author: HAYS, Circuit Judge:

text:
    Elena Jerezano MONCADA, as Personal Representative of the Estate of Arturo Moncada, Deceased, Plaintiff-Appellant, v. LEMURIA SHIPPING CORP. et al., Defendants-Appellees.
    No. 48, Docket 73-1184.
    United States Court of Appeals, Second Circuit.
    Argued Oct. 30, 1973.
    Decided Jan. 21, 1974.

      Thomas M. Breen, New York City, for plaintiff-appellant.
    William M. Kimball, New York City (Burlingham, Underwood & Lord, New York City, on the brief), for defendants-appellees.
    Before MOORE, HAYS and FEINBERG, Circuit Judges.
   HAYS, Circuit Judge:

Arturo Moneada was a Honduran seaman employed aboard the S.S. Ekberg from June 12, 1968 until his death on September 27, 1968. Moneada fell ill and died aboard ship at Maceio, Brazil. The medical examiner determined the cause of death to be severe edema of the lungs (pulmonary congestion). Alleging negligence by the master of the ship in failing to call a doctor rapidly, the widow of the decedent brought this suit under the Jones Act and general maritime law against Ekberg Shipping Corp. (which owned the vessel and employed the crew), Lemuria Shipping Corp. (the chartering broker for the vessel), and S.A. Lumber & Shipping Co. (which managed the ship).

The district court held that the American contacts were insufficient to establish Jones Act jurisdiction. It therefore dismissed the Jones Act claim and discharged the jury to which plaintiff would have been entitled under the Jones Act. Proceeding to trial without a jury, the judge found for defendants. We reverse as to defendant Ekberg Shipping Corp., but affirm as to the other defendants.

The literal terms of the Jones Act do not require that either the parties or the injury have any connection with the United States. However, the courts have long recognized that Jones Act jurisdiction is subject to some limitations. See Lauritzen v. Larsen, 345 U.S. 571, 576-577, 73 S.Ct. 921, 97 L.Ed. 1254 (1953). In Bartholomew v. Universe Tankships, Inc., 263 F.2d 437 (2d Cir.), cert. denied, 359 U.S. 1000, 79 S.Ct. 1138, 3 L.Ed.2d 1030 (1959), we held that Jones Act jurisdiction exists only where there are substantial contacts between the transaction involved in the case and the United States, with substantiality to be determined on an absolute scale and not by comparing or balancing the presence of certain contacts with the absence of others. Id. at 440-441. No subsequent decision of this court or of the Supreme Court has undercut the holding of Bartholomew. Indeed, in Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306, 309 n.4, 90 S.Ct. 1731, 26 L.Ed.2d 252 (1970), the Supreme Court expressly adopted the test enunciated by Judge Medina in Bartholomew. Whether, as appellee suggests, the dissent in Rhoditis might now win the support of a majority of the Supreme Court is not for us to decide.

In determining whether the contacts in a given case are “substantial” the courts have given consideration to the significance attaching to specific contacts. In Lauritzen v. Larsen, supra, the Supreme Court enumerated the following contacts as worthy of consideration: (1) the place of the wrongful act; (2) the law of the flag; (3) the allegiance or domicile of the injured party; (4) the allegiance of the shipowner; (5) the place where the contract of employment was made; (6) the inaccessibility of a foreign forum; and (7) the law of the forum. 345 U.S. at 583-592, 73 S.Ct. 921. In Rhoditis the Court held that this list is not exhaustive. It decided that the shipowner’s base of operations is also an important contact and that “there may well be others.” 398 U.S. at 309, 90 S.Ct. 1731. Thus we must consider each factor and its importance in the context of this case.

The majority of the contacts enumerated in Lauritzen, seem to favor the defendants in this case. But as we have indicated above, our task is not to weigh or balance present against absent contacts, but merely to determine whether the contacts which are present are substantial. Thus the Court in Rhoditis found for the plaintiff although the majority of contacts favored the defendant. Moreover, many of the factors here favoring defendants have been declared insignificant in Lauritzen and succeeding cases. In Lauritzen the Court conceded that traditional maritime law “gives cardinal importance to the law of the flag,” 345 U.S. at 584, 73 S.Ct. at 929, but noted that in light of resort of American shipowners to foreign flags of convenience, courts have often ignored the law of the flag in order “to enforce against American shipowners the obligations which our law places upon them.” Id. at 587, 73 S.Ct. at 931. Other contacts to which the courts have paid little attention include the place of injury, Lauritzen, supra, at 583, 73 S.Ct. 921; the place where the contract was made, Lauritzen, supra, at 588-589, 73 S.Ct. 921; Southern Cross Steamship Co. v. Firipis, 285 F.2d 651, 653 (4th Cir. 1960), cert. denied, 365 U.S. 869, 81 S.Ct. 903, 5 L.Ed.2d 859 (1961); and the inaccessibility of a foreign forum, Lauritzen, supra, 345 U.S. at 589-591, 73 S.Ct. 921; Southern Cross Steamship Co. v. Firipis, supra, 285 F.2d at 653.

Of the contacts favoring the plaintiff in the present case, the most important is that all of the stock of all the defendants was owned by Americans. In Bartholomew we suggested that American ownership alone suffices to establish Jones Act jurisdiction. 263 F.2d at 443 n. 4. That position was expressly adopted by then District Judge Irving R. Kaufman in Bobolakis v. Compania Panamena Maritima San Gerassimo, S.A., 168 F.Supp. 236 (S.D.N.Y. 1958). However, we need not rely upon this ground alone, for there are here additional contacts which, when added to American ownership, make the sum of the contacts substantial. The Supreme Court in Rhoditis, approving Pavlou v. Ocean Traders Marine Corp., 211 F.Supp. 320, 325 (S.D.N.Y.1962), held that the shipowner’s base of operations is also significant. 398 U.S. at 309, 90 S.Ct. 1731. The location of the managing and chartering agents for the vessel are also entitled to consideration. See Bartholomew, 263 F.2d at 441. In the instant case all defendants have their base of operations in this country and the managing and chartering of the vessel were conducted from this country. In addition to those contacts all officers of the defendants are American. See Bartholomew, 263 F.2d at 441. Approximately 40% of the vessel’s voyages began or ended in American ports. See Rhoditis, 398 U.S. at 310, 90 S.Ct. 1731.

In light of the precedents construing the Jones Act and of the purposes of Congress in enacting the Jones Act we hold that the contacts between this transaction and the United States are substantial and that Jones Act jurisdiction exists. The decision of the district court must be reversed. Because plaintiff was entitled to have her Jones Act claim tried to a jury, she was also entitled to a jury trial on her claims under general maritime law. Fitzgerald v. United States Lines Co., 374 U.S. 16, 83 S.Ct. 1646, 10 L.Ed.2d 720 (1963); Harney v. William M. Moore Building Corp., 359 F.2d 649, 656 (2d Cir. 1966). Thus plaintiff will also have a right to a jury trial of these claims on remand.

Although there were sufficient contacts to establish Jones Act jurisdiction the district court properly dismissed the actions against defendants Lumber and Lemuria on the ground that they neither owned the S.S. Ekberg nor were the employers of the deceased seaman. Thus the dismissal is affirmed as to these defendants. Romero v. International Terminal Operating Co., 358 U.S. 354, 384-385, 79 S.Ct. 468, 3 L.Ed.2d 368 (1959); Cosmopolitan Shipping Co. v. McAllister, 337 U.S. 783, 69 S.Ct. 1317, 93 L.Ed. 1692 (1949); Fitzgerald v. A. L. Burbank & Co., 451 F.2d 670 (2d Cir. 1971); Dassigienis v. Cosmos Carrier & Trading Corp., 442 F.2d 1016 (2d Cir 1971).

      . The Jones Act, 46 Ü.S.C. § 688 (1970), reads as follows:
      “Any seaman who shall suffer personal injury in the course of his employment may, at kis election, maintain an action for damages at law, with the right of trial hy jury . . .


source: Caselaw Access Project

author: FEINBERG, Circuit Judge:

license: Public Domain

text:
    UNITED STATES of America, Appellant, v. Peter DORNAU, Defendant-Appellee.
    No. 350, Docket 73-2204.
    United States Court of Appeals, Second Circuit.
    Argued Dec. 6, 1973.
    Decided Jan. 24, 1974.

      John J. Kenney, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., S. D. N. Y., John W. Nields, Jr., Asst. U. S. Atty., on the brief), for appellant.
    Franklin S. Bonem, New York City (London, Buttenwieser & Chalif, Bonnie P. Winawer, New York City, on the brief), for defendant-appellee.
    Before WATERMAN and FEINBERG, Circuit Judges, and GURFEIN, District Judge.

       Of the United States District Court for the Southern District of New York, sitting by designation.

   FEINBERG, Circuit Judge:

The United States appeals from the dismissal in the United States District Court for the Southern District of New York, by Charles M. Metzner, J., of an indictment that charged appellee Peter Dornau with use of the mails and wire communications in interstate commerce in furtherance of a scheme to defraud investors in violation of 18 U.S.C. §§ 1341, 1343. The basis for dismissal was that the prosecution, in presenting its case to the grand jury, may have made derivative use of testimony given by Dornau pursuant to a grant of immunity under section 7(a) (10) of the Bankruptcy Act. We hold that the order of dismissal is appealable to this court. On the merits, we further hold that Dornau received mere use immunity in the bankruptcy proceeding and that the prosecution’s alleged derivative use of his testimony was not unlawful. Accordingly, we reverse and remand to the district court with instructions to reinstate the indictment.

I

A brief history of this litigation is necessary for an understanding of the issues before us. Appellee Peter Dornau was vice-president of Ra-Dor Industries, Inc. (Ra-Dor), which manufactured materials used in defense contracts. In May 1969, he testified at the first meeting of creditors in Ra-Dor’s bankruptcy proceeding in a federal district court in Florida; this testimony and the circumstances under which it was given are the key facts in this appeal. Five months later, Dornau was indicted in the Southern District of New York on 15 counts of mail and wire fraud in furtherance of a scheme to bilk investors in Ra-Dor. Early in 1973, Dornau moved, among other things, for an order entitling him to inspect the grand jury minutes. This relief was granted. D.C., 356 F.Supp. 1091, 1097-1098. Thereafter, upon Dornau’s motion, a hearing was held to determine whether the Government had made improper use of Dornau’s prior testimony either in presenting evidence to the grand jury or in preparing for trial. In a thorough opinion, D.C., 359 F.Supp. 684, the judge granted Dornau’s motion to dismiss the indictment.

Judge Metzner proceeded on the assumption, apparently unchallenged by the Government at that time, that Dornau’s Florida testimony had been compelled pursuant to a grant, under the Bankruptcy Act, of use and derivative use immunity coextensive with the fifth amendment privilege against self-incrimination. On this assumption, the judge examined the intended trial evidence in light of the Supreme Court’s admonition that the prosecution bears a “heavy burden of proving that all of the evidence it proposes to use was derived from legitimate independent sources.” Kastigar v. United States, 406 U.S. 441, 461-462, 92 S.Ct. 1653, 1665, 32 L.Ed.2d 212 (1972). After careful scrutiny of the sources of this evidence, Judge Metzner ruled:

[I]t is clear that the prospective government witnesses on this trial . were all discovered and interviewed without relation to anything that appeared in the minutes of the [bankruptcy] testimony.

359 F.Supp. at 686. The judge also examined for taint the evidence which the Government had presented to the grand jury. Here he found that the Assistant United States Attorney then in charge had sought, and obtained, a transcript of the bankruptcy testimony less than a month before he began to present the case to the grand jury, and had made copious notes on the transcript. Consequently, although Dornau was unable to point out any specific instance of taint, the judge dismissed the indictment, holding that the prosecutor may have made derivative use of the testimony in a variety of ways and that the Government had not met its burden of proving freedom from taint.

II

The first issue before us is whether the Government can appeal from the district court’s order. Since the indictment in this case was returned in October 1969, before the effective date of the current Criminal Appeals Act, 18 U.S.C. § 3731, appealability is governed by the “elusive provisions” of the 1948 version of the Act. United States v. Weller, 401 U.S. 254, 255 & n. 1, 91 S.Ct. 602, 28 L.Ed.2d 26 (1971); United States v. DiStefano, 464 F.2d 845, 847 (2d Cir. 1972). Despite the breadth of its language, the 1948 Act has been construed to incorporate the provisions of the 1942 Act. These permit appeals to the courts of appeals only in a narrow class of eases, which includes a decision “sustaining a plea in abatement. . . . ” Id. at 847-848; United States v. Apex Distributing Co., 270 F.2d 747, 751-755 (9th Cir. 1959) (en banc). We hold that the dismissal here is appealable to this court because, in effect, it sustained a plea in abatement.

The function of a plea in abatement is “to impeach the indictment without at the same time destroying the cause of action.” United States v. Apex Distributing Co., supra, 270 F.2d at 753. Thus, an attack on an indictment because of a defect in the proceedings leading to its procurement, which would not necessarily end the prosecution, would be such a plea. Id. Here, Judge Metzner found that the witnesses the Government proposed to produce at trial were discovered and interviewed independently of appellee’s bankruptcy testimony; the problem of taint arises only because the prosecutor read that testimony before presenting the Government’s case to the grand jury. However difficult it may be to eliminate that taint, if such it was, dismissal did not necessarily terminate the cause of action. Even if dismissal was proper, the Government may be able to reindict successfully if a prosecutor, who has not read either the bankruptcy transcript or the grand jury minutes, presents the independently derived evidence to a different grand jury. See United States v. Tane, 329 F.2d 848, 851 & n.4, 852 (2d Cir. 1964) (dismissal of indictment because it was procured through the use of illegally obtained evidence did not necessarily terminate cause of action and was appealable).

Dornau, however, claims that we do not have jurisdiction over the appeal from Judge Metzner’s order. Citing various decisions, e. g., United States v. Brewster, 408 U.S. 501, 506, 92 S.Ct. 2531, 33 L.Ed.2d 507 (1972), and United States v. Ponto, 454 F.2d 657, 663-664 (7th Cir. 1971) (en banc), appellee first contends that the dismissal is not appealable at all because it is based on facts not alleged in the indictment. The district court, the argument goes, went beyond the indictment to examine the prosecution’s trial evidence and concluded that the Government had failed to prove that it was untainted. The argument flies in the face of Judge Metzner’s finding, quoted above, that the Government’s trial evidence was not tainted. Moreover, appellee’s citations do not support his contention since they deal with dismissals that necessarily determined the merits of criminal charges and had the effect of terminating the prosecution altogether. In contrast, the order here did not determine or purport to determine the merits of the charges against Dornau.

Appellee alternatively suggests that the dismissal in this case has the effect of sustaining a motion in bar and is thus appealable only to the Supreme Court. See note 5 supra. The argument is without merit. As defined by the Supreme Court, a motion in bar has the characteristics of a common law plea of confession and avoidance; at least for purposes of the motion, the movant admits his guilt but claims he is nonetheless immune from prosecution because of some extraneous factor such as a grant of transactional immunity or the expiration of the statute of limitations. United States v. Weller, supra, 401 U.S. at 259-261, 91 S.Ct. 602. As we have already held, dismissal here did not necessarily bar reindictment. See United States v. Tane, supra, 329 F.2d at 851 n.4.

III

Having determined that we have jurisdiction, we would ordinarily turn directly to the Government’s arguments as appellant, but before we can consider them still another preliminary question must be faced. One of the Government’s principal contentions in this court is that, by testifying under the 1969 version of section 7(a) (10) of the Bankruptcy Act, Dornau received only use immunity; consequently, even if the prosecution made derivative use of his testimony—which is not conceded—such use was lawful. Dornau argues that this issue is not properly before us because the Government did not make this point in the trial court. Dornau is apparently correct in the latter assertion. The Government seems to concede that it raised the issue of the scope of appellee’s immunity only at the last moment in the district court and even then only obliquely by calling United States v. Goodwin, 470 F.2d 893 (5th Cir. 1972), which is discussed below, “to the Court’s attention informally after the hearing and before the Court’s opinion was filed.”

Nevertheless, we conclude that we should consider the' Government’s “scope of immunity” argument. We undoubtedly have discretion to entertain on appeal contentions not raised in the district court. McDonnell v. American Leduc Petroleums, Ltd., 456 F.2d 1170, 1185 (2d Cir. 1972); United States v. Drummond, 354 F.2d 132, 141 n.4 (2d Cir. 1965) (en banc), cert. denied, 384 U.S. 1013, 86 S.Ct. 1968, 16 L.Ed.2d 1031 (1966). Here, the argument as it comes. before us is essentially one of law; appellee points to no seriously disputed factual issues whose resolution would best be left in the first instance to the district court. Moreover, appellee’s ability to litigate the “scope of immunity” issue in this court is not impaired by the Government’s failure to raise it below. Finally, absent this kind of prejudice to Dornau, it is significant that the indictment charges serious crimes in whose continued prosecution the public has a strong interest. Under these circumstances, we exercise our discretion to consider the Government’s argument.

Addressing ourselves, at last, to the merits, we hold that Dornau received only use immunity in the baiikruptcy proceeding and that consequently the Government’s alleged derivative use of his testimony was not improper. Section 7(a) (10) of the Bankruptcy Act, as it stood in 1969, conferred only use immunity. It was so worded and had been so interpreted by the Supreme Court. Arndstein v. McCarthy, 254 U.S. 71, 73, 41 S.Ct. 26, 65 L.Ed. 138 (1920); see 1A Collier on Bankruptcy ¶ 7.21 at 1013-1015. Because use immunity is not coextensive with the privilege against self-incrimination, Counselman v. Hitchcock, 142 U.S. 547, 564-565, 12 S.Ct. 195, 35 L.Ed. 1110 (1892), section 7(a) (10) could not have been used in 1969 to compel a bankrupt’s testimony over an assertion of his fifth amendment privilege. Arndstein, supra, 254 U.S. at 73, 41 S.Ct. 26. Consequently,

. the witness faced two alternatives under the [1969] version of the statute: he could choose to testify freely and then later claim whatever protection the statute afforded; or he could refuse to testify on the grounds that the answers sought might be incriminating.

United States v. Goodwin, 470 F.2d 893, 904 (5th Cir. 1972), cert. denied, 411 U.S. 969, 93 S.Ct. 2160, 36 L.Ed.2d 691 (1973). The record in this ease indicates that Dornau was informed by the referee of his constitutional right to refuse to testify, and that, without compulsion, he nonetheless chose to testify, relying on the immunity granted by the Act. Such conduct hardly supports Dornau’s claim that he received derivative use immunity.

Appellee maintains, however, that the 1969 version of section 7(a) (10) is not controlling. Noting that the section was amended in 1970 to provide use and derivative use immunity, and relying on United States v. Seiffert, 463 F.2d 1089, 1091-1092 (5th Cir. 1972), Dornau argues that the 1970 amendment applies to all attempts to make derivative use of bankruptcy testimony after its effective date even if the testimony was given prior thereto. We reject this argument and decline to follow Seiffert, which we think was wrongly decided. In enacting the 1970 amendment as part of the Organized Crime Control Act, Title II, 84 Stat. 926, 929, Congress did not have the remedial purpose, suggested by Seiffert, of conferring additional immunity upon witnesses who, like Dornau, had already chosen to testify under a grant of use immunity; rather, Congress intended to achieve “effective displacement of the privilege against self-incrimination by granting protection coextensive with the privilege” in order to enable bankruptcy referees for the first time to compel the testimony of witnesses who refused to testify, claiming the privilege. H.R.Rep.No.1549, 91st Cong., 2d Sess. (1970), quoted at 1970 U.S.Code Cong. & Adm.News p. 4008. Indeed, in United States v. Goodwin, supra, 470 F.2d at 903-904, the Fifth Circuit itself held that the 1970 amendment does not confer derivative use immunity on testimony given before its effective date but sought to be used thereafter. The unanimous denial of a rehearing en banc in Goodwin, id. at 904 (1973), is, in view of the clear conflict with Seiffert, a strong indication that Seiffert’s retroactive application of the 1970 amendment has been overruled sub silentio. Thus, Dornau never did receive derivative use immunity under the 1969 statute, a conclusion we are confident Judge Metzner would have reached had the Government properly presented the issue to him.

Appellee raises one final argument which requires discussion. He maintains that he testified on the “express assurance” that he would receive not only use but also derivative use immunity. Consequently, his argument runs, it would frustrate the policy of the privilege against self-incrimination to allow the Government to take advantage of his misconception of the scope of immunity he would receive by testifying. The argument lacks merit. The record shows that the so-called “express .assurance” was not an assurance at all. More importantly, it came not from the referee but from Dornau’s own counsel. Dornau’s reliance on the erroneous advice of counsel not claimed to be incompetent can hardly operate to convert what was in fact a statutory grant of use immunity into a grant of use and derivative use immunity.

Accordingly, we reverse the judgment below and remand to the district court with instructions to reinstate the indictment.

      . Also named as defendants in the indictment but not involved in this appeal were Fred Dornau and Ra-Dor Industries, Inc.

      . Apparently, Dornau had been designated under § 7(b) of the Bankruptcy Act, 11 U. S.C. § 25(b), as one of the corporate officers required to perform the duties of the bankrupt and appeared at the meeting pursuant to order.

      . Dornau also moved to dismiss the indictment because of the more than three-year post-indictment delay. Judge Metzner denied this motion, finding that much of the delay was due to the adjudication of pending charges against co-defendant Fred Dornau.

      . The judge declined to speculate on the precise effect reading the transcript might have had on the conduct or thinking processes of the prosecutor. The possibility of some use was held sufficient to violate the command of Kastigar that immunized testimony must not be used “in any respect.” 406 U.S. at 453, 92 S.Ct. 1653.

      . The 1948 Act provided in relevant part:
      An appeal may be taken by . . . the United States from the district courts to a circuit court of appeals in all criminal cases, in the following instances :
      From a decision or judgment setting aside, or dismissing any indictment or information, or any count thereof except where a direct appeal to the Supreme Court of the United States is provided by this section.
      62 Stat. 845.
      An appeal lies to the Supreme Court from, inter alia, a decision “sustaining a motion in bar, when the defendant has not been put in jeopardy.” Id. at 844r-845.

      . The 1942 Act provided in relevant part that an appeal lies to a court of appeals:
      From a decision or judgment quashing, setting aside, or sustaining a demurrer or plea in abatement to any indictment or information, or any count thereof except where a direct appeal to the Supreme Court of the United States is provided by this Act.
      56 Stat. 271.

      . United States v. Blue, 384 U.S. 251, 86 S.Ct. 1416, 16 L.Ed.2d 510 (1966), relied upon by appellee, is not to the contrary. To be sure, the Supreme Court there found that dismissal of the indictment because of the defendant’s past compulsory self-incrimination operated as the granting of a motion in bar. But the Court so found only because of the district court’s erroneous ruling that the taint was so pervasive that prosecution on the same counts was forever barred. Id. at 254, 86 S.Ct. 1416. In reversing, the Court noted that the defendant would at most be entitled to bar the incriminating evidence and its fruits if they were sought to be used against him at a subsequent trial. Id. at 255, 86 S.Ct. 1416.

      . For other claims of the Government, see note 15 infra.

      . Reply brief for the United States, at 4 n. * *. Dornau moves to strike this footnote because it relates ex parte conduct not in the record. We deny the motion, noting that we do not rely on the information in the footnote to support our decision.

      . The 1969 version of § 7(a) (10), 52 Stat. 847, provides that no testimony given by a bankrupt pursuant thereto “shall be offered in evidence against him in any criminal proceeding . . . . ” There does not appear to be any question that Dornau, though not himself bankrupt, was entitled to the immunity granted by this section since he testified at the first meeting of creditors after apparently being designated as one of the corporate officers required to perform the duties of the bankrupt Ra-Dor. See note 2 supra; United States v. Castellana, 349 F.2d 264, 273-274 (2d Cir. 1965).

      . The referee told Dornau:
      Mr. Dornau, it is my duty to advise you that under the Fifth Amendment to the United States Constitution, a person cannot be compelled to give testimony which might be used against the person in prosecution for violating any laws of the United States or any State.
      It is my duty to advise you that you have this constitutional right and if in the course of the questioning you are of the honest belief that the answer sought to be elicited from you does or might tend to incriminate you or put you in jeopardy and that might be used against you in subsequent prosecution for violating any laws of the United States or any State thereof, then you have a constitutional right to refuse to answer.
      I also have to explain to you and your counsel here what is known as the Doctrine of Waiver, that once you commence giving answers pertaining to a certain subject that you might be deemed to have waived your constitutional rights because you voluntarily commenced to answer.

      . Section 7(a) (10) currently provides that no testimony given by a bankrupt pursuant thereto “or any evidence which is directly or indirectly derived from such testimony . . . shall be offered in evidence against him in any criminal proceeding 11 U.S.C. § 25(a) (10).

      . Appellee also argues that § 7(a) (10) would be unconstitutional under Kastigar if it were interpreted to provide only use immunity. This contention is without merit. Under the 1969 version of the section, the referee had no power to compel testimony over an assertion of the privilege against self-incrimination; as we read Kastigar, it applies only to compelled testimony.
      In addition, Dornau cites United States v. Monia, 317 U.S. 424, 63 S.Ct. 409, 87 L.Ed. 376 (1943), for the proposition that a witness, who testifies under a statute such as the Bankruptcy Act which specifies no procedure for conferring the statutory immunity, automatically receives use and derivative use immunity. We do not agree. Monia stands at most for the proposition that the witness automatically receives the immunity provided for by the statute—here, in 1969, only use immunity.

      . The only “assurance” Dornau cites is the following statement by his counsel to the referee at the creditors’ meeting :
      I wanted the record to show that he is appearing under Section 7-B of the Act because it is our position that thereby the provisions of 7-A-10 cannot be used against him nor could any evidence which is found as the result of testimony.
      On its face, this statement is an announcement of a position which Dornau intended to take in any subsequent litigation rather than an “assurance” that he would definitely receive derivative use immunity.

      . In view of our disposition of this appeal, we need not reach other issues raised by the Government, i. e., whether the evidence presented to the grand jury was in fact tainted, cf. United States v. McDaniel, 482 F.2d 305 (8th Cir. 1973), and if it was, whether dismissal of the indictment was a remedy within the district court’s discretion. The latter is a particularly important issue, which we are reluctant to decide unnecessarily. Before the district court, the Government contended vigorously that dismissal was not a proper remedy, relying on dicta in Gelbard v. United States, 408 U.S. 41, 60, 92 S.Ct. 2357, 33 L.Ed.2d 179 (1972), and United States v. Blue, 384 U.S. 251, 255 n.3, 86 S.Ct. 1416, 16 L.Ed.2d 510 (1966), and on United States v. Piccini, 412 F.2d 591, 593-594 (2d Cir. 1969), cert. denied, 397 U.S. 917, 90 S.Ct. 923, 25 L.Ed.2d 98 (1970). Judge Metzner rejected this argument, relying on United States v. McDaniel, 449 F.2d 832, 835 (8th Cir. 1971), cert. denied, 405 U.S. 992, 92 S.Ct. 1264, 31 L.Ed.2d 460 (1972), and on our statement in Goldberg v. United States, 472 F.2d 513, 516 n.4 (2d Cir. 1973), that the dictum in Blue did not settle the issue. 356 F.Supp. at 1099-1100. It may be, however, that the Supreme Court’s recent decision in United States v. Calandra, 414 U.S. 338, 94 S.Ct. 613, 38 L.Ed.2d 561 (1974), which holds that the fourth amendment exclusionary rule does not apply to grand jury proceedings, resolves the issue in the Government's favor. The Calandra Court observed in dictum:
      [A]n indictment valid on its face is not subject to challenge . . . even on the basis of information obtained in violation of a defendant’s Fifth Amendment privilege against self-incrimination.
      Id. at 345, 94 S.Ct. at 618.


author: ADAMS, Circuit Judge: VAN DUSEN, Circuit Judge,

text:
    Dean MATHEY et al., Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
    No. 72-1400.
    United States Court of Appeals, Third Circuit.
    Argued Feb. 12, 1973.
    Reargued En Banc Nov. 16, 1973.
    Decided Jan. 29, 1974.

      Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwaeks, Paul M. Ginsburg, Virginia H. Gallagher, Attys., Tax Div., Dept. of Justice, Washington, D. C., for defendant-appellee; Herbert J. Stern, U. S. Atty., of counsel.
    Donald B. Kipp, Pitney, Hardin & Kipp, Newark, N. J., for plaintiffs-appellants; Joel A. Wolff, Newark, N. J., of counsel and on the brief.
    Argued Feb. 12, 1973.
    Before VAN DUSEN and ADAMS, Circuit Judges, and BRODERICK, District Judge.
    Reargued Nov. 16, 1973.
    Before SEITZ, Chief Judge, and VAN DUSEN, ALDISERT, ADAMS, GIBBONS, ROSENN, HUNTER, WEIS and GARTH, Circuit Judges.
   OPINION OF THE COURT

ADAMS, Circuit Judge:

Plaintiff taxpayers, the executors of the estate of the late Helen H. Mathey, seek to recover federal estate taxes, interest paid thereon, and administrative and legal fees in the amount of $390,402.50, which they claim were illegally assessed and collected by the Government.

The Government contends, and the district court concluded, that the value of eleven inter vivos trusts created by Mrs. Mathey were includable in her gross estate under section 2038 of the Internal Revenue Code, for the purpose of computing federal estate taxes. We must evaluate the propriety of that conclusion.

On April 20, 1955, Mrs. Mathey, then 63 years old, set up under New York law eleven trusts for the benefit of her grandchildren, the youngest of whom was then two years of age. Two additional trusts were created in 1961 and 1962, for two more grandchildren. The Empire Trust Company (later merged into the Bank of New York) was named, and continues to serve, as trustee. All thirteen trusts were identical, with the exception of the beneficiaries’ names and their birth dates. When Mrs. Mathey died in September, 1965, eleven of the thirteen trusts remained in existence (two grandchildren having previously reached the age of distribution) and were valued at $808,018.52.

Mrs. Mathey died testate, and a federal estate tax return was filed by her executors in December, 1966, revealing a gross estate valued at $1,811,198.02, and an estate tax liability of $484,599.19. After audit and examination, the Government took the position that Mrs. Mathey's gross estate should include, for federal estate tax purposes, the value of the eleven inter vivos trusts in existence at the date of her death. The Government’s position resulted in a claimed net deficiency in estate tax liability of $318,883.17. Mrs. Mathey’s executors paid this sum, together with $41,769.33 in interest, and then filed suit in the district court for a refund.

The controversy over the includability of the trusts in Mrs. Mathey’s gross estate stems from a clause in each of the trust agreements giving Mrs. Mathey the power to change the trustee.

“ARTICLE SIXTH: The Grantor reserves to herself and after her death to her Executors the right at any time and from time to time during the continuance of the trust to change the Trustee hereunder after ten days notice in writing which shall specify the name of the trustee to be substituted, the date of such substitution and the time and place within the City of New York where the securities then constituting the trust estate are to be delivered to the substituted trustee and to require the trustee, upon receiving such notice to transfer and deliver to the substituted trustee at the time and place within the City of New York specified in such notice any and all securities, cash and other assets constituting the trust after deducting its lawful compensation and expenses.
“Upon its removal as above provided, any Corporate Trustee, shall be entitled to reimbursement from the trusts hereunder for all loans and advances, if any, theretofore made by it and all expenses, including expenses incurred by it in connection with the settlement of its accounts as Trustee. Likewise in the case of the change or removal of any corporate Trustee, it shall be entitled to all fees to which it would be entitled if the trust were fully administered or if the trusts for which it is Trustee were then to terminate.”

The Government contends that, under Article Sixth of the trust indentures, Mrs. Mathey retained the unrestricted power to appoint herself as successor trustee and that, because under the terms of the trust instruments the trustee has the power to pay trust income and corpus to the beneficiaries before the date set for corpus distribution, the trust corpora were includable in her gross estate. In support of this proposition, the Government points to section 2038 of the Code, which provides in part:

“. . . The value of the gross estate shall include the value of all property ....
“. . .To the extent of any interest therein of which the decedent has at any time made a transfer (except in ease of a bona fide sale for an adequate and full consideration in money or money’s worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person . . ., to alter, amend, revoke, or terminate . . . .”

The taxpayers, on the other hand, assert essentially that (1) in view of the terms and design of the trust agreements, Mrs. Mathey retained the power to name only a corporate trustee as successor to the original trustee, and under no circumstances intended to or did reserve the right to substitute herself as trustee; and (2) even assuming that Mrs. Mathey did retain the power to substitute herself as trustee, a New York court would not have permitted her to act in that capacity.

The district court dismissed the taxpayers’ complaint, holding that Mrs. Mathey did in fact retain the power to appoint herself successor trustee and that New York law erected no absolute bar to her exercise of that power. It concluded that the aggregate value of the eleven trusts was includable in her gross estate for federal estate tax purposes. We affirm.

Section 2038, quoted above, focuses upon the retention by a grantor of the power to “alter, amend, revoke, or terminate” a trust. If such power exists at the date of the grantor’s death, the value of such trust is includable in the decedent’s gross estate. The taxpayers concede that, under the trust agreements involved here, a power in the grantor to name herself as trustee would amount to a power to “alter, amend, revoke or terminate.” The taxpayers agree, too, that such a power, if it exists, need never actually be exercised for the trusts to be includable in the decedent’s estate. Their argument, in essence, is that the facts and circumstances of this case make clear that Mrs. Mathey intended to retain no such power, that the trust agreements cannot be read to provide for a retention by her of such power, and that New York law would bar her from ever exercising any such power. The trust agreements do not expressly forbid Mrs. Mathey from appointing herself as trustee.

At the request of the taxpayers, and over the objection of the Government, the trial court ruled that oral testimony would be permitted on the question of the meaning of the language of the trust indentures and on the practice in the New York courts regarding the service of trustees. Pursuant to this ruling, the parties introduced extensive expert testimony concerning the language in the trust indentures that refers to the trustee and its successor or successors and specifically the use of the pronoun “it.” The taxpayers assert that use of the pronoun “it” establishes that, under the trust agreements, Mrs. Mathey could name only a corporate trustee as successor to the original trustee, inasmuch as a natural person is more commonly referred to as “he” or “she.” The district court found that use of the neuter pronoun did not signify an intent on Mrs. Mathey’s part to allow a corporation only to be named as a successor trustee, and that therefore an individual could be substituted for the original trustee.

We cannot say that the district court’s finding as to the meaning of the word “it” in the trust agreements was clearly erroneous. The Government’s expert testified that:

“[T]his is a grammatical convention used by every experienced draftsman of a trust or will, that the personal pronoun referring to the trustees follows the section [sic] of the original trustee.
“Again, in my opinion, no inference would be permissible as to intention concerning the nature of a successor trustee generally from the mere use of ‘its’ in this connection.”

Based on such evidence, and after gauging contrary testimony and the persuasiveness of the witnesses for both parties, the district court could reasonably have found that Mrs. Mathey’s use of the word “it” was not intended to limit successor trustees to corporations.

In an effort to demonstrate that Mrs. Mathey intended to restrict the trustee to a corporation, the taxpayers point to the trust provision in Article Sixth dealing with compensation for the trustee.

However, contrary to what the taxpayers maintain, the district court concluded that Article Sixth of the trust agreements may be appropriately construed to provide for the compensation of a removed individual trustee as well as a corporate trustee. In addition, the district court determined that the absence of a provision empowering the trustee to hire and remunerate accountants, custodians, and investment advisers does not indicate that the trustee had to be a corporation. We find no fault with this conclusion of the trial court. Indeed, the reference in the first paragraph of Article Sixth to “trustee,” in contradistinction to the second paragraph’s use of the phrase “corporate trustee,” might well be taken as evidence that the trust agreements contemplated both individual and corporate trustees.

Next, the taxpayers maintain that a fair reading of the trust agreements, coupled with uncontradicted testimony as to Mrs. Mathey’s circumstances and state of mind, compel the conclusion that she could not reasonably be found ever to have intended to name herself as successor to the original trustee.

The taxpayers point out that Mrs. Mathey’s personal portfolio was managed by The Empire Trust Company, and she had no evident interest in corporate reports, proxy statements, financial journals, or the like. Her energies were devoted primarily to her family and to certain charities. In short, the taxpayers claim that it is plausible to assume she never intended actually to name herself as trustee. But such an assumption is largely irrelevant in an application of section 2038; that statute looks to the existence of a power in the grantor to “alter, amend, revoke or terminate” the trust, not to the likelihood that the grantor will ever exercise such power.

The district court properly conceived that its task, then, to ascertain whether the trust agreements reposed the power in Mrs. Mathey to name herself trustee, not whether there was a substantial likelihood that she might actually do so. The district court determined that, irrespective of her intent to name herself, the trust indentures would not have prevented her from doing so. Such a determination is a sufficient basis for inclusion of these trusts in her estate under section 2038.

Whatever Mrs. Mathey’s intent may have been, we think it worth noting that her husband, plaintiff Dean Mathey, who had acted as his wife’s agent in the drafting of the trusts, testified that he intended for Mrs. Mathey to retain the power to name herself as successor trustee. Mr. Mathey stated:

“. . . I thought, yes, this—since Mrs. Mathey was the donor it was very logical that she should be a trustee along with the bank.”
“I had Mrs. Mathey as the donor, as a donor, as an honorary trustee—Furthermore if there were something that was done—refused to be done in this trust, then Mrs. Mathey could come to me or I would go to her and say, ‘Look, we ought to change this trustee.’
“This is awfully simple, taking pare of a trust, this is my experience, and very logical for Mrs. Mathey to be a trustee along with the bank.”
THE COURT: “Do you know whether she was named as a trustee in that indenture Mr. Kipp [the taxpayers’ counsel] has presented to you?
MR. MATHEY: “She was a trustee, yes . . . . ”

Mr. Mathey added that he saw to it that the trust instruments were drafted in accordance with his wishes. Though it was contended that Mr. Mathey may have been somewhat confused on the witness stand, the district court, having viewed his demeanor, could properly have relied on Mr. Mathey’s testimony in construing the language and import of the trust agreements. In any event, there is no basis for saying that the trial court’s finding regarding intent was clearly erroneous.

The taxpayers’ ultimate contention is that even assuming Mrs. Mathey had retained the power to name herself trustee, a New York court would not have allowed her to exercise such a power, because of her age and lack of financial background and interest.

Taxpayers have not demonstrated, either in the district court or before this Court, that New York law absolutely bars a person in Mrs. Mathey’s circumstances from naming herself as a trustee or from proceeding to serve in a fiduciary capacity. The most that can be said with assurance is that a New York court, after consideration of all the facts and circumstances, might have deemed Mrs. Mathey unsuitable as a trustee. That New York law vests such a power in its courts is undoubted; that those courts might have exercised that power would appear to be irrelevant.

Were it the ease that New York law rendered it a certainty that Mrs. Mathey could not serve as a trustee, we could not say that she retained the “power” to affect the trusts within the meaning of section 2038. But the determination of suitability to serve as a fiduciary is left to the discretion of the state courts. There is thus no “objective standard” by which a federal court can establish that, beyond any doubt, Mrs. Mathey would not have been permitted to act as trustee.

Moreover, there was expert testimony in the district court, which we have carefully reviewed, indicating that the New York courts would not have disqualified Mrs. Mathey from acting as successor trustee. (Tr. 135). In addition, it should be noted that Mrs. Mathey had served as executrix of her first husband's estate, was mentally and physically competent, and was herself the grantor of the trusts, facts which would, according to the testimony, have weighed in her favor in determining her suitability as a trustee.

Accordingly, we affirm the district court’s determination that New York law did not strip Mrs. Mathey of her power to alter, amend, revoke or terminate these trusts.

While we sustain the judgment of the district court that the eleven trusts are includable in Mrs. Mathey’s gross estate under section 2038, we are not unmindful that this result may appear to some to be unduly harsh. Nonetheless, we reiterate that the language of that section is unequivocal, requiring only that a grantor reserve unto himself the power to control disposition of trust principal and income. Whether that power is ever exercised, or whether there was ever a real likelihood of its being exercised, are questions the statute removes from consideration.

It should be remembered, too, that Congress has provided substantial tax advantages to those who wish to dispose of property by way of a gift, and that long before these trust agreements were drafted it was clear that a grantor who retained any power to become a trustee would be deemed a trustee for purposes of computing estate tax liability. Thus, the problem presented here could have been obviated by careful draftsmanship and closer attention to the laws of federal estate taxation—reasonable consideration to ask in return for a substantial tax exemption.

An order will be entered affirming the judgment of the district court.

VAN DUSEN, Circuit Judge,

with whom ALDISERT and WEIS, Circuit Judges, join, dissenting:

I respectfully dissent. In construing the trust instrument, admittedly governed by New York law, “ . . . it is the duty of the court to give effect to the intent with which the declaration of trust was made, so far as such intent can be collected from the whole instrument. (1 R.S. 748, § 2). And for this purpose reference may be had to the general scheme of the trust, its object and purpose as so represented. Knowlton v. Atkins, 134 N.Y. 313, 319, 31 N.E. 914, 916 (1892). See also Farmers’ Loan & Trust Co. v. Callan, 246 N.Y. 481, 487, 159 N.E. 405 (1927); Matter of Fields, 302 N.Y. 262, 97 N.E.2d 896 (1951). Also, evidence of circumstances surrounding the creation of the trust is admissible where, as here, the meaning of the trust as to the trustee’s power to name herself as trustee is uncertain and ambiguous. See Restatement of Trusts 2d, §. 24, comment (b), p. 67, and § 38, comment (a), p. 103; Spencer v. Childs, 1 N.Y.2d 103, 150 N.Y.S.2d 788, 789, 134 N.E.2d 60 (1956).

The following are among the items to be considered in construing the above intent. As noted by the majority, the decedent set up in 1955 the identical trusts for her grandchildren, the corpus of which were included in her estate for purposes of federal estate tax.

“The creation of the trusts was motivated, at least in part, by the 1954 legislation making the annual $3,000 gift tax exclusion available in connection with certain forms of gifts in trust for minors. In 1954 the Code, for the first time, provided that, under certain conditions, gifts in trust for minors would not be considered gifts of future interests and thus would fall within the $3,000 annual gift tax exclusion. See 26 U.S.C. § 1622.” (Note 3, majority opinion.)
“When [the decedent] died in September, 1965, . . . [the trusts] were valued at $808,018.52.” (Page 482, majority opinion.)
“ . . . [the decedent’s] personal portfolio was managed by The Empire Trust Company [the corporate trustee], and she had no evident interest in corporate reports, proxy statements, financial journals, or the like. Her energies were devoted primarily to her family and to certain charities.” (Page 485, majority opinion.)

Also, the district court found the following background facts:

“Mrs. Mathey originally had the trusts created upon the suggestion of her second husband, Mr. Dean Mathey who, at the time was chairman of the Board of Empire Trust Company. It was Mr. Mathey who actually supervised the creation of the trusts since Mrs. Mathey devoted her life to the care of her family and to certain charities and had little, if any, knowledge of investment or financial matters. [4a]
“ . . . Mrs. Mathey’s personal characteristics indicate it was unlikely she would appoint herself trustee, . . . .” [8a]

In addition to the foregoing, the uncontradicted evidence showed that the decedent-grantor had no interest in, or experience with, investments and that the reservation of the right to change the trustee had been included in the trusts at the suggestion of her husband. Pages 34-37 of the transcript of May 26, 1971, make clear that Mr. Mathey had included in the trust the provision for change of the trustee so that the corporate trustee could be removed if it became too restrictive in its investment policy. By having such a provision, Mr. Mathey would have been able to tell the officers of the trustee that if they persisted in refusing to make what he considered prudent and desirable investments because of undue fear of possible surcharge, he would have to go to his wife and suggest a removal of the trustee. In his experience, when this possibility was suggested to the corporate trustee’s officers, they would approve the investment (see, particularly, N.T. 34-35, 38-39).

Experts for both plaintiff and defendant (Parsons and Bush, respectively) agreed that in the situation presented by this record, the object and purpose of these trusts were to make tax-free gifts to the donee-grandchildren and to remove the property from the taxable estate of the donor for estate tax purposes (N.T. 64 and 157; see also N.T. 29-30). New York courts, as well as this court, have recognized that the presumed intent of a decedent in transferring property by gift inter-vivos is to save estate taxes. See Dodd v. United States, 3 Cir., 345 F.2d 715, 718 & 719 (1965); In re Ossman’s Will, 27 Misc.2d 632, 209 N.Y.S.2d 251 (Surr.Ct.1960); Matter of Wolf, 204 Misc. 356, 121 N.Y.S.2d 412 (Surr.Ct.), aff’d, 282 App.Div. 1018, 126 N.Y.S.2d 302 (1953), aff’d, 307 N.Y. 280, 121 N.E.2d 224 (1954); Matter of Peters, 204 Misc. 333, 88 N.Y.S.2d 142 (Surr.Ct.), aff’d, 275 App.Div. 950, 89 N.Y.S.2d 651 (1949).

The language of the trust instrument in the following respects indicates that the decedent-grantor did not intend to reserve the right to appoint herself as trustee:

A. The language consistently referring to the trustee as “it.”
B. The failure to include any provisions authorizing an individual trustee to employ investment advisors, accountants, etc., which a trustee with the lack of investment experience and knowledge of the decedent-grantor would clearly require.
C. The provision for fees in Article Sixth only for removed corporate trustees, as opposed to individual trustees.

In light of the foregoing principles of trust construction recognized by New York law, it is my view that the New York courts would not have permitted the grantor to serve as trustee of these trusts. See City Bank Farmers Trust Co. v. McFadden, 65 N.Y.S.2d 395 (Sup. Ct.1946); Guaranty Trust Co. of New York v. Mackey, 178 Misc. 862, 36 N.Y. S.2d 535, 537 (Sup.Ct.1942); Application of Wehrli, N.Y.L.J., 11/5/70, p. 2, aff’d, 36 A.D.2d 488, 321 N.Y.S.2d 438 (1st Dept. 1971), aff’d without opinion, 30 N.Y.S.2d 510, 330 N.Y.S.2d 60, 280 N.E.2d 887 (1972).

The Supreme Court of the United States has recently held in United States v. Byrum, 408 U.S. 125, 136, 92 S.Ct. 2382, 2390, 33 L.Ed.2d 238 (1972), that the word “right,” as used in the estate tax statutes discussing the retention and reservation of “rights,” “connotes an ascertainable and legally enforceable power” which the decedent-grantor in this case did not have under the above-cited New York cases. The Court also stated in the Byrum, ease supra at 147, 92 S.Ct. at 2396, in holding that no estate tax was due on the corpus of an inter-vivos trust:

“In none of the cases cited by the Government has a court held that a person has retained possession or enjoyment of the property if he has transferred title irrevocably, made complete delivery of the property and relinquished the right to income where the property is income producing.”

The non-technical approach of Byrum, supra, has been used in other recent federal estate tax decisions. See Peoples Trust Co. of Bergen County v. United States, 444 F.2d 193, 199 (3d Cir. 1971); Estate of James S. Todd, Jr., 57 T.C. 288 (1971), Acg. I.R.B.1973—-28.5.

I would vacate the district court order, remand, and direct entry of judgment for the plaintiffs.

      . The plaintiffs brought suit pursuant to section 7422 of the Internal Revenue Code, 26 U.S.C. § 7422.

      . 26 U.S.C. § 2038.

      . The creation of the trusts was motivated, at least in part, by the 1954 legislation making the annual $3,000 gift tax exclusion available in connection with certain forms of gifts in trust for minors. In 1954 the Code, for the first time, provided that, under certain conditions, gifts in trust for minors would not be considered gifts of future interests and thus would fall within the $3,000 annual gift tax exclusion. See 26 U.S.C. § 1622.

      . The district court’s jurisdiction was based upon 28 U.S.C. § 1346(a) (1).

      . Under each trust agreement the trustee has the wholly discretionary power to pay the beneficiary all or part of the net income, accumulated income, and principal of the trust. Such power, if reposed in the grant- or as an individual or as a trustee, warrants inclusion of the trust in the grantor’s estate under § 2038. See Estate of Varian v. Com’r of Internal Revenue, 396 F.2d 753 (9th Cir.), cert. denied, 393 U.S. 962, 89 S.Ct. 402, 21 L.Ed.2d 376 (1968) ; Loughridge’s Estate v. Com’r of Internal Revenue, 183 F.2d 294 (10th Cir. 1950) ; cf. Florida Nat’l Bank v. United States, 336 F.2d 598 (3d Cir. 1964) ; Miller v. United States, 325 F.Supp. 1287, 1292-1293 (E.D.Pa.1970).

      . See Treas.Reg. § 20-2038-1 (a) (3) ; see also Van Beuren v. McLoughlin, 262 F.2d 315, 316 (1st Cir. 1958) ; cert. denied, 359 U.S. 991, 79 S.Ct. 1120, 3 L.Ed.2d 979 (1959) ; Cum.Bull.Rev.Rul. 73-21, 1973 Int. Rev.Bull. 1973-2, p. 15; cf. United States v. Winehell, 289 F.2d 212 (9th Cir. 1961).

      . See Rule 52(a), Federal Rules of Civil Procedure. In the context of this litigation, the meaning of the word “it” is relevant to a determination of the grantor’s intent as expressed in the trust agreements, and thus is properly considered a question of fact. The district court so understood the question (Tr. 116).

      . Tr. 116-119.

      . The taxpayers have brought to our attention not a single case holding that use of the pronoun “it” in trust agreements invariably, or even usually, signified only a corporate trustee.

      . The determination of the import of the compensation clauses may present mixed questions of law and fact, inasmuch as New York law regulates the compensation to be paid a trustee. This Court, on appeal, has plenary power to review the district court’s determination concerning what state law is, and so we are not bound by the “clearly erroneous” standard of Rule 52(a). See 5 Wright and Miller, Federal Practice and Procedure § 1253 (1969) ; cf. Rule 44.1, Federal Rules of Civil Procedure. Whether the significance of the compensation clauses is deemed a question of fact, of law, or of both, there is no basis for concluding that the district court erred regarding this point.

      . See Treas.Reg. § 20-2038-1 (a)(3).

      . See Estate of Stewart v. Commissioner of Internal Revenue, 436 F.2d 1281 (3d Cir. 1971) ; Zentmayer’s Estate v. Commissioner of Internal Revenue, 336 F.2d 488 (3d Cir. 1964).

      . See, e. g., Tr. 31.

      . See Tr. 42-43, 44-45, 46.

      . See, e. g., Guaranty Trust Co. of New York v. Mackey, 178 Misc. 862, 36 N.Y.S.2d 535 (Sup.Ct.1942).

      . Application of Wehrli, N.Y.L.J., Nov. 5, 1970 (not otherwise reported).

      . Estate of Stewart v. Commissioner of Internal Revenue, supra, 436 F.2d at 1285.

      . The determination of the effect of New York law on the trust agreements is a question of law. See Note 9, supra. Under New York law, the question of the suitability of a trustee to serve is essentially one of fact, guided by statutory considerations. It is clear that the applicability vel non of section 2038 cannot be made to turn on speculation concerning the outcome of a purely hypothetical New York litigation. The whole thrust of section 2038 and of the regulations promulgated thereunder is that inclusion of trusts in a decedent’s gross estate is to be measured by reference to the terms of the trust agreement, not by positing a spectrum of possibilities and contingencies.

      . See, e. g., Loughridge’s Estate v. Commissioner of Internal Revenue, 183 F.2d 294 (10th Cir. 1950) ; Estate of Wilson, 13 T.C. 869 (1969).

      . The first sentence of this comment provides :
      “In the interpretation of the words and other conduct of the settlor, circumstances throwing light upon the settlor’s intention are relevant, and evidence of such circumstances is admissible except when excluded by the parol evidence rule, . . . . ”

      . The second sentence of the comment states:
      “If the meaning of the writing is uncertain or ambiguous, evidence of the circumstances is admissible to determine its interpretation.”

      . Two of such eleven identical trusts were created in 1961 and 1962.

      . Mr. Mathey testified that he had not even discussed this provision with the decedent, “Mrs. Mathey wasn’t interested anyhow” (N.T. 35), and he went on to testify (N.T. 36) :
      “Q. Do you recall whether Mrs. Mathey ever read Exhibit P-1 or any of these other trusts?
      “A. I am sure she didn’t read it. ‘You have to sign this, Helen. ‘Okay, it is all done.’ ”

      . I cannot find in the record as a whole any “evidentiary support displaying some hue of credibility,” Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972), for this statement of the district court at page 6 of its opinion (8a) and believe that it is clearly erroneous :
      “Indeed, he [Mr. Mathey] implied that when the original trusts were drawn up, he intended for the decedent to be able to appoint herself trustee (Tr. 42).”
      In my view, the testimony of Mr. Mathey (over 80 years old) that she was to be trustee along with the bank, at N.T. 42-47, was clearly the result of confusion of this, witness and is not credible.

      . The witnesses pointed out that if the grantor had been named as trustee, she would have been serving in that capacity at the age of 90, assuming that she had lived until all the trusts terminated, using language such as:
      “Here is a woman with no business experience, no knowledge, no interest, according to the testimony given by Mr. Behr and Mr. Mathey, in financial affairs or investments, having none of the ordinary qualifications to be a trustee, and with death on her part almost certain to ensue before the falling in of these trusts.”

      . The above cases and the testimony make clear the New York procedure for securing court approval at the time of appointing a successor trustee. Also, it is noted that considering the legal situation as of the moment before the grantor’s death, she was then 74 and a New York court would not have approved an attempt that such a grant- or be substituted in place of . a corporate trustee, in view of the factual background of this trust.

      . “. . . [I]t is inconceivable that the courts of that state would permit a New Jersey trustee to pursue an investment policy designed to divert corpus from the remainderman to a life beneficiary.”


author: TALBOT SMITH, Senior District Judge.

text:
    Beauregard F. BIRDWELL, Appellant, v. HAZELWOOD SCHOOL DISTRICT et al., Appellees.
    No. 73-1034.
    United States Court of Appeals, Eighth Circuit.
    Submitted Sept. 11, 1973.
    Decided Feb. 5, 1974.
    As Amended on Denial of Rehearing and Rehearing En Banc March 6, 1974.

      Daniel T. Rabbitt, St. Louis, Mo., for appellant.
    Richard O. Funsch, St. Louis, Mo., for appellees.
    Before GIBSON and BRIGHT, Circuit Judges, and TALBOT SMITH, Senior District Judge.

       Hon. Talbot Smith, United States Senior District Judge, Eastern District of Michigan, sitting by designation.

   TALBOT SMITH, Senior District Judge.

The appellant, a former teacher employed by the Hazelwood School District, St. Louis County, Missouri, instituted this action against the Board of Education of the School District, the members of the Board individually, and three administrative officers of the Hazelwood School District. Violations of 42 U.S.C. §§ 1981 and 1983 were alleged, with jurisdiction based on 28 U.S.C. § 1343(3) and (4). The complaint sought reinstatement, back pay, injunctive relief, and, in the alternative, money damages for loss of reputation and breach of contract in the amount of $100,000 for the alleged violations of appellant’s constitutional rights of free speech and due process of law, and for violation of R.S. Mo. § 168.126 (1969), V.A.M.S., requiring a written statement of charges and ninety days’ notice before termination. A trial to the court, Judge Wangelin, held for the appellees. Birdwell v. Hazelwood School District, 352 F.Supp. 613 (E.D.Mo.1972). We affirm.

The opinion in the District Court set forth the facts in detail. We here summarize only those relevant to the issues raised. The appellant was a probationary teacher. Prior to the incidents giving rise to the charges here made he had objected to the presence of the R.O.T.C. at the school, expressing the view that they had “no right to be on the campus.” It was his position that the students and faculty should decide who should visit the campus, but his arguments were rejected by the principal, Mr. Fuqua, who informed appellant that he, the principal, was the agent of the Board of Education in the matter and that it was his responsibility, not the appellant’s, to make such determinations. The appellant at this time was a probationary teacher and not in a policy-making position in the school hierarchy.

On May 19, 1971, it was announced over the public address system that United States Army personnel would be in the building and students were invited to speak with them. This announcement was made at the beginning of a class period during which appellant was conducting a class in Algebra II for students of all three years. A general class discussion of the visit by military personnel ensued. Appellant indicated that before such visitors were invited onto the campus there should be a consensus of faculty and students in favor of the visit. He became emotionally upset as he continued the discussion, although the trial court found that he “retained some control over his emotional state.” One of the students testified that appellant observed to the class that the students at Hazelwood were “4000 strong,” that they could get the military off the campus, and that at Washington University the students would not tolerate the military coming onto the campus. This reference was taken by student Stephens to pertain to an incident where “at this time last year Washington University had just burned down their R.O.T.C. building.” There was no suggestion that the students actually remove the recruiters physically, but reference to the use of force against them was made. It happened to be on this date that a student organization distributed apples to the faculty members to show their appreciation of their work.' Several students testified that appellant suggested that the students could throw their apples at the recruiters. “[H]e was serious, he meant it” testified one of the students. And, also, “to get them in a crowd, and push them and kick them, make them feel like they weren’t wanted.” This latter was accomplished in part during the recess period when many students were in the hall. Appellant approached Sergeant Smith, who, with his two companions, were standing near their table in their khaki uniforms. Appellant pointed his finger at the Sergeant and said in a loud voice “On behalf of myself and other faculty members and the students, we don’t want you here. We are getting together a petition to have a restraining order having you restrained from the school.” Sergeant Smith made no comment in reply, simply acknowledging the greeting. The servicemen were there with permission for the purpose of discussing with students a military career. They brought with them no firearms, but literature. “We were strictly in the hall with a table of literature, strictly providing information to those who requested it,” testified the sergeant. We are constrained to observe at this juncture that the appellant’s zealous advocacy in our court of his constitutional right of free speech contrasts sharply with his obvious intolerance of the exercise of such speech by others with whose views he disagrees.

The incident was reported to the Principal Fuqua by Mr. Henner, the assistant principal, who requested that appellant meet with him that day, but appellant did not respond. The next day, following a complaint from one of the parents, appellant was requested to, and did, meet with the school’s administrative officials to discuss the incident. At this meeting, the District Court found, appellant admitted confronting the soldiers in the hall as well as making the statement to his class that the student body was some 4000 strong and that at Washington University the presence of the military visitors would not be tolerated by the students. Mr. Huss, Hazel-wood Co-ordinator of Secondary Education, thereupon advised appellant that he was suspended from his classroom duties until the matter was resolved.

A report was made to Dr. McDonald, Superintendent of Education for the Hazelwood School District. It was the recommendation of Mr. Huss, according to the oral testimony of Dr. McDonald, that appellant should be dismissed because a) he was inciting the students to disruptive processes, and b) he was interrupting the educational process. Dr. McDonald confirmed the suspension, instructed Huss to notify appellant that the Board would meet that night, and to inform the appellant that he was invited to appear and speak. Huss so advised appellant of the Board meeting, that his dismissal would be recommended, and that he was invited to attend. Appellant did not do so, upon advice of counsel, and the Board, after- consideration, unanimously voted to terminate his employment.

Before this court the appellant argues that he was dismissed for constitutionally impermissible reasons, namely, “'because he informed his students of his opposition to the campus visitation by military recruiters in violation of his right of free speech as guaranteed by the First and Fourteenth Amendments to the Constitution of the United States.” The right of free speech, thus, asserted, is not, of course, an absolute right. Schenk v. United States, 249 U. S. 47, 39 S.Ct. 247, 63 L.Ed. 470 (1919). We must weigh the interests asserted by the state officials against the infringement of the protected rights of the individual. Particularly demanding is this process in the educational field where freedom of expression is peculiarly appropriate, since the classroom is peculiarly the “market place of ideas.” In the situation presented we must “arrive at a balance between the interests of the teacher, as a citizen, in commenting upon matters of public concern and the interests of the State, as an employer, in promoting the efficiency of the public service it performs through its employees.”

The controlling law in this area, as we noted in Gieringer v. Center School Dist. No. 58, 477 F.2d 1164 (8th Cir. 1973), is found in Pickering, supra, note 2. It was there held (1) that a teacher retains the right as a citizen to comment on matters of public concern; (2) that to the degree such commentary is substantially accurate, it provides no grounds for dismissal absent a showing of disruption of the teacher’s classroom duties or the regular operation of the school, and (3) that, even if the commentary is inaccurate, a showing of disruption is still required unless it can be proved that the statements in question were knowingly or recklessly made.

The District Court found that the appellant’s statements, both in class and in the hallway, interfered with the educational process. The statements were completely irrelevant to appellant’s duties of teaching mathematics and diverted the time and attention of both students and teacher from the prescribed curriculum. They embodied, as well, an attempt to defeat a school policy by improper means. But, beyond matters of school policy and curriculum, it was found that appellant’s statements were “infused with the spirit of violent action” to the degree that the school authorities found a situation of potential disruption.

The findings thus made we do not disturb, absent such clear error as to leave us, on the entire evidence, with the definite and firm conviction that a mistake has been committed. We note, as well, that this rule applies also to factual inferences from undisputed facts. Commissioner v. Duberstein, 363 U.S. 278, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960) ; St. Louis Typographical Union No. 8 v. Herald Company, 402 F.2d 553, 557 (8th Cir. 1968). So examined, the conduct of the appellant comes squarely within the proscriptions of Pickering, supra, note 2.

But appellant urges to us that Tinker v. Des Moines Independent Community School District, 393 U.S. 503, 89 S.Ct. 733, 21 L.Ed.2d 731 (1969), warrants his exculpation on the ground that there must be actual disruption before the authorities may act. It is argued that “there was no material or substantial disruption of the school” and that, in fact, the only tangible result of appellant’s statements was the circulation of a petition by one of the students supporting appellant’s views. Tinker, however, is inapposite. It involved only the silent wearing of armbands, a situation not analogous to a thinly veiled exhortation to violence. Moreover, Tinker itself distinguishes the conduct we here consider. See also Esteban v. Central Missouri State College, 415 F.2d 1077 (8th Cir. 1969), cert. denied, 398 U.S. 965, 90 S.Ct. 2169, 26 L.Ed.2d 548 (1970). In a situation of potential disruption there is no requirement in the law that the proper authorities must wait for the blow to fall before taking remedial measures.

Moreover, even should violence not have occurred, we do not take it that such is a sine qua non of disruptive conduct. The trial court found that the appellant’s actions, both in the classroom and in the hallway, were “disruptions of the orderly and disciplined operation of the school in and of themselves.” It is clear upon this record that appellant’s termination did not result from the exercise of a constitutionally protected right of free speech.

Appellant also argues that he was denied due process as to the Board’s hearing. He asserts that he must be given a reasonable opportunity to be heard and to be advised of the identity of witnesses against him, as well as other procedural rights. He complains that the hearing was held “behind closed doors” and that neither the Army personnel nor students were present to testify. We need not catalog the numerous offenses to due process claimed by appellant after the event. He is in no position before us to complain of these alleged deficiencies. He was aware of the time and the place of the Board meeting, that his continued employment was at stake, and that his dismissal was being recommended because of his statements in class and his actions towards the servicemen in the building. Nevertheless, with this knowledge, and after conferring with legal counsel, it was his decision not to attend the meeting.

The “standards of procedural due process are not wooden absolutes.” The sufficiency of the procedures must be judged in the light of the totality of the circumstances. The fundamental requirement of due process “is the opportunity to be heard, ‘at a meaningful time and in a meaningful manner,’ * * * This opportunity must be ‘appropriate to the nature of the case.’ * * * ‘The very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation.’ ”

The opportunity thus demanded was here afforded but appellant deliberately chose not to avail himself of it and not to present to the Board the arguments made to us. He cannot now scour the record of the hearing he thus ignored for flaws in its conduct. We find a voluntary and knowing waiver. Johnson v. Zerbst, 304 U.S. 458, 58 S.C. 1019, 82 L.Ed. 1461 (1938).

It is also the urging of the appellant that, being a probationary teacher, his discharge was governed by the provisions of R.S.Mo. § 168.126, subd. 2 (1969), V.A.M.S., stating that a board of education “may terminate the employment of the probationary teacher” for incompetency. From this the appellant apparently argues that there is no further authority,, express or implied, in the Board to dismiss for any other cause and thus, not having been discharged for incompetency, his discharge was in violation of his contractual rights. For this he seeks monetary damages. These claims, asserted under the statutes of the State of Missouri, arose from the same incident as did the federal claims heretofore considered. In view of the interrelation of the claims under the circumstances of this case the District Court properly concluded that it had pendent jurisdiction over such state claim. See United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

The District Court rejected the argument made, pointing out that such construction of the act would vest in a probationary teacher far greater security than that afforded a permanent teacher, obviously not the intent of the act. In addition the court found, after exhaustive analysis of the applicable statutes of the State of Missouri, and the judicial interpretations thereof, ranging from McCutchen v. Windsor, 55 Mo. 149 (1874), Arnold v. School District, 78 Mo. 226 (1883), Magenheim v. Board of Education, 347 S.W.2d 409 (St. Louis C.A.1961), to Williams v. Longtown School District No. 71, 468 S.W.2d 673 (St. Louis C.A.1971), that, whatever the Missouri law may have been prior to the passage of the Teacher Tenure Act, it is now clear from a comparison of the requirements of § 168.116, subd. 1 relating to the termination of permanent teachers, with those of § 168.-126, subd. 2, supra, note 12, relating to the termination of probationary teachers, that it was the legislative intent to grant the Board implied authority to act as it did in the circumstances here presented. We concur in the interpretation made. The conduct of this probationary teacher in utilizing his algebra class as a forum from which to suggest, none too subtly, to young and immature minds, that they employ measures of violence as a demonstrative device, presented a grave situation, with respect to which the Board was well authorized to exercise its implied authority.

We find no error in the proceedings below. The judgment is affirmed.

      . By amendment the Hazelwood School District was substituted as a party defendant in place of the Board of Education.

      . Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968).

      . Keyishian v. Board of Regents, 385 U.S. 589, 603, 87 S.Ct. 675, 17 L.Ed.2d 629 (1967). The cases are collected in Emerson, The System of Freedom of Expression, “Academic Freedom,” 593, 598-611 (1970). See also Healy v. James, 408 U.S. 169, 92 S.Ct. 2338, 33 L.Ed.2d 266 (1972) ; “Developments in the Law, Academic Freedom,” 81 Harv.L.Rev. 1045 (1968).

      . Pickering v. Board of Education, 391 U.S. at 568, 88 S.Ct. at 1734.

      . Mr. Huss, a teacher of some twenty years’ experience, regarded the situation following the incident as grave. The school was the largest in the state, overcrowded, and had had past problems with a student organization (SDS) seeking to “disrupt the educational process.” It was his testimony that because of the “quick action” taken there had been no disruption, that “we headed it off.” Continuing he explained in these terms: “You asked me or somebody asked me a while ago about my opinion on dealing with this type of kids and I know the longer they get the chance to talk about it and the fact that no action is taken, there might be something happen, and I think in my best judgment the action we took may have prevented any demonstrations or any severe action.”

      . Fed.R.Civ.P. 52; Barryhill v. United States, 300 F.2d 690 (8th Cir. 1962).

      . “As we-have discussed, the record does not demonstrate any facts which might reasonably have led school authorities to forecast substantial disruption of or material interference with school activities, and no disturbances or disorders on the school premises in fact occurred.” Tinker, 393 U.S. at 514, 89 S.Ct. at 740.

      . “That emphasis [in the majority opinion in Tinker] is on the absence of ‘actually or potentially disruptive conduct’ by the participants * * Esteban, 415 F.2d at 1087.

      . Ferguson v. Thomas, 430 F.2d 852, 856 (5th Cir. 1970).

      . Ahern v. Bd. of Education, 456 F.2d at 403.

      . “Probationary teachers, how terminated —reemployed, how.
      If in the opinion of the board of education any probationary teacher has been doing unsatisfactory work, the board of education through its authorized administrative representative, shall provide the teacher with a written statement definitely setting forth his alleged incompetency and specifying the nature thereof, in order to furnish the teacher an opportunity to correct his fault and overcome his incompeteney. If improvement satisfactory to the board of education has not been made within ninety days of the receipt of the notification, the board of education may terminate the employment of the probationary teacher immediately or at the end of the school year.”

      . R.S.Mo. § 168.106 (1969), V.A.M.S., provides : “Indefinite contract, what affects
      The contract between a school district and a permanent teacher shall be known as an indefinite contract and shall continue in effect for an indefinite period, subject only to:
      (1) Compulsory or optional retirement when the teacher readies the age of retirement provided by law, or regulation established by the local board of education;
      (2) Modification by a succeeding indefinite contract or contracts in the manner hereinafter provided;
      (3) The death of the teacher;
      (4) Resignation of the teacher with the written consent of the school board;
      (5) Termination by the board of education after a hearing as hereinafter provided ; and
      (6) The revocation of the teacher’s certificate.”

      . R.S.Mo. §§ 168.102-168.130 (1969), Y.A. M.S., effective July 1, 1970; R.S.Mo. § 168.-102 (1969), Y.A.M.S.

      . “Termination by board—notice—charges
      1. The indefinite contract of a permanent teacher may not be terminated by the board of education until after service upon the teacher of written charges specifying with particularity the grounds alleged to exist for termination of such contract, notice of a hearing on charges and a hearing by the board of education on charges if requested by the teacher.”


author: ELY, Circuit Judge:

text:
    In the Matter of Ben OKAMOTO, Alleged Bankrupt. HORNBLOWER & WEEKS-HEMPHILL, NOYES, Petitioner-Appellant, v. Ben OKAMOTO, Alleged Bankrupt-Appellee.
    No. 71-3013.
    United States Court of Appeals, Ninth Circuit.
    Jan. 21, 1974.

      John A. Donnelly, Claire D. Johnson, William Smiland (argued), of Donnelly, Clark, Chase & Haakh, Los Angeles, Cal., for appellant.
    Robert L. Ordin, Richard F. Broude (argued), Los Angeles, Cal., for appellee.
    Before ELY and CHOY, Circuit Judges, and SOLOMON, District Judge.

       Honorable Gus J. Solomon, Senior United States District Judge, Portland, Oregon, sitting by designation.

   OPINION

ELY, Circuit Judge:

On November 28, 1969, Hornblower & Weeks-Hemphill, Noyes (hereinafter “Hornblower”) filed a petition that Okamoto be adjudged an involuntary bankrupt. Hornblower attempted to proceed as the sole petitioning creditor, pursuant to section 59(b) of the Bankruptcy Act, 11 U.S.C. § 95(b). Okamoto’s answer alleged that he was indebted to more than eleven creditors, and the answer was accompanied by a schedule listing twenty-one creditors. The Referee in Bankruptcy conducted a hearing under section 59(d) and found that Okamoto had nineteen unsecured creditors which must be counted. Since a single creditor cannot proceed under section 59(b) unless the total number of claimants is less than twelve, the Referee dismissed Hornblower’s petition. On review, the District Court affirmed the Referee’s Order of dismissal.

Here, Hornblower attacks the finding of the Bankruptcy Court that Okamoto had more than eleven creditors. Hornblower principally asserts that creditors for relatively small current expenses should be excluded in computing the total number of creditors under section 59(b). Section 59(b) provides in part:

“Three or more creditors who have provable claims not contingent as to liability against a person, amounting in the aggregate to $500 in excess of the value of any securities held by them, or, if all of the creditors of the person are less than twelve in number, then one or more of the creditors whose claim or claims equal that amount, may file a petition to have him adjudged a bankrupt . . . .”

If less than three creditors join in the petition, section 59(e) furnishes the guidelines for computing the total number of claimants. Although section 59 (e) does not provide for the exclusion of creditors with small claims, Hornblower contends that the doctrine of de minimis non curat lex should be applied. Since eight of the debts here involved were for amounts less than sixty-five dollars, Hornblower argues that the total number of creditors meets the statutory limit.

In support of its contention, Hornblower cites several early District Court decisions, including In re Blount, 142 F. 263 (E.D.Ark.1906). At the time of filing its petition, Hornblower recognized that the more recent decisions had disapproved the Blount rationale. See, e.g., Grigsby-Grunow Co. v. Hieb Radio Supply Co., 71 F.2d 113 (8th Cir. 1934); In re Colorado Lime Co., 298 F.Supp. 1053 (D.Colo.1969). Subsequent to the decision by the Bankruptcy Court, however, the Fifth Circuit issued its opinion in Denham v. Shellman Grain Elevator, Inc., 444 F.2d 1376 (5th Cir. 1971). In Denham the Court adopted a similar contention to that here advanced, holding that creditors claiming insignificant amounts are not to be included in determining the total number of creditors for the purposes of section 59(b). The Court explained:

“It is our belief that whether or not a scheme was involved, it was not the intent of Congress to allow recurring bills such as utility bills and the like to create a situation which, by refusal of these small creditors to join in an involuntary petition, can defeat the use of the Bankruptcy Act by a large creditor, as in the subject case. This would be grossly inequitable, and for this reason this Court refuses to follow the Colorado Lime decision.”

444 F.2d at 1379. The Court also referred to section 56(c) of the Bankruptcy Act to demonstrate the Congressional treatment of small claims in other situations.

We are not persuaded by Denham, for it appears to us that the Denham court ignored unambiguous Congressional direction. The Congress has explicitly prescribed the procedure that must be followed when less than three creditors join in the petition. In such circumstances the Act provides that the alleged bankrupt must have less than twelve creditors and expressly excludes certain types of creditors from the required computation. Since Congress made no distinction between large and small claims, we cannot arrogate unto ourselves the power to do so and thereby engraft an additional exception to the Act. Hornblower’s argument properly should be addressed to the Congress. Our conclusion is reinforced by the fact that Congress has clearly and expressly excluded small claims when it has intended to do so. See Bankruptcy Act § 56(c), 11 U.S.C. § 92(c).

Rejecting Hornblower’s first contention, we reach its assertion that the small creditors should be discounted because Okamoto entered into a scheme to circumvent the provisions of the Act. The short answer to this contention is that the Referee concluded that no such scheme or device had existed. We cannot, in the light of the evidence, hold that this finding was clearly erroneous.

Hornblower also attacks the inclusion of certain creditors as not being creditors of Okamoto. It asserts that two of the debts were incurred by others through the use of credit cards issued in Okamoto’s name. The Referee found that the cards were used with Okamoto’s consent and that the obligations were owed by him. This finding also has substantial evidentiary support and is not clearly erroneous.

Finally, Hornblower contends that Okamoto Enterprises, a partnership, is indebted to six of the creditors and that these claimants should not be included for section 59 purposes. Even if we assume, arguendo, that these creditors were improperly included, the number of creditors still exceeded eleven.

Since Okamoto was indebted to more than eleven creditors and only one claimant filed the petition under section 59(b), the petition was properly dismissed.

Affirmed.

      . Bankruptcy Act § 59(d), 11 U.S.C. § 95(d).

      . Bankruptcy Act § 59(e), 11 U.S.C. § 95(e).

      . Bankruptcy Act § 56(c), 11 U.S.C. § 92(c), provides:
      “Claims of $50 or less shall not be counted in computing the number of creditors voting or present at creditors’ meetings, but shall be counted in computing the amount.”