author: ADAMS, Circuit Judge.

text:
    William J. HARNETT, Appellant in No. 73-1790, v. RYAN HOMES, INC., a corporation and Edward M. Ryan.
    Appeal of Edward M. RYAN, in No. 73-1714.
    Nos. 73-1714, 73-1790.
    United States Court of Appeals, Third Circuit.
    Argued Feb. 12, 1974.
    Decided April 29, 1974.
    J. N. Poffinberger, Jr., Michael C. McLean, David L. McClenahan, Robert B. Sommer, Kirkpatrick, Lockhart, Johnson & Hutchison, Pittsburgh, Pa., for William J. Harnett.
    Leonard Boreman, Harold Gondelman, Baskin, Boreman, Wilner, Sachs, Gondelman ,& Craig, Pittsburgh, Pa., for Ryan Homes, Inc. and Edward M. Ryan.
    Before VAN DUSEN and ADAMS, Circuit Judges, and HUYETT, District Judge.
   OPINION OF THE COURT

ADAMS, Circuit Judge.

The principle issue presented by this case relates to the operation of the inveterate legal concepts of materiality and reliance in the context of a suit under Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 of the Securities and Exchange Commission.

This action was brought by William H. Harnett, a former shareholder-employee of a closely-held corporation, Ryan Homes, Inc., against Edward Ryan, the chief officer and majority shareholder of the corporation, and the corporation. The purported transgressions prompting this litigation emerge from the business and financial relationship between top personnel of this ostensibly prosperous enterprise. The company was engaged in home building, sales and land development, an industry, during the years relevant here, subjected to both favorable and not-so favorable economic winds.

Harnett became an employee of Ryan Homes, Inc. in 1961. His skills impressed Edward Ryan and Harnett made quick advancement. By 1965, he had attained the position of Vice-President of Marketing, and was a member of the Operating Committee.

During his tenure with Ryan Homes, Harnett acquired 1000 shares in the corporation. Resale of employee stock in Ryan Homes was governed by an agreement between Ryan Homes and its employees, including Harnett, which required “that when a stockholder left the employ of the company that [sic] he sell his shares back to the company at a price equal to their book value” at the end of the quarter preceding the sale.

In 1963 or early 1964, Edward Ryan began to investigate the possibility of developing a tract of land near St. Charles City, Maryland. Ryan Homes’ formal connection with the resulting project is not entirely clear and, in some respects, disputed. For the purposes of this appeal, however, it is important to note that Edward Ryan actively sought in 1965 an accomplished executive to manage the St. Charles development. After failing to persuade his brother, James, to undertake the task, Edward Ryan attempted to recruit Harnett.

Ryan Homes was, at the time, making preparations for a public offering of its stock. The projected market value of the stock was substantially in excess of its book value. Thus, if the employees, including Harnett, were released from their stockholder agreements with the company and permitted to participate in the public offering, they could reap substantial profits. At a meeting of the Board of Directors on April 24, 1965, however, Edward Ryan, in the presence of Harnett, announced, on the basis of advice from the underwriters, that he himself would be the only employee allowed to participate in the public offering, and that no other employee would be able to sell his shares to the public for five years.

On May 13, 1965, Harnett and Edward Ryan agreed that Harnett would resign from Ryan Homes, sell his stock back to the company for $150. per share, accept significant responsibilities with another corporation involved in the St. Charles project, and receive a salary increase from $1700. to $4000. per month. The portion of the agreement relating to the sale of the stock provided further that Harnett would receive any difference between the $150. per share figure and the stock’s book value on December 31, 1965. The $150. price was later reduced to $142., but the provision for payment of the difference between the June, 1965 selling price and the December 31st book worth figure remained unaltered. Harnett’s move to the St. Charles project proved particularly propitious. Although the district court made no specific finding, it did note that Harnett became very wealthy as a result of his involvement in the St. Charles development, owning at the time of the lawsuit, stock worth $6,750,000.

Ryan Homes did not go public in 1965 as contemplated, and business reversals delayed the public offering of Ryan Homes stock until 1968. However, in April, 1965, when he stated to the Board that employees would not be free to participate in the public offering, Edward Ryan apparently had given some thought to permitting such participation if the underwriters so agreed. In fact, in 1968, some Ryan Homes employees, in addition to Edward Ryan, were permitted to sell their stock to the public.

Harnett, in his capacity as seller of his stock in Ryan Homes, claimed below, among other things, that Edward Ryan’s failure to reveal to him in April, 1965 Edward’s thoughts with respect to the possible employee participation in the impending public offering breached Rule 10b-5. These thoughts, at that time, were, at least in part, in writing. Harnett also asserted that Edward Ryan and Ryan Homes did not fulfill their obligation, included in the agreement terminating Harnett’s employment with Ryan Homes, to compensate him for the difference between the $142. per share payment and the December 31, 1965 book value figure of the stock.

Ryan and Ryan Homes denied the existence of both a violation of 10b-5 and a duty to pay to Harnett any additional consideration for the Ryan Homes stock. In addition, they contended that Harnett received payments amounting to $16,000. not attributable to any services performed for Ryan Homes by Harnett. Edward Ryan and Ryan Homes sought to set-off this allegedly mistaken payment of $16,000. against any recovery Harnett might receive.

The district court, in an oral opinion delivered from the bench on June 12, 1972, that carefully analyzed the factual material presented, rejected Harnett's 10b-5 claim. It, in effect, appeared to conclude that Harnett’s behavior would not have been different had Edward Ryan disclosed in April, 1965, his thinking with regard to possible employee participation in the public offering. The following excerpts from the district court’s oral opinion seem to suggest that it found an absence of reliance on the part of Harnett to be dispositive:

The real problem is that we do not believe that the plaintiff was deceived. We do not believe that he sold his stock in Ryan Homes because of the alleged misrepresentation or failures to disclose the conditions he claims of.

After listing three factors that, according to the court, prompted Harnett’s decision to sell his Ryan Homes stock— the salary increase, the opportunity to enhance his image as a successful business man, and the desire to impress Edward Ryan and retain his good will — the court stated further:

[T]he things left unsaid were not material to the transaction in the sense that they induced plaintiff’s actions, and the plaintiff was not misled by the silence of Mr. Ryan, if in fact there was silence.

The district court’s oral opinion came just after the Supreme Court’s decision in Affiliated Ute Citizens v. United States.

After thus disposing of Harnett’s 10b-5 allegation, the district court entered a verdict for Harnett for $18,790. on his claim for payment under that part of the agreement requiring Ryan Homes to compensate Harnett for the difference between the $142. per share delivered in June, 1965 and the stock’s book value on December 31, 1965. The court announced that the verdict was subject to further review of the documentary evidence. In its oral opinion, the court did not deal with the $16,000. set-off claimed by Edward Ryan and Ryan Homes.

On June 8, 1973, the district court issued a written opinion and order denying the various motions for new trial and judgment n. o. v. In its written opinion, the court substantially adopted the findings of fact recited in its earlier oral opinion, but its “conclusions of law [were] somewhat modified.” Specifically, with respect to Harnett’s 10b-5 claim, the court stated in its written opinion:

[T]he statute and rule only require that an insider reveal “material facts.” We think the subsequent plan [to allow employees to participate in the public offering] was nothing more than his random thoughts reduced to paper and need not be revealed. Along a continuum between solid, important information and rank speculation, surely the former must be revealed but the latter need not be. It would be impossible to peg Edward Ryan’s “plan” at some point along the continuum. Suffice it to say we think it was closer to the latter, i. e., speculation.
Edward Ryan’s freedom of decision and action in this area was severely circumscribed by the dictates of the stock underwriter. The plan was not a plan which Edward Ryan could unilaterally put into effect.
Early 1965 was a period of especially intense planning and negotiation among various parties about . the possibility of Ryan Homes going public. Absent some evidence that it was something more, we think that the “plan” was only the kind of speculation or/aspiration that continually occupies the minds of businessmen. It would appear, therefore, that the

court, in disposing of Harnett’s 10b-5 claim, receded somewhat from the absence-of-reliance rationale utilized in its oral opinion and, instead, in its written opinion, focused on the lack of materiality of the omission, the matter now being stressed by Harnett. In addition, in its written opinion, the court refused to alter its verdict of $18,790. for Harnett and expressly rejected the set-off claim of Ryan and Ryan Homes.

On this appeal, Harnett, in substance, contends that the district court erred in characterizing Edward Ryan’s thoughts and writings relating to the possibility of employee participation in the proposed public offering as “speculation,” and that these undisclosed cogitations satisfied the tests of materiality set forth by this Court in Kohn v. American Metal Climax, Inc. and by the Second Circuit in List v. Fashion Park, Inc.

On their cross-appeal, Ryan and Ryan Homes challenge Harnett’s recovery of $18,790. under the agreement terminating his employment with Ryan Homes. They also claim a $16,000. set-off. In both instances, they rely primarily on an alleged absence of consideration supporting any agreements to pay these moneys.

Since the respective appeals are from the district court’s judgment dated June 8, 1973, denying the various motions for new trial and judgment n. o. v., we must, of course, address that judgment and the reasoning supporting it as expressed in the court’s written opinion also filed on June 8, 1973.

The complementary concepts of materiality and reliance have injected uncertainty into the jurisprudence of the Securities and Exchange Act of 1934. This uncertainty may well stem from a partial incongruence, in the context of private litigation, between the traditional tort requirement that there be a causal link between the wrongdoer’s action and the plaintiff’s injury and the statutory purpose of discouraging sharp, ethically-suspect, and fraudulent business practices. In most tort cases analogous to 10b-5 actions, the injured plaintiff’s reliance on the defendant’s deception constitutes the significant element of the causal link. In certain situations where plaintiff’s reliance is doubtful, a choice must be made, it would seem, between achieving the statutory purpose and preserving the causal connection ingredient.

The role of reliance in various Rule 10b-5 cases, has never been entirely clear. In the case of an alleged material omission, such as the claim Harnett asserts on this appeal, the Supreme Court has provided recent guidance. In Affiliated Ute Citizens v. United States, it stated that:

“[U]nder the circumstances of this case, involving primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery. All that is necessary is that the facts withheld be material in the sense that a reasonable investor might have considered them important in making his decision. . . . This obligation to disclose and this withholding of a material fact establish the requisite element of causation in fact.”

In Rochez Bros., Inc. v. Rhoades, this Court construed the Supreme Court’s language in XJte in the following manner:

“We do not read this decision [Ute] to say that the question of reliance vel non may not be considered at all in a non-disclosure case, but only that proof of reliance is not required for recovery. If defendant is able to demonstrate that there was clearly no reliance, that is, that even if the material facts had been disclosed, plaintiff’s decision . . . would not have been different from what it was, then the non-disclosure cannot be said to have caused the subsequent loss and under the ordinary principles of the law of fraud, recovery should be denied.”

Since the judgment appealed from in the present case turned on the absence of materiality, rather than the absence of reliance, the principles relating to reliance enunciated in Ute and Rochez would not appear to be controlling.

Fortunately, in this case, we are not faced with the choice between the tort requirement of a causal connection and the statutory purpose, for the district court, in its written opinion, held that the undisclosed facts were not material. We need, however, determine whether the factual predicate leading to the district court’s conclusion of nonmateriality is clearly erroneous, and whether in assessing the materiality of the factual predicate the district court correctly applied the proper standard.

The district court concluded, after a non-jury trial concerning the business and financial intricacies of Ryan Homes and the relationship among the various personnel, that the undisclosed facts constituted “nothing more than Edward Ryan’s random thoughts reduced to paper.” Our examination of the record reveals little testimony or documentary evidence tending to establish that the so-called undisclosed material were, actually, more than Edward Ryan’s random thoughts.

Harnett, in challenging the district court’s finding, relies primarily on a colloquy between Edward Ryan and Harnett’s counsel during cross-examination and a document dated May 28, 1965, allegedly reflecting Edward Ryan’s intention to permit employee participation in the public offering. Referring to the document dated May 28, 1965, Harnett’s counsel asked Edward Ryan, inter alia, whether it was “the plan,” as of May 28, 1965, to permit certain employees, not including Ryan, to sell a limited number of shares to the public. Ryan merely responded in the affirmative. The sobriquet “plan” was attached to Edward Ryan’s ruminations by Harnett’s counsel, not the district court nor, indeed, Edward Ryan himself. Also, this testimony comprised only an exiguous segment of a lengthy record.

Furthermore, the document indicating that Edward Ryan contemplated employee participation in the public offering, apart from possessing on its face ambiguous import, is, quite significantly, dated May 28, 1965, over two weeks after Edward Ryan and Harnett initially reached agreement regarding the sale of the Ryan Homes stock back to the corporation. Hence, even if it were to be conceded that Edward Ryan’s thoughts attained a greater degree of substantiality by virtue of their reduction to writing, such event did not occur until after Harnett and Edward Ryan had agreed to the stock sale. Thus, it is difficult to see how this memorandum, on which plaintiff relies, so heavily could be considered material with respect to Harnett’s earlier agreement to sell back his stock.

In light of the questionable significance of the portions of the record relied on by Harnett, we cannot say that the district court erred in finding, after acquiring an understanding of the complicated affairs of Ryan Homes during 1965, that Edward Ryan’s personal views concerning employee participation would not, at least in their then incipient state, have a significant impact on the course of those affairs. Nor can we say that the finding of the district court that the underwriters’ position in the matter would probably be decisive is clearly erroneous.

However, Harnett argues that Ryan’s sentiments regarding employee participation “might have been considered important by a reasonable shareholder who was in the process of deciding [whether to sell his shares] ” or that “a reasonable man would attach importance [to Ryan’s thoughts] in determining his choice of action in the transaction in question.” These statements represent alternative formulations of the materiality test and reveal its objective nature.

Although the district court did not recite any of the standard materiality tests, it would appear that it did, in fact, conclude that a reasonable shareholder would not “attach importance” to Ryan’s April, 1965 views concerning possible shareholder participation. The district court’s written opinion seems to reflect the principles enunciated in Ute, and insofar as the opinion may not reflect those principles precisely, Ute, of course, controls. The undisclosed facts were, according to the district court, “only the kind of speculation or aspiration that continually occupies the minds of businessmen,” and, it would seem to follow, not the type that are likely to influence dealings in the stock of corporations.

The district court’s finding that these undisclosed celebrations represented no more than a set of the numerous thoughts that separately occupy, at their early stages, slight portions of a business executive’s time leads us to agree with the district court’s conclusion that they were not material. In the corporate world, as elsewhere, the initial ruminations of executives must complete a circuitous course before becoming, if ever, actuality. Further, if we were to require corporate officers to disclose inchoate ideas, musings as it were, on matters that relate to the value of their companies’ stock, few stock transactions in which they participate would avoid the possible charge of a Rule 10b-5 violation. If, on the other hand, the district court had found that the undisclosed facts were something more than Edward Ryan’s thoughts and that they would likely have an identifiable impact on the fact of any proposal for employee participation in- the public offering, a conclusion that the undisclosed facts were material might well have been warranted.

In sum, the findings underpinning the district court’s conclusion are not clearly erroneous; the district court’s discussion of Harnett’s Rule 10b-5 claim reveals an appreciation of the materiality standard; and, in this case, applying that standard to the facts found by the district court requires the rejection of Harnett’s Rule 10b-5 claim.

As for Harnett’s contractual allegation for $18,790. and the assertion of Edward Ryan and Ryan Homes that they are entitled to a $16,000. set-off, we agree with the district court that the evidence sustains the conclusion that the agreements at issue were supported by consideration flowing from Harnett to Ryan and Ryan Homes. Hence, Harnett is entitled to $18,790. undiminished by any set-off.

Accordingly, the judgment of the district court will be affirmed.

      . “Sec. 10. It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, or of the facility of any national securities exchange—
      “(b) To use or employ, in connection with the purchase or sale of any security registered on a national securities exchange or any security not so registered, any manipulative or deceptive device or contrivance in controvention of such rules and regulation as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.” 15 U.S.C. § 78j(b).

      . “It shall be unlawful for any person, directly or indirectly by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
      “(a) To employ any device, scheme, or artifice to defraud,
      “(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
      “(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5.

      . Harnett v. Ryan Homes, Inc., D.C., 360 F.Supp. 878 (1973).

      . During the period between 1965 and 1968, employees of Ryan Homes purchased substantial amounts of its stock, just as Harnett had done prior to 1965. Also, employees, who left the corporation during that period, including Edward’s brother, James, were required, as was Harnett, to sell back their stock in the company. On the basis of these facts, Edward Ryan argues that it is not reasonable to conclude that Edward Ryan sought to defraud Harnett to the extent of the difference between the $150. per share price paid and the projected market value of the 1000 shares that Harnett owiied.

      . Tr. at 1821-22.

      . 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972) ; see note 15 infra.

      . Harnett v. Ryan Homes, Inc., D.C., 360 F.Supp. 878 (1973).

      . Id. at n. 2. The modifications were undoubtedly occasioned by an awareness of the precepts set forth in Affiliated Ute Citizens v. United States, 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972), a decision that came down shortly before the district court’s oral verdict. See note 15 infra.

      . 360 F.Supp. at 889.

      . 458 F.2d 255, 269 (3d Cir.), cert. denied, 409 U.S. 814, 93 S.Ct. 120, 34 L.Ed.2d 126 (1972).

      . 340 F.2d 457, 462 (2d Cir.), cert. denied, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965).
      Edward Ryan and Ryan Homes do not squarely meet Harnett’s arguments that the district court’s 'finding regarding the insubstantial nature of Edward Ryan’s thoughts was erroneous and that the district court’s conclusion that the omission was not material was incorrect. Instead, Edward Ryan and Ryan Homes assert that the district court’s finding that there had been no misrepresentation — a finding that Harnett seems no longer to dispute — precludes recovery under 10b-5 and, further, that Harnett’s “insider” status and the existence of the agreement to resell the stock render 10b-5 inapplicable to the situation.

      . “Because there is much disagreement and confusion among the parties concerning the meaning and applicability of ‘reliance’ and ‘materiality’ under Rule 10b-5, we think it advisable first to set forth the well-known and well-understood common law definitions of these terms and the reasons for the rules in which the terms are incorporated. Insofar as is pertinent here, the test of ‘reliance’ is whether ‘the misrepresentation is a substantial factor in determining the course of conduct which results in [the recipient’s] loss.’ Restatement, Torts § 546 (1938) ; accord, Prosser, Torts 550 (2 ed. 1955) ; I. Harper & James, Torts 583-84 (1956). The reason for this requirement, as explained by the authorities cited, is to certify that the conduct of the defendant actually caused the plaintiff’s injury. The basic test of ‘materiality,’ on the other hand, is whether ‘a reasonable man would attach importance [to the fact misrepresented] in determining his choice of action in the transaction in question.’ Restatement, Torts § 538(2) (a) ; accord, Prosser, Torts 554-55; I. Harper & James, Torts 565-66. Thus, to the requirement that the individual plaintiff must have acted upon the fact misrepresented, is added the parallel requirement that a reasonable man would also have acted upon the fact misrepresented.” List v. Fashion Park, Inc., 340 F.2d 457, 462 (2d Cir. 1965).

      . 406 U.S. 128, 92 S.Ct. 1456, 31 L.Ed.2d 741 (1972).

      . Id. at 153-154, 92 S.Ct. at 1472 (citations omitted).

      . 491 F.2d 402 (3d Cir. 1973).

      . Id. at p. 410.

      . “Findings of fact shall not he set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses. F.R.Civ.P. 52(a) ; see Rochez Bros., Inc. v. Rhoades, 491 F.2d 402 at p. 408 (3d Cir. 1973).

      . Mills v. Electric Auto-Lite, 396 U.S. 375, 384, 90 S.Ct. 616, 621, 24 L.Ed.2d 593 (1970); see Kohn v. American Metal Climax, Inc., 458 F.2d 255, 269 (3d Cir.), cert. denied, 409 U.S. 874, 93 S.Ct. 120, 34 L.Ed.2d 126 (1972).

      . List v. Fashion Park, Inc., 340 F.2d 457, 462 (2d Cir.), cert. denied, 382 U.S. 811, 86 S.Ct. 23, 15 L.Ed.2d 60 (1965); see Rochez Bros., Inc. v. Rhoades, 491 F.2d 402 (3d Cir. 1973). That portion of List dealing with reliance apparently has been undercut, in part, by Ute. 406 U.S. at 152-153.

      . When, however, there is a single buyer allegedly hiding facts from a single seller it is difficult to divorce consideration of the probable effects of the unrevealed facts from the particular circumstances of the solitary seller. Indeed, it may be argued that the distinction between the objective materiality test and the subjective reliance test breaks down in such circumstances.


source: Caselaw Access Project

author: DUNIWAY, Circuit Judge:

license: Public Domain

text:
    WESTGATE-CALIFORNIA CORPORATION, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 73-3219.
    United States Court of Appeals, Ninth Circuit.
    April 10, 1974.

      Herbert L. Moody (argued), Tax Div. Dept, of Justice, Washington, D. C., Harry D. Steward, U. S. Atty., Robert Filsinger, Asst. U. S. Atty., San Diego, Cal., for defendant-appellant.
    Ralph K. Kessler (argued), Mudge, Rose, Guthrie & Alexander, New York City, Friedman, Heffner, Kahn, & Dysart, San Diego, Cal., for plaintiff-appellee.
    Charles P. Scully, San Francisco, Cal., amicus curiae for Cal. State Federation of Labor, AFL-CIO.
    Before MERRILL, KOELSCH and DUNIWAY, Circuit Judges.'
   OPINION

DUNIWAY, Circuit Judge:

On October 19, 1973, the Internal Revenue Service (IRS) acting under 26 U. S.C. § 6861, levied a $4,200,000 jeopardy assessment against appellee WestgateCalifornia Corporation (Westgate), covering Westgate’s alleged liability for federal income taxes for the tax periods 1963-67, 1969 and 1970. On October 23, 1973, the IRS filed notices of federal tax liens in several California and Oregon counties where Westgate’s properties and assets are located.

After unsuccessful negotiations between the parties, Westgate filed this action on November 15, 1973, seeking to enjoin the IRS from continuing to enforce the liens. Westgate alleged that the Commissioner of Internal Revenue had abused his discretion under 26 U.S. C. § 6325 by refusing to issue a certificate of release or subordination of the liens or a certificate of discharge of any property subject to the liens. On that day, the district court issued an Order to Show Cause why the relief requested by Westgate should not be granted, and set a hearing for November 19. The government responded by filing a motion to dismiss, arguing lack of jurisdiction and failure to state a claim upon which relief could be granted.

Following a two-day hearing, the district court entered an order on November 20 directing the Commissioner immediately to release and discharge all liens which had been imposed upon the property of Westgate and its subsidiaries. The order also prohibited the IRS from imposing any further liens upon the property of Westgate or its subsidiaries without prior approval of the court. Stay of this order pending an appeal was denied. The government appealed and applied to Circuit Judge Wallace for a stay of the order pending appeal. Judge Wallace directed that the order be stayed until November 26, 1973, pending a determination of the merits of the government’s motion by a panel of this court.

Following oral arguments on November 26, we granted the government’s motion to stay the district court’s order until further notice. At the same time, we directed Westgate to show cause in writing why the district court’s order should not be vacated and the action dismissed for want of jurisdiction. We conclude that the November 20 order of the district court must be vacated and the action must be dismissed.

The jurisdictional question is whether a district court has jurisdiction to enjoin the IRS from imposing a jeopardy assessment. Three provisions of the Internal Revenue Code are involved. 26 U.S.C. § 7421(a) provides that “[ejxeept as provided in section . 6123(a), ... no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person. . ” This “pay and sue” rule, which originated in 1867, requires that a taxpayer must first pay an assessment before he seeks judicial review of that assessment.

26 U.S.C. § 6213(a) contains a broad exception to § 7421(a). It provides, in pertinent part:

Within 90 days . . . after the notice of deficiency authorized in section 6212 is mailed . . . , the taxpayer may file a petition with the Tax Court for a redetermination of the deficiency. Except as otherwise provided in section 6861 no assessment of a deficiency in respect of any tax imposed by subtitle A or B or chapter 42 and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until such notice has been mailed to the taxpayer, nor until the expiration of such 90-day . . . period, nor, . . . until the decision of the Tax Court has become final. Notwithstanding the provisions of section 7421(a), the making of such assessment or the beginning of such proceeding or levy during the time such prohibition is in force may be enjoined by a proceeding in the proper court. (Emphasis added)

26 U.S.C. § 6861(a) provides:

If the Secretary or his delegate believes that the assessment or collection of a deficiency, as defined in section 6211, will be jeopardized by delay, he shall, notwithstanding the provisions of section 6218(a), immediately assess such deficiency (together with all interest, additional amounts, and additions to the tax provided for by law), and notice and demand shall be made by the Secretary or his delegate for the payment thereof. (Emphasis added)

Westgate argues that these three statutes create the following procedural scheme: Section 6861(a) operates within the procedure of § 6213(a). At most, § 6861(a) authorizes a deviation in the collection process; otherwise, it deals with the identical subject matter of § 6213(a) and is intended to achieve substantially the same result. Moreover, § 6861(a) does not preclude a taxpayer from seeking injunctive relief in the district court pursuant to § 6213(a). It is therefore erroneous to interpret § 6861(a) as preventing the remedy provided in § 6213(a) and reinstating § 7421(a).

This argument is without merit. First, § 6861(a) does not authorize a deviation from § 6213(a) solely in respect to the collection process; it concerns the “assessment or collection of a deficiency” (emphasis ours) and authorizes the IRS immediately to “assess such deficiency. . . .” Second, § 6861 (a) does preclude the taxpayer from seeking injunctive relief under § 6213 (a). Section 6861(a) authorizes the IRS to make a jeopardy assessment “notwithstanding the provisions of section 6213(a). . . .” Moreover, § 6213 (a) grants the district court jurisdiction to enjoin the “ma[ki ng], beg [inning], or prosecut[ion]” of a deficiency assessment with respect to a tax imposed under subtitle A, levy or court proceeding for collection, in three specific circumstances, “[e]xcept as otherwise provided in section 6861. . . .” The jeopardy assessment in the present case was made on October 19, 1973, before Westgate had received a deficiency notice. This falls within the express exception in § 6213(a) to its requirement that no assessment may be made “until such notice [of deficiency authorized in section 6212] has been mailed to the taxpayer. . . . ” Section 6861(b) authorizes the IRS to withhold mailing a deficiency notice for 60 days after the making of the jeopardy assessment. Because § 6861(b) authorizes a procedure different from that authorized in the second sentence of § 6213(a), and because the second sentence of § 6213(a) exempts from its coverage those provisions of § 6861 which are in conflict with it, § 6861 does displace the remedial provisions of § 6213(a) on these facts. Thus § 7421(a) does apply here.

Westgate also makes a statutory construction argument based upon the third sentence of § 6213(a). It is true that this sentence, standing alone, would give the district court jurisdiction to enjoin an assessment, but this sentence does not stand alone. It authorizes an injunction against an assessment only “during the time period such prohibition is in force. . . . ” The second sentence of § 6213 dictates that the prohibition was not in force, because § 6861 provides otherwise, and thus the third sentence of § 6213(a) does not create jurisdiction in the district court.

Westgate also argues that it falls within the narrow exception to the “pay and sue” rule of § 7421(a) recognized in Miller v. Standard Nut Margarine Co. of Florida, 1932, 284 U.S. 498, 52 S.Ct. 260, 76 L.Ed. 422, and Enochs v. Williams Packing and Navigation Co., Inc., 1962, 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292. These cases establish a two-part test which the taxpayer must meet before he may seek an injunction in district court. First, he must show that “it is clear that under no circumstances could the Government ultimately prevail.” Enochs, supra, 370 U.S. at 7, 82 S.Ct. at 1129. Whether the government has a chance of ultimately prevailing

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

Second, the taxpayer must show that “there exists special and extraordinary circumstances sufficient to bring the case within some acknowledged head of equity jurisprudence. . . . ” Miller, supra, 284 U.S. at 509, 52 S.Ct. at 263, e. g., that he “would suffer irreparable injury if collection were effected.” Enochs, supra, 370 U.S. at 7, 82 S.Ct. at 1129.

The only documents in the record before us are Westgate’s complaint and several affidavits. These documents allege that as a result of the liens imposed by the IRS under the jeopardy assessment, Westgate “has been unable to obtain badly needed financing and lines of credit from various financial and commercial banking institutions” and “will be rendered insolvent and forced to file a petition in bankruptcy.” We assume that this meets the second requirement of the Miller-Enochs test, but need not, and do not, decide that it does.

It is settled that a suit to enjoin the assessment or collection of taxes, in spite of § 7421(a), “may not be entertained merely because collection would cause an irreparable injury, such as the ruination of the taxpayer’s enterprise.” Enochs, supra, 370 U.S. at 6, 82 S.Ct. at 1129 (emphasis supplied). Westgate must also establish the inability of the Government to prevail on any valid theory of tax collection. The burden of proof is on the taxpayer. Vuin v. Burton, 6 Cir., 1964, 327 F.2d 967. The complaint, construed in a manner most favorable to Westgate, fails to show that the government cannot establish its claim. Westgate does not even allege that the taxes are not due, nor that the government has acted in bad faith. We cannot infer nonliability of Westgate from the record before us.

Westgate also alleged that the District Director of Internal Revenue arbitrarily, capriciously and unreasonably refused to issue any certificates of release, discharge or subordination of the liens, as he is empowered to do under § 6325. We need not decide whether this allegation would permit the court to issue the injunction that it issued, or whether it would support an action to review the District Director’s alleged failure to act. This question is moot. Since we heard oral argument, the parties have entered into an “Agreement as to Subordination of Federal Tax Liens.” The District Director has acted.

The order appealed from is reversed, and the case is remanded with directions to enter a judgment dismissing the action.

      . See Act of March 2, 1867, ch. 169, § 10, 14 Stat. 475.

      . In the present case, the taxes allegedly owed by Westgate were imposed under subtitle A (income taxes). When the action was filed, the time within which the Commissioner was required to give notice of deficiency had not expired and no notice had been given. Thus no petition could be, or had been, filed with the Tax Court.

      . The decision of the District Director to make a § 6861 jeopardy assessment is subject to very narrow review. Transport Manufacturing and Equipment Co. of Delaware v. Trainor, 8 Cir., 1967, 382 F.2d 793; Ginsburg v. United States, 1 Cir., 1960, 278 F.2d 470; Lloyd v. Patterson, 5 Cir., 1957, 242 F.2d 742. See also 9 Mertens, Law of Federal Taxation, § 49.145: “It is necessary only that the District Director believe that collection of the tax will be jeopardized by delay. The Code grants him a broad discretionary power, the exercise of which is a matter left to his personal judgment and opinion. For this reason the Tax Court and other courts have declined to inquire into the District Director’s belief or in any way to substitute their judgment for the judgment of the District Director.” (Emphasis in original) But see Sherman v. Nash, 3 Cir., 1973, 488 F.2d 1081; Iannelli v. Long, 3 Cir., 1973, 487 F.2d 317; United States v. Bonaguro, E.D.N.Y., 1968, 294 F.Supp. 750.

      . “[T]he IRS [has] the power to make the jeopardy taxpayer wait as long as 60 days after the jeopardy assessment for a . . . right to petition to and obtain review by the [Tax Court].” Schreck v. United States, D.C., Md., 1969, 301 F.Supp. 1265, 1271.

      . Cf. United States v. Bonaguro, supra.

      . Although Enochs involved a collection and not an assessment, the Court’s rationale applies to both procedures under § 7421(a). The Court stated in dictum that “[t]he manifest purpose of § 7421(a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund.” 370 U.S. at 7, 82 S.Ct. at 1129 (emphasis supplied).

      . Botta v. Scanlon, 2 Cir., 1963, 314 F.2d 392, 394 n. 1.


text:
    Robert HAYWARD, Plaintiff-Appellant, v. Walter T. STONE, Superintendent, Defendant-Appellee.
    No. 72-2299.
    United States Court of Appeals, Ninth Circuit.
    May 9, 1974.
    Emil Roy Eisenhardt, Farella, Braun & Martel, San Francisco, Cal., for plaintiff-appellant.
    John T. Murphy, Michael Buzzell, Deputy Attys. Gen., Evelle J. Younger, California Atty. Gen., San Francisco, Cal., for defendant-appellee.
    Before DUNIWAY and CHOY, Circuit Judges, and JAMESON, District Judge.

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

   OPINION

DUNIWAY, Circuit Judge:

Hayward appeals from the dismissal of his petition for a writ of habeas corpus. The district court held that Hayward had failed to exhaust his state remedies as required by 28 U.S.C. § 2254. We reverse.

Hayward was convicted in California Superior Court of robbery with great bodily injury. His conviction was affirmed on appeal by the California Court of Appeal and his petition for a hearing in the California Supreme Court was denied. Next, his petition for a writ of habeas corpus was denied by the California Supreme Court. Hayward then submitted an application to recall the remittitur to the California Court of Appeal that had decided his appeal. This was denied, as was a petition for a rehearing. Hayward petitioned the California Supreme Court for a hearing on the denial of his application to recall the remittitur, which was also denied. Hayward next filed a petition for a writ of habeas corpus with the California Supreme Court which was denied without opinion.

Finally, Hayward turned to the district court and filed a petition for a writ of habeas corpus there. The court denied the petition, holding that Hayward had not exhausted his state remedies. However, the district judge granted a certificate of probable cause to appeal because he was of the view that a “higher authority” should decide whether an application to recall the remittitur could serve to exhaust state remedies. In substance, Hayward’s application to recall the remittitur asserted that he had been denied his constitutional right to adequate and effective representation by counsel on appeal. We express no opinion on the merit of his claim.

It is well settled that the exhaustion doctrine does not require petitioners to file “repetitious applications” in the state courts. Wilwording v. Swenson, 1971, 404 U.S. 249, 250, 92 S.Ct. 407, 30 L.Ed.2d 418; Brown v. Allen, 1953, 344 U.S. 443, 449, n.3, 73 S.Ct. 397, 97 L.Ed. 469. All that is required is that the federal claim be presented once on its merits, to and passed upon by the state courts. Picard v. Connor, 1971, 404 U.S. 270, 275, 92 S.Ct. 509, 30 L.Ed.2d 438; Roberts v. LaVallee, 1967, 389 U.S. 40, 88 S.Ct. 194, 19 L.Ed.2d 41. The question of first impression before us is: Did Hayward fairly present his federal claim to the state courts in his applications to recall the remittitur, thereby exhausting his state remedies ?

An application to recall the remittitur is a unique California post-conviction remedy whereby the petitioner asks the Court of Appeal or Supreme Court to reassert its jurisdiction over a ease after it has relinquished that jurisdiction by issuing a remittitur following the final determination of the appeal. California Rules of Court, Rule 25(d); B. Witkin, California Criminal Procedure, § 735 at 704 (1963). Though traditionally the use of an application to recall the remittitur has been limited (see People v. Mutch, 1971, 4 Cal.3d 389, 93 Cal.Rptr. 721, 482 P.2d 633, 640, 641 (concurring and dissenting opinion of Justice Sullivan); In re Martin, 1962, 58 Cal.2d 133, 23 Cal.Rptr. 167, 373 P.2d 103, 106), “its scope has been so broadened in recent years that the motion to recall serves functions similar to those of certiorari and habeas corpus in the field of post-conviction review.” B. Witkin, supra,, at 704.

Recently the California Supreme Court held that “[t]he remedy of recall of the remittitur may then be deemed an adjunct to the writ, and will be granted when appropriate to implement the defendant’s right to habeas corpus.” People v. Mutch, supra, 93 Cal.Rptr. at 725, 482 P.2d at 637. The application to recall the remittitur has thus attained “independent vitality” as a post-conviction remedy in certain circumscribed situations “even though . . . the writ of habeas corpus is available to perform the same function.” Id. (emphasis in original). For example, by either a writ of habeas corpus or an application to recall the remittitur, the petitioner can raise the claim that he was convicted under a statute which did not prohibit his conduct. Id.; In re Crumpton, 1973, 9 Cal.3d 463, 106 Cal.Rptr. 770, 507 P.2d 74. And, in People v. Rhoden, 1972, 6 Cal.3d 519, 99 Cal.Rptr. 751, 492 P.2d 1143, on an application to recall the remittitur, the California Supreme Court held that the petitioner was denied his right to effective counsel on appeal. See also In re Smith, 1970, 3 Cal.3d 192, 203, 90 Cal.Rptr. 1, 8, 474 P.2d 969, 976, where the petitioner was allowed to raise the issue of ineffective counsel on appeal arid “the petition for habeas corpus [was treated] as an application to recall the remittitur.” The California Supreme Court may also treat an application to recall the remittitur as a petition for a writ of habeas corpus; People v. Rummel, 1966, 64 Cal.2d 515, 50 Cal. Rptr. 785, 413 P.2d 673; or a petition for a writ of habeas corpus as an application to recall the remittitur, In re Smith, supra.

In his application to recall the remittitur, Hayward claimed that he was denied effective aid of counsel on appeal. He raised the same issue in his petition for a rehearing, his petition for a hearing in the California Supreme Court and in his petition for a writ of habeas corpus before the federal district court. There appears to be no question that the application to recall the remittitur may be used to bring this issue before the California Appellate and Supreme Courts. People v. Rhoden, supra; In re Smith, supra. Hayward has therefore fairly presented his federal claim to the state courts (see Picard v. Connor, supra) and he “has met the requirements of the exhaustion rule, inasmuch as no direct appeal is presently available to him, and he. has taken his claim for post-conviction relief to the highest state court.” Humphrey v. Cady, 405 U.S. 504, 516, 92 S.Ct. 1048, 1055-1056, 31 L.Ed.2d 394.

By this holding we do not imply that a petitioner has exhausted his state remedies every time that the California Supreme Court denies without opinion an application to recall the remittitur or a petition for a hearing to review a denial of an application to recall the remittitur, thereby putting the recall of the remittitur remedy on a par with habeas corpus. The contrary is closer to the truth. The application to recall the remittitur is the correct procedure only in cases in which the appropriate remedy is the reinstatement of the appeal (e. g., where counsel or effective counsel was denied on appeal). When the petitioner employs an application to recall the remittitur in appropriate circumstances (see, e. g., People v. Mutch, supra; In re Martin, supra; B. Witkin, supra) then a denial of the application, followed by a denial of a petition for hearing by the California Supreme Court, exhausts an appropriate state court remedy, unless the California court expressly or by an appropriate citation indicates that the denial is on procedural grounds. In all other circumstances, a denial without opinion of an application to recall the remittitur would be a denial on the procedural ground that the incorrect remedy was sought and the exhaustion requirement would not be met. Daniels v. Nelson, 9 Cir., 1972, 453 F.2d 340, 342.

Here, the application to recall the remittitur was an appropriate remedy. We therefore need not consider, in this case, the effect of the denial by the California Supreme Court of Hayward’s petition for a writ of habeas corpus. Hayward cannot be charged with failing to exhaust a state remedy that he was not required to pursue in the first place. Roberts v. Lavallee, supra; cf. Pope v. Harper, 9 Cir., 1969, 407 F.2d 1303, 1305.

Reversed and remanded for further proceedings consistent with the views expressed in this opinion.

      . Rule 25(d), California Rules of Court, provides :
      (d) “A remittitur may be recalled by order of the reviewing court on its own motion, on motion or petition after notice supported by affidavits, or on stipulation setting forth facts which would justify the granting of a motion.” West, California Rules of Court (1974) page 33.
      In this opinion we refer to the motion or petition as an application, the label used by Hayward.


author: MOORE, Circuit Judge: OAKES, Circuit Judge

text:
    Wilbur BUFF, Appellee, v. COMMISSIONER OF INTERNAL REVENUE, Appellant.
    No. 85, Docket 72-2372.
    United States Court of Appeals, Second Circuit.
    Argued Jan. 24, 1974.
    Decided April 5, 1974.
    William A. Friédlander, Tax Div., Dept, of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Ernest J. Brown and Jonathan S. Cohen, Attys., Tax Div., Dept, of Justice, Washington, D. C., of counsel), for appellant.
    Robert D. Heyde, Washington, D. C., for appellee.
    Before MOORE, HAYS and OAKES, Circuit Judges.
   MOORE, Circuit Judge:

Between January 1 and June 7, 1965, appellee, who was employed as a bookkeeper, embezzled approximately $22,000 from his employer, S & D Meats, Inc. Appellee’s crime was discovered by his employer in June, 1965. Appellee immediately confessed. Then, at his employer’s insistence, appellee signed an affidavit of confession of judgment for the embezzled amount, plus interest, agreed to continue his employment, and to repay $25 per week from his paycheck. He also borrowed $1,000 from a bank, paying over the proceeds from the loan to his employer. However, in July, 1965, the employer became dissatisfied with this arrangement, discharged appellee, and filed the affidavit whereupon judgment was entered in his favor.

The Commissioner (appellant) determined that appellee, a cash-basis taxpayer, had received as income in 1965 the sum he had embezzled minus the sums he had returned in that year. While there was no doubt that embezzled funds constitute income, James v. United States, 366 U.S. 213, 81 S.Ct. 1052, 6 L.Ed.2d 246 (1961), the taxpayer contended that since he had agreed to repay the entire amount embezzled, the transaction should be seen to be in the nature of a loan — his debt exactly equalling his receipts. The Tax Court agreed with the taxpayer, relying in large part on the case of United States v. Merrill, 211 F.2d 297 (9th Cir. 1954). See also J. W. Gaddy, 38 T.C. 943 (1962), reversed in part on other grounds, 344 F.2d 460 (5th Cir. 1965). In the Merrill case, a cash-basis taxpayer received in 1940 from his wife’s estate, for his services as executor, an overpayment of $7,500. That same year the error was discovered and “appropriate adjustments were made in his own books and those of his wife’s estate. . . .” 211 F.2d at 303-304. Actual repayment of the sum, however, was not made until 1943. The Commissioner assessed income tax on the $7,500 under the claim of right doctrine. North American Oil Consol. v. Burnet, 286 U.S. 417, 52 S.Ct. 613, 76 L.Ed. 1197 (1932). This doctrine holds that monies received by a taxpayer under a “claim of right” are taxable to him as income in the period of receipt even though it is eventually discovered that he was not entitled to the funds and makes restitution in some later period. The court in Merrill held that there had been no taxable income in 1940:

We think there is no warrant for extending the harsh claim of right doctrine to such a situation. In such case [where the error is discovered in the same fiscal year] the Internal Revenue Bureau is not faced with the problem of deciding the merits of the claims to the funds received, for the question has been resolved by the interested parties. No question is here raised as to the bona fides of appellee’s 1940 bookkeeping entries relative to the mistaken payments. Good faith is indicated by the fact that the taxpayer’s $7500 obligation to the estate was not only recognized by him in 1940 but was paid in cash in 1943.

211 F.2d, at 304.

The Tax Court in this case analogized the present situation of embezzlement and judgment with the Merrill case:

Where there is “consensual recognition” of indebtedness within the same taxable year, formalized by a confession of judgment, such a transaction does not result in the realization of taxable gain.

68a.

Seven judges of the Tax Court dissented from this decision in two opinions. These dissents and the brief of the Commissioner in this court raise three arguments for reversal.

The first broadly attacks the Merrill doctrine as the embodiment of an error in accounting. It is contended that it is improper to allow a cash-basis taxpayer to balance for tax purposes the receipt of income with a promise — not given in connection with the receipt — to repay in a later tax period. This argument would have us dispute the validity of such an exception to the claim of right rule.

The second argues that the criminal nature of the initial receipt in this case should exclude it from the sweep of Merrill. It is claimed that the lack of consensual recognition of an obligation to repay at the time of receipt is the crucial element to consider for the purposes of James v. United States, supra, rather than the presence of that recognition at the end of the pertinent accounting period. James, which, as was stated above, held embezzled funds to be income, distinguished embezzlement from a loan arrangement by stating that, although the embezzler has an obligation in law to repay the misappropriated funds, he lacks the consensual recognition of this obligation. 366 U.S. at 219-220. James, however, is silent as to the precise moment a court should inquire as to the presence or absence of this recognition.

The third attack made on the decision below proposes that the confession of judgment should be viewed as a mere sham. As such it should not be of tax significance and should be given no weight in the determination of appellee’s income.

The facts of Merrill are so different from those now before us that the decision there is neither dispositive nor authoritative in'this case. Here there was no offsetting payment or promise to pay of any value.

As was found by the Court, seven years have passed without any payment on the judgment. We agree that “the judgment was not worth the paper it was written on. . . .” (Hoyt, J dissenting opinion in which six judges joined). Further it is clear that this was true at the time of its creation and was not ascribable to events then in the future. There would be no logic in finding in this document a significance it did not contain and to allow it to balance $22,000, taken in cash, would be wholly unrealistic. The Merrill case itself placed weight on the bona fides of the intent to repay and the fact of actual repayment. 211 F.2d at 304. Such circumstances are very much in absence here.

The decision of the Tax Court is, therefore, reversed.

OAKES, Circuit Judge

(concurring):

While I agree with the majority that United States v. Merrill, 211 F.2d 297 (9th Cir. 1954), is readily distinguishable, I do not think that we need give Merrill any precedential value in this circuit. In my view, Merrill was erroneously decided, perhaps because it was a point decided without the benefit of adversary argumentation.

I believe Merrill runs contrary to the theory underlying the concept of annual accounting, at least in the case of cash basis taxpayers. The whole purpose of treating each tax year separately is so as to affect only the timing of the tax consequences for a given transaction: where a taxpayer concludes a particular transaction in Year One he will receive the tax treatment prescribed therefor in that year, while a second taxpayer who concludes the same transaction in Year Two will receive that same tax treatment in the second year. Thus, at the end of two years the two taxpayers will be equal, each having the same tax treatment in the appropriate tax year ir, respect to identical economic events. If Taxpayers A and B each receive money erroneously in January of Year One, but Taxpayer A assumes an obligation to repay in December of Year One and Taxpayer B assumes such an obligation in January of Year Two, at the end of the second year the two taxpayers have done exactly the same things and are in the same economic position with the result that equitably and otherwise they should be in the same position taxwise. Merrill, however, puts Taxpayer A in a different position; he pays no tax on the receipt of income while Taxpayer B must pay a tax (in Year One) and is denied any offsetting deduction. Nor is it any answer to say that Taxpayer B can ultimately expect to be brought into equality if and when B effects repayment; A is in the favored position under Merrill because Merrill treats the income as not being received merely on the basis of A’s agreement to repay whether or not that agreement is in fact performed.

In short, giving credence in the case of a cash basis taxpayer to an agreement to repay, whether in the same year of receipt, is a gross misuse of the annual accounting concept; a repayment agreement per se should be viewed as a nullity for tax purposes. It should make no difference whether the amount was received illegally or under a “claim of right”; the subsequent agreement to repay should have no tax consequences. North American Oil Consolidated v. Burnet, 286 U.S. 417, 52 S.Ct. 613 (1932), which contains the most familiar statement of the “claim of right” doctrine, is of course not to the contrary; all that doctrine does is establish that income received under a claim of right without restriction as to disposition is taxable in the year received and that a subsequent obligation to refund that income entitles the taxpayer to a deduction in the year actually refunded. See § 1341, Int.Rev.Code of 1954.

To sum up, I see no reason to distinguish Merrill-, I would decline to follow it in any event. Since I reach the same result of the majority, I happily join with it in voting to reverse the Tax Court.

      . This argument in Merrill was made for the first time on appeal by the taxpayer in his answering brief. The Commissioner filed no a reply brief, simply arguing that the point could not be raised for the first time on appeal. See 211 F.2d at 302-303.

      . The mere acknowledgment of the erroneous nature of the receipt and of the obligation to repay will not support a deduction except to the extent and in the year when repayment is actually effected. Cf. Helvering v. Price, 309 U.S. 409, 60 S.Ct. 673, 84 L.Ed. 836 (1940) (guarantor’s loss deductible only in year in which funds are actually paid over); Whitaker v. Commissioner, 259 F.2d 379, 382 (5th Cir. 1958) (prepayment of stud fee contingent on birth of live foal constitutes income in year in which prepayment made). Merrill, of course, established a special exception to this rule where the obligation to repay becomes fixed before the end of the year in which the amounts were re-” ceived.
      It is true that Merrill has been followed both by the majority of the Tax Court below and by the Tax Court in Gaddy v. Commissioner, 38 T.C. 943 (1962). The Fifth Circuit, in Gaddy v. Commissioner, 344 F.2d 460, 462 (1965), while quoting in part the Tax Court’s treatment of the Merrill question, is not really authoritative support of Merrill because this portion of the Tax Court’s decision was not appealed by the Commissioner. I do not find Curran Realty Co. v. Commissioner, 15 T.C. 341 (1950), in any way persuasive from an accounting viewpoint; it seemed to reach the Merrill result without even mentioning the claim of right rule or any exception thereto.


author: GIBSON, Circuit Judge.

text:
    Guy W. RUCKER, Appellant, v. La-CO, INC., et al., Appellees, and Union National Bank of Little Rock, Appellee and Cross-Appellant.
    Nos. 73-1793, 73-1794, 73-1832 and 73-1891.
    United States Court of Appeals, Eighth Circuit.
    Submitted March 12, 1974.
    Decided April 22, 1974.

      H. Clay Robinsin, Port Smith, Ark., for Rucker.
    Cyril E. Hollingsworth, Jr., Little Rock, Ark., for Lane.
    Griffin Smith, Little Rock, Ark., for Union Nat. Bank.
    Before GIBSON, BRIGHT and STEPHENSON, Circuit Judges.
   GIBSON, Circuit Judge.

Plaintiff, under Arkansas law, sought a recission of a sale of corporate stock and monetary damages. We affirm the District Court’s judgment dismissing plaintiff’s action and awarding of costs, including attorney’s fees, to defendant Union National Bank of Little Rock (Union).

Plaintiff-appellant, Guy W. Rucker, is a certified public accountant and lawyer with experience as a comptroller or accountant at several companies. La-Co, Inc., a defendant in this case, employed Rucker as its Comptroller. On March 10, 1969, Rucker purchased 500 shares of DBS, Inc. (DBS) common stock from United Diversified, Inc. (United Diversified) and seeks by this action to rescind that purchase and to obtain monetary damages. On March 19, 1969, the DBS stock was issued to Rucker, but delivered to Union as pledged security for a $25,000 loan that Union had made to Rucker for the stock purchase.

On September 6, 1968, Harlan Lane, also a defendant, with Don Couch formed DBS as a one-bank holding company. Lane was at that time Chairman of the Board and Chief Executive Officer of Union and Couch was its president. Union was controlled by Lane through United Diversified, another defendant. An exemption to the registration of the DBS stock as a private offering under Arkansas securities law was granted by the Arkansas Securities Commissioner pursuant to Ark.Stat.Ann. § 67-1248(b)(9). Immediately thereafter the stock was sold to 20 purchasers, including United Diversified. United Diversified subsequently sold its DBS stock in four transactions to five different individuals, including Rucker.

During December, 1968, ÑAPAR Chemical Corporation, Inc. (ÑAPAR) representatives met with Lane representing United Diversified and DBS to discuss a merger, which was initially agreed upon on December 11, 1968. In January, 1969, Rucker interviewed for the comptroller position of the new corporation and began work on February 2 or 3, 1969. Rucker spent most of March gathering financial data on ÑAPAR to effectuate the merger, which was finally and formally agreed upon on March 12, 1969.

The new merged corporation, La-Co, Inc., came into existence on June 12, 1969. In July, 1969, Rucker transferred his 500 shares of DBS for La-Co stock, which was also delivered to Union as substituted security for the same $25,000 loan described above. Sometime later in 1969, Union demanded payment from Rucker on the $25,000 loan; Ruck-er paid the loan in its entirety; and La-Co stock was released to Rucker. In December, 1968, and the first half of 1969, United Diversified sold 200 shares of DBS to Gladys Powell and 200 shares to Ladd and Clara Jameason, as joint owners. After Rucker’s purchase, United Diversified sold Lane 7,100 shares.

The District Court first held that the DBS stock fell within the private offering exemption pursuant to Ark.Stat.Ann. § 67-1248 (b) (9). We agree. The defendants have demonstrated that less than 25 persons were offered DBS stock, that DBS reasonably believed the purchasers were buying for investment, and that no commission was paid. Further, the Arkansas Securities Commissioner exempted DBS stock from registration.

The District Court also held that the sale of the 500 shares of DBS stock to Rucker and the three other sales of DBS by United Diversified were exempted as “isolated non-issuer transactions” under Arkansas law. Ark.Stat. Ann. § 67-1248(b) (1). We agree with the District Court that “[t]he small number of transactions, the ‘insider’ status of two of the purchases [by Rucker and Lane] and the infrequent nature of these sales clearly indicate that they are within the meaning of Section (b)(1).” Cf. Arkansas Real Estate Co. v. Fullerton, 232 Ark. 713, 339 S.W.2d 947 (1960). Rucker, a certified public accountant and lawyer, had several years of financial experience; he was well-acquainted with the financial operations of La-Co and actively assisted in completion of the merger. Since Rucker was an insider to La-Co’s entire financial operations, United Diversified should not be considered to be an issuer of the DBS securities in an isolated transaction to the knowledgeable comptroller of La-Co. We have reviewed plaintiff’s other arguments, including the purported liability of Union to Rucker for United Diversified’s sale of DBS stock to Rucker, and find them meritless. Union was not a seller nor a participant in the sale, but only a lender on the securities purchased.

In the District Court, Union requested $2,463.70 costs and attorney’s fees and was awarded $693.70 pursuant to 15 U.S.C. § 77k(e). On appeal Union again requests $2,463.70 and Lane also requests costs of defense, including reasonable attorney’s fees, under 15 U.S.C. § 77k(e) for expenses incurred prior to the voluntary dismissal of the alleged federal securities violations. Rejecting the requests on appeal by Union and Lane, we affirm the District Court’s award of $693.70 to Union for costs and reasonable attorney’s fees incurred at the District Court before the dismissal of the federal securities allegations. The award of costs and attorney’s fees is within the discretion of the District Court. The plaintiff here voluntarily dismissed the alleged violations under federal securities law against all defendants. We think that the claim against Union, as only a security holder, was. frivolous and an award of costs to Union is within the District Court’s discretion. Katz v. Amos Treat & Co., 411 F.2d 1046, 1056 (2d Cir. 1969). We deny Lane’s request for costs and attorney’s fees, for he has not specifically demonstrated to us how Rucker’s claims under the federal securities law were frivolous as to him. Regarding the amount of costs and attorney’s fees, we affirm the $693.70 award as within the District Court’s discretion.

The District Court is affirmed.

      . The Honorable Daniel H. Thomas, United States Senior District Judge, Mobile, Alabama, sitting by designation in the Eastern District of Arkansas, entered the unpublished judgment dismissing this action. Plaintiff originally alleged violations “including counts of common law fraud, violation of SEC Rule 10b-5, and violation of the disclosure provisions of the Arkansas Securities law”; however, plaintiff voluntarily before trial dismissed with prejudice “all these claims except the one based on the allegation of a sale or issuance of a security which was neither registered nor exempt in violation of the provisions of the Arkansas Securities Act.”

      . Section 67-1248(b) reads in part:
      (b) The following transactions are exempted from sections 7 and 15 [regarding registration of securities and filing of sales literature] :
      * * * * *
      (9) any transaction pursuant to an offer directed by the offeror to not more than twenty-five (25) persons (other than those designated in paragraph (8)) in this State during any period of twelve (12) consecutive months, whether or not the offeror or any of the offerees is then present in this State, if (A) the seller reasonably believes that all the buyers in this State are purchasing for investment, and (B) no commission or other remuneration is paid or given directly or indirectly for soliciting any prospective buyer in this state; but the Commissioner may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in Clauses (A) and (B) with or without the substitution of a limitation on remuneration * * *.

      . Section 67-1248(b) reads in part:
      (b) The following transactions are exempted from Sections 7 and 15 [regarding registration of securities and filing of sales literature] :
      (1) any isolated non-issuer transactions, whether effected through a broker-dealer or not; provided, that repeated or successive transactions shall be prima facie evidence that such transactions are not isolated non-issuer transactions * * *.


author: PER CURIAM:

text:
    James Burnett McKay LAING, Plaintiff-Appellant, v. UNITED STATES of America et al., Defendants-Appellees.
    No. 707, Docket 73-2537.
    United States Court of Appeals, Second Circuit.
    Argued April 8, 1974.
    Decided May 2, 1974.

      Rudolph F. Pierce, Boston, Mass. (Joseph S. Oteri, Kevin M. Keating, Martin G. Weinberg, Crane, Inker & Oteri, Boston, Mass., of counsel), for appellant.
    Robert S. Watkins, Atty., Dept, of Justice, Washington, D. C. (Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Bennet N. Hollander, Attys., Dept, of Justice, Washington, D. C., and George W. Cook, U. S. Atty. for the District of Vermont, of counsel), for appellees.
    Before FRIENDLY and TIMBERS, Circuit Judges, and THOMSEN, District Judge.

       Of the District of Maryland, sitting by designation.

   PER CURIAM:

Plaintiff appeals from the judgment of the district court dismissing plaintiff’s complaint, which sought an injunction against the continued possession by the Interna] Revenue Service of money allegedly belonging to him and a declaratory judgment that the provisions of the Interna] Revenue Code under which the assessment and levy on his property were made were unconstitutional. The facts are set out in the opinion of the district judge, 364 F.Supp. 469, at 470, 471, and are not disputed.

On appeal plaintiff argues: (1) that the Government cannot assess a taxpayer’s tax liability pursuant to 26 U.S.C. § 6201 unless or until the taxpayer, or the Secretary or his delegate on behalf of the taxpayer, files a tax return; (2) that the IRS cannot terminate a taxable year and make a jeopardy assessment under § 6851, but must proceed under § 6861; (3) that the assessment and seizure in the instant case constituted a denial of due process, and (4) that the district court was not without jurisdiction to grant relief. In effect, plaintiff is asking the Court to reconsider and overrule Irving v. Gray, 479 F.2d 20 (2 Cir. 1973).

We affirm the dismissal of the complaint. Notwithstanding the recent decision of the Sixth Circuit in Rambo v. United States, 492 F.2d 1060 (1974), we adhere to our decision in Irving, which discussed and declined to follow the decisions upon which Ram-bo was largely based, particularly Schreck v. United States, 301 F.Supp. 1265 (D.Md. 1969). See 479 F.2d at 23, 24. The facts and applicable principles in the instant case are essentially similar to those in Irving. Plaintiff was attempting to take some $300,000 in cash out of this country in a suitcase in the engine compartment of his automobile. A jeopardy assessment was clearly justified. So far as the record shows, no deficiency has yet been determined and plaintiff therefore has not yet had access to the Tax Court. But he has had the right, at any time, to file a return showing the amount of any tax due and to file an action in the appropriate district court six months thereafter to recover any claimed overpayment as a result of the jeopardy assessment and seizure of his money. Int.Rev.Code of 1954, §§ 7422(a) and 6532(a); T.R. § 301.604-3(b) (1958); Irving v. Gray, 479 F.2d at 24.

Actions to restrain the assessment or collection of federal taxes are generally barred by § 7421. This case does not fall within any of the exceptions enumerated in that section; nor does it fall within the exception created by Enochs v. Williams Packing Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292 (1962), i. e., where (1) “it is clear that under no circumstances could the Government ultimately prevail” and (2) “equity jurisdiction otherwise exists”. See Irving v. Gray, 479 F.2d at 25.

Affirmed.


author: PER CURIAM: CHAMBERS, Circuit Judge FRED M. TAYLOR, District Judge

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Randall Everett CARPENTER, Defendant-Appellant.
    No. 73-1910.
    United States Court of Appeals, Ninth Circuit.
    May 7, 1974.
    Charles M. Sevilla (argued), Federal Defenders of San Diego, San Diego, Cal., for defendant-appellant.
    Michael E. Quinton, Asst. U. S. Atty. (argued), Harry D. Steward, U. S. Atty., San Diego, Cal., for plaintiff-appellee.
    Before CHAMBERS and HUFSTED-LER, Circuit Judges, and TAYLOR, District Judge.

         Honorable Fred M. Taylor, Senior United States District Judge for the District of Idaho, sitting by designation.

   OPINION

PER CURIAM:

The judgment of conviction for importing heroin in a body cavity is reversed. We find that there was probable cause to undertake a strip search, but on the particular record before us a doctor should have been summoned. See Schmerber v. California (1966), 384 U. S. 757, 86 S.Ct. 1826, 16 L.Ed.2d 908.

CHAMBERS, Circuit Judge

(concurring) :

I concur reluctantly.

Carpenter apparently was a “mule” carrying a package of heroin up his derriére in a condom, a rubber or plastic tube not invented for carrying narcotics.

When Carpenter disrobed at the border in a searching room, an inch or so of condom was protruding, from the anus. The customs agent simply took hold of the end of the object and pulled it out. Inside the thing was a separate package about the size of a large finger. Eventually Carpenter would have pulled it out by hand or evacuated it with the help of his sphincter muscle.

Because the “hazard” of the method was only lightly touched on in the original hearing on the motion to suppress, we remanded the case to the district court to hold a hearing on the hazard of the method used.

At the district court hearing, the defense produced a proctologist who was very positive that a doctor should have been summoned to perform the operation. He speaks of using instruments. Then the government produced the doctor who is ordinarily called to remove such objects from prospective defendants. On direct examination the latter didn’t object to the method used. On cross-examination, in sum, he seems to have agreed with the defense. And, even he talks of using instruments.

I would have thought that on this remand the district court could have held that on the government’s doctor’s direct testimony the method of extraction was safe. But the district court finds that the method used should not have been used and will not be repeated. Then the court relies on the fact that the procedure did no harm to Carpenter and so the seizure was reasonable.

I regard the ease as one simply where the defense outmaneuvered an overworked prosecutor, and of no precedential value except on a similar record.

I think we deal with a matter where one can use his common sense as a layman.

I remember once taking a written instrument to a handwriting expert. My contention in the case was that the document was a forgery. The expert looked at it and said, “You are right. It is a' forgery.” I was happy. Then he added, “But I can’t testify that it is.” I was crushed. Then, I weakly queried, “Why not?” He replied, “Because you or anybody else can see that is a forgery. We only testify when you can’t see the forgery with your naked eye.”

Carpenter’s case is such a case. When the condom is wholly secreted, the anus and area above should be dilated for removal. It is a ticklish thing — the constant danger that the operator will puncture the condom is always there. So the wise thing is to first pull, if there is a loose end protruding from the body, assuming the prisoner is not fighting back. Here Carpenter didn’t help much, but he didn’t resist.

The customs officer was entitled to assume the probable — that the package was one that went in without much trouble and would come out the same way.

The closest analogy is the splinter. If it has a good end sticking outside the skin, one takes hold and pulls it out. One does not dilate.

Except to let the guilty Carpenter go, the decision will cause little harm in San Diego. Doctors will be summoned without real need. So, we shall have no similar case again from San Diego.

But if Carpenter is found at some remote place, the perils of leaving the contraption in will far outweigh a simple removal.

When this opinion has been filed, I shall go out and ask my doctor what he' would have done. If he does not say, “I would have pulled it out,” I shall ask the government’s forgiveness.

FRED M. TAYLOR, District Judge

(concurring) :

I am constrained to concur in reversing the conviction of appellant only because of the record made on remand of the case to the district court for a hearing in regard to the hazard of the method used in extracting the condom from the body of appellant. It is unfortunate and regrettable that because we must accept the idealistic testimony of medical experts, instead of relying on ordinary common sense, that the guilty appellant must be set free to again traffic in narcotics.

On the basis of the original record, prior to remand, I would have been in favor of affirming the conviction. It clearly appears from that record that the condom containing the heroin was removed by the simple process of the inspector taking hold of and pulling the protruding end of the condom and with the cooperation of appellant the condom was removed without any intrusion of the cavity and without any injury, harm or significant pain to appellant.


author: CHAMBERS, Circuit Judge:

text:
    CASTLE & COOKE, INC., Plaintiff-Appellant, v. Donald H. WILLIAMS, Individually, and doing business as Deseret Supply Co., Defendants-Appellees. CASTLE & COOKE, INC., Plaintiff-Appellee, v. Donald H. WILLIAMS, Individually, and doing business as Deseret Supply Co., Defendants-Appellants.
    Nos. 71-2872, 71-3063.
    United States Court of Appeals, Ninth Circuit.
    April 23, 1974.
    Charles E. Wills (argued), of Wills, Green & Mueth, Los Angeles, Cal., Edward G. Fenwick, Jr., of Mason, Fen-wick & Lawrence, Washington, D. C., for Castle & Cooke, Inc.
    R. Douglas Lyon (argued), of Lyon & Lyon, Los Angeles, Cal., for Donald H. Williams.
    Before CHAMBERS and SNEED, Circuit Judges, and KING, District Judge.

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

   OPINION

CHAMBERS, Circuit Judge:

Castle & Cooke, owner and operator of Bumble Bee Seafoods, brought this action against Williams, doing business as Deseret Supply Company, alleging that several marks used by Deseret on various food products infringed trademarks for which Castle & Cooke held exclusive rights. The district court enjoined Deseret from using its design of a “humanized” bee on seafood products but entered judgment for Deseret on the remainder of Castle & Cooke’s claims. Castle & Cooke appealed and Williams cross-appealed.

This case is controlled primarily by the law compiled in Paul Sachs Originals Co. v. Sachs, 325 F.2d 212 (9th Cir. 1963). Accordingly, we find the market for Deseret’s products sufficiently isolated from the market for Bumble Bee Seafoods’ products to have allowed the district court, on that basis alone, to deny relief to Castle & Cooke. We limit our decision to that aspect of the ease and express no opinion on whether any of the Deseret marks involved in this case, except the design of the “humanized” bee, might infringe or unfairly compete with any of Castle & Cooke’s registered trademarks if their markets begin to overlap significantly. It is also unnecessary at this time to decide whether Castle & Cooke has any common law trademark rights in the “Bumble Bee” mark and, if so, whether any of Deseret’s marks might infringe or unfairly compete with that mark under the right market conditions.

Despite the insignificant overlap in the markets, a review of the other determinants prescribed in Sachs, supra, dissuades us from overruling the district court’s finding that Deseret’s design of a “humanized” bee infringed Castle & Cooke’s design of a “humanized” bee. We are particularly influenced by the strong similarity between the designs and the circumstances under which Deseret adopted its design.

Once infringement was established in regard to the design of the “humanized” bee, the district court should have enjoined the mark on all food products. See Fleischmann Distilling Corp. v. Maier Brewing Co., 314 F.2d 149, 159-160 (9th Cir. 1963).

This case is remanded with instructions to enter an order extending the scope of the current injunction to all food products. Otherwise, the judgment is affirmed.

Each side will bear its own costs here.

      . The “humanized” bees involved in this case are caricatures of bees with human characteristics. For example, Castle & Cooke’s bee has a human-shaped head and body as well as human-like hands, feet and facial features. lie is attired in slacks and a black and yellow striped shirt. Deseret’s bee has similar head and torso shapes and facial features. She sports a black and yellow striped dress-like garment.
      While there is an apparent difference in the sex of the two bees, use of the big “humanized” bee by Deseret seems to be pirating-and inexcusable.

      . In its complaint Castle & Cooke alleges that it had exclusive common law trademark rights to the “Bumble Bee” mark, but that claim disappeared in the pretrial stages of the case and was never tried. If the proper market conditions develop, it will, of course, have the right to reassert that claim.

      . Another mark applied to food products by Deseret is the design of a beehive with a swarm of bees around it. This decision does not prohibit Deseret from using that mark with the minuscule bees flitting around the Deseret hive.


author: FEINBERG, Circuit Judge:

text:
    Jesus NEGRON, Relator-Appellee, v. Robert J. HENDERSON, Warden, Auburn Correctional Facility, Respondent-Appellant.
    No. 812, Docket 73-2830.
    United States Court of Appeals, Second Circuit.
    Argued March 22, 1974.
    Decided April 17, 1974.

      Arthur Weinstein, Asst. Dist. Atty. (Frank S. Hogan, Dist. Atty., New York County; Michael R. Juviler, Asst. Dist. Atty., on the brief), for appellant.
    Gray Thoron, Ithaca, N. Y. (Cornell Legal Assistance Project for the Auburn Correctional Facility; Daniel F. Cash-man, assisted by Kent G. Harbison and Jack Horn, Cornell Law School Senior students, on the brief), for relator-appellee.
    Before MOORE, FEINBERG and MULLIGAN, Circuit Judges.
   FEINBERG, Circuit Judge:

In this well briefed and excellently argued case, Robert J. Henderson, the Warden of Auburn Correctional Facility, appeals from a decision of the United States District Court for the Northern District of New York, Edmund Port, J., granting the petition of Jesus Negron for a writ of habeas corpus. For reasons set forth below, we reverse the judgment of the district court.

In 1965, Negron, together with a co-defendant, was tried in the Supreme Court of the State of New York, New York County, on a charge of murder in the first degree. According to the undisputed facts, the victim was a New York City police officer who was shot in ■the back five times with his own gun, in an attempt to stop a burglary in East Harlem. At his trial, Negron claimed he was innocent and offered an alibi. To explain away his confession, which was the prosecution’s key evidence, Negron testified that he had made incriminating statements only because he had been beaten and threatened with physical force. Those charges were categorically denied by the detectives allegedly involved. The state trial judge properly instructed the jury, in effect, that if Negron’s statements had been obtained by physical force or the threat of such force, they should be rejected and Negron should be acquitted. The issue was thus sharply posed for the jurors, who apparently disbelieved Negron since they found him guilty. Negron was sentenced to life imprisonment. The conviction was affirmed in the Appellate Division by a 3-1 decision, People v. Negron, 32 A.D.2d 747, 302 N.Y.S.2d 120 (1st Dep’t 1969), and unanimously by the Court of Appeals. People v. Negron, 27 N.Y.2d 696, 314 N.Y.S.2d 13, 262 N.E.2d 219 (1970) (mem.dec.).

Thereafter, Negron brought a federal habeas petition, claiming that the state trial judge had denied him due process. The first constitutional error alleged was the judge’s instruction to the jury that the failure of the police to advise Negron of his constitutional rights prior to questioning had no bearing whatsoever on the voluntariness of his confession. The habeas petition further claimed that this error must also have infected the Huntley hearing, at which Negron’s statements were held to be voluntary, because the same judge presided and must therefore have applied the wrong legal standard. Judge Port did not decide the second issue since he granted the writ on the theory that the judge’s charge deprived Negron “of a fundamentally fair trial.”

. On this appeal, the Warden concedes that the charge was wrong, as the Appellate Division had noted, 302 N.Y.S.2d at 121, but argues that Judge Port should nonetheless have denied the writ. The Warden argues that since Negron claimed that statements were beaten out of him, the failure to give warnings could not have been relevant on the issue of overall voluntariness and was therefore harmless. The Warden also contends that since there is no constitutional right to retry voluntariness as a jury question, subsequent to a pre-trial hearing under Jackson v. Denno, 378 U.S. 368, 84 S.Ct. 1774, 12 L.Ed.2d 908 (1964), any error in the jury instruction was one of state law only and not a ground for federal relief. Finally the Warden claims that “in the absence of any showing that the confession was unconstitutionally admitted” into evidence, the federal writ should not issue.

Although we would phrase it differently, we believe that the last argument is essentially correct and is dis-positive on this appeal. The admitted procedural error here — the erroneous jury instruction on the relevance of the failure to inform Negron of his rights —does not of itself justify federal interference and the release of petitioner from custody unless he is promptly retried. The Supreme Court has held, in a similar context, that an applicant for federal habeas is not entitled to a new hearing, much less a new trial, merely because he can point to procedural errors in the original hearing on voluntariness. Procunier v. Atchley, 400 U.S. 446, 91 S.Ct. 485, 27 L.Ed.2d 524 (1971). To obtain a second hearing or trial, “he must also show that his version of events, if true, would require the conclusion that his confession was involuntary.” Id. at 451, 91 S.Ct. at 488. Negron has made no such showing here. The voluntariness of his confession was neither challenged in the habeas petition nor passed upon by Judge Port. Of course, we can glean the substance of Negron’s claim of physical beatings from the trial record, and these allegations would certainly appear to meet the Procunier requirement of compelling a finding of involuntariness, if true. But the claim of physical beatings relates only remotely to the procedural errors complained of here. The erroneous jury instruction does bear closely upon Negron’s allegations of psychological coercion, which his appellate counsel now presses upon us. But these allegations were neither made in the habeas petition nor passed upon by Judge Port. Finally, the petition does assert that the state judge applied an incorrect standard for determining voluntariness at the Huntley hearing, an issue not decided by Judge Port. But this claim also alleges a procedural error unsupported by any contention or showing that the confession was in fact involuntary.

Accordingly, since Negron’s habeas petition is insufficient to justify federal relief, we reverse the judgment of the district court with instructions to dismiss the petition without prejudice to the filing of a new or amended petition setting forth sufficient allegations.

      . This claim had also been the basis of a pre-trial “Huntley hearing,” after which the state trial judge denied a motion to suppress.

      . Miranda v. Arizona, 384 U.S. 436, 86 S.Ct. 1602, 16 L.Ed.2d 694 (1966), was not decided until the following year.

      . Brief for Appellant at 9.

      . If they had been, Judge Port would have had to determine initially whether state remedies had been exhausted on these issues.


text:
    UNITED STATES of America, Appellee, v. Herman Olin WELCH, Appellant.
    No. 73-2041.
    United States Court of Appeals, Fourth Circuit.
    Argued Feb. 4, 1974.
    Decided April 23, 1974.
    Thomas E. Smith, Jr., Pamplico, S. C. [Court-appointed counsel], and E. LeRoy Nettles, Lake City, S. C. (Nettles, Thorny, Floyd, & Smith, Lake City, S. C., on brief) for appellant.
    Marvin L. Smith, Asst. U. S. Atty. (John K. Grisso, U. S. Atty., on brief) for appellee.
    Before BRYAN, Senior Circuit Judge, and WINTER and BUTZNER, Circuit Judges.
   PER CURIAM:

Appellant Herman Olin Welch protests that he was prejudiced because of an experiment the jury initiated and conducted during its deliberations and so his bank robbery conviction, 18 U.S.C. § 2113, should be vacated. One member produced a roll of adhesive tape, like that allegedly used by the defendant as a partial disguise in the holdup, while another juror simulated its use.

On defendant’s motion for a new trial the District Judge, sensitive of the attaintment of a verdict by the injection into the jury room of proof dehors the record, declared the rehearsal to be misconduct and an error in trial. United States v. Beach, 296 F.2d 153, 158 (4 Cir. 1961); Cf. United States v. Hephner, 410 F.2d 930, 936 (7 Cir. 1969). Further, however, he appraised it as harmless beyond a reasonable doubt. See Chapman v. California, 386 U.S. 18, 87 S.Ct. 824, 17 L.Ed.2d 705 (1967).

In his assessment, the Judge cautiously assayed the evidence, both in its detail and in its entirety, and found )Yelch overwhelmed in guilt. These conclusions were accurate applications of authentic measures. Chapman v. California, supra, p. 22, 87 S.Ct. 824.

Upon consideration of the record and argument of counsel, orally and on brief, we find appellant’s assignments of error meritless, and affirm his conviction on the opinion of the District Judge. United States v. Welch, 377 F.Supp. 367 (1973).

Affirmed.


text:
    MISSISSIPPI EXTENDED CARE CENTER, INC., d/b/a Care Inn, Collierville, Petitioner, v. NATIONAL LABOR RELATIONS BOARD, Respondent.
    No. 73-1597.
    United States Court of Appeals, Sixth Circuit.
    Argued April 11, 1974.
    Decided May 21, 1974.
    Andrew C. Partee, Jr., Kullman, Lang, Inman & Bee, New Orleans, on brief, for petitioner.
    Peter G. Nash, Gen. Counsel, John S. Irving, Deputy Gen. Counsel, Patrick Hardin, Associate Gen. Counsel, Elliott Moore, Deputy Associate Gen. Counsel, Allison W. Brown, Jr., William L. Corbett, Attys., National Labor Relations Board, Washington, D. C., on brief, for respondent.
    Before PHILLIPS, Chief Judge, and CELEBREZZE and MILLER, Circuit Judges.
   ORDER

This case is before the court on the petition of Mississippi Extended Care Center, Inc., d/b/a Care Inn, Collierville, to review and set aside an order issued by the National Labor Relations Board. The Board has cross-applied for enforcement of its order. 202 N.L.R.B. 139. Reference is made to the reported decision of the Board for detailed recitation of the pertinent facts.

Upon consideration of the briefs, record and oral argument of counsel, the court concludes that the decision of the Board is supported by substantial evidence on the record considered as a whole.

It is, accordingly, ordered that the cross-application of the Board for enforcement of its order is granted.


text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, Intervenor, v. ESSEX WIRE CORPORATION, Respondent.
    No. 71-2080.
    United States Court of Appeals, Sixth Circuit.
    Argued June 2, 1972.
    Decided June 8, 1972.
    Peter G. Nash, Gen. Counsel, Marcel Mallet-Prevost, Asst. Gen. Counsel, Abigail Cooley Baskir, Stephen C. Yohay, Attys., National Labor Relations Board, Washington, D. C., on brief, for petitioner.
    Stringari, Fritz, Asher & Kreger by Richard J. Fritz, Detroit, Mich., on brief, for respondent.
    Before CELEBREZZE, McCREE and KENT, Circuit Judges.
   ORDER

The Board, in agreement with the Trial Examiner, found that the Company violated 8(a)(1) of the Act, 29 U.S. C. § 151 et seq., by threatening and coercive interrogation of its employees and by speeches on the part of management which threatened economic reprisals in the event of a vote for the Union. While the evidence is in substantial conflict upon consideration of the record as a whole, we cannot say that there is not substantial evidence to support the finding as to Section 8(a) (1) violation.

The Board in agreement with the Trial Examiner further found that the respondent violated Section 8(a)(5) of the Act by refusing to bargain with the Union upon request based upon a claimed majority represented by authorization cards.

Upon consideration of the record as a whole we are not satisfied that the facts presented are sufficient to justify the bargaining order which the Board seeks to enforce. We recognize the impact of N.L.R.B. v. Gissel Packing Co., 395 U.S. 575, 89 S.Ct. 1918, 23 L.Ed.2d 547 (1969), but do not find the rationale of that decision applicable to the facts of this ease. Rather the language of the Court of Appeals for the Fifth Circuit in N.L.R.B. v. American Cable Systems, Inc., 427 F.2d 446, 449 (1970), cert. den., 400 U.S. 957, 91 S.Ct. 356, 27 L.Ed.2d 266, is more appropriate. In the present case the language of the Fifth Circuit, 427 F.2d 449, describes the reasoning of the Board in ordering bargaining as a “a litany, reciting conclusions by rote without factual explication.”

It is, therefore, ordered that enforcement be granted only as to the Section 8(a)(1) violation, and is denied as to the alleged Section 8(a)(5) violation.

      . The Board’s order is found at 188 N.L.R.B. No. 59.


author: PER CURIAM. ROSS, Circuit Judge

text:
    L. R. PUTMAN, Petitioner, v. Miles W. LORD, Respondent.
    No. 74-1220.
    United States Court of Appeals, Eighth Circuit.
    Submitted June 10, 1974.
    Decided June 13, 1974.
    Stephen G. Palmer, Asst. U. S. Atty., Minneapolis, Minn., for petitioner.
    William M. Kunstler, Center for Constitutional Rights, New York City, for respondent.
    Before LAY, HEANEY and ROSS, Circuit Judges.
   PER CURIAM.

The writ of mandamus is denied. The district court and the parties are ordered to hold an evidentiary hearing at the earliest date possible. This court will thereafter view favorably a request by either party for an expedited appeal.

It is so ordered.

ROSS, Circuit Judge

(dissenting).

I would grant the writ of mandamus.