author: MERRILL, Circuit Judge:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Elbert Lamar BOSTON, Defendant-Appellant.
    No. 74-1791.
    United States Court of Appeals, Ninth Circuit.
    Dec. 9, 1974.
    Certiorari Denied May 27, 1975.
    See 95 S.Ct. 1994.

      Bryan R. Gerstel (argued), San Diego, Cal., for defendant-appellant.
    Harry D. Steward, U.S. Atty., Herbert B. Hoffman, Asst. U.S. Atty., (argued), San Diego, Cal., for plaintiff-appellee.
    Before MERRILL and TRASK, Circuit Judges, and FERGUSON, District Judge.

       Honorable Warren J. Ferguson, United States District Judge for the Central District of California, sitting by designation.

   OPINION

MERRILL, Circuit Judge:

Appellant was charged in a four-count indictment with illegal importation of heroin under 21 U.S.C. §§ 952, 960, possession of heroin with intent to distribute under 21 U.S.C. § 841(a)(1), and conspiracy both to import and to possess under 21 U.S.C. § 963.

Appellant and a female companion, returning to the United States from Mexico, had been stopped at the border. Suspicions of the guards were aroused and appellant’s companion was subjected to a vaginal search which produced heroin. A motion to suppress was made, appellant contending that the search was made without a clear indication that it would produce contraband, and accordingly that the standards established in Henderson v. United States, 390 F.2d 805 (9th Cir. 1967), had not been met. The motion was denied. Appellant later volunteered a confession by letter addressed to the United States Attorney, in which he assumed full responsibility for the importation and asserted that his companion had been coerced by him into doing the actual importing. Following trial without jury appellant was acquitted on both conspiracy counts and found guilty on both substantive counts.

On appeal the major assignments of error are (1) that the heroin should have been suppressed as the result of an unlawful search and (2) that without corroboration — without independent evidence that a crime had been committed to which the confession related — the confession should not have been received in evidence. See Rodriquez v. United States, 407 F.2d 832 (9th Cir. 1969).

We agree with appellant that as to the search of his companion the standards established in this Circuit for a body cavity search were not met and that the motion to suppress should have been granted as to the possession count. Appellant has standing to challenge the search as to this count under Jones v. United States, 362 U.S. 257, 80 S.Ct. 725, 4 L.Ed.2d 697 (1960), as interpreted in Brown v. United States, 411 U.S. 223, 93 S.Ct. 1565, 36 L.Ed.2d 208 (1973). We have held that standing is conferred under Jones by a charge of a crime which includes as an essential element possession of the evidence seized, with such possession or rights to possession existing at the time of seizure. Valesquez v. Rhay, 408 F.2d 9 (9th Cir. 1969). Other circuits have ruled likewise. See, e. g., United States v. Mapp, 476 F.2d 67, 72—73 (2d Cir. 1973); United States v. Willis, 473 F.2d 450, 451 (6th Cir.), cert. denied, 412 U.S. 908, 93 S.Ct. 2290, 36 L.Ed.2d 974 (1973); United States v. West, 453 F.2d 1351, 1353-1355 (3d Cir. 1972); United States v. Cobb, 432 F.2d 716, 720-722 (4th Cir. 1970); United States v. Allsenberrie, 424 F.2d 1209 (7th Cir. 1970); Niro v. United States, 388 F.2d 535, 537 (1st Cir. 1968). The Court in Brown expressly reserved judgment as to this aspect of the Jones standing rules where, as here, possession of the evidence at the time of the search is an essential element of the crime charged. See 411 U.S. at 228, 229, 93 S.Ct. 1565.

As to the importation count, however, this court has held that possession is not an essential element of that offense and accordingly that what the Court in Brown refers to as “ ‘automatic’ standing,” 411 U.S. at 229, 93 S.Ct. 1565, does not follow from the charge. United States v. Valencia, 492 F.2d 1071 (9th Cir. 1974).

Appellant seeks to distinguish Valencia on the ground that the importation conviction there could be supported on a theory of aiding and abetting, see 18 U.S.C. § 2, which can be accomplished without ever exercising such dominion and control over the contraband as would constitute constructive possession. Here, it is asserted, appellant’s conviction was not based on aiding and abetting; if he is to be found guilty as a principal, then, as a matter of actual fact, he must have been in constructive possession of the heroin. By asserting constructive possession for purposes of guilt while denying such possession as would confer standing, appellant contends, the United States commits that “vice” of “prosecutorial self-contradiction,” Brown, supra, 411 U.S. at 229, 93 S.Ct. 1565, which was the concern of the Court in Jones, supra, and as to which the Court in Brown expressly reserved judgment. Appellant relies on the recent decision in Commonwealth v. Weeden, 322 A.2d 343 (Pa.), petition for cert. denied, 420 U.S. 937, 95 S.Ct. 1147, 43 L.Ed.2d 414.

We must respectfully disagree. The problems giving rise to the Jones/Brown “ ‘automatic’ standing” — essentially, standing implied in law — do not ordinarily arise in those cases where the defendant has directly been aggrieved by the unreasonableness of the search. If a search has intruded upon someone’s privacy he is not likely to be hesitant in saying so. Automatic standing ordinarily comes into play where the search has not intruded upon the privacy of the defendant but where that which has been seized nevertheless can be used against him. In such cases if he is to have standing to object to the seizure as the product of an unreasonable search he must show that some recognizable interest of his has been offended by the seizure — a showing that prior to Jones was highly embarrassing. The embarrassment, as the Court in Brown notes, has now been eliminated by Simmons v. United States, 390 U.S. 377, 88 S.Ct. 967, 19 L.Ed.2d 1247 (1968), holding that concessions made by a defendant in order to establish standing to move to suppress cannot be used against him at trial. What is left to outrage one’s sense of fairness — when there is no intrusion upon a defendant’s privacy and his claim of possessory right to that which has been seized no longer has its devastating effect — -is the matter of “prosecutorial self-contradiction.” The question is as to the degree and quality of governmental inconsistency that suffice to create that condition and, on balance, to trigger “automatic” standing. In such cases, as we read Brown, it is not the facts as developed at trial or the prosecutor’s theory of guilt that controls. Rather, it is whether the defendant has been charged with possession — whether possession is an essential element of the crime for which he has been indicted. In reciting the minimum requirements for standing the Court, as an alternative to a showing establishing- intrusion upon privacy, requires that the defendant be “charged with an offense that includes, as an essential element of the offense charged, possession of the seized evidence at the time of the contested search and seizure.” 411 U.S. at 229, 93 S.Ct. at 1569.

We conclude that where, as in this case and Valencia, possession at the time of the search is not an essential element of the crime charged, there is no automatic standing under Brown. Cf., e. g., United States v. Felix, 474 F.2d 610 (9th Cir. 1973); United States v. Johnson, 454 F.2d 700 (9th Cir. 1972); Diaz-Rosendo v. United States, 357 F.2d 124 (9th Cir. en banc), cert. denied, 385 U.S. 856, 87 S.Ct. 104, 17 L.Ed.2d 83 (1966).

Nor can it be said that what might be called “actual standing” (as distinguished from standing implied in law) was established here such as to render erroneous the denial of the motion to suppress. We now know the truth to be that appellant at the time of seizure did in fact claim as his the heroin seized. It was on that basis that he was convicted. But truth as it emerges from trial cannot reach backward to confer standing to move to suppress. Rather it is the showing made by the defendant at the time he moves to suppress that counts. He must then show that at’ the time of seizure he had a possessory interest in that which he seeks to suppress. Should he, in support of a motion to suppress, concede such an interest in order to establish “actual standing,” his concession, as we have noted, cannot now be used against him at trial. Simmons v. United States, supra. But it is a concession that must be made. Neither jury verdict nor governmental contention can serve to relieve the defendant of his burden in those cases where automatic standing does not serve to relieve him.

As to the importation count, then, it was not error to deny the motion to suppress. Since the heroin was properly received in evidence as to that count there was ample evidence, apart from the confession, as to the fact that a crime had been committed. We find no merit in appellant’s contention that the United States has failed to meet its burden of proving that the confession was freely and voluntarily made.

Appellant’s remaining assignments of error are without merit.

Judgment on the possession count reversed.

Judgment on the importation count affirmed.

      . “The possession on the basis of which petitioner is to be and was convicted suffices to give him standing under any fair and rational conception of the requirements of Rule 41(e).” 362 U.S. at 264, 80 S.Ct. at 732.


source: Caselaw Access Project

author: HUFSTEDLER, Circuit Judge: ELY, Circuit Judge

license: Public Domain

text:
    UNITED STATES of America, Appellee, v. Marion H. MacKENZIE et al., Appellants. UNITED STATES of America, Appellee, v. ENGINE SERVICE CO., INC., an Arizona Corporation et al., Appellants.
    Nos. 71-1925, 71-1574.
    United States Court of Appeals, Ninth Circuit.
    Jan. 13, 1975.
    See also 9 Cir., 474 F.2d 1008.
    Frederick Steiner, Jr., Snell & Wilmer (argued in 71-1574), Phoenix, Ariz., Michael K. Halley (argued in 71-1925), Reno, Nev., for appellants.
    Stephen M. McNamee, Asst. U. S. Atty. (argued in 1574), Phoenix, Ariz., Stephen Eilpren, Atty., Dept, of Justice, Washington, D. C. (argued in 1925), for appellee.

      Before CHAMBERS, MERRILL, KOELSCH, BROWNING, DUNIWAY, ELY, HUFSTEDLER, WRIGHT, TRASK, CHOY, GOODWIN, WALLACE and SNEED, Circuit Judges.
   OPINION

HUFSTEDLER, Circuit Judge:

Upon foreclosure of these mortgages the courts below denied appellants the protection of state laws which would respectively have limited the deficiency judgment against MacKenzie and given Engine Service Co., Inc., redemption rights in the foreclosed property. We have taken these cases en banc to resolve the question whether federal law defers to or adopts these state laws when the creditor is the federal government and the property involved is security for loans made by the Small Business Administration (“SBA”).

In both cases the Government through foreclosure of its security obtained advantages that the laws of Nevada and Arizona would clearly have denied to private creditors. No applicable federal statute or administrative regulation expressly establishes the rights and duties of the Government and the debtor upon the Government’s foreclosing security for an SBA loan. Thus no federal statute nor regulation nullifies these debtor protections in the SBA context, and no provision in the underlying contracts purported to do so. Nor should we create federal law by implication that is antithetical to state laws protecting debtors unless doing so is necessary to achieve the overriding purposes of Congress in enacting the statutes under which the loans were made or to preserve some other paramount federal interest. Because we conclude that the congressional purpose in enacting the SBA legislation is not impaired by federal deference to the state laws involved here and because no other federal interest justifies refusal to respect the state interests reflected in them, we hold that these debtors had the protection of the state laws which they unsuccessfully asserted below.

In MacKenzie, SBA made a $150,000 loan to a Nevada corporation. MacKenzie guaranteed the loan and secured it by a deed of trust on his Nevada real property. When the principal obligor defaulted, the Government brought an action against MacKenzie in federal court to foreclose the deed of trust and to recover any deficiency remaining after the sale. The court ordered foreclosure, and the Government made a credit bid for $34,000.

Upon the Government’s motion, the court confirmed the sale and ordered an evidentiary hearing to determine the fair market value of the property, following the practice under Nevada law. (Nev. Rev.Stat. § 40.457.) At the hearing the parties stipulated that the fair market value on the date of foreclosure was $50,550. If federal law defers to Nevada law, the deficiency would have had to be limited to the difference between the unpaid balance of the loan and the fair market value of the property at the date of foreclosure. (Nev.Rev.Stat. §§ 40.455, 40.457, 40.459.) The district court refused to apply the Nevada law and entered a deficiency judgment for $89,-907.35, the difference between the bid-in price on the foreclosure sale and the unpaid balance of the obligation. The result was that the deficiency judgment exceeded the amount allowed under Nevada law by $16,550 plus interest.

Engine Service Co., Inc. (Engine Service) presents the same choice-of-law problem in a slightly different context. The factual background is complex, but the essential features can be briefly stated. Mr. and Mrs. Smith guaranteed an SBA loan to Engine Service and secured their guaranty by a realty mortgage on their home and farm. All of the transactions and the real property involved were in Arizona.

When Engine Service defaulted on its promissory note, the Government brought an action against it on the note and sought foreclosure of the security that Engine Service had given. The Government joined the Smiths, who were sued on their guaranty for any deficiency that might exist after Engine Service’s assets were sold. The Government filed motions for summary judgment against Engine Service for $187,-561.50 principal plus interest on the note and for foreclosure of the security that it had given, and against the Smiths on their guaranty if the proceeds -from the sale of the security were inadequate to satisfy the judgment. Engine Service and the Smiths stipulated to a judgment and a decree of foreclosure against Engine Service only; the stipulation preserved for later litigation the question whether the Engine Service’s foreclosure should be made with or without redemption right.

The court entered judgment against Engine Service and retained jurisdiction to decide the Smiths’ liability. The Government made a credit bid of $46,000 for the Engine Service property at the marshal’s sale, which the court ordered to be without Arizona redemption rights. The Government resold the property to a third person shortly thereafter for a much higher price. The district court confirmed the sale to the Government, fixed the deficiency at $158,286 (the difference between the unpaid amount of the obligation and the bid-in price), and granted summary judgment against the Smiths for that sum. The court also denied the Smiths’ motion to supplement the record by proof that the fair market value at the time of the foreclosure sale was over $100,000.

The question whether federal law should defer to state laws protecting debtors when the Government seeks to recover a debt generated by an SBA loan is not novel. The Supreme Court answered the question affirmatively in United States v. Yazell (1966) 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404. In our cases, as in Yazell, the SBA loans were “individually negotiated in painfully particularized detail,” (id. at 345-46, 86 S.Ct. at 503) and, by thwarting debtor protections imposed by state law, the Government obtained an unconscionable advantage over debtors by gaining rights that no other creditor could have had.

Yazell makes clear these cases are to be decided in light of the state and federal policies at stake. (Id. at 352, 86 S.Ct. 500.) The underlying purpose of both the Nevada and Arizona statutes is to prevent the injustice that occurs when a debtor’s property is sold on foreclosure sale for a price significantly less than its fair market value. The Nevada mechanism is to confine the amount of a recoverable deficiency to the difference between the fair market value of the property on foreclosure and the amount of the unpaid obligation, thus making economically fruitless unconscionably low bidding by the creditor. The Arizona device is to secure to the debtor redemption rights and thus pose an economic threat to prospective purchasers, including the creditor, that an artificially low bid can be defeated by redemption.

The two federal interests involved are the protection of the federal fisc and service of the congressional purpose in enacting the Small Business Act to “aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise . . . and to maintain and strengthen the over-all economy of the Nation.” (15 U.S.C. § 631(a).)

The governmental interests in Yazell and in our cases are identical. We can justify a departure from Yazell only if we can reasonably conclude that a state’s interests in protecting its debtors from inflated deficiency judgments and from unfair prices at foreclosure sales are of lesser moment to the states concerned than was the “quaint doctrine of coverture” (United States v. Yazell, supra, 382 U.S. at 343, 86 S.Ct. 500) to the State of Texas, or that the former weigh less heavily than the latter when each is balanced against the same federal interests.

We cannot say that Nevada’s and Arizona’s concern in protecting their debtors from economic overreaching in foreclosure sales is less weighty than Texas’ interest (whether spawned by chivalry or chauvinism) in shielding a married woman’s property from debts that she acquired.

Recognition of the debtor protections before us does not pose any significant threat to the legitimate interests of the Government in having its loans repaid. Devices to assure that fair market prices are received at foreclosure sales redound to its benefit. Depriving the Government of potential “double recoveries” created by artificially large deficiencies that it has caused takes away nothing to which it is entitled.

In fact, the application of the debtor protections before us encourages Congress’ announced aims in enacting the SBA legislation. Congress wanted to assist small business and, perforce, small businessmen “insofar as is possible.” To deprive those very businessmen of protection from economic overreaching will adversely affect their ability to survive a foreclosure and to start afresh and will potentially deter those whom Congress wanted to help as much as possible from seeking SBA loans.

The Government’s reliance on United States v. Stadium Apartments, Inc. (9th Cir. 1970) 425 F.2d 358 to support its contention that state law should not be deferred to is unavailing. Stadium Apartments, Inc. held that federal law did not adopt state law granting post-foreclosure sale rights of redemption

when the Federal Housing Authority forecloses a mortgage which it has guaranteed. The considerations that prompted that conclusion are different from those that appear in the SBA context, excepting that both situations involve state debtor protections and efforts to collect federal debts after foreclosure. As the court observed in Yazeli:

“None of the cases in which this Court has devised and applied a federal principle of law superseding state law involved an issue arising from an individually negotiated contract.” (382 U.S. at 353, 86 S.Ct. at 507.)

Unlike the FHA guarantees treated in Stadium Apartments, Inc., SBA transactions are individually tailored.

In addition, Stadium Apartments, Inc. expressly distinguished Yazeli (425 F.2d at 363), and relied heavily upon United States v. View Crest Garden Apartments, Inc. (9th Cir. 1959) 268 F.2d 380. Yazeli distinguished View Crest Garden Apartments, Inc. (382 U.S. at 348 n. 15, 86 S.Ct. 500) and approved Bumb v. United States (9th Cir. 1960) 276 F.2d 729, in which we held California’s “bulk sales” statute applicable to an SBA transaction (382 U.S. at 347, 86 S.Ct. 500). Here Yazeli controls and requires deference to the state laws before us.

Nothing more needs to be said to dispose of MacKenzie. But we must add that, apart from the Yazeli issue, Engine Service must be reversed for the further reason that material issues of fact were raised that foreclosed summary judgment against the Smiths.

Reversed and remanded.

ELY, Circuit Judge

(Joined by Circuit Judge BROWNING) concurring:

I concur in the majority’s opinion because, in my view, it comports with my dissenting opinions in United States v. Stadium Apartments, Inc., 425 F.2d 358, 367 (9th Cir. 1970), and Branden v. Driver, 441 F.2d 1171 (9th Cir. 1971).

In the present cases, the loans in question were made by the Small Business Administration (SBA). In Stadium Apartments, the loan was made by the Federal Housing Authority (FHA), and in Branden, by the Veterans Administration (VA). The lending documents in all the cases specified, in effect, that the loans were made subject to the laws of the states in which the real property was situated. In Stadium Apartments, supra, the majority held that Idaho’s redemption statute could not be invoked by the mortgagor upon the FHA’s foreclosure of the mortgage. In Branden, supra, the majority held that VA, the mortgagee, might take a deficiency judgment upon its foreclosure of a purchase-money mortgage on California property, despite a California statute prohibiting such a deficiency judgment. For comments generally supporting my dissenting views in those cases, see Note, Federal Courts — Choice of Controlling Law in Cases Involving Federally Insured Mortgages, 49 N.C.L.Rev. 358 (1971); Note, Property — Mortgages— State Redemption Statutes Not Applicable to Foreclosure by the United States on FHA Insured Mortgage, 23 Vand.L.Rev. 1384 (1970); Note, Federal Courts—Refusal to Apply State Redemption Statute to FHA-Insured Mortgage Foreclosure, 17 Wayne L.Rev. 178 (1971).

I respectfully submit that there is no such sufficient difference in loans made by the SBA, as in the present appeals, as to justify a more favorable treatment to the debtors than that given to the debtors in Stadium Apartments and Branden. Under United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404 (1966), the pertinent state law should control in all four cases. It therefore seems to me that the majority, in reaching the correct result in the cases now before us, should have, in the interest of consistency, if not for the reasons expressed by me in Stadium Apartments and Branden, expressly overruled the holdings of those two cases.

      . See generally Durfee & Doddridge, Redemption From Foreclosure Sale, 23 Mich.L.Rev. 825, 827-34 (1925); Note, Redemption From Judicial Sales, 5 U.Chi.L.Rev. 625, 626 (1938).

      . Congress has itself indicated that the SBA need not recoup every cent expended. Congress required only that “[a]ll loans made under this subsection shall be of such sound value or so secured as reasonably to assure repayment.” (15 U.S.C. § 636(a)(7) (emphasis added).) See also 15 U.S.C. § 646, which subordinates SBA security interests to certain state tax liens normally not prior to federal claims. (City of Sherman v. United States (5th Cir. 1968) 400 F.2d 373.) This provision was added in part to clarify “the position of the SBA in actions brought to realize its intérest in the assets of borrowers who have defaulted under SBA loans.” (S.Rep.No.1714, 85th Cong., 2d Sess. (1958), 1958 U.S.Code Cong. & Admin.News, Vol. 2, at pp. 3071, 3080.) At the very least the attitude underlying §§ 636(a)(7) and 646 is consistent with the claims of the appellants here.

      . It is worthy of note that Congress, recognizing the possibilities for abuse inherent in foreclosure sales, has provided that the United States shall have a right of redemption upon foreclosure of a lien prior to its own. (28 U.S.C. § 2410(c); Equity Mortgage Corp. v. Loftus (E.D.Va.1970) 323 F.Supp. 144.)

      . The majority of the court is of the view that the merits of Stadium Apartments, Inc., are not before us; we express no view on the merits of that case.


author: McENTEE, Circuit Judge:

text:
    Robin HAFT TRUST et al., Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 74-1302.
    United States Court of Appeals, First Circuit.
    Argued Dec. 2, 1974.
    Decided Jan. 31, 1975.

      Lewis H. Weinstein, Boston, Mass., with whom Norman H. Wolfe, Washington, D. C., Louis P. Georgantas, and Foley, Hoag & Eliot, Boston, Mass., were on brief for petitioners-appellants.
    Carolyn R. Just, Atty., Tax Div., Dept, of Justice, with whom Scott P. Cramp-ton, Asst. Atty. Gen., Gilbert E. Andrews and Leonard J. Henzke, Jr., Attys., Tax Div., Dept, of Justice, Washington, D. C., were on brief, for respondent-appellee.
    Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.
   McENTEE, Circuit Judge:

In their federal income tax returns for the year 1967 the taxpayer trusts reported gains from the redemption of certain stock they owned as long-term capital gains. The Commissioner determined that the gains were ordinary income and asserted deficiencies of $17,-445.49 for each trust. The Tax Court found for the Commissioner and the taxpayers appeal. The issue before us is the relevance, after United States v. Davis, 397 U.S. 301, 90 S.Ct. 1041, 25 L.Ed.2d 323 (1970), of family hostility in mitigation of the constructive ownership rules of Code section 318 in determining dividend equivalence under section 302(b)(1).

On October 28, 1956, Marcia Foster married Burt Haft. Two children were born of this marriage, and Burt Haft adopted his wife’s two children by her deceased previous husband. After the marriage Marcia’s father, Joseph C. Foster, loaned $200,000 to the Haft-Gaines Company, of which Burt Haft was an officer and stockholder, and purchased 100,000 shares of the company’s common stock. In January of 1962 he created the four identical taxpayer trusts, one for each grandchild, and transferred 25,-000 shares of Haft-Gaines stock to each without consideration.

In November 1966 Marcia Haft commenced divorce proceedings against Burt Haft, and each made serious and bitter charges and countercharges against the other. To separate the parties’ financial interests and to provide for their future relationship, there were negotiations in which both were represented by lawyers or accountants, and Joseph Foster, Burt Haft, and Burt’s brother-in-law Jack Gaines also participated at times. Disputes characterized the discussions that led to the property settlement between Mr. and Mrs. Haft. When Mrs. Haft initiated the divorce, Burt Haft moved his residence from the house they had been occupying in Bay Harbor, Miami Beach, Florida, and had no contact with the children until six or seven months later, although he had obtained extensive visitation rights and was still residing in Florida during this period. Sometime after her divorce and before 1970, Marcia Haft remarried. Thereafter, she and her new husband moved to New York, taking the children with them. After the divorce was granted on June 26, 1967, Burt Haft was indifferent to the children; he did not see them at all from the time of the divorce until 1971. After 1971 they visited him in Florida; he saw them at Christmas of 1972. After November 1966 he did not pay support for the children until a court decree ordered him to do so, and he ceased paying support entirely in the middle of 1970, although his income during the period was quite high.

While the divorce proceedings were taking place, Mr. Foster and the trusts terminated their financial involvement in the corporation. There were negotiations concerning retirement of the debt owed by the corporation to Mr. Foster, and it was finally paid in March 1967. There were also negotiations respecting thé termination of the trusts’ stock interests. The corporation originally offered $183,000 for all the trusts’ shares, but in a subsequent meeting the offer was raised. On June 17, 1967, it was agreed that the trusts’ shares would be redeemed for $250,000 plus 6 percent interest, if the corporation chose to pay the purchase price in installments over a period of years, and $200,000 plus 6 percent interest, if the entire purchase price was paid on or before February 1, 1968. The Corporation agreed that while this obligation was outstanding, it would not pay dividends, would not pay compensation in excess of $200,000 to its shareholder-employees, would not recapitalize, and would not dispose of most or all of its assets. The corporation elected to complete payment for the stock in 1967.

Immediately before the redemption of the stock on-June 17, 1967, the stock of the corporation was owned as follows:

Shares
Burt Haft .......................... 100,000
Richard Haft (Burt's brother) .......... 100,000
Jack Gaines ......................... 100,000
Abraham Haft Trust for the benefit of Burt Haft, Richard Haft, and Norma Gaines (Burt's sister) ..................... 100,000
Robin Haft Trust .................... 25,000
Wendy Laura Haft Trust .............. 25,000
Lisa Ann Haft Trust ................. 25,000
Daniel Foster' Haft Trust .............. 25,000
Total ........................ 500,000

After the redemption of the stock of the last four trusts listed above, only 400,000 shares of the stock of the corporation were outstanding.

In form a redemption is a sale of stock like any other sale of stock and would as such be entitled to capital gains treatment like other such sales. However, redemption could be used as a device to bail out dividends at capital gains rates if a corporation could redeem its shares proportionately and thus pay cash to the shareholders just as a dividend would without the shift in control that characterizes true sale transactions. Moreover, even a redemption disproportionate on its face may not in reality result in any shift in control if the shareholders comprise an economic unit like a family, in which the usual community of interest makes insignificant the precise location of title to shares. The Code handles these problems by treating redemptions as sales only if they meet one of the tests of section 302(b), subsection (1) of which provides for such treatment provided the distribution is “not essentially equivalent to a dividend.” Dividend equivalence under this test results whenever the practical result of the transaction is to distribute accumulated earnings essentially pro rata while leaving ownership basically unchanged. Bradbury v. Commissioner, 298 F.2d 111, 115-116 (1st Cir. 1962). Section 302(c)(1) calls for the application under these tests of the complex rules of section 318 attributing constructive ownership between family members and between entities and their beneficiaries.

Although the taxpayers here were divested of all their shares in the Haft-Gaines Company, the redemption actually resulted in a slight increase in their proportional interests under the attribution rules from 31/s% to 33Vs%, indicating no significant shift in control under the principle of Bradbury, supra. However, in Estate of Squier v. Commissioner, 35 T.C. 950 (1961), the Tax Court embraced the principle that family discord could belie the community-of-interest rationale of the attribution rules and was thus a relevant circumstance in determining dividend equivalency under (b)(1):

“Even after applying the attribution rules . . . the record herein reveals a sharp cleavage between the executor and members of the Squier family, and in spite of the attribution rules as to stock ‘ownership’ the redemptions herein in fact resulted in a crucial reduction of the estate’s control. Accordingly, notwithstanding the attribution rules, the redemptions in this case did result in a substantial dislocation of relative stockholding in the corporation and also in fact brought about a significant change in control.” 35 T.C. at 956-957.

We endorsed this principle in dictum the following year in Bradbury v. Commissioner, supra. Taxpayers argued its applicability in the present case, but the court below took the view that Squier was overruled sub silentio by the Supreme Court’s decision in United States v. Davis, 397 U.S. 301, 90 S.Ct. 1041, 25 L.Ed.2d 323 (1970). Davis involved no claim of family hostility. Nevertheless, although he has not withdrawn his acquiescence in Squier, the Commissioner argues against the leading scholarly commentators that Davis’ interpretation of § 302(b)(1) necessarily establishes the irrelevance of family discord. We do not so read that case. In Davis, taxpayer owned 25 percent of the common stock of the redeeming corporation, and his wife, son, and daughter owned the remaining 75 percent which was attributed to him under section 318. Taxpayer also owned all the outstanding preferred, which he had purchased soon after the corporation was organized in 1945 so that it could meet the capitalization prerequisites for a Reconstruction Finance Corporation loan. It was understood that the corporation would redeem the preferred stock when the loan was repaid. In 1963 the corporation redeemed its preferred in accordance with this understanding, and taxpayer treated his gain as not essentially equivalent to a dividend under § 302(b)(1). The Commissioner maintained that taxpayer was to be regarded as the sole shareholder because of the attribution rules, and that all distributions to such a shareholder were proportional, hence dividends, regardless of any legitimate business purpose.

In arguing before the Supreme Court taxpayer sought to avoid this result by contending on the basis of minor discrepancies in wording among the subsections of section 302(b) that the attribution principle was irrelevant in the application of the “not essentially equivalent to a dividend” test of § 302(b)(1). The Court gave this argument short shrift. But in holding that the attribution rules must be “taken into account” under section 302(b)(1), citing our Bradbury decision for this proposition, 397 U.S. at 306-307, 90 S.Ct. 1041, the Court did not require that the inquiry end there. The Commissioner’s own regulations, § 1.302-2(b), which have not been amended in this respect since Davis, provide that the application of section 302(b)(1) “depends upon the facts and circumstances of each case. One of the facts to be considered in making this determination is . constructive stock ownership under section 318(a)” (emphasis supplied). And in fact the court in Squier did apply the rules though it concluded on balance that the redemption before it was not essentially equivalent to a dividend. Taxpayers here argue not that the rules are inapplicable, but that they are not in themselves determinative.

The Court’s rejection of Davis’ further argument that the redemption of his shares was motivated by a legitimate business purpose, hence entitled to sale treatment, does not imply a rejection of all mitigating factors in the application of section 302(b)(1). In fact the Court’s thorough review of that provision’s legislative history suggests the contrary. The “essentially equivalent” test was for many years the sole criterion for establishing the tax treatment of corporate redemptions. In an effort to eliminate the confusion occasioned by this indefinite provision and facilitate tax planning, the drafters of the 1954 Code replaced it with objective tests, the “safe harbor” rules which now appear as sections 302(b)(2) and (3). But the Senate considered the elimination of the “essentially equivalent” test “unnecessarily restrictive,” S.Rep.No.1622, 83d Cong., 2d Sess. 44, U.S.Code Cong. & Admin.News, 1954, p. 4629, and it was reenacted along with the “safe harbor” rules. The Senate Committee stated that in the future the inquiry would be “devoted solely to the question whether the transaction by' its nature may properly be characterized as a sale . . ..” Id. at 234, U.S. Code Cong. & Admin.News, 1954, p. 4870. Focusing on this language, the Court held in Davis that a redemption was not entitled to preferred treatment absent a “change in the relative economic interests or rights of the stockholders.” 397 U.S. at 313, 90 S.Ct. at 1048. The effect of the transaction rather than its motivation is determinative. Section 302(b)(1) requires a “meaningful reduction of the shareholder’s proportionate interest in the corporation,” id. (emphasis supplied). This language certainly seems to permit, if it does not mandate, an examination of the facts and circumstances to determine the effect of the transaction transcending a mere mechanical application of the attribution rules.

The Commissioner urges apart from Davis that the Squier approach is ill-conceived because the hostility inquiry leads the courts into the uncertain shifting quagmires of family relationships. The rarity with which the Squier rationale was invoked before Davis suggests that this will not prove an insurmountable problem and of course the courts are entitled to view such claims of hostility with jaundiced eyes. At any ráte, though a wooden subjugation to the attribution rules might have administrative advantages it could also work injustice in particular cases, and we think that in retaining this section in the Code alongside the safe harbor rules, Congress showed itself willing to tolerate some administrative inconvenience for the sake of taxpayer equity. We are not prepared to hold that Squier was wrong when decided.

Since the court below made no findings on the hostility question, we remand to the Tax Court to reconsider taxpayers’ claims in the light of the facts and circumstances of the case, including the existence of family discord tending to negate the presumption that taxpayers would exert continuing control over the corporation despite the redemption. We intimate no opinion as to the validity of these claims.

Vacated and remanded for proceedings consistent with this opinion.

      . Taxpayers also contend that they “substantially complied” with the requirements of one of the safe harbor rules, § 302(b)(3), providing nondividend treatment for redemptions completely terminating the shareholder’s interest in the corporation. Under subsection (c)(2) of that section, the attribution rules of § 318(a) are waived provided the shareholder files an agreement promising to notify the Commissioner of the acquisition of any interest in the corporation within ten years of the redemption. Taxpayers made this contention to the court below without having filed such agreements, and the court found that this was not substantial compliance. After the decision had been rendered and the judgment entered, taxpayers filed the necessary agreements and moved for vacation or reconsideration. The court did not abuse its discretion in denying these motions. Traum v. Commissioner, 237 F.2d 277, 281 (7th Cir. 1956). Whether these late filings could represent substantial compliance with the statute presented questions of fact and law not fully raised or litigated before the court at trial. Supplemental Opinion 62 T.C. 145 (1974). Since taxpayers could properly have put this point in issue by the simple expedient of filing the agreements before trial, they cannot be heard to raise it now. Cf. Second Carey Trust, 41 B.T.A. 800, aff’d, 75 U.S.App.D.C. 263, 126 F.2d 526 (1942). The redemption’s failure to qualify under (b)(3) is irrelevant to its treatment under (b)(1). See § 302(b)(5).

      . The following analysis, drawn substantially from the government’s brief, indicates how this result is reached. Before the redemption, each taxpayer trust owned 25,000 shares or 5 percent of the 500,000 outstanding shares of Haft-Gaines Company stock. Under § 318(a)(2)(B)(i), the stock owned by the trust of which Burt Haft was the beneficiary is attributed to him to the extent of his */3 interest therein. Under § 318(a)(1)(A), an individual is deemed to own the stock owned by his parents. Thus each of the four Haft children who were beneficiaries under the four trusts were deemed to own the 20 percent of the stock owned directly by Burt Haft, plus the 6/3 percent interest of Burt Haft in the trust of which he was a beneficiary. Before the redemption, each taxpayer thus owned a total of 31/3 percent, after applying the attribution rules. After the redemption only 400,000 shares remained outstanding, and Burt Haft’s interest accordingly increased to 25 percent from his directly owned stock. His stock ownership in the trust of which he was a beneficiary became 8V3 percent, totaling 33 V3 percent, which, under the attribution rules, was attributed to each of the taxpayers, although they no longer actually owned any stock.

      . “While these attribution rules are generally applicable to § 302(b)(1) . . . their imposition is not inflexible and if it can be demonstrated that discord exists in a family relationship which would make attribution unwarranted, they will not be applied.” 298 F.2d at 116-117 n. 7 (citing Squier).

      . Bittker and Eustice, described by the Supreme Court in Davis as “the leading commentators,” 397 U.S. at 306, 90 S.Ct. 1041, and cited twice in that opinion, declare “the Davis decision . . . weakens, but does not eliminate, the ‘family fight’ argument in mitigation of § 318 attribution under § 302(b)(1),” Federal Income Taxation of Corporations and Shareholders, § 9.24 at 26 n. 43 (3d ed. 1971). Comment, Defining Dividend Equivalency Under Section 302(b)(1), 16 Vill. L.Rev. 88, 105 (1970) states “. . . it is believed that the test of a meaningful reduction should be applied in the same manner as it was applied in the Squier and Parker cases. .” Both D. Kahn, Basic Corporate Taxation 32-33 n. 80 (1973) and Swennes, “Not Essentially Equivalent to a Dividend” Exception Still Viable Despite Davis, 41 J.Tax. 78, 82 (1974) declare that family hostility “might” serve as a mitigating factor after Davis. But see 23 U.Fla.L.Rev. 188, 192 n. 38 (1970).


author: MILLER, Judge:

text:
    Lloyd PATTERSON and Charlene Patterson, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee.
    No. 73-2728.
    United States Court of Appeals, Ninth Circuit.
    Jan. 27, 1975.

      Charles H. Creason, Creason & Creason (argued), Rupert, Idaho, for petitioners-appellants.
    George G. Wolf (argued), Tax Div., Dept, of Justice, Washington, D.C., for respondent-appellee.
    Before WRIGHT and GOODWIN, Circuit Judges, and MILLER, Judge, U. S. Court of Customs and Patent Appeals.

       Honorable Jack R. Miller, Judge United States Court of Customs and Patent Appeals, sitting by designation.

   OPINION

MILLER, Judge:

This is an appeal by the taxpayers, husband and wife, from a decision of the United States Tax Court (TC Memo 1973 — 39) determining a deficiency in income tax for calendar year 1969 for which they filed a joint return on the cash basis. As pointed out by the Tax Court, the only issue between the parties is whether appellants constructively received in 1969 an $18,000 payment which was actually received on January 5, 1970.

The Pattersons were residents of Idaho, where Lloyd Patterson (hereinafter “Patterson”) engaged in farming. On June 17, 1969, he entered into a “Potato Growing Agreement” and a “Modification-Agreement” with J. R. Simplot Company for services on his land consisting of growing, harvesting, and storing potatoes, with compensation to be based on quantity and quality of the potatoes grown and stored. Key provisions of the “Modification-Agreement” are as follows:

Section VI as modified:
a. Grower shall at his expense plant said seed on the described real property and shall cultivate, irrigate, harvest and in every respect care for said crop in a proper farmer-like manner and shall deliver to his own storage facilities field run at his expense, the potato crop resulting therefrom as herein provided. . . ' .
b. Grower shall maintain storage temperature suitable for keeping potatoes for processing, ie 40° F. or above.
c. Grower assumes all risk of loss, depreciation, or damage to potatoes from any cause until removal from storage by Company and Grower shall 'insure potatoes against loss or damage from fire or other casualty while in storage, with a loss payable clause in favor of the Company to reimburse Company for all advances made by Company to Grower. d. The Company shall accept delivery of and move potatoes field run from storage at its own expense and at Company option from November 1, 1969, to May 31, 1970.
Section VII as modified:
a. There shall be deducted from the sum to be paid to the Grower hereunder an amount equal to the cost of services, seed, material and cash advanced by the Company .... The balance remaining shall be paid to the Grower one-half at the time of harvest, one fourth at Grower’s option, December 31, 1969 or January 5, 1970 and the balance by March 15, 1970 or when potatoes are delivered whichever is later.
c. Any payment made to the Grower before potatoes are moved from storage shall be based on the estimated total payment to be made hereunder to the Grower by the Company as computed by the Company.

The potato crop governed by the aforesaid agreements was harvested during the fall of 1969 and was stored in Patterson’s storage facilities. Delivery of the potatoes occurred as follows:

Date Pounds Delivered Price
2-19-70 3,061.0 $ 6,105.28
2-20-70 6,756.2 12,821.97
2-21-70 2,917.4 5,440.69
12,734.6 $24,367.94

Payments for the above were received by Patterson from the Company as follows:

Date Amount
11-7-69 $ 1,500.00
1-5-70 18,000.00
3-6-70 4,867.94
$24,367.94

On January 3, 1970, Patterson requested a payment of $18,000, and almost immediately thereafter the Company’s field manager (Rasmussen) made the estimate provided by Section VII c. as modified, set forth above, using merely a tape measurement and visual inspection of the stored potatoes. However, before the check for $18,000 could be issued, Patterson insured the stored potatoes for $27,000 through SAFECO Insurance Company, with a loss payable clause in favor of J. R. Simplot Company. The policy was for ninety days and was dated January 5, 1970. It is apparent that this action was in pursuance of Section VI c. of the “Modification-Agreement,” quoted above and that such action was a condition precedent to the $18,000 payment. Indeed, appellee so recognizes it in its brief, stating:

“The facts are that Rasmussen told taxpayer on January 3, 1970, that the insurance must be purchased before the $18,-000 could be paid . . . ”

Among the Tax Court’s findings of fact is the following:

All petitioners needed to do to receive payment was to request inspection and payment in December 1969.

In view of the clear requirement in the “Modification-Agreement” that the potatoes be insured by the Grower, with a loss payable clause in favor of the Company to reimburse it for all advances made to Patterson, coupled with the absence of any evidence showing a practice on the part of the company of waiving the requirement, we have a definite and firm conviction that this finding constituted a mistake by the Tax Court. See United States v. United States Gypsum Co., 333 U.S. 364, 394, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948); Grace Bros. v. Commissioner, 173 F.2d 170, 174 (9th Cir. 1949).

The Tax Court cited Treas. Reg. § 1.451-2, T.D. 6723, 29 F.R. 5342 (1964), which sets forth Treasury’s interpretation of the doctrine of constructive receipt, as follows:

(a) General rule. Income although not actually reduced to a taxpayer’s possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer’s control of its receipt is subject to substantial limitations or restrictions.

It is appellee’s position that Patterson had the clear and unrestricted right to receive payment of three-fourths of the estimated contract proceeds, i. e. $18,000, in 1969 and that his failure to reduce these proceeds to his possession was due solely to his own volition, citing, as did the Tax Court, Romine v. Commissioner, 25 T.C. 859 (1956). We do not find this case apposite, however, inasmuch as all the taxpayer there needed to do was collect his money from the sale of livestock in December; also the purchaser had entered the purchase on its books for that month.

Nor do we find the “volition” argument persuasive. After all, a cash basis grain farmer, for example, has it within his “volition” to sell his harvested grain before the end of the year rather than in a subsequent year. However, the doctrine of constructive receipt cannot be stretched to force him to report the proceeds in the year of harvest. The Internal Revenue Service has ruled that a cash basis farmer who contracted to deliver wheat in one year but was not to be paid until the following year “did not have an unqualified right” to receive payment in the year of delivery. Rev. Rui. 58-162, 1958-1 Cum.Bull. 234. However, it would assuredly have been within his “volition” to sell his right to the payment and realize income in the year of delivery.

It is clear that Patterson had it within his “volition” to take steps to obtain one-half the estimated contractual payments at the time of harvest and another one-fourth on December 31, 1969. It is equally clear that the Company had the option of delaying its acceptance of delivery of the potatoes well into the following year, so that a condition precedent to earlier payments would have been Patterson’s arranging for earlier and longer-term insurance to protect the Company, which did not accept delivery until February 19 — 21, 1970. Appellee argues that this obligation is not a “substantial limitation” because it was totally within the control of the taxpayer. However, we do not believe the doctrine of constructive receipt extends so far as to, in effect, force such a monetary commitment with an unrelated third party (the insurance company) upon the taxpayer. This is particularly true when there is no evidence that the agreements between Patterson and J. R. Simplot Company constituted a mere tax avoidance scheme or were other than arms-length and bona fide.

Accordingly, we hold that payment of the $18,000 in 1969 was not subject to Patterson’s “unfettered command and control” and was not “available to the taxpayer without [substantial] restriction or limitation.” Bennett v. United States, 293 F.2d 323 (9th Cir. 1961).

The decision of the Tax Court is reversed.

       Includes payménts for storage provided by the "Modification-Agreement."

       The $1,500 appears to have been paid to cover harvesting expenses.

      . The parties have argued the issue of whether the $18,000 payment, being based on an estimate, was “indeterminate” and, therefore, not within the doctrine of constructive receipt. See 2 Mertens, Law of Federal Income Taxation (1967 Rev.Ed.) § 10.04. However, this issue need not be reached in view of our holding.


author: BEEKS, District Judge:

text:
    ALW, INC., a Nevada Corporation, d/b/a Kings Castle Hotel and Casino, Plaintiff-Appellant, v. UNITED AIR LINES, INC. and UAL, Inc., Defendants-Appellees.
    No. 73-1499.
    United States Court of Appeals, Ninth Circuit.
    Jan. 20, 1975.

      Richard C. Leonard (argued), Los Angeles, Cal., for plaintiff-appellant.
    Alvin J. Rockwell (argued), of Bro-beck, Phleger & Harrison, San Francisco, Cal., for defendants-appellees.
    Before CHOY and SNEED, Circuit Judges, and BEEKS, District Judge.

       The Honorable William T. Beeks, Senior United States District Judge for the Western District of Washington, sitting by designation.

   OPINION

BEEKS, District Judge:

This is an appeal from an order of the district court granting summary judgment of dismissal. The complaint alleges violations of the federal antitrust laws and also contains allegations sounding in common law tort, breach of contract, or both. The court below accorded adequate treatment to the antitrust issues, but, finding the action to be “expressly predicated” on the antitrust laws, declined to discuss the common law claims.

Viewing the evidence adduced in the light most favorable to appellant, as we must, the facts may be summarized as follows. Appellant, ALW, Inc. d/b/a Kings Castle Hotel and Casino (hereinafter “K.C.”) operates a resort hotel in the Reno-Lake Tahoe, Nevada area. Appellee, United Air Lines, Inc. (hereinafter “United”), is one of several common carriers furnishing air service to Reno, but is the only scheduled airline operating a one-carrier service between Reno and the Eastern portion of the United States.

In early 1970 K.C. and United engaged in discussions concerning the development of a joint promotional campaign, the purpose of which was to advertise K.C. and thereby increase travel (via United) to Reno-Lake Tahoe and the appellant hotel. In mid-1970 K.C. was approached by United with a request for information about the hotel and its facilities. This information was to be included in a special March, 1971 issue of United’s “Mainliner” magazine that was to feature promotional material on the State of Nevada. In cooperating with United, K.C. entertained, as its guests, the free lance writer and photographer assigned by United to prepare the article. K.C. was advised by various employees of United on several occasions that it could expect to receive favorable editorial comment in the feature issue. K.C. consequently reduced its advertising expenditures and entertainment schedule for the months during which it expected to reap the promotional benefits accruing from publication of the feature. K.C. specifically declined to purchase advertising space in the March, 1971 edition of Mainliner.

In the course of preparing the Nevada issue of Mainliner, several employees of United received information adverse to K.C. and its reputation in the Reno-Lake Tahoe community.

In any event, although the original draft of the article contained considerable praise of the K.C. hotel facility; the final version, as edited by United and published in the March, 1971 edition of Mainliner contained no mention of K.C. It , did contain photographs of the facilities and personnel of K.C. that were not identified in text or caption as such. The text referred to the availability in the Reno-Lake Tahoe area of facilities and entertainment that actually are found only at K.C., but no credit was given to appellant. An inference might thus be drawn by one reading the article that these facilities and entertainment are found at other hotels mentioned by name in the feature.

On the basis of these events, K.C. brought this action on April 12, 1971, alleging jurisdiction based upon Section 4 of the Clayton Act, and upon diversity of citizenship. The complaint alleged violations of Sections 1 and 2 of the Sherman Act, and Section 3 of the Clayton Act. The complaint also contained certain allegations that are apparently unrelated to the antitrust counts, and which might be construed as allegations of breach of contract, fraudulent misrepresentation, or both.

I.

K .C.’s claim under Section 1 of the Sherman Act rests upon its allegation that United conspired with unidentified parties to delete mention of K.C. in the March, 1971 Mainliner feature and thereby destroy the commercial value of the hotel. It has alleged the elements essential to maintenance of a cause of action under Section 1 of the Sherman Act: It has alleged (1) the existence of a contract, combination or conspiracy, (2) for the purpose of restraining a significant line of interstate commerce and (3) damage to its business or property arising from the antitrust violation. Yet the mere allegation of these elements, once they are rebutted is not sufficient to withstand a motion for summary judgment.

We are mindful that summary judgment is not typically a favored course in antitrust litigation. Yet, even within this specialized realm that so frequently presents issues of law and of fact that are inextricably entwined, the procedures set forth in Fed.R.Civ.P. 56 retain their utility under circumstances such as those present here. Once the allegations of conspiracy made in the complaint are rebutted by probative evidence supporting an alternative interpretation of a defendant’s conduct, if the plaintiff then fails to come forward with specific factual support of its allegations of conspiracy, summary judgment for the defendant becomes proper.

United has, in response to interrogatories, denied any conspiratorial conduct. United maintains that it exercised its discretion as the publisher of Mainliner in making a unilateral decision, albeit based on information received from others, to delete references to K.C. from Mainliner’s coverage of the Reno-Lake Tahoe area. K.C., although having made full use of the discovery process, is nonetheless unable to specify the names of, or otherwise identify, the parties to any conspiracy, the substance of any conspiratorial agreement or the motive therefor.

Fed.R.Civ.P. 56(e) requires opposing affidavits that “set forth such facts as would be admissible in evidence, and [that] show affirmatively that the affiant is competent to testify to the matters stated therein.” First Nat. Bank v. Cities Service Co., expressly rejected the contention that

“ . . . Rule 56(e) should, in effect, be read out of antitrust cases [permitting] plaintiffs to get to a jury on the basis of the allegations in their complaints, coupled with the hope that something can be developed at trial in the way of evidence to support those allegations . . While we recognize the importance of preserving litigants’ rights to a trial on their claims, we are not prepared to extend those rights to the point of requiring that anyone who files an antitrust complaint setting forth a valid cause of action be entitled to a full-dress trial notwithstanding the absence of any significant probative evidence tending to support the complaint.”

This holding is apposite here. The district court was correct in summarily dismissing the alleged violation of Section 1 of the Sherman Act.

II.

Appellant’s cause of action under Section 2 of the Sherman Act also suffers from deficiencies of factual support that ultimately, and properly proved fatal when'subjected to the test of the motion for summary judgment. K.C.’s theory under Section 2 is that United used its CAB-authorized monopoly on air travel to Reno-Lake Tahoe from the Eastern United States for the improper purpose of gaining a concurrent monopoly on tourist display advertising available to all United passengers and to persons traveling by air to Reno-Lake Tahoe from the Eastern United States.

To sustain a cause of action for monopolization under Section 2 an injury resulting from an acquisition of monopoly power must be shown. Monopoly power has been defined as the power to control prices or exclude competition in the relevant market.

K.C. is inconsistent in its attempts to define the relevant market within which United’s alleged monopoly power has been acquired. At one point it is claimed that United “monopolized . interstate and foreign commerce in printed display advertising and editorial material distributed to persons who travel by air from the Eastern portion of the United States to the Reno-Lake Tahoe area, and all of defendant UNITED’S passengers.” Elsewhere in the complaint it is alleged that United’s route structure creates a monopoly “in the market for public relations and advertising addressed to air travelers and potential air travelers from the Eastern portion of the United States to the Reno-Lake Tahoe area . . . .” The first statement of the relevant market would seemingly limit that market to the peculiar niche occupied by Mainliner. The second statement is apparently of broader scope since there is a considerable volume of public relations and advertising material addressed to residents of the Eastern United States who potentially might travel by air at some time to the Reno-Lake Tahoe area.

We reject K.C.’s contention that the relevant market consists of and is limited to printed display advertising and editorial material that has the specific circulation of Mainliner magazine. In considering what is the relevant market for determining the control of price and competition, the Supreme Court has observed that “no more definite rule can be declared than that commodities reasonably interchangeable by consumers for the same purposes make up that ‘part of the trade or commerce,’ monopolization of which may be illegal.” In Bushie v. Stenocord Corporation, this court noted that

“[a] single manufacturer’s products might be found to comprise, by themselves, a relevant market for the purposes of a monopolization claim, if they are so unique or so dominant in the market in which they compete that any action by the manufacturer to increase his control over his product virtually assures that competition in the market will be destroyed.”

As did the plaintiff in Bushie, K.C. here seeks to define the relevant market by excluding competitors marketing products similar to that of defendant. Undisputed evidence establishes that United carries aboard its aircraft numerous publications containing printed display advertising and editorial material, and that these publications are made available to its passengers.

While we need not determine the precise scope of the relevant market within which Mainliner magazine competes for the advertising dollar, even if we limit our attention to the segment of that market represented by publications carried aboard aircraft of United, it becomes clear that K.C. has failed to provide any factual support whatever for a contention that United has the power to control prices or restrict competition within that segment of the market.

K.C.’s contention that the combination of United’s route system and its publication of Mainliner amount to an attempt at monopolization as proscribed by Section 2 fails for a similar reason. K.C.’s failure to make any showing whatever with regard to any power United might have to control prices or exclude competition from the relevant market not only precludes a finding of monopoly; it also precludes, on the basis of the record before us, any support for the inference that there exists a dangerous probability that a monopoly will be achieved. K.C.’s allegations of an attempt to monopolize must also fail because of the total absence of any indication that United’s publication and control of Main-liner was inspired by a monopolistic purpose or intent.

It might further be observed that even if monopoly power were found to be present, K.C. has not alleged that this power worked to deprive it of exposure within any relevant market. K.C. was not denied the opportunity to advertise in Mainliner: indeed, it was encouraged yet declined to do so.

Thus, the evidence presented to the district court did not support a cause of action under Section 2: no monopoly power or dangerous probability thereof was shown to exist within any relevant market, and no monopolistic intent is indicated. In the absence of factual support, general allegations of monopoly or attempted monopoly do not suffice to withstand a motion for summary judgment.

III.

K.C. alleges that free editorial comment in Mainliner is denied to those who do not purchase advertising space in the publication. This is claimed to be a tying arrangement, as prohibited by Section 3 of the Clayton Act. This section makes it unlawful for a person engaged in commerce to lease or sell “goods, wares, merchandise, machinery, supplies, or other commodities,” if the lease or sale, price, discount or rebate is conditioned on an agreement that the lessee or purchaser “shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor . . . ” where the effect of the lease, sale, or condition would be substantially to lessen competition or tend to create a monopoly in any line of commerce.

Advertising does not fall within the traditional definition of “commodities” within the purview of Section 3. Even if we assume the contrary and the facts alleged by K.C. were to show conclusively that United predicated laudatory editorial comment in Mainliner upon the purchase of advertising space, this would not constitute a violation of the statute. That is, editorial comment is not conditioned on an agreement not to use the advertising space of competing publications. This demonstrates that United’s control of the tying product, Mainliner editorials, is not sufficient to restrain competition in the market for advertising space, the tied product.

The district court concluded that assuming K.C.’s allegations to be true, United was nevertheless entitled to summary judgment as a matter of law. We agree.

IV.

The complaint contains, in at least a rudimentary form, certain factual allegations that could form the basis for common law liability in the nature of breach of contract, fraudulent misrepresentation, or both.

In granting summary judgment for United, the trial court chose not to deal at length with the common law allegations:

“This action ... is expressly predicated upon [the antitrust laws]. While diversity of citizenship is alleged and admitted, as well as the jurisdictional amount, no effort has been made in pleading, briefing or argument to sustain a cause of action on the basis of a common law or statutory tort or breach of contract. Plaintiff’s target is exclusively the pot of gold of treble damages available under the antitrust laws.

Paragraphs 24 and 25 of the complaint appear to state (albeit not in the traditional linear sequence) the existence of a contract between K.C. and United, whereby K.C. would assist United’s employees in the preparation of the Main-liner feature, in return for the assurance that K.C. would receive favorable treatment in the feature. Alternatively these same paragraphs, buttressed by an affidavit filed later in the case, appear to state a representation by United that K.C. would receive favorable comment in the feature, and detrimental reliance by K.C. upon that representation.

The complaint manifests an effort to combine the pleading of antitrust and common law causes of action. The result is an obtuse and confusing document. Nevertheless, certain of the jurisdictional, factual, and remedial allegations indicate there may be more to K.C.’s case than an antitrust suit. K.C. was never required to separately state its common law claims or to provide a more definite statement with respect thereto.

Viewing the evidence as a whole and the inferences that can be drawn therefrom in the light most favorable to K.C., it cannot fairly be said that there are no genuine issues of material fact to be resolved at trial. Factual issues tendered include the possible existence of a contract for publication in Mainliner of an article favorable to K.C.; the nature of representations, if any, made by United to K.C. in respect to the article in Mainliner; possible acts of reliance on such representations; possible fraudulent intent by United; possible detriment to K.C.

We do not presume to comment here on the issue of actual common law liability. We observe only that the standards required to support summary judgment are clear. As stated in Consolidated Electric Co. v. United States,

“[summary judgment] should be rendered, upon motion, only ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ Fed.R.Civ.P. 56(c). If, viewing the evidence as a whole and the inferences which may be drawn therefrom in the light most favorable to the party opposing the motion, we can see that there is no genuine issue of fact, then the- granting of a motion for summary judgment should be sustained.”

These standards have not been met. Since the court below did not expressly deal with factual issues raised by the common law claims, it is our view that justice requires remand to the district court with instructions that appellant be given leave' to amend its complaint to separately state its common law claims plainly, concisely and with specificity.

Accordingly, the judgment of the district court is affirmed as to the antitrust causes of action and the case is remanded to the district court for further proceedings in accordance herewith. The parties shall bear their respective costs.

      . Also named as a defendant in the complaint is UAL, Inc. of which United Air Lines, Inc. is a wholly owned subsidiary. UAL, Inc. was dismissed from the action pursuant to an order dated January 7, 1972, and the purported service of the summons on UAL, Inc. was quashed.

      . United enjoys this monopoly on service to Reno from the Eastern United States by virtue of the regulatory actions of the Civil Aeronautics Board.

      . Mainliner is a publication of United. It typically contains paid advertising and feature “editorials” that focus on items of interest to tourists. United provides a complimentary copy of Mainliner to each of its passengers by placing a copy in the pouch attached to the rear of each seat in its airliners.

      . 15 U.S.C. § 15.

      . 15 U.S.C. §§ 1, 2.

      . 15 U.S.C. § 14.

      . First Nat. Bank v. Cities Service Co., 391 U.S. 253, 88 S.ct. 1575, 20 L.Ed.2d 569 (1968).

      . See, Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962).

      . First Nat. Bank v. Cities Service Co., supra note 7.

      . Co-conspirators are not named in the complaint. K.C.’s responses to interrogatories do no more than suggest its suspicion of possible links between United and other Reno-Lake Tahoe hotels, the Reno Chamber of Commerce, and UAL, Inc., owner of Western International Hotels and a potential entrant into the competitive Reno-Lake Tahoe resort business.

      . Supra note 7.

      . 391 U.S. at 289-290, 88 S.Ct. at 1593.

      . See, United States v. Grinnell Corp., 384 U.S. 563, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966).

      . United States v. E. I. DuPont de Nemours & Co., 351 U.S. 377, 395, 76 S.Ct. 994, 1007, 100 L.Ed. 1264 (1956).

      . 460 F.2d 116, 121 (9th Cir. 1972). See also, Syracuse Broadcasting Corp. v. New-house, 236 F.2d 522 (2nd Cir. 1956).

      . Cf., American Tobacco Co. v. United States, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946).

      . Cf., Bushie v. Stenocord Corporation, supra note 15; Daily Press, Inc. v. United Press International, 412 F.2d 126 (6th Cir.), cert. denied, 396 U.S. 990, 90 S.Ct. 480, 24 L.Ed.2d 453 (1969); Syracuse Broadcasting Corp. v. Newhouse, supra note 15.

      . First Nat. Bank v. Cities Service Co., supra note 7.

      . Supra note 6.

      . Columbia Broadcasting System, Inc. v. Amana Refrigeration, Inc., 295 F.2d 375 (7th Cir. 1961), cert. denied, 369 U.S. 812, 82 S.Ct. 689, 7 L.Ed.2d 612 (1962).

      . 355 F.2d 437, 438 (9th Cir. 1966).


author: WEBSTER, Circuit Judge.

text:
    Eugene FORESTER, Appellant, v. The CALIFORNIA ADULT AUTHORITY, Appellee.
    No. 74-1802.
    United States Court of Appeals, Eighth Circuit.
    Submitted Jan. 10, 1975.
    Decided Jan. 30, 1975.

      Eugene Forester, pro se.
    Dennis A. Schneider, Burleigh County State’s Atty., Bismarck, N. D., for appellee.
    Before MATTHES, Senior Circuit Judge, and STEPHENSON and WEBSTER, Circuit Judges.
   WEBSTER, Circuit Judge.

Appellant, Eugene Forester, appeals the summary dismissal of his complaint and the denial of his motion for the appointment of counsel. Forester, an inmate at the North Dakota State Penitentiary, brought a civil rights action in federal court against The California Adult Authority in which he alleged that the Authority had caused a detainer to be lodged against him at the North Dakota penitentiary and that the Authority had reasserted its intention to return Forester to California for parole revocation proceedings following his release from the North Dakota penitentiary. The pro se complaint further alleged that a North Dakota official had promised him that he would not be returned to California, that while in California he had signed an extradition waiver under coercion, and that in any event parole violation is not an extraditable offense. Finally, he alleged that the detainer had “affected plaintiff’s rehabilitation program here at the North Dakota Penitentiary and has caused him grievous loss.” He sought monetary damages and an injunction to remove the detainer.

I.

The District Court ordered the documents submitted by Forester to be filed without the payment of a filing fee, but denied his request for counsel and dismissed the complaint as patently frivolous. 28 U.S.C. § 1915(a) provides in part:

Any court of the United States may authorize the commencement, prosecution or defense of any suit, action or proceeding, civil or criminal, or appeal therein, without prepayment of fees and costs or security therefor, by a person who makes affidavit that he is unable to pay such costs or gives security therefor. Such affidavit shall state the nature of the action, defense or appeal and affiant’s belief that he is entitled to redress.

The procedure to be followed where a complaint is filed in federal court along with a motion for leave to proceed in forma pauperis is directed to the sound discretion of the district court. Cole v. Smith, 344 F.2d 721, 723 (8th Cir. 1965); Conway v. Fugge, 439 F.2d 1397 (9th Cir. 1971). It is well settled, however, that where the requirements of 28 U.S.C. § 1915(a) are satisfied on the face of the documents and pleadings submitted, the better practice is for a district court to allow the action to be docketed without prepayment of costs and thereafter to dismiss it, if dismissal is appropriate, even though it may have been judicially determined earlier that the complaint did not state a claim upon which relief could be granted. Duhart v. Carlson, 469 F.2d 471, 473 (10th Cir. 1972), cert. denied, 410 U.S. 958, 93 S.Ct. 1431, 35 L.Ed.2d 692 (1973); Campbell v. Beto, 460 F.2d 765, 768 (5th Cir. 1972); Higgins v. Steele, 195 F.2d 366, 369 (8th Cir. 1952); see Cole v. Smith, supra; Brown v. Schneckloth, 421 F.2d 1402, 1403 (9th Cir.), cert. denied, 400 U.S. 847, 91 S.Ct. 95, 27 L.Ed.2d 85 (1970); Stiltner v. Rhay, 322 F.2d 314, 317 (9th Cir. 1963), cert. denied, 376 U.S. 920, 84 S.Ct. 678, 11 L.Ed.2d 615 (1964); Oughton v. United States, 310 F.2d 803, 804 (10th Cir. 1962), cert. denied, 373 U.S. 937, 83 S.Ct. 1542, 10 L.Ed.2d 693 (1963); Ragan v. Cox,.305 F.2d 58, 60 (10th Cir. 1962); United States ex rel. Morris v. Radio Station WENR, 209 F.2d 105, 107 (7th Cir. 1953). This procedure allows an adequate record to be made in an orderly fashion for the benefit of both the district court and this court, thereby protecting any legal rights the petitioner might have while sparing a respondent the burden of making a return or answer in a patently frivolous proceeding. Compare Cole v. Smith, 344 F.2d 721 (8th Cir. 1965), with Higgins v. Steele, 195 F.2d 366 (8th Cir. 1952).

This was the procedure followed by the District Court in this case. Accordingly, our review is limited to whether the District Court’s conduct in dismissing the action constituted an abuse of judicial discretion. Cole v. Smith, supra, 344 F.2d at 723; see Ivey v. Frost, 346 F.2d 115, 116 (8th .Cir. 1965).

II.

Contrary to Forester’s contention, a parole violation is an extraditable offense. Brewer v. Goff, 138 F.2d 710 (10th Cir. 1943), and eases cited therein; Boothe v. State, 43 Ala.App. 119, 180 So.2d 450 (1965); Ex parte Summers, 40 Wash.2d 419, 243 P.2d 494 (1952); see State v. Parsells, 124 N.J.Super. 144, 305 A.2d 88 (1973).

Likewise, there is no merit in Forester’s contention that he was promised by the North Dakota prosecutor that he would not be returned to California. We assume this allegation to be true for purposes of review of the summary dismissal, notwithstanding that it is disputed by counteraffidavits. Nevertheless it is clear that a promise which, if made at all, preceded Forester’s arraignment and trial by jury was not a bargained plea and we accord such promise no weight. Nor is any prejudice shown from any promise made following the conviction. Moreover, this is an action against The California Adult Authority, and there is no allegation that the North Dakota prosecutor was acting for the Authority; the alleged promise could not bind those in California charged with the decision to return Forester for parole revocation proceedings. This contention is patently frivolous.

Next, Forester alleges that while still in a California prison “the authorities compelled him to sign an extradition waiver prior to his release from prison, or remain in prison. Therefore, plaintiff signed said extradition waiver under duress, by force of coercion, causing grievous loss of plaintiff’s constitutional rights to procedural due process.” (Emphasis added). An analysis of this contention shows that Forester claims that conditioning his parole upon the execution of an extradition waiver was per se coercion. This is not the law. Parole is an act of grace and reasonable conditions may be imposed in connection therewith. In Brown v. Daggett, 458 F.2d 14 (8th Cir. 1972), we said “[t]he Board of Parole has wide discretion to determine under what conditions an inmate is to be paroled.” In Morrissey v. Brewer, 408 U.S. 471, 477, 92 S.C.t. 2593, 2598, 33 L.Ed.2d 484 (1972), the Supreme Court noted that “[t]he essence of parole is release from prison, before the completion of sentence, on the condition that the prisoner abide by certain rules during the balance of the sentence.” While that case addressed conditions of parole which dealt with a parolee’s life-style rather than conditions that might affect the procedure to be used in recalling him to prison should he violate his parole, a pardon conditioned upon an extradition waiver was explicitly upheld in In re Saucier, 122 Vt. 208, 167 A.2d 368 (1961). Nor has Forester demonstrated how such a condition was coercive as applied to him. His allegations are fatally conclusory.

In Ellingburg v. King, 490 F.2d 1270 (8th Cir. 1974), this court said:

Broad and conclusory statements unsupported by factual allegations are not sufficient to support a cause of action under § 1983. Id. at 1271 (citations omitted).

Finally, the allegation that the detainer “affected” Forester’s rehabilitation program at the North Dakota penitentiary is conclusory and it likewise fails to state a claim upon which relief may be granted.

The District Judge followed the proper procedure; his order dismissing Forester’s complaint is well supported by the law. We find no abuse of discretion here.

Affirmed.

      . The Honorable Bruce M. VanSickle, United States District Judge for the District of North Dakota.

      . 28 U.S.C. § 1915 provides in part:
      * * * * * *
      (d) The court may request an attorney to represent any such person unable to employ counsel and may dismiss the case if the allegation of poverty is untrue, or if satisfied that the action is frivolous or malicious.

      . Of course all agreements and promises that are part of plea bargaining should normally be incorporated into the record. People v. Selikoff, 35 N.Y.2d 227, 360 N.Y.S.2d 623, 318 N.E.2d 784 (1974); see Santobello v. New York, 404 U.S. 257, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971).

      . See Stanturf v. Sipes, 335 F.2d 224 (8th Cir. 1964) (mere assertion of deprivation of federal constitutional right is not sufficient to sustain federal jurisdiction). See also Wilson v. Lincoln Redevelopment Corp., 488 F.2d 339, 341 (8th Cir. 1973) (where allegations are conclusory in nature, the court has a duty to measure these allegations in light of the factual claims actually made).