissioner, 309 U.S. 78, 82, 60 S.Ct. 424, 426, 84 L.Ed. 585 (1940), the Supreme Court stated, “. . . in the application of a federal revenue act, state law controls in determining the nature of the legal interest which the taxpayer had in the property or income sought to be reached by the statute.” In Blair v. Commissioner, 300 U.S. 5, 57 S.Ct. 330, 81 L.Ed. 465 (1937), the Court held that a decision of a state court was final on the nature and incidences of a trust and denied the Commissioner’s claim that the assignor of trust income should be taxed. See also Aquilino v. United States, 363 U.S. 509, 80 S.Ct, 1277, 4 L.Ed.2d 1365 (1960), which dealt with the priority of liens and relied on Morgan v. Commissioner, supra. These cases merely affirm the recognized principle that property rights and interests are usually deter rmn'ed — by ‘ StaTe“law. They do noChold “that"Congress is~precluded from subjecting certain transactions with respect to such property rights and interests to federal taxation. In Morgan, supra, 309 U.S. at 80-81, 60 S.Ct. at 426, the Court further stated:

State law creates legal interests and rights. The federal revenue acts designate what interests or rights, so created, shall be taxed. Our duty is to ascertain the meaning of the words used to specify the thing taxed. If it is found in a given case that an interest or right created by local law was the object intended to be taxed, the federal law must prevail no matter what name is given to the interest or right by state law. (Footnote omitted.)

We believe the present case is controlled by the “claim of right” doctrine set forth in North American Oil v. Burnet, 286 U.S. 417, 52 S.Ct. 613, 76 L.Ed. 1197 (1932), where the Supreme Court held—

If a taxpayer receives earnings under a claim of right and without restriction as to its disposition, he has received income which he is required to return, even though it may still be claimed that he is not entitled to retain the money, and even though he may still be adjudged liable to restore its equivalent. 286 U.S. at 424, 52 S.Ct. at 615.

This doctrine has been followed in other cases by both the Supreme Court and this court. See Healy v. Commissioner, 345 U.S. 278, 73 S.Ct. 671, 97 L.Ed. 1007 (1953); United States v. Lewis, 340 U.S. 590, 71 S.Ct. 522, 95 L.Ed. 560 (1951); Davis v. United States, 226 F.2d 331 (6th Cir. 1955); Haberkorn v. United States, 173 F.2d 587 (6th Cir. 1949). These cases point out that one of the basic features of the federal income tax laws is the requirement of an annual accounting. Where a transaction with taxable consequences is carried out in one year and treated by the parties accordingly, the discovery in a subsequent year that the transaction in fact violated a state law does not alter the tax liability of the year of the event. From November 30, 1965 until sometime in April 1966, all parties to the redemption transaction took the position that taxpayer was no longer a shareholder of Chemical and that neither Chemical nor Vulcan was a creditor of taxpayer. Later discovery that the transaction by which this situation was brought about apparently violated the corporation laws of Ohio did not affect the tax consequences, as they were fixed on December 31, 1965. The Supreme Court stated in Healy v. Commissioner, supra, 345 U.S. at 282, 73 S.Ct. at 674, “A mistaken claim is nonetheless a claim . . . .” (Citation omitted.)

Other courts have applied the claim of right doctrine to situations similar to the present case. In United States v. Lesoine, 203 F.2d 123 (9th Cir. 1953), it was held that dividend payments by a close corporation which were determined in a subsequent year to have violated state law were nevertheless taxable to the shareholders in the year of payment. In that case the dividends were repaid and the book entries were “reversed” in the later year, but this action was held ineffective to alter the taxability in the year of receipt. In Osburn California Corporation v. Welch, 39 F.2d 41 (9th Cir.), cert. denied, 282 U.S. 850, 51 S.Ct. 28, 75 L.Ed. 753 (1930), it was stated that the power of Congress to impose an income tax and to define what is income is unaffected by the laws of the various states. A similar view was expressed in Gunby v. Helvering, 74 App.D.C. 185, 122 F.2d 203, 206 (1941). These are n.ot cases where a corporation could have complied with state law, but did not do so and then relied on a technical violation of state law to escape taxes. See, e. g., Lodi Iron Works, Inc., 29 T.C. 696 (1958). In each of the cited cases, the transaction upon which the tax was based violated a substantive provision of state law, though such violation was not apparent at the time of the transaction.

The liability of closely held corporations and their shareholders for federal taxes should not be made to depend upon their compliance with state laws. In addition to providing formal requirements for doing business in corporate form, state corporation laws are designed to protect minority stockholders and outsiders who deal with or are affected by activities of the corporations subject to such laws; they are not primarily revenue measures. Statutes such as § 1701.35(B) are not self-executing, but are enforced by the courts at the behest of one who suffers injury or a threat of injury by reason of their violation. See, e. g., Lowry v. Sunday Creek Coal Co., 2 Ohio App.2d 260, 207 N.E.2d 678 (1964). In the present case, no steps were taken by the Ohio authorities to set aside the stock redemption of November 30, 1965, or to treat it as a nullity. The Internal Revenue Service was entitled to treat this transaction in the same way that the parties who effected it did, and to insist that Chemical and taxpayer adhere to the requirement of annual accounting. To hold otherwise would be to permit a situation where the taxability of transactions could be made to depend upon a decision by the people directly affected on whether to “reverse” previously completed transactions to secure more favorable tax consequences. An equitable system of taxation cannot permit the possibility of such manipulation.

The judgment of the Tax Court is affirmed.


author: BIGGS, Circuit Judge.

text:
    UNITED STATES of America ex rel. Theodore GEISLER, Appellant, v. Gilbert A. WALTERS, Superintendent, Western Correctional Institution, Pittsburgh, Pennsylvania.
    No. 74-1345.
    United States Court of Appeals, Third Circuit.
    Final Submission Dec. 16, 1974.
    Decided Feb. 5, 1975.

      Joseph N. Bongiovanni, III, Speese & Kephart, Philadelphia, Pa., for appellant.
    John J. Hickton, Dist. Atty. of Allegheny County, John M. Tighe, First Asst. Dist. Atty., Robert L. Eberhardt, Robert L. Campbell, J. Kent Culley, Asst. Dist. Attys., Pittsburgh, Pa., for appellee.
    Before BIGGS, ADAMS and GARTH, Circuit Judges.
   OPINION OF THE COURT

BIGGS, Circuit Judge.

This is an appeal from the district court’s dismissal without a hearing of the relator-appellant’s, Geisler’s, application for habeas corpus. The district court ruled that Geisler had failed to exhaust his state remedies. The instant appeal followed. Its disposition requires our examination of the complicated history of Geisler’s various motions and petitions and a determination of whether he has either exhausted his state remedies or been victimized by circumstances rendering those remedies ineffective. 28 U.S.C. § 2254(b).

I. FACTUAL BACKGROUND

Geisler was tried by a jury on October 19, 1962 for armed robbery and violation of the Uniform Firearms Act. His trial was conducted by Judge Robert Morris of the Pennsylvania Court of Common Pleas. Geisler was found guilty on both counts, and his counsel filed a motion for a new trial but subsequently withdrew it. On February 15, 1963, Geisler was sentenced to a term of 1Lh to 15 years. At a hearing on March 3, 1963, his counsel requested leave to argue the original motion for a new trial. Leave was denied.

In 1964, Geisler filed a petition for habeas corpus in the state court. Judge Morris dismissed that petition without a hearing on October 6, 1964 because it raised issues which he deemed were not properly before him in a habeas corpus proceeding. On appeal, the Pennsylvania Superior Court affirmed per curiam. Commonwealth ex rel. Geisler v. Maroney, 205 Pa. Super. 739, 209 A.2d 437 (1965). The Pennsylvania Supreme Court denied allocatur on August 30, 1965.

Geisler then filed a pro se petition pursuant to the Pennsylvania Post Conviction Hearing Act, 19 P.S. § 1180-1 et seq., on October 23, 1967. On March 7, 1968 Judge Morris conducted a hearing on the petition, having appointed the Allegheny County Public Defender as counsel for Geisler. The issue was stated to be whether Geisler had been deprived of his right to appeal. On March 4, 1969, Judge Morris filed an opinion and order dismissing the PCHA petition but permitting Geisler to file a motion for a new trial nunc pro tunc. The Public Defender again served as counsel for Geisler. On June 27, 1969, Geisler filed pro se a motion for a new trial, as follows: (1) he was denied effective assistance of counsel; (2) the identification was so impermissibly suggestive as to be constitutionally infirm; (3) the trial court erred in permitting introduction into evidence of the appellant’s prior record of convictions under the Uniform Firearms Act; (4) the admission of prejudicial and unrelated evidence was improper; (5) his arrest was without probable cause; (6) the Assistant District Attorney engaged in prosecutorial misconduct; (7) the trial judge’s charge to the jury denied Geisler a fair trial; and (8) the jury’s double verdict resulted in double jeopardy to the appellant.

On December 17, 1969, six months after the motion for new trial was filed, a court consisting of Judge Morris and Judge Samuel J. Feigus heard oral argument on the motion and took it under advisement. On April 27, 1970, ten months after Geisler filed his motion of June 27, 1969 for a new trial, and again on July 16, 1970, thirteen months after the filing of his motion for a new trial on June 27, 1969, Geisler filed petitions for disposition of his motion for a new trial. These petitions were identical, the second having been filed because the first did not reach the clerk’s office. In substance, they were a procedural request that Judge Morris act immediately on the motion for a new trial and not a substantive enumeration of Geisler’s claims. While appellant specifically elaborated upon several contentions, including denial of effective assistance of counsel and prejudice arising from introduction into evidence of appellant’s prior record, the petition also referred to appellant’s motion for a new trial and the oral argument on that motion.

On September 11, 1970, fifteen months after Geisler had filed his motion for a new trial, Judge Morris filed the following opinion and order:

“This matter is before the Court on a Petition which the Defendant describes as a ‘Petition for Disposition and Remedy as a Matter of Law, a New ■ Trial.’
“Upon a careful review of the Petition in the light of the petitions heretofore filed, hearing held, Orders made by this Court as well as the Superior Court, we can see nothing in the Petition of a meritorious nature.
“On March 4, 1969, this Court filed its Opinion and Order granting to the Defendant the right to file a motion for new trial, nunc pro tunc. This Order was made as a result of a Post Conviction Petition filed by the Defendant alleging previously that he had been improperly denied his right of appeal. After hearing and testimony taken the Order granting him the right to appeal was made. For reasons known only to the defendant, no action was taken by the defendant to perfect such appeal. We refer to our Opinion and Order of March 4, 1969, wherein we review the case from its inception. We see no merit to Defendant’s allegations. Accordingly, we make the following ORDER. AND NOW, September 11, 1970, for the reasons stated above the prayer of the Petition is denied and the Petition is dismissed” (emphasis added).

The foregoing opinion of the learned Pennsylvania trial judge is not entirely clear, but his order is clear enough for he states that “the prayer of the Petition is denied and the Petition is dismissed.” It would appear to us that, whatever may have been in the mind of Judge Morris, the order of September 11, 1970 was an appealable final order.

Geisler appealed this decision to the Pennsylvania Superior Court, which granted him leave to file a brief pro se in addition to the brief which the Public Defender filed in his behalf. The Public Defender’s brief dealt only with the identification issue. Geisler’s pro se brief raised all the issues which had been contained in the motion for a new trial. It argued as well that appellant had been denied a fair trial and effective assistance of counsel at all proceedings subsequent to trial. On June 30, 1971, the Superior Court affirmed the judgment of sentence per curiam. Commonwealth v. Geisler, 218 Pa. Super. 911, 279 A.2d 198 (1971). Both appellant and the Public Defender then petitioned for allocatur to the Supreme Court of Pennsylvania. Geisler’s petition contained all eight issues raised in the motion for a new trial. Those petitions were denied per curiam on January 14, 1972.

Geisler then turned to the federal courts for relief and filed a petition for habeas corpus on March 20, 1972 in the United States District Court for the Western District of Pennsylvania. The Honorable Joseph Weis, then a district court judge, conducted a hearing on August 28, 1972 to determine whether an evidentiary hearing should be held on the petition. Judge Weis concluded that the exhaustion requirement had not been met. Possibly confusion arose from the fact that Geisler filed two petitions for disposition of his motion for a new trial. The learned district judge apparently took the view that Geisler’s motion for a new trial had not been disposed of on the merits by Judge Morris and that the Court of Common Pleas had disposed only of the petitions asking disposition of his motion for a new trial. Regardless of the basis for this decision, Judge Weis, having concluded that Judge Morris’ order and opinion of September 11, 1970 were not a disposition of Geisler’s motion for a new trial, advised President Judge Ellenbogen of the Allegheny County Court of Common Pleas of this discovery by letter on August 30, 1972 and requested that his court formally dispose of the motion. On October 24, 1972 Judge Morris formally denied the appellant’s motion for a new trial. On October 26, 1972, Judge Weis dismissed Geisler’s federal habeas corpus petition for failure to exhaust state remedies. The United States District Court denied appellant’s motion for reconsideration, and this court denied a certificate of probable cause on March 1, 1973 (C.A. Misc. Rec. No. 72-8114). We cannot agree with Judge Weis’ conclusion that Judge Morris’ decision and order of September 11, 1970 were not a sufficient disposition of Geisler’s claims for the purpose of exhaustion of state remedies.

It should be observed that three years and four months passed before the post trial motion was “formally” disposed of by the Court of Common Pleas, viz., the period from June 27, 1969 to October 24, 1972. Nor perhaps would disposition have been made even on this late date had it not been for the letter of Judge Weis to Judge Ellenbogen.

Geisler next moved to appeal Judge Morris’ order of October 24, 1972 in the Pennsylvania Superior Court. In a per curiam affirmance of that judgment the Superior Court on September 19, 1973 denied appellant’s application for the third time. Commonwealth v. Geisler, 226 Pa.Super. 722, 309 A.2d 817 (1973).

Then occurred whát we deem to be a curious circumstance. In the first federal habeas corpus proceeding, that of March 20, 1972, a United States Magistrate appointed as counsel for Geisler a member of the bar of Allegheny County. Counsel continued to advise appellant after the case returned to the state tribunals and, when the Superior Court rejected Geisler’s appeal on September 19, 1973, wrote Geisler that he had exhausted his state remedies and that he could now file his “Federal Court Petition for Writ of Habeas Corpus”. The substance of the letter is set out in the footnote. At this point, Geisler, as would be expected, apparently abandoned the thought of any appeal to the Supreme Court of Pennsylvania. In view of the great vigor with which Geisler sought relief from his judgments of conviction, we think he would have applied for allocatur, probably pro se, and if allocatur had been denied, there could be no question but that he would have exhausted his state remedies. Geisler foreclosed himself from this course, however, probably because of the advice of counsel.

Geisler then filed a second petition for federal habeas corpus and this was referred to Judge Snyder, who rejected it on the ground that Geisler had not exhausted his state remedies. It is this denial of habeas corpus which is before us on this appeal.

II. THE LAW AND THE DISPOSITION OF THIS CASE

(A)(1) Geisler has exhausted his state remedies. He filed a petition for state habeas corpus. This was refused. On appeal to the Superior Court the judgment was affirmed and allocatur was denied by the Supreme Court. He also filed a petition under the PCHA and Judge Morris, while on the record denying the relief sought, nonetheless granted it in substance by giving Geisler leave to file a motion for a new trial nunc pro tunc. In our view it is not necessary that he again make use of the provisions of the PCHA or raise these same issues again on collateral attack. “[T]he Supreme Court made clear in Brown v. Allen that the exhaustion doctrine is not intended to give the states more than one full chance.” Developments in the Law — Federal Habeas Corpus, 83 Harv. L.Rev. 1038 at 1096 (1970) (footnote omitted).

We cannot agree with our Brother Weis or with Judge Snyder that Judge Morris’ order of September 11, 1970, the affirmance of that judgment by the Superior Court, and the denial of allocatur by the state Supreme Court did not exhaust Geisler’s state remedies. As we have stated earlier, Geisler’s pro se motion for a new trial and his appeals’ briefs embraced identical issues. They likewise included all issues raised previously in the state habeas corpus proceedings and all issues, save that of denial of the right to appeal, raised in the PCHA proceeding. More importantly, those same issues have been raised in both federal habeas corpus petitions. Geisler’s petitions and briefs are inartistic and do not fit exactly or with clockwork precision into the Pennsylvania state court procedures, but since he was acting pro se, they were sufficiently adapted to their purpose to put the Superior Court and Supreme Court of Pennsylvania on notice as to the issues raised and the relief sought. See United States ex rel. Turner v. Rundle, supra; United States ex rel. Montgomery v. Brierley, 414 F.2d 552, 555 (3d Cir. 1969), cert. denied 399 U.S. 912, 90 S.Ct. 2206, 26 L.Ed.2d 566 (1970).

We deem it imperative to note that the exhaustion doctrine does not require that the state courts have actually ruled on the merits of the claims, but merely that they have had those contentions presented to them. See Brown v. Allen, supra, 344 U.S. at 448-449, note 3, 73 S.Ct. 397; United States ex rel. Turner v. Rundle, supra, 438 F.2d at 845; Ralls v. Manson, 375 F.Supp. 1271 (D.Conn.1974). In this regard, the decision as to whether exhaustion has occurred should be based on the record and pleading before the state courts not the length of their opinions. United States v. Pate, 240 F.Supp. 696, 704 (N.D.Ill.1965). See also Sokol, Federal Habeas Corpus, § 22.2 (2d ed. 1969). While the case before us is most certainly sui gen eris, we emphasize that “[i]t is the legal issues that are to be exhausted, not the petitioner.” Park v. Thompson, 356 F.Supp. 783, 788 (D.Haw.1973).

(2) If we assume that our Brother Weis’ position is correct as to the “formal” disposition of Geisler’s motion for a new trial, we are confronted with a further dilemma. The motion for a new trial was filed on June 27, 1969 and was not “formally” disposed of by Judge Morris until October 24, 1972, a period of three years and four months. We hesitate to repeat the ancient statement that justice delayed is justice denied, but there can be no doubt that such an inordinate delay is an adequate basis for federal habeas corpus relief even though state remedies have not been exhausted. See, e. g., United States ex rel. Senk v. Brierley, 471 F.2d 657, 660 (3d Cir. 1973); Tramel v. Idaho, 459 F.2d 57, 58 (10th Cir. 1972); Ralls v. Manson, supra, 375 F.Supp. at 1282; Phillips v. Tollett, 330 F.Supp. 776, 778 (E.D.Tenn.1971).

(B) As we have pointed out, counsel appointed for Geisler at the time of the first federal habeas corpus proceeding by the United States Magistrate was unaware of what constituted exhaustion of state remedies and expressly informed Geisler that he did not need to apply for allocatur to the Supreme Court of Pennsylvania after the Superior Court had affirmed the decision of the Court of Common Pleas of Allegheny County. This court has taken the position that effective representation is to be judged by a standard of normal and reasonable competency as suggested in McMann v. Richardson, 397 U.S. 759, 90 S.Ct. 1441, 25 L.Ed.2d 763 (1970). See the cases cited in Case Note, 43 Fordham L.Rev. 310 at 313-315 (1974).

Assuming, however, that the position taken by the learned district judges, i. e., to the effect that Judge Morris’ order of September 11, 1970 was insufficient, we conclude that Geisler is entitled to have his petition heard because of the provisions of 28 U.S.C. § 2254(b), which state that habeas is available if there exists “circumstances rendering [State corrective] process ineffective »

III. CUSTODY FOR THE PURPOSE OF FEDERAL HABEAS CORPUS

One point remains for disposition, but as we read the Government’s position, it is not really contested. The record indicates that appellant is presently on “furlough” from the State Correctional Institution at Pittsburgh. The restraints upon Geisler’s freedom, however, constitute “custody” within the terms of 28 U.S.C. §§ 2241(c), 2254(a) for the purposes of federal habeas corpus jurisdiction.

IV. CONCLUSION

The judgment will be reversed and the case remanded. All issues save that of exhaustion of state remedies remain open for disposition by the district court.

      . Geisler had been indicted at No. 3 October Sessions, 1962 in the Criminal Courts of Allegheny County on counts of armed robbery (formerly, 18 P.S. § 4705; now, 18 C.P.S. §§ 3701 and 6103) and receiving stolen goods (formerly, 18 P.S. § 4817; now, 18 C.P.S. § 3925). Geisler was also indicted at No. 14 October Sessions, 1962 on a count of violation of that portion of the Uniform Firearms Act which prohibits former convicts from owning or possessing firearms (formerly, 18 P.S. § 4628(d); now, 18 C.P.S. § 6105). He and his co-defendant Wilbert Kastle were tried and convicted solely on the armed robbery and firearms violation counts.

      . The issues raised by this habeas corpus petition were as follows: (1) ineffective assistanee of counsel; (2) trial court erred in permitting evidence as to prior convictions; (3) prejudicial and unrelated evidence; (4) arrest without probable cause; (5) trial judge’s instructions denied fair trial; and (6) prosecutorial misconduct.
      Judge Morris’ order was as follows:
      “And Now, October 6, 1964, the within petition for writ of habeas corpus is ordered filed, filing fee to be paid by Allegheny County. Inasmuch as the petition sets forth no complaints which can properly be considered under a petition for writ of habeas corpus, the petition is hereby dismissed.”

      . The issues raised by the Pennsylvania Post Conviction Hearing Act petition were as follows: (1) ineffective assistance of counsel; (2) introduction into evidence of prejudicial and unrelated evidence; (3) identification; (4) arrest without probable cause; (5) denial of right to appeal; (6) use of prior criminal record; (7) prosecutorial misconduct; and (8) trial judge’s jury charge was erroneous.
      Judge Morris’ order of March 4, 1969 stated in part:
      “[T]he Defendant-Petitioner is hereby granted the right to file a Motion for a New Trial, nunc pro tunc.”

      . Copies of the briefs and petitions filed in these appeals to the Superior and Supreme Courts of Pennsylvania were not in the record before us, a record which, as is too frequently the case in habeas corpus proceedings, is woefully lacking in this and other respects. However, copies of the briefs and petitions to these courts in the aforementioned appeals have been procured, and this court will order them to be included in and made part of the record before us so that the Reviewing Court may have a full and proper record before it. We, of course, take judicial notice of these documents, as the United States District Court could have done. See Doe v. Wohlgemuth, 505 F.2d 186 (3d Cir. 1974), note 5 at 188, citing inter alia, Funk v. Commissioner of Internal Revenue, 163 F.2d 796 (3d Cir. 1947), and Zahn v. Transamerica Corporation, 162 F.2d 36 (3d Cir. 1947). Cf. Rule 44(b), F.R.Civ.Proc., and Rule 10(e), F.R.App.Proc., 28 U.S.C.

      . Geisler’s prolix petition consists of 26 typewritten pages, with numerous appendices. This petition asserts ten “grounds” for relief. These grounds when boiled down to their essence, and giving to Geisler’s pleading every advantage to be granted a pro se petition under Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972), present the same bases for relief, and none other, as were asserted in Geisler’s motion for new trial and in the aforementioned appeals’ briefs and petitions filed with the Pennsylvania Superior and Supreme Courts after Judge Morris’ order of September 11, 1970.

      . On this appeal, appellant again raised the eight issues enumerated, supra. In addition, he contended that the three and a half year delay in ruling on his motion for new trial was a deprivation of due process and equal protection of the laws. The briefs filed in this appeal are not in the record before us. We have, however, gleaned the foregoing from the brief which appellee filed with us, and under these circumstances we treat this uncontradicted statement as an admission.

      . Appellant alleges, and we find it noteworthy, that on March 27, 1973 during the pend-ency of this appeal before the Superior Court, the Commonwealth filed a “Petition to Dismiss Due to Prior Appellate Review of Issues.” In effect, such a petition is an admission that the Superior Court’s decision of June 30, 1971 was an adequate review of the contentions raised in Geisler’s post-trial motion. The issue of whether appellant has exhausted his state remedies would, then, turn solely on the content of the allocatur petitions rejected by the Pennsylvania Supreme Court on January 14, 1972.

      . Please find enclosed the opinion of the Superior Court affirming your judgment of sentence. I now suggest that if you carry this matter further, that you can file your Federal Court Petition for Writ of Habeas Corpus as you have now exhausted the state remedies." (Emphasis added.)

      . The “Issues and Grounds" presented in this petition are substantially the same as those which were before the United States District Court in Geisler’s first petition for federal habeas corpus, save two which were added, as follows:
      “The district court executed fundamental error in sending petitioner back through the courts of the State, by letter and suggestive belief that the State court would remedy the flagrant abuses of a totality tainted trial, judgment and appeal, without competent counsel, which, subjected him to: a three-year delayed opinion from without jurisdiction and without trial record, on one paragraph opinion and repeat issues on appeal and affirmed on appeal on the previously affirmed appeal.”
      “Where petitioner has proceeded to the only appellate court wherein his legal and rightful appeal is mandated, has he not exhausted state remedies? And/or is graceful allowance of appeal to the Supreme Court mandatory?”
      We need not concern ourselves with these two claims in respect to any issue of exhaustion of remedies since their contents cannot be considered in an on-the-merits adjudication of appellant’s petition. In fact, they consist of incoherent legal jargon.
      For purposes of identification and clarity, we state that the first federal petition for habeas corpus is numbered Civil No. 72-234 and the second federal petition for habeas corpus is numbered Civil No. 73-1034.

      . Brown v. Allen, 344 U.S. 443 at 447, 73 S.Ct. 397, 97 L.Ed. 469 (1953); United States ex rel. Schultz v. Brierley, 449 F.2d 1286, 1287 (3d Cir. 1971); Osborn v. Russell, 434 F.2d 650, 651 (3d Cir. 1970).

      . A denial of allocatur, as here, or a similar refusal to entertain an appeal constitutes a sufficient presentation for purposes of exhaustion. United States ex rel. Turner v. Rundle, 438 F.2d 839, 845 (3d Cir. 1971) (denial of allocatur by the Pennsylvania Supreme Court).

      . Ralls v. Manson, supra, 375 F.Supp. at 1282: “The three and one-half year period during which the direct appeal in the instant case has been pending, although somewhat longer than the average, is by no means unique among Connecticut cases. Nevertheless, this delay in adjudicating the petitioner’s rights is clearly inordinate and excessive: it certainly offends the ‘limits to the sacrifices men must make upon the altar of comity.’ United States ex rel. Lusterino v. Dros [D.C.N.Y.], supra, 260 F.Supp. [13] at 16. As the United States Supreme Court declared in Bartone v. United States, 375 U.S. 52, 54, 84 S.Ct. 21, 22, 11 L.Ed.2d 11 (1963), ‘Where state procedural snarls or obstacles preclude an effective state remedy against unconstitutional convictions, federal courts have no other choice but to grant relief in the collateral proceedings.’ Cf. Hunt v. Warden, Maryland Penitentiary, 335 F.2d 936, 940-941 (4th Cir. 1964).” The Supreme Court of Delaware in Erb v. Delaware, 332 A.2d 137 (1974) expresses a strong view in respect to delayed juridical actions. The Court said this in respect to delays of counsel:
      “The Court docket . . . chronicles appalling and unnecessary delay in prosecution of the appeals resulting from a lack of coordination between trial counsel and the Public Defender and the failure of both of them to meet their responsibilities as counsel of record. Trial counsel did not order a transcript of testimony nor provide the Public Defender with pertinent information as to errors of law on which the appeals are based, and the Public Defender did not meet his responsibility to prosecute the appeals with diligence. The delay of some thirteen months without a transcript, without an order for transcript and without a meaningful brief is simply unconscionable.” (footnote omitted).

      . See Hensley v. Municipal Court, 411 U.S. 345, 93 S.Ct. 1571, 36 L.Ed.2d 294 (1973). See also Sokol, supra, at § 6.1.