author: GEE, Circuit Judge: GEWIN, Circuit Judge BY THE COURT:

text:
    BIEDENHARN REALTY COMPANY, INC., Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
    No. 73-3690.
    United States Court of Appeals, Fifth Circuit.
    March 10, 1975.
    Rehearing En Banc Granted May 12, 1975.

      Scott P. Crampton, Asst. Atty. Gen., William A. Friedlander, Atty., Tax Div., Dept, of Justice, Washington, D. C., Donald E. Walter, U. S. Atty., Shreveport, La., Fleming T. de Graffenried, Tax Div., Dept, of Justice, Dallas, Tex., William A. Whitledge, Atty., Meyer Rothwacks, Chief, Appellate Sec., Tax Div., Dept, of Justice, Washington, D. C., for defendant-appellant.
    Paul K. Kirkpatrick, Jr., John C. Blackman, Nauman S. Scott, III, Monroe, La., for plaintiff-appellee.
    Before GEWIN, AINSWORTH and GEE, Circuit Judges.
   GEE, Circuit Judge:

Once more we are called on to characterize profit from sales of subdivision lots as ordinary income or capital gain. The facts, pre-eminent in these cases, are detailed in the careful opinion below and we set out only a précis of them.

Taxpayer is a' family investment corporation organized by the paterfamilias in 1923 for advantages of scale and unity. Among its holdings are bottling plants, a shopping center, miscellaneous commercial and residential rent properties, several going businesses, a portfolio of stocks and bonds, two farms, and Hardtimes Plantation. This last, the terrain of our case, is a 973-acre farm purchased at a bargain in 1935. Taxpayer has since farmed it continuously but has also, as the nearby city of Monroe expanded toward and over Hardtimes during the years from 1939 through the taxable years in question (1964 — 66), subdivided and disposed of about half its acreage in residential lots. Since the United States does not dispute that taxpayer’s original purpose in buying Hardtimes was investment, but rather contends that a change in that purpose is evidenced by taxpayer’s mode of operation and handling of the property, we describe these briefly.

Taxpayer has four employees: A farmer and a camp caretaker are full-time, but its manager and its bookkeeper are, respectively, principally employed as general manager and comptroller of a soft drink corporation, another family enterprise. The manager testified that taxpayer’s affairs occupied about ten percent of his time, chiefly spent in supervising rental collections and building maintenance. Taxpayer has a listed telephone, which rings in the soft-drink concern’s offices, but no offices of its own. Though, because of special circumstances, the taxpayer has platted and sold one other tract in lots and platted, though it did not so sell, two others back in the 1920’s, it is fair to say it does not have a significant history of acquiring and subdividing other tracts of land. Indeed, the United States does not seriously contend that it is in that business unless its Hardtimes activities put it there.

The subdivision and sale of Hardtimes has proceeded somewhat languidly. From the time of the first lot sale in 1939 through 1966, the last taxable year in question, sales averaged about five per year. Some sales were of multiple lots. 1957 was the high year, with 23 transactions involving 35x/2 lots. In six of these years, no lots were sold and in eight — including 1962 and 1963 — only one. During the three taxable years in question sales were 37, or about one per month on the average.

In all instances taxpayer laid out and paved streets by the lots sold, and sometimes it added curbs and gutters, sewerage and utilities. Selling was by independent commission agents, who handled all aspects of the transaction except fixing of price and transfer of title, done by the taxpayer. The agents bore, from their commissions, such merchandising costs as there were: signs posted on the property and newspaper advertisements. Taxpayer’s profits ranged from 74% to 97%, reflecting in significant part the initial bargain price and the approach of Monroe. During the years in suit, gains from Hardtimes’ lots were about 11% of taxpayer’s gross income.

Our case originated as taxpayer’s action for refund of something over $30,-000 in additional taxes determined by the Internal Revenue Service to be due as a result of its classification of the 1964 — 66 gain on lot sales as ordinary income. The district court, taking testimony and documentary evidence which established as undisputed the facts summarized above, concluded that the lots in question were not “held primarily for sale” nor were the taxpayer’s activities in connection with them a “trade or business.” Instead, it found the taxpayer to have been engaged in no more than the reasonable improvement for liquidation and liquidation of portions of a large farm property acquired and held for investment, which had greatly appreciated in value as a result of market factors favorable to but not caused by the taxpayer. The Court’s analysis proceeded along conventional lines, giving due regard to the seven major factors reiterated in Winthrop and recognizing that these furnish only a matrix giving form to the consideration of each individual case as a whole. Other appropriate principles are recognized and applied in the published opinion, a reiteration of which would serve little purpose here. On appeal to us, however, the Government attacks along lines somewhat less conventional, which may be fairly summarized as follows:

Capital gain treatment, we are told, must turn on the purpose for which the property is held at the time of sale, not at some earlier time. Biedenharn Realty Company, the taxpayer, was subdividing, improving and developing this land, a procedure generally recognized as a business. Had Biedenharn bought this land for purposes of subdividing just before so using it, it could not have expected capital gain treatment. Hence, its earlier purposes and uses become irrelevant. Moreover, Biedenharn’s activities may not properly be considered liquidation, since in a “true” liquidation the property is offered without change of form, for whatever price it will bring. Since Biedenharn sought to create additional value by changing the property’s form, it chose not to “liquidate” but to use the property in a new and different manner — and one recognized as a business. Biedenharn’s situation should be tested purely by examining the nature of its activities at time of sale, or as if its original purpose in buying the land was subdivision and sale of residential lots. So seen, Biedenharn’s situation is not essentially different from that of Winthrop and Thompson. Finally, at oral argument stress was laid on the incongruousness, even unfairness, of according markedly different tax treatment to two hypothetical parcels of land, lying side by side and developed and sold in the same or similar manners, on the basis, in part, of past purposes and uses, or even present uses of other adjacent portions in common ownership.

We are not persuaded. The first argument, which asks us in terms to read out of the analysis Winthrop’s first factor — “the nature and purpose of the acquisition of the property and the duration of the ownership” — would require us to overrule Winthrop pro tanto, which we decline to do. Implicit in the capital asset concept are such notions as the factor epitomizes; they belong in the calculus. Further, the argument proves too much: if one focuses exclusively on the instant of sale, of course the lot being sold is at that moment “held primarily for sale.” And if a recent, constructive purchase for purposes of subdividing is to be imputed in every case of a lot sale, then the concepts of purchase for investment and orderly liquidation, embedded in our case law, are simply purged from it.

The second argument, asserting that any change in form of the asset made by the taxpayer prevents its disposition being a liquidation, flies directly in the face of this Court’s holding in Barrios’ Estate v. Commissioner of Internal Revenue, 265 F.2d 517, 520 (5th Cir. 1959), cited and quoted with approval in Winthrop:

The idea of selling a large tract of land in lots embraces necessarily the construction of streets for access to them, the provision of drainage and the furnishing of access to such a necessity as water. It is hardly conceivable that taxpayer could have sold a lot without doing these things.

On reason and authority, we reject it.

The final argument, instancing possible differing tax consequences for adjacent tracts developed similarly merely because one was acquired as an investment and long held while the other was not, represents a mild form of the “chamber of horrors” or “most unforeseeable consequences” technique — and likewise proves too much. Such possibilities are inherent in the congressional scheme of providing different tax rates for gain realized on disposition of long-held capital assets than for ordinary income. There is nothing especially shocking in this instance of the general plan; a mere day or two’s difference in the holding period of a capital asset could have a similar effect. As the Government notes, it is just conceivable that two hypothetical tracts might be side-by-side and be so developed that Winthrop’s other six factors are equivocal and so that a difference in purpose of purchase and holding period between them might be dispositive of capital gain treatment for one and ordinary income treatment for the other. If so, we need not blanche; if this factor is to be included in the seven other than as a sham there must be instances imaginable in which it will be critical, perhaps dispositive. On this head, the Government’s argument finally comes down to a dispute with the Congressional scheme of taxation and with Winthrop. We are powerless to alter the first were we so inclined, and we decline to alter the second.

Thus matters remain, in our Circuit, essentially where the now-famous 4******* passage from an earlier edition of Mertens, commenting on “Capital Gains: Dealer v. Investor Problems,” left them: “If a client asks in any but an extreme case whether, in your opinion, his sale will result in capital gain, your answer should probably be, T don’t know, and no one else in town can tell you.’ ” The difficulty, however, is inherent in the nature of the thing itself, and does not lie in judicial perversity or a delight in being obscure. Results cannot be casually predictable where so many variables are present and so many factors of judgment must be exerted. Extreme cases will be clear, but those who elect to sail close to the wind must take their chances.

Biedenharn has walked a dangerous path in the case at bar. The trial court concludes that it has done so unscathed. And though, as Winthrop notes, where there is no basic disagreement as to the evidentiary facts and the trial court’s conclusion of the ultimate facts is the product of legal reasoning, we are not trammeled by the clearly erroneous rule, still the decision of the court which saw and heard the witnesses is always entitled to a certain deference. We conclude, moreover, that the court correctly applied our case law and that its decision is right.

Affirmed.

GEWIN, Circuit Judge

(dissenting):

With deference to the views expressed in the majority opinion, I respectfully dissent. The relevant facts are sufficiently outlined by Judge Gee. It is my view that the facts, when considered in their totality, United States v. Winthrop, 417 F.2d 905 (5th Cir. 1969), compel the conclusion that the lots in question were “held primarily for sale” and that the taxpayer’s activities in connection with the lots was a “trade or business.” Accordingly, the profits from the land sales should be regarded as ordinary income, rather than capital gain.

ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC

Before BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORN-BERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, RONEY and GEE, Circuit Judges.

BY THE COURT:

A member of the Court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in active service having voted in favor of granting a rehearing en banc.

It is ordered that the cause shall be reheard by the Court en banc on briefs without oral argument. The Clerk shall set a briefing schedule for the filing of supplemental briefs.

      . United States v. Winthrop, 417 F.2d 905 (5th Cir. 1969).

        . Biedenharn Realty Co. v. United States, 356 F.Supp. 1331 (W.D.La.1973).

      . For $50,000, or just over fifty dollars per acre. Record evidence indicated a raw land value of one of the subdivisions when sold at seven to eight thousand dollars per acre.

      . Taxpayer purchased a site for a glass plant, but negotiations with the glass company failed to persuade it to locate in Monroe. Taxpayer therefore platted and sold the site.

      . The court below heard expert testimony that subdividers’ profits in the area usually did not exceed 33'/3%.

      . “(1) the nature and purpose of the acquisition of the property and the duration of the ownership; (2) the extent and nature of the taxpayer’s efforts to sell the property; (3) the number, extent, continuity and substantiality' of the sales; (4) the extent of subdividing, developing, and advertising to increase sales; (5) the use of a business office for the sale of the property; (6) the character and degree of supervision or control exercised by the taxpayer over any representative selling the property; and (7) the time and effort the taxpayer habitually devoted to the sales. Smith v. Dunn, supra [5 Cir.], 224 F.2d [353] at 356.
      Despite their frequent use, this court has often declared that these seven pillars of capital gains treatment ‘in and of themselves * * have no independent significance, but only form part of a situation which in the individual case must be considered in its entirety to determine whether or not the property involved was held primarily for sale in the ordinary course of business (source cited).’ Cole v. Usry, supra [5 Cir.], 294 F.2d [426] at 427. Accord: Thompson v. Commissioner of Internal Revenue, 5 Cir. 1963, 322 F.2d 122; Wood v. Commissioner of Internal Revenue, 5 Cir. 1960, 276 F.2d 586; Thomas v. Commissioner of Internal Revenue, 5 Cir. 1958, 254 F.2d 233; Smith v. Commissioner of Internal Revenue, 5 Cir. 1956, 232 F.2d 142; Consolidated Naval Stores Co. v. Fahs, 5 Cir. 1955, 227 F.2d 923.” United States v. Winthrop, 417 F.2d 905, 910 (5th Cir. 1969).

      . Thompson v. Commissioner of Internal Revenue, 322 F.2d 122 (5th Cir. 1963).

      . In counterpoint, the Government also pursues a reliance on Winthrop, supra, and a likening of this case to that, in which the Service prevailed. But there are significant facts distinguishing Winthrop from the matter in hand, some noted in the district court opinion and some not. Winthrop inherited substantial acreage in the Tallahassee environs and pursued an orderly program of subdividing and selling it, platting and laying out streets, installing utilities and in some cases sewer lines. Unlike Biedenharn, however, this was his primary and, indeed, well-nigh his sole activity during the tax years in question. Over half his income resulted from this activity. The tempo of his sales was somewhat higher, having reached 64 transactions in one past year and averaging 24 per year over the period of his efforts. On some of the lots he constructed houses for sale. He held a real estate brokers license and, though rather passively, did his own selling. His sole motivation, our opinion notes, long before the tax years mooted, had been the development and sale of his lots, and he devoted to it a substantial amount of his time, skill and financial resources. He began selling lots shortly after he acquired the land and he never used the land for any other purpose. None of these factors, taken alone, is a talisman. Taken together, however, as they must be, they make ours a different case; and by its other arguments the Government tacitly but correctly recognizes that it must go beyond Winthrop to prevail here.

      . See authorities at note 6 above.

      . United States v. Winthrop, 417 F.2d, at 909.

      . Quoted in Cole v. Usry, 294 F.2d 426, 427 n. 3 (5th Cir. 1961) and Thompson v. Commissioner of Internal Revenue, 322 F.2d 122, 123 n. 2 (5th Cir. 1963).


source: Caselaw Access Project

author: BELL, Circuit Judge:

license: Public Domain

text:
    SHELL OIL COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent. The RODMAN CORPORATION, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
    Nos. 74-3304, 74-3330, 74-4032, 74-4034, 74-4036, 74-4038, 74-4040, 74-4042 and 74-4044.
    United States Court of Appeals, Fifth Circuit.
    Feb. 20, 1975.

      Thomas G. Johnson, William G. Riddoch, William A. Wood, Jr., E. M. Sutter, Houston, Tex., for petitioners.
    Leo E. Forquer, Gen. Counsel, F. P. C., George W. McHenry, Sol., Washington, D. C., for respondent.
    Morton L. Simons, Washington, D. C., for Sen. Abourezk.
    William B. Cassin, Phillip D. Endore, Houston, Tex., Knox Benis, W. DeVier Pierson, C. Richard Cornelius, Washington, D. C., for United Gas Pipe Line Co.
    Jeron Stevens, Houston, Tex., R. Gordon Gooch, Bruce F. Kiely, John P. Mathis, Washington, D. C., for Tenneco.
    Joseph M. Wells, Paul E. Goldstein, Chicago, 111., for Natural Gas Pipeline Co.
    Lilyan G. Sibert, Leland F. Cadenhead, Houston, Tex., for Tenn. Gas Pipeline Co.
    John L. Williford, C. J. Roberts, Charles Laurence Pain, Bartlesville, Okl., for Phillips Petroleum.
    William A. Sackmann, Findlay, Ohio, for Marathon Oil Co.
    B. James McGraw, Warren M. Sparks, Tulsa, Okl., for Gulf Oil.
    John H. Cooper, Jr., Martin N. Erck, Houston, Tex., for Exxon.
    Tom Burton, Houston, Tex., for Continental Oil.
    Peter H. Schiff, Albany, N. Y., Richard A. Solomon, Washington, D. C., for P. S. C. — N. Y.
    Tom P. Hamill, Houston, Tex., for Mobil Oil Co.
    Ronald J. Jacobs, David C. Henri, Tulsa, Okl., for Skelly Oil Co.
    Edward J. Kremer, Jr., Dallas, Tex., for Atlantic Richfield.
    Kirk W. Weinert, C. Fielding Early, Jr., Roger L. Brandt, Houston, Tex., for Texaco.
    Kenneth L. Riedman, Jr., George C. Bond, Los Angeles, Cal., for Union Oil Co.
    Edward J. Grenier, Jr., Richard P. No-land, Floyd I. Robinson, Jr., Washington, D. C., for General Motors Corp.
    Richard F. Generelly, Washington, D. C., Jere G. Hayes', Robert C. Murray, Dallas, Tex., for General American Oil Co.
    Justin R. Wolf and Richard F. Generelly, Washington, D. C., for California Co. — Div. of Chevron Oil.
    Jerome J. McGrath, Washington, D. C., for Interstate Natural Gas Assoc, of America.
    Patrick J. McCarthy, Omaha, Neb., for Northern Natural Gas Co.
    Frederick Moring, Washington, D. C., for Associated Gas Distributors.
    Before BELL, CLARK, and RONEY, Circuit Judges.
   BELL, Circuit Judge:

Despite the energy crisis and the fact that the orders forming the subject matter of the instant petitions for review are said to grant the largest rate increase in the history of regulatory agencies, the review process is at a standstill pending decision on jurisdiction as between this court and the Court of Appeals for the District of Columbia. As will be seen, the problem stems, in the main, from the option given by statute, § 19(b) of the Natural Gas Act, 15 U.S. C.A. § 717r, to one aggrieved by an order of the Federal Power Commission, to obtain review of such order in the “court of appeals . . . wherein the natural-gas company to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia”.

Pursuant to this procedure,, numerous petitions have been filed in this court and in the District of Columbia Circuit to review certain opinions and orders issued by the Federal Power Commission (FPC) in a proceeding entitled “Just and Reasonable National Rates for Sales of Natural Gas from Wells Commenced on or after January 1, 1973, and New Dedications of Natural Gas to Interstate Commerce on or after January 1, 1973”. The first opinion and order was issued June 21, 1974, designated Opinion No. 699 and was followed by Opinion Nos. 699-A through 699-H. Primarily we are concerned with Opinion Nos. 699, 699-B, and 699-H and we find that this court has jurisdiction to hear all petitions for review of these opinions and orders.

The sequence of pertinent orders and events is as follows: (1) Opinion No. 699, issued June 21, 1974, (2) the several petitions for rehearing, (3) in response, Opinion 699-B was issued on September 9, 1974 to modify No. 699, (4) Opinion No. 699-F was issued thereafter to deny certain of the petitions for rehearing theretofore filed as to Nos. 699-B and 699-C, and (5) Opinion No. 699-H, the final rate increase order, was issued on December 4, 1974.

I.

Shell’s petition for review of Opinion 699 — B, No. 74 — 3330, is properly before this court. Only Shell petitioned to review this order at the time it was issued and its petition was filed in this court. The attack on this petition for review, as will be seen, is on its form and the contention that the matter was not ripe for review.

In Opinion No. 699, the FPC rescinded (1) § 157.29 of its Regulations under the Natural Gas Act which had permitted emergency sales without a certificate for up to 60 days, and (2) § 2.70 of its General Policy Statements and Interpretations which had permitted limited term certificates. Upon applications for rehearing, Opinion No. 699-B reinstated these procedures for onshore sales, but declined to fully reinstate for sales in the offshore federal domain.

We conclude that the issue made was then ripe for review and that Shell, as an aggrieved party, properly filed its petition for review No. 74-3330 on September 12, 1974.

The first petition to review No. 699-B in the District of Columbia Circuit was filed on November 11, 1974. Thus Shell was clearly the first in filing time except for the further contention that Shell failed to put the date and title of Opinion No. 699-B in its petition for review. We hold that this defect was not fatal to review.

We have no difficulty in ascertaining from the petition for review which opinion Shell sought to have reviewed. See Foman v. Davis, 1962, 371 U.S. 178, 181-182, 83 S.Ct. 227, 9 L.Ed.2d 222, 225-226; Hoiness v. United States, 1948, 335 U.S. 297, 300-301, 69 S.Ct. 70, 93 L.Ed. 16, 19 — 20; Blitzstein v. Ford Motor Co., 5 Cir., 1961, 288 F.2d 738; see also 9 Moore, Federal Practice § 203.18 (2 ed. 1973). The test is whether an opposing party was misled or prejudiced by the failure to properly designate the judgment which is the subject of the appeal. Foman v. Davis, supra. Since those parties opposing this motion argue merely from a technical standpoint and do not allege that they were misled or prejudiced by Shell’s petitions, their contentions are without merit.

Shell has moved to supplement its petition to review No. 74-3330 (No. 699-B), so as to include the date and title of the Opinion, and also No. 74-4034 (No. 699-H) which suffers from the same defect. The motions to supplement are granted.

As to the Opinion No. 699-H, there was a classic race to the courthouse of the District of Columbia by counsel for United States Senator Abourezk of South Dakota and American Public Gas Association, and to the Fifth Circuit by Rodman and Shell. This race by Rod-man and Shell was in terms of multiple petitions filed in intervals of seconds. In each instance the filings were accomplished by relays of persons stationed between the issuing point of the Federal Power Commission, the nearest available telephones, and the respective courts.

The filing procedures and times are supported by affidavits. They convince us that Rodman was first in filing time and thus jurisdiction to review Opinion No. 699-H is in this court.

Such forum shopping as is present in this case is inherent in the statute, 15 U.S.C.A. § 717r, and care must be taken not to cast the courts of appeals in an untoward position vis-a-vis one another. Cf. Saturn Airways, Inc. v. C.A.B., 1973, 155 U.S.App.D.C. 151, 476 F.2d 907. Nevertheless, having found jurisdiction in this court to review Opinion Nos. 699, 699-B, and 699-H, the Federal Power Commission should file the record in this court. 28 U.S.C.A. § 2112(a), 15 U.S.C.A. § 717r (§ 19(b) of the Natural Gas Act), and Amerada Petroleum Corp. v. FPC, 10 Cir., 1964, 338 F.2d 808.

In sum, Nos. 74-3304 and 74-4032 are dismissed by reason of premature filing. The motion of Shell to supplement its petitions for review Nos. 74-3330 and 74-4034 is granted. The record in the matters giving rise to Opinions Nos. 699, 699-B, and 699-H will be filed by the Federal Power Commission in this court.

All petitions now pending in this court to review Opinions 699, 699-B, and 699-H, or hereafter filed or which may be transferred to this court will be consolidated with the Shell petitions to review, Nos. 74-3330 and 74-4034, including but not limited to those of the Rodman Corporation, Nos. 74-1036, 74-4038, 74-4040, 74-4042 and 74-4044, and Texas Eastern Transmission Corp. and Transwestern Pipeline Co., No. 74-4147; General American Oil Company of Texas, No. 74-4233; Continental Oil Company, No. 74- 1123; The Superior Oil Company, No. 75- 1164; Placid Oil Company and Hunt Oil Company, No. 74-1246; Inexco Oil Company, No. 75-1266; Texas Production Company, Et Al., No. 75-1268; Freeport Minerals Company, No. 75-1270.

The motion that such petitions for review be consolidated into a single proceeding under the title “National Rate cases for New Gas” is granted with same to carry Docket No. 74-3330.

The clerk of this court is directed to expedite the proceeding as consolidated.

      . Opinion No. 699-F, also involving Opinion Nos. 699, 699-B, 699-C, and the rehearing sought thereon in the FPC is before the Court of Appeals for the District of Columbia. We are told by counsel for the FPC that a motion to transfer the petition to review No. 699-F to this court will be filed in the District of Columbia Circuit in the event jurisdiction is found in this court to review Opinion Nos. 699, 699-B, and 699-H. This, of course, is a matter that addresses itself to that court.

      . It being agreed that Shell’s petition for review Nq. 74 -3304 (Opinion No. 699-B), and petition for review No. 74-4032 (Opinion No. 699-H), were filed prior to the issuance of the opinions m question, they are hereby dismissed as being premature.

      . Opinion No. 699-F, now pending for review in the District of Columbia Circuit, n. 1, supra, overruled petitions for rehearing as to No. 699-C which limited this 60 day period of No. 699-B to a single 60 day period.

      . As discussed infra, the Rodman petition to review is controlling as to time of filing and jurisdiction with respect to Opinion No. 699-H.

      . Petitioner Time
      2. Rodman in 5th Cir. No. 74-4038 December 4, 1974, at 9:02 and 20 sec. a. m., c. s. t. (10:02 and 20 sec. a. m., e. s. t.)
      3. Rodman in 5th Cir. No. 74-4040 December 4, 1974, at 9:02 and 22 sec. a. m., c. s. t. (10:02 and 22 sec. a. m., e. s. t.)
      4. Shell in 5th Cir. No. 74-4034 December 4, 1974, at 9:02 and 24 sec. a. m., c. s. t. (10:02 and 24 sec. a. m., e. s. t.)
      5. Rodman in 5th Cir. No. 74-4042 December 4, 1974, at 9:02 and 30 sec., a. m., c. s. t. (10:02 and 30 sec. a. m., e. s. t.)
      6. Rodman in 5th Cir. No. 74-4044 December 4, 1974, at 9:02 and 45 sec. a. m., c. s. t. (10:02 and 45 sec. a. m., e. s. t.)
      7. American Public Gas Association in D.C.Cir. No. 74-2073 December 4, 1974, at 9:03 and 30 sec. a. m., c. s. t. (10:03 and 30 sec. a. m., e. s. t.)
      8. Senator James Abourezk in D.C. Cir. No. 74-2074 December 4, 1974, at 9:03 and 30 sec. a. m., c. s. t. (10:03 and 30 sec. a. m., e. s. t.)
      9. Public Service Commission of the State of New York in D.C. Cir. No. 74-2080 December 6, 1974, at 10:41 a. m., c. s. t. (11:41 a. m., e. s. t.)

      . We have carefully considered and reject Senator Abourezk’s contrary contention based on the claim that the clocks in both the District of Columbia and Fifth Circuits were wrong at the time of the various filings. (The clerks of the two courts had synchronized the clocks just prior to the filings.) By a process of correcting the time, the Senator is able to make premature all filings ahead of him. To do this, he finds it necessary to go one step further so as to adjust and assume a later time for the release of the opinion by the FPC.


author: BY THE COURT:

text:
    LOUISIANA POWER & LIGHT COMPANY, Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
    No. 74-2091.
    United States Court of Appeals, Fifth Circuit.
    Jan. 23, 1975.
    Andrew P. Carter, H. Sloan McCloskey, William T. Tete, New Orleans, La., for petitioner.
    Ronald L. Kuehn, Jr., Walter M. Starke, Birmingham, Ala., for Southern Natural Gas Co.
    Joseph M. Wells, Paul E. Goldstein, Paul W. Mallory, Chicago, 111., for Natural Gas Pipeline Co. of America.
    Platt W. Davis, III, Washington, D. C., J. Evans Attwell, Jack D. Head, Houston, Tex., for Texas Eastern Transm.
    Arnold D. Berkeley, David R. Straus, Washington, D. C., for St. of La., La. Municipal Assoc. & Ph. of Cameron.
    Christopher T. Boland, John F. Harrington, Washington, D. C., for Texas Gas Transmission Corp.
    Harold L. Talisman, Washington, D. C., A. S. Lacy, Birmingham, Ala., for Ala. Gas Corp.
    Jefferson D. Giller, David Claflin, Houston, Tex., for Entex, Inc.

      Wm. W. Bedwell, John J. Mullally, Washington, D. C., James H. Wuller, St. Louis', Mo., for Miss. River Transmission.
    Edward J. Grenier, Jr., Richard P. No-land, Floyd I. Robinson, Washington, D. C., for General Motors Corp.
    Leo E. Forquer, Gen. Counsel, George W. McHenry, Jr., Acting Sol., Washington, D. C., for respondent.
    William B. Cassin, Lome D. Bain, Houston, Tex., W. DeVier Pierson, Ross F. Hamachek, Washington, D. C., for United Gas Pipe Line Co.
    Before BELL, CLARK and RONEY, Circuit Judges.
   BY THE COURT:

The Court hereby orders that the record in this case be remanded to the Federal Power Commission for consideration of the merits of Louisiana Power & Light Company’s contentions in conjunction with the consideration of United Gas Pipe Line Company’s curtailment plans, policies and practices directed by this Court in Louisiana v. FPC, 503 F.2d 844 (5th Cir. 1974).. If LP&L is dissatisfied with the FPC’s decision after remand, it will be free to seek appropriate review from the FPC and the Court of Appeals under the provisions of section 19(b) of the Natural Gas Act.

LP&L’s petition for review by this Court seeks to present us an issue in an unusual posture. The sequence of material events is as follows:

1. On January 12, 1973, FPC entered an Order and Opinion No. 647 which resulted in all of the gas used by LP&L to generate electricity being placed in the lowest priority category of United’s interim gas curtailment plan. Gas ultimately used by domestic customers was given highest priority. LP&L did not seek a rehearing of this decision, although others did and appealed to the court from a denial of rehearing. Louisiana v. FPC, 503 F.2d 844 (5th Cir. 1974).

2. Subsequent events led LP&L to question United’s allocation to its resale customers under the interim plan. LP&L asserted that interruptible industrial users, with no more than equal priority to LP&L, were, in fact, receiving gas under a higher priority by buying from United’s resale customers, which obtained such gas under the higher domestic priority. This situation led LP&L to file a motion with FPC on November 29, 1973, basically seeking to have FPC examine the facts underlying United’s allocation plan and if necessary, order United to “cease from not following the plan”.

3. On December 29, 1973, LP&L’s motion was denied by operation of law, FPC not having acted on the motion within thirty (30) days.

4. On January 8, 1974, LP&L sought a rehearing of the denial of its motion of November 29.

5. FPC denied the motion for rehearing on February 27, 1974, stating that it considered LP&L’s motion an attempt to attack the FPC Opinion No. 647 collaterally, and FPC would not consider the merits presented in that manner, where a proper petition for rehearing of Opinion 647 had not been filed.

6. On April 26, 1974, LP&L filed in this Court a petition for review of the February 27th denial of rehearing.

7. On August 2, 1974, FPC filed a motion in this Court to dismiss LP&L’s petition as an unauthorized collateral attack on its Opinion 647. The motion to dismiss has been carried with the case by order of this Court.

8. On November 8, 1974, this Court issued its decision in Louisiana v. FPC, 503 F.2d 844 (5th Cir. 1974), which remanded Opinions 647 and 647A to the FPC for further proceedings.

9. On November 25, 1974, FPC filed the instant motion for remand of the record to it for reconsideration of the merits of LP&L’s contentions along with the rest of the issues directed to be reconsidered by Louisiana v. FPC. This motion was supported by United and opposed by LP&L and the State of Louisianá and its allied intervenors.

Were this Court to refuse the remand, as LP&L requests, and proceed with the case, it would not reach the merits of LP&L’s claim. Instead our review would be limited to one question: was the FPC correct in refusing to consider the merits of LP&L’s motion on the basis that such motion was an attempt to attack FPC Opinion 647 collaterally. Were we to decide that FPC was correct, we would merely affirm its decision not to consider the merits of LP&L’s claim. On the other hand, were we to decide FPC should have considered the merits, we would remand the entire matter to FPC with directions that it consider the merits of LP&L’s motion. We would at that time not consider the merits of LP&L’s claim. See, e.g., FPC v. United Gas Pipe Line Co., 393 U.S. 71, 89 S.Ct. 55, 21 L.Ed.2d 55 (1968); cf. J. M. Huber Corp. v. Denman, 367 F.2d 104, 111 — 121 (5th Cir. 1967). There would not be sufficient record before us, even if we were inclined to rule on its claim before the FPC had done so. Such being the case, the most relief that LP&L could receive is a remand for consideration of the merits of its claim, and this is precisely what FPC has requested that it be allowed to do.

We view an immediate remand as in the best interest of all intervenors even those who feel “justice delayed is justice denied” as to them because of the anticipated winter natural gas shortages. We are giving the only justice these intervenors could receive at this time from this Court faster than they would receive it if we fully considered LP&L’s petition.

Therefore, it is ordered that the previous action of FPC concerning LP&L’s motion is vacated and the record in this case is remanded to FPC, with direction that LP&L be allowed to present the merits of its contentions regarding United’s alleged illegal activity for initial consideration by FPC.

Remanded with direction.


text:
    TEXAS EASTERN TRANSMISSION CORP., Petitioner, v. FEDERAL POWER COMMISSION, Respondent.
    Nos. 74-3800, 75-1048.
    United States Court of Appeals, Fifth Circuit.
    Feb. 24, 1975.

      Platt W. Davis, III, Washington, D. C., J. Evans Attwell, Jack D. Head, Houston, Tex., for petitioner.
    Leo E. Forquer, Gen. Counsel, George W. McHenry, Jr., Sol., William J. Grealis, Atty., Washington, D. C., for respondent.
    William B. Cassin, Phillip D. Endom, Houston, Tex., W. DeVier Pierson, Peter J. Levin, Ross F. Hamachek, Washington, D. C., for United Gas Pipe Line Co.
    Michael R. W. Green, Ronald D. Jones, New York City, for Aluminum Co. of America.
    Edward J. Grenier, Jr., Richard P. No-land, Floyd I. Robinson, Washington, D. C., for General Motors.
    Christopher T. Boland, John F. Harrington, Washington, D. C., for Texas Gas Transmission Corp.
    Clayton L. Orn, Houston, Tex., W. C. Nelson, New Orleans, La., for NOPSI.
    Richard M. Merriman, Washington, D. C., Sherwood W. Wise, Jackson, Miss., for Miss. Power & Light.
    Arnold D. Berkeley, David R. Straus, Harry E. Barsh, Washington, D. C., for State of La. et al.
    Before BELL, CLARK and RONEY, Circuit Judges.
   BY THE COURT:

It is ordered that the petitions for review are hereby dismissed and the records remanded to the Federal Power Commission for consideration in light of this Court’s opinion in Louisiana v. FPC, 503 F.2d 844 (5th Cir. 1974).

The orders which are subject to these two petitions for review had their genesis in the Federal Power Commission’s (FPC) Opinions Nos. 647 and 647A issued January 12, 1973 and May 30, 1973, respectively. Those opinions by FPC were an initial step in its attempt to establish a just and reasonable natural gas curtailment plan for United Gas Pipe Line Company. While some portions of Opinions Nos. 647 and 647A were final, the Opinions remanded United’s curtailment program, as modified by the Opinions to be a five-tier plan, for further hearings by an Administrative Law Judge (ALJ). FPC ordered that while these hearings were being conducted, an interim three-tier curtailment plan was to be utilized by United.

In the course of the hearings on the permanent plan, the ALJ ruled that certain evidence regarding the advisability of that plan, which FPC had already ordered implemented in Opinions Nos. 647 and 647A, was admissible. Texas Eastern Transmission Corporation (TETCO) and others moved to strike all such evidence as outside the scope of the remanded proceedings. The ALJ denied that motion, but certified his ruling to the full FPC pursuant to the FPC’s Rules of Practice and Procedure. 18 C.F.R. § 1.28 (1974). In a June 24, 1974 Order, FPC refused to consider the merits of the appeal, however, ruling instead that the introduction of the evidence had “not created a situation of ‘extraordinary circumstances where prompt decision by the Commission is necessary to prevent detriment to the public interest.’ ” See 18 C.F.R. § 1.28(a) (1974). Thus, FPC in its discretion, refused to allow an interlocutory appeal of an evidentiary ruling of an ALJ. Cf. 28 U.S. C.A. § 1292(b).

TETCO duly applied for a rehearing of the Order by FPC, a condition precedent for review by a Court of Appeals, 15 U.S.C.A. § 717r, raising various substantive contentions. FPC denied the motion for rehearing on September 6, 1974 in an “Order on Clarification and Denying Rehearing.” In that Order FPC stated, in part:

“Pending final decision upon completion of the remanded proceedings, United shall continue to implement the three-category plan on an interim basis in accordance with our previous orders. ...”

Order at p. 3. TETCO then sought a rehearing of the Order denying its rehearing, asserting that for the first time the three-tier plan, which in January 12, 1973, had been scheduled for 60 days, had been declared a long-term curtailment plan without any opportunity to challenge it as discriminatory. TETCO also petitioned this Court to review the September 6th Order, and that petition is Docket No. 74 — 3800 in this Court. FPC denied that rehearing request on November 6, 1974, and TETCO has also petitioned for review of that FPC “Order Upon Reconsideration.” That case has been assigned Docket No. 75 — 1048 in this Court. Various interested parties have intervened in both cases.

Various motions have been filed seeking dismissal or to hold these proceedings in abeyance until FPC has acted on Opinions Nos. 647 and 647A as required by this Court in Louisiana v. FPC, 503 F.2d 844 (5th Cir. 1974). The various motions and responses thereto seem to view these petitions as involving one of two extremely different questions. Most parties view TETCO as attempting to appeal FPC’s discretionary refusal to allow an interlocutory appeal of an evidentiary ruling. In fact that is the only Order of the FPC which TETCO could conceivably have standing to challenge. Other than that, TETCO seeks to have this Court correct evils which it says arise from language in the Order denying its rehearing. FPC refused to consider the substance of these same contentions by TETCO as attempts to attack earlier Orders collaterally after the time for proper direct attack had passed. We agree that TETCO is not entitled to review at this time.

First, the Order appealed from, a discretionary refusal to review an evidentiary ruling is simply not appealable as such. See Humble Oil & Refining Co. v. FPC, 236 F.2d 819 (5th Cir. 1956), cert. denied, 352 U.S. 967, 77 S.Ct. 354, 1 L.Ed.2d 321 (1957).

Second, the reasonableness of the three-tier plan, which is what TETCO seeks to have reviewed, was before this Court in Louisiana v. FPC, supra. We there ruled that the three-tier plan was reviewable either as a partial implementation of a final curtailment plan or as an integral part of a currently effective interim curtailment plan. Louisiana v. FPC, supra, 503 F.2d, at 857.

As the three-tier plan was reviewable when it went into effect, an attempt by TETCO to seize upon language in an FPC Order some year and a half later as a vehicle for review is clearly untimely. Whatever review of the three-category plan that was appropriate at this time was provided by Louisiana v. FPC.

Under either theory these petitions should be dismissed and the record remanded to FPC.

Dismissed and remanded.


text:
    Donald LANE, for himself and all others similarly situated, Plaintiff-Appellant, v. John INMAN, etc., et al., etc., Defendants-Appellees.
    No. 74-1140.
    United States Court of Appeals, Fifth Circuit.
    March 10, 1975.

      Robert Dokson, Jacqueline Bennett, Alden C. Harrington, Thomas A. Bowman, Atlanta, Ga., for plaintiff-appellant.
    James H. Weeks, Henry L. Bowden, Atlanta, Ga., for defendants-appellees.
    Before BROWN, Chief Judge, and BELL and MORGAN, Circuit Judges.
   BELL, Circuit Judge:

This appeal involves the tag-end of a civil rights suit. We affirm.

Appellant pleaded guilty in the district court in 1970 to the offense of smuggling marijuana into the United States in violation of then 21 U.S.C.A. § 176 a, and received a probated sentence of three years. In 1971, he applied for and was granted a permit by the City of Atlanta to drive a taxi. In 1973, his file was reviewed because of a dispute with a passenger. The marijuana conviction was discovered and his permit was revoked, after notice and hearing, on the basis of an Atlanta ordinance which proscribed permits to persons convicted of such an offense. Feeling aggrieved by this ruling and particularly because the prior conviction had been disclosed in his original application for a permit, appellant filed suit seeking declaratory and injunctive relief, lost earnings and attorneys’ fees.

It developed that appellant was without his permit from July 27 to August 13, 1973, at which time the ordinance was rescinded at the suggestion of the district court. This mooted the claim for declaratory and injunctive relief but the suit proceeded in an effort to collect damages in the form of lost earnings in the amount of $200.00 and attorneys’ fees. At this point the district court dismissed the complaint on a limited immunity theory said to be applicable to municipal officers. The defendants here are the Mayor, Vice-Mayor, Police Chief, Members of the Aldermanic Police Committee, and a police officer responsible for the issuance of taxi driver permits.

As did the district court, we pretermit decision on the validity of the ordinance in question, assuming its invalidity arguendo. Instead, we decide the case on the good faith defense which is applicable to a claim for damages of the type here under the Civil Rights Act. 42 U.S. C.A. § 1983.

With respect to the good faith defense, Justice Stewart, then a member of the Sixth Circuit, in ruling for municipal officers in a civil rights suit claiming damages to a business because of invalid ordinances, described the good faith defense and the limited immunity in terms of a qualified privilege. Nelson v. Knox, 6 Cir., 1958, 256 F.2d 312, 315. It was pointed out that municipal officers did not enjoy complete immunity in such a case but only a qualified privilege in the form of a defense against civil liability for acts done by them in good faith in the performance of their official duty.

This line of reasoning has been adopted in our court. See Traylor v. City of Amarillo, 5 Cir., 1974, 492 F.2d 1156, 1157 — 58 n. 2. See also Donaldson v. O’Connor, 5 Cir., 1974, 493 F.2d 507, 530, cert. granted, 419 U.S. 894, 95 S.Ct. 171, 42 L.Ed.2d 138 (1974), where Judge Wisdom spoke in terms of “good faith for qualified governmental immunity”, allowing immunity (1) when the officers’ acts are discretionary and (2) the officers have acted in good faith.

In these cases, good faith was submitted as a factual issue. Here we proceed on undisputed facts that the defendants were performing discretionary acts within the scope of their offices with no claim whatever having been asserted of bad faith. The underlying premise of the district court’s finding of limited immunity was an assumption of good faith. Taking the case at this stage, we will not vacate and remand for a factual finding on good faith, given the posture that bad faith is not claimed.

Appellant’s other contention is that the ordinance had a racially discriminatory effect. This argument rests on the statistical theorem often used in voter, juror and employment discrimination cases to make out a prima facie case. In such cases it is enough to show a substantial difference in the treatment of the black and white classes. See Bing v. Roadway Express, Inc., 5 Cir., 1971, 444 F.2d 687, 689, and the cases there cited. The argument here is that more blacks have been convicted of disqualifying criminal offenses than whites and therefore, as we understand the argument, it is improper to deny a taxi driver permit to a black under the ordinance. We decline to extend the statistical premise to the award of a taxicab permit involving only one person. We also decline to extend our employment testing device holding of discrimination in Cooper v. Allen, 5 Cir., 1972, 467 F.2d 836, to this case where the ordinance, as distinguished from employment mental and ability tests, is so obviously job-related in determining who is to be entrusted to operate taxicabs. The district court offered appellant an opportunity to plead and prove that the ordinance was enacted with discriminatory intent, or that it was enforced in a racially discriminatory manner, but the offer was declined.

We also find no error in the refusal to award attorneys’ fees.

Affirmed.


author: AINSWORTH, Circuit Judge:

text:
    RESTLAND MEMORIAL PARK OF DALLAS, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
    No. 74-2054.
    United States Court of Appeals, Fifth Circuit.
    March 10, 1975.
    Sam G. Winstead, William D. Jordan, Dallas, Tex., for plaintiff-appellant.
    Frank D. McCown, U. S. Atty., Martha Joe Stroud, Asst. U. S. Atty., Ft. Worth, Tex., Scott P. Crampton, Asst. Atty. Gen., Gilbert E. Andrews, Acting Chief, Elmer J. Kelsey, Robert S. Watkins, U. S. Dept, of Justice, Tax Div., Washington, D. C., Eugene G. Sayre, Tax Div., Dept, of Justice, Dallas, Tex., for defendant-appellee.
    Before AINSWORTH, GODBOLD and SIMPSON, Circuit Judges.
   AINSWORTH, Circuit Judge:

This is a tax refund suit of Restland Memorial Park of Dallas [Taxpayer], a cemetery corporation, relative to federal income taxes paid under protest for the fiscal years ended June 30, 1965, 1966 and 1969, in the total sum of $86,095.62. At issue is whether the District Court correctly held that Taxpayer failed to qualify under Section 501(c)(13) of the Internal Revenue Code of 1954 (26 U.S.C. § 501(c)(13)) which allows an exemption for:

“(13) Cemetery companies owned and operated exclusively for the benefit of their members or which are not operated for profit; and any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that purpose, no part of the net earnings of which inures to the benefit of any private shareholder or individual.”

The District Court without a jury tried the case on stipulated facts and found that Taxpayer failed to meet any of the requirements of the tests for exemption under the statute and entered a judgment in favor of the Government. Taxpayer limits its appeal to the last-mentioned exemption, following the SemicoIon, in subsection (13) of the statute above set forth.

The facts as stipulated show that Taxpayer, a Texas corporation, organized in 1953 as a nonprofit lot owners association, owns and operates a perpetual care cemetery. One of the original incorporators, George Young, was the former president, general manager and virtual owner of Realty Development Corporation [Realty], a profit cemetery corporation, which was the predecessor to Taxpayer. Young sold his stock in Realty to Taxpayer in consideration of the sum of $1,482,000, evidenced by a note in that amount payable in semiannual installments, final payment on which was made in January 1972. Assets of the predecessor corporation included 190.154 acres of land, developed but unsold grave sites, improvements including a mausoleum, and accounts receivable in the approximate amount of $1,000,000. Taxpayer owned no assets prior to the transfer, but presently owns all of the outstanding stock of its predecessor, and its cemetery consists of approximately 285 acres, the result of three additional subsequent transfers of land from Young in 1954, 1961 and 1965.

The District Court’s findings of a prohibited inurement under Section 501(c)(13) of the Internal Revenue Code of 1954 are predicated on the three following sets of circumstances: 1) the 1954, 1961 and 1965 land conveyances from Young, the consideration for which was a certain percentage of the gross receipts from future sales of lots and improvements thereon, as contrasted to a fixed sum; 2) the close relationship, interlocking management, directorship and ownership existing between Taxpayer and other related entities, including a funeral home, life insurance company and a trust company; • and 3) allowance-, of personal expenses and other benefits by Taxpayer to Young and its executive officers.

We agree that the interrelation of these three features constitute prohibited inurement to the benefit of a private individual under Section 501(c)(13) thus precluding tax-exempt status for Taxpayer.

1. The land conveyances.

In 1954 and 1961 Taxpayer acquired from Young and his wife 11.343 and 104.677 acres of land, respectively, adjacent to the cemetery, for which Taxpayer agreed to pay Young 20 per cent of the gross receipts from future sales of grave spaces, plus 10 per cent of the gross receipts from future sales of niches and crypts on the property acquired under the agreements. No maximum price was determined, but minimum annual payments after a certain number of years were required under the agreements. These minimum payments have not been made to date, Young having agreed to delays as they became due. A third contract was executed in 1965 by which Taxpayer acquired an additional 25 acres of land which Young had placed in trust for his daughter in 1964, for which Taxpayer agreed to pay to the trust 15 per cent of the gross receipts from future sales of property. Similar to the two prior contracts, there was no fixed price but a required minimum payment. In each instance, shortly after the properties were acquired, Taxpayer had them dedicated for cemetery purposes.

2. The relationship between Taxpayer and other associated entities controlled by Taxpayer and its executive director.

a. Restland Funeral Home, Inc.

In 1956 Taxpayer sold 2.356 acres of formerly dedicated cemetery land to Young for $10,165. Young then formed a profit corporation, Restland Funeral Home, Inc., of which he was the sole shareholder, for the purpose of constructing a mortuary adjacent to the cemetery. Taxpayer entered into an agreement with Young to lease space in the funeral home, which lease was in turn pledged as collateral in obtaining a loan for the construction of the building. Young is president of Restland Funeral Home, Inc. Its vice-president and secretary-treasurer, C. H. Shackelford and Harry Thompson, respectively, are also officers of Taxpayer corporation — Shackelford as vice-president, and Thompson as vice-president-secretary. Taxpayer shares certain joint expenses with the funeral home including overhead, advertising charges and salaries. Taxpayer does not charge the funeral home the usual $25 fee which it charges other funeral homes for the use of its cemetery chapels. Taxpayer maintains office space and operates a flower shop and memorial salesroom within the building. Sixty-four per cent <?f the funerals held in Taxpayer’s cemetery come from Rest-land Funeral Home. Salesmen for Taxpayer also arrange for some pre-need funerals for the funeral home. The funeral home and Taxpayer hold themselves out to the public as offering all funeral-related services at one place. This package-plan arrangement was at one time advertised with the slogan, “One call does all.” The family of the deceased receives one bill covering such items and services as a lot, memorial, flowers, vault and the funeral service. Another cemetery and mortuary, Laurel Land Memorial Park and Funeral Home, operates as a subsidiary of Restland Funeral Home, Inc. Young, Shackelford and Thompson serve as officers thereof. As executive director of Taxpayer, Young sets his own salary. He also selects the members of Taxpayer’s Board of Directors. Lot owners are required by contract to relinquish their proxies to Young to vote at meetings of Taxpayer.

b. Other entities controlled by Taxpayer and its executive director.

Young is also the virtual owner and president of three additional companies whose operations are interrelated with those of Taxpayer — Restland Life Insurance Company, Restland Investment Company and American Trust Company.

The primary purpose of the insurance company is to insure the unpaid balance on funeral trust accounts. A family purchases a casket and funeral services; the seller of the funeral puts 90 per cent of the funds in trust. These sales are made on a time-payment installment basis. In order to assure that the entire amount would be paid in the event of the death of the purchaser, the unpaid balance is covered by the insurance company. The investment company was chartered as a profit company for the purpose of selling debentures of Taxpayer. Pre-need funerals were funded by the debentures which mature on the death of the purchaser, or in twenty years. The trust company serves as a vehicle for the investment of perpetual care funds. It has no assets of its own and its stock is presently worthless.

3. Personal expenses and other benefits inuring from Taxpayer to its officers.

Taxpayer provides Young, Shackelford and Thompson with automobiles which are replaced every three years. These vehicles are also used in the business of the related entities. Taxpayer pays for membership dues and all of Young’s expenses at the Northwood Country Club, including entertainment, food and beverages for himself and his wife. The same is true in regard to Lock and Key Club and the Dallas Club. Taxpayer also pays membership dues for Shackelford at the Northwood Country Club and the Chaparral Club. Group memberships in other organizations for the purpose of entertaining out-of-town visitors are also maintained by Taxpayer, such as the Rafters Club, Dominique’s Restaurant, and the Commonwealth Club. Young, Shackelford and Thompson receive salaries from both Taxpayer and Restland Funeral Home.

The District Court held that the percentage-of-sales agreements were not permissible sales under section 501(c)(13) and were in effect contributions to capital. We agree with the District Court’s conclusion as well as with its observation that the decision of Rose Hills Memorial Park Association v. United States, 1972, 463 F.2d 425, 199 Ct.Cl. 6, is directly in point. For all intents and purposes the cases are virtually indistinguishable. Rose Hills involved a percentage-of-sales arrangement similar to the instant one. The predecessor, for-profit corporation, from which the cemetery corporation acquired its land, sold all of its outstanding stock to the nonprofit cemetery corporation and received in consideration therefor a promise to pay: 30 per cent of the gross selling price of grave sites sold from the property; 10 per cent of sales of mausoleums, niches, and crypts; 20 and 25 per cent of sales of various underground crypts; 50 per cent of rents and royalties received for the use of real property; and on sales of real property under any other circumstances, during the first five years, 90 per cent of the proceeds; during the following ten years, 80 per cent, and thereafter, 75 per cent. The Court of Claims found that the substance of the transaction resembled an equity interest because all the traditional elements of a valid debt were missing. These elements were enumerated as follows: No unqualified obligation on taxpayer to pay; no maturity date; no sum certain; no stated interest rate; no minimum annual payment; no right of the creditor to share with general creditors and no paid-in capitalization to the business. The court also found complete control by transferors over the cemetery’s operations evidencing an equity interest. 463 F.2d at 431. An application of these factors to the present case indicates that the debtor-creditor relationship is lacking here as well. There is no stated interest. There is neither maturity date nor sum certain, as the amount to be received by Young is wholly dependent upon the number of lots and graves sold. Although minimum annual payments were required by the three percentage-of-sales contracts, the payments provided for in the 1954 and 1961 contracts were never made, having been deferred by Young as they became due. The right of the “creditor” (Young and his family) to share with general creditors is meaningless inasmuch as there is nothing in the record to indicate that Taxpayer has borrowed funds. The only assets received by Taxpayer came from the Young family. The initial capitalization of Taxpayer, a mere $500, is negligible in comparison to its original debt obligation to Young of almost $1,500,000.

The identical issue — whether funds advanced to a business corporation are in substance debt or equity — has arisen many times in this Court in other areas of federal income tax law. Consequently certain guidelines have evolved over the years in resolving the debt-equity question. These are in substance the same as those listed in Rose Hills. Other factors which we have considered are the names given to the instruments evidencing indebtedness, the intent of the parties, and the identity of interest between creditor and stockholder. Here, of course, the “creditor” is in essence the “stockholder.” Thus the interest of the parties, their alleged intent to enter into sales agreements with resultant debts, and the fact that the instruments are on their face sale transactions, have little if any significance. Balancing these factors we find a clear preponderance in favor of an equity interest.

Appellant, relying on C. I. R. v. Brown, 380 U.S. 563, 85 S.Ct. 1162, 14 L.Ed.2d 75 (1965), attempts to distinguish Rose Hills on the ground that the percentages in Restland’s acquisitions are fair and reasonable, being substantially lower than those used in the Rose Hills transaction, and also for the reason that the original assets of Restland were acquired for a fixed price whereas all of the assets of Rose Hills were acquired on a percentage-of-sales basis. We cannot agree that these variations in percentages and in the number of such agreements used are material in determining whether or not the transactions created an equity interest in Taxpayer in contrast to a debt. Nor are we convinced of any great disparity between the overall facts of the cases which would characterize the arrangements here fair and reasonable in contrast to those in Rose Hills. Underlying that decision, and perhaps the most relevant factor here, is the substantial control exercised by transferor over transferee Taxpayer and the almost inseparable identity of the two. Except for the contemplated change in the tax structure (from a for-profit corporation to an exempt nonprofit one) the Restland cemetery operation was the same operation, under the same control and management, after the transfer as it was before. The record is replete with evidence of Young’s control over Taxpayer, as shown for example by his uncontested authority to select board members, and to vote at all meetings as proxy for all lot-owner members.

C. I. R. v. Brown, supra, relied on by appellant, is inapposite. There the Supreme Court upheld as valid the sale of a business concern to an exempt charitable organization despite the fact that the purchase price (less a deduction for a nominal downpayment) was payable only from the income which would be produced by the business sold. The Court noted with approval that the Tax Court had found the price was within reasonable limits as a result of good-faith bargaining at arm’s length. 380 U.S. at 569, 85 S. Ct. at 1165. However, unlike the present case and that of Rose Hills, the agreement in Brown between taxpayer and the transferor called for a fixed price to be paid within a fixed period of time. 380 U.S. at 567, 85 S.Ct. at 1164. Rose Hill Memorial Park, Inc., 23 T.C.M. 1434 (1964) (C.C.H.), and Washington Park Cemetery Association, Inc., 22 T. C.M. 1345 (1963) (C.C.H.), also relied on by Taxpayer, contrary to appellant’s contentions, are cases involving fixed prices. In holding that no net earnings inured to private interests, the Tax Court in Rose Hill used as a predicate the fact that “The purchase price was fixed and was not dependent upon the proceeds realized from the sale of individual lots.” 23 T.C.M. at 1438 (C.C.H.). Likewise, in Washington Park the Tax Court found that “the purchase price was a fixed amount, as opposed to an indefinite purchase price.” 22 T.C.M. at 1360 (C.C.H.). In contrast to the three aforementioned cases relied on by appellant, the price payable to the transferor here has neither been determined nor is it capable of determination, thus lacking the characteristics of a true sale, and at the same time providing for the possibility of tremendous financial gain to a private individual. Thus “charity becomes too intertwined with promotion” to permit a tax exemption. Evergreen Cemetery Ass’n of Seattle v. United States, 9 Cir., 1971, 444 F.2d 1232, 1235.

Finally, appellant contends that the decision of the District Judge holds that the acquisition of land by a cemetery under a percentage-of-sales agreement constitutes in itself a sufficient ground for denying the cemetery’s exemption under the statute, thus creating a per se rule contrary to the opinion in Rose Hills on which the District Judge relied. We do not agree with that interpretation. It is obvious that the District Judge was incorporating the reasoning in Rose Hills in relying on that decision. The percentage-of-sales character of the arrangements was an important element, but only one of several factors considered by the District Judge in denying the exemption and considered by us in upholding that denial.

We fully agree that the 1954, 1961 and 1965 percentage-of-sales agreements, under the particular circumstances of this case, were in effect contributions to capital. When this type of agreement is considered in conjunction with other factors present heretofore discussed, we cannot escape the conclusion that the land transfers were not sales but contributions to capital, and that part of the net earnings of the corporation are inuring to the benefit of the investor.

Affirmed.

      . By separate agreement the parties provided for a division of condemnation proceeds between Restiand and Young as well as for reconveyance to Young of any land made no longer suitable for development for cemetery purposes. As the result of a subsequent purchase of 20 acres from Taxpayer by the County of Dallas and the State of Texas for a right-of-way, 25 acres of Taxpayer’s land were cut off from its remaining property. The parties divided the proceeds of the sale, approximately $600,000, and the 25-acre tract was then declared by the directors as unsuitable for cemetery purposes and reconveyed to Young and his wife for no additional consideration.

      . See, e. g., Du Gro Frozen Foods, Inc. v. United States, 5 Cir., 1973, 481 F.2d 1271; Plantation Patterns, Inc. v. C. I. R., 5 Cir., 1972, 462 F.2d 712; Estate of Mixon v. United States, 5 Cir., 1972, 464 F.2d 394, and numerous cases cited therein at 398 n. 1.

      . See Estate of Mixon v. United States, 5 Cir., 1972, 464 F.2d 394, 402.

      . The District Court also cited Knollwood Memorial Gardens v. Commissioner, 1966, 46 T.C. 764, as authority for its holding. As in Rose Hills, factors evidencing debt or equity characteristics were explored. The court said:
      “Not only does petitioner’s obligation lack the principal elements of debt, but the interests of the landshare holders evidence the principal characteristics of equity interests. Petitioner was an empty shell without capital or assets of any kind before it acquired Petitjean’s' land and promise to begin development. Of primary importance is the fact that the ultimate receipt of payment by the landshare holders is completely dependent upon sales by the alleged ‘debtor’; the sole obligation petitioner had to Petitjean and his transferees was at the risk of its cemetery operation; sales proceeds are the sole, source for payment to these landshare holders and in the absence of sales, payments could not be made. This arrangement embodies the very essence of an equity interest, ‘a participation in the pot luck of the enterprise.’ ”

      . This case should not be confused with Rose Hills Memorial Park Association v. United States, 1972, 463 F.2d 425, 199 Ct.Cl. 6, supra.

      . The Court of Claims in Rose Hills said:
      “We do not mean, by our decision today, to hold that the percentage-of-sales agreement is, per se, a violation of § 501(c)(13). We only hold that, on the basis of the situation before us, a contribution to capital was made instead of a sale and consequently net earnings of the corporation wound up in individuals’ hands in violation of § 501(c)(13).”

      . In a somewhat brief explanation of its reliance on Rose Hills, the District Court stated, after discussing the percentage-of-sales type of agreement, that the exemption in Rose Hills was denied “because such a purported sale of land is really a contribution to capital. The seller in these instances retains what amounts to an equity in the land.” Taken out of context, the statement arguably lends some support to appellant’s impression that a per se rule has been established. However, the District Judge’s footnote referral to the Rose Hills case “for a full exposition of the reasoning behind these decisions” should dispel this impression.


author: COLEMAN, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellant, v. The STATE OF TEXAS, ET AL. (SAN FELIPE DEL RIO CONSOLIDATED INDEPENDENT SCHOOL DISTRICT), Defendants-Appellees.
    No. 74-3942.
    United States Court of Appeals, Fifth Circuit.
    Feb. 19, 1975.

      J. Stanley Pottinger, Asst. Atty. Gen., Dept, of Justice, Washington, D. C., William S. Sessions, U. S. Atty., San Antonio, Tex., John Hoyle, Civ. Rights Div., Brian K. Landsberg, Dept, of Justice, Washington, D. C., for plaintiff-appellant.
    Jesus B. Ochoa, Jr., El Paso, Tex., Mike V. Gonsalez, Del Rio, Tex., Grant Cook, Houston, Tex., for defendants-appellees.
    Before WISDOM, COLEMAN and SIMPSON, Circuit Judges.
   COLEMAN, Circuit Judge.

Acting sua sponte, the District Court dismissed this school desegregation case from its docket. The United States appeals. Because the dismissal was not in compliance with the standards prescribed by Youngblood v. Board of Public Instruction, 5 Cir. 1971, 448 F.2d 770 we vacate and remand.

The facts are not in dispute. In March, 1970, the United States commenced an action in the District Court for Eastern Texas to consolidate and desegregate the San Felipe and Del Rio Independent School Districts. Consolidation and desegregation were ordered, United States v. State of Texas, 342 F.Supp. 24 (E.D., Tex., 1971). We affirmed, but ordered the case transferred to the Western District of Texas for supervision of the consolidation-desegregation process, United States v. State of Texas (San Felipe-Del Rio Consolidated Independent School District), 5 Cir. 1972, 466 F.2d 518. Thereafter, from August 29, 1972 to November 7, 1973 nothing happened in the District Court except the filing of the customarily required semi-annual reports by the School Board.

On November 7, 1973, acting on its own initiative, without notice of the action taken or an opportunity for a hearing as to any opposition thereto, the District Court found that the objective of a unitary school system had been achieved, felt that its supervision was no longer necessary or .required, and, as already stated, dismissed the case.

The United States moved to vacate the dismissal, but this motion was denied.

In Youngblood the governing principles were clearly and succinctly stated:

It is ordered by'the Court:
1. The order of the District Court dismissing this action is vacated, and the cause ■ is remanded to the District Court with directions to reinstate the action, and to retain jurisdiction over the action for a period not less than three school years. During the next three school years the school district shall be required by the court below to file semi-annual reports with the District Court similar to those required in United States v. Hinds County School Board, 5 Cir., 1970, 433 F.2d 611, 618-619.
2. At the conclusion of three school years the District Court should again consider whether the cause should be dismissed. In no event, however, shall the District Court dismiss the action without notice to the plaintiffs below and a hearing providing opportunity to plaintiffs-appellants to show cause why dismissal of the cause should be further delayed. See Wright v. Board of Public Instruction of Alachua County, Florida, 5 Cir., 1971, 445 F.2d 1397

For cases following Youngblood see Calhoun v. Cook, 5 Cir. 1971, 451 F.2d 583; Steele v. Board of Public Instruction, 5 Cir. 1971, 448 F.2d 767. See Cisneros v. Corpus Christi Independent School District, 5 Cir. 1972, 467 F.2d 142, 153 (n. 10); United States v. Texas Educational Agency (Austin Independent School District), 5 Cir. 1972, 467 F.2d 848, 886 (n. 2); Wright v. Board of Public Instruction, 5 Cir. 1971, 445 F.2d 1397; United States v. Hinds County School Board, 5 Cir. 1970, 433 F.2d 611, 618-19.

In dismissing the case the District Court relied on the following language appearing in Swann v. Charlotte-Mecklenburg Board of Education, 402 U.S. 1, 32, 91 S.Ct. 1267, 1284, 28 L.Ed.2d 554 (1971):

Neither school authorities nor district courts are constitutionally required to make year-by-year adjustments of the racial composition of student bodies once the affirmative duty to desegregate has been accomplished and racial discrimination through official action is eliminated from the system. This does not mean that federal courts are without power to deal with future problems; but in the absence of a showing that either the school authorities or some other agency of the State has deliberately attempted to fix or alter demographic patterns to affect the racial composition of the schools, further intervention by a district court should not be necessary.

Our decision in Youngblood was not intended to be a contradiction of these principles, nor do we think that it was. We were there enunciating guidelines by which, in the absence of a contrary showing after notice, the District Courts could with confidence close the books on a school desegregation case. We were establishing a uniform rule upon which school authorities and District Courts might rely for insuring proper local and judicial administration of the school desegregation process. It has never been our purpose to keep these cases interminably in the federal courts.

The appellate record indicates that subsequent to our affirmance (August 29, 1972, 466 F.2d 518) reports have been filed dated October, 1972, March 1973, and October, 1973. This leaves reports due for March, 1974, October, 1974, and March, 1975, which apparently were not filed because of the dismissal. We assume that the records are available from which past due and current reports may be filed.

Once these reports have been filed, then upon proper notice, and following a hearing if one is appropriately sought, the District Court may proceed to determine whether San Felipe Del Rio has achieved unitary status. If it has, then a dismissal is not out of order.

If, however, such reports have not been or cannot now be filed then the matter may not be considered until three additional semi-annual reports shall have been filed in due course.

Vacated and remanded for further proceedings not inconsistent herewith.


author: DYER, Circuit Judge:

text:
    Andrew Earl WHITAKER, Petitioner-Appellant, v. W. J. ESTELLE, Director, Texas Department of Corrections, Respondent-Appellee.
    No. 74-2520.
    United States Court of Appeals, Fifth Circuit.
    March 6, 1975.
    Rehearing and Rehearing En Banc Denied April 9, 1975.

      Donald A. Smyth, Staff Counsel for Inmates, Texas Dept, of Corrections, Brazoria, Tex., for petitioner-appellant.
    John L. Hill, Atty. Gen., Thomas W. Choate, Asst. Atty. Gen., Austin, Tex., for respondent-appellee.
    Before BROWN, Chief Judge, and COLEMAN and DYER, Circuit Judges.
   DYER, Circuit Judge:

Whitaker appeals from the district court’s denial without hearing of his petition for habeas corpus. He claims that his state rape conviction was unconstitutional because of 1) an illegal arrest and detention, 2) an involuntary confession, and 3) the state court’s lack of jurisdiction to try him as an adult. Since we find that none of the errors alleged amounted to a denial of Whitaker’s federal constitutional rights, we affirm.

On December 8, 1969, the victim, a waitress at the Cattleman’s restaurant in Fort Worth, Texas, finished her shift at approximately 11:00 P. M. While starting her car in a parking lot across the street from the restaurant, a man forced his way into the auto, threatened to kill her if she resisted, drove the car to another section of the parking lot and raped her. Just then a second man, later identified as Whitaker, appeared, and following a short conversation with the initial attacker, also entered the car and raped the victim.

These two men, together with a third picked up en route, then drove the victim to an isolated area where she was again sexually assaulted. While there, Whitaker asked the woman if she would like to see him again. Both out of fear for her life should she refuse and a desire to trap her attacker, she agreed and set up a meeting outside the restaurant two evenings later.

After being released, the victim notified the police, furnished them a general description of her abductors and alerted them to the planned rendezvous. Detective Jones of the Fort Worth police placed the restaurant and parking lot under surveillance on the appointed night and observed Whitaker, wearing clothes similar to those described by the victim, arrive shortly before the victim was scheduled to finish her shift. When Whitaker loitered in the area for several minutes in such a position that he could observe both the front door of the restaurant and the victim’s car, Detective Jones placed him under arrest. Following an identification by the victim and his own confession, Whitaker was convicted of rape.

Whitaker’s first contention is that he was illegally arrested and detained. The validity of his arrest of course depends on whether it was based on probable cause — the officer’s possession at the moment of arrest of sufficient facts to support a genuine probability, though not necessarily a certainty or a conclusion beyond a reasonable doubt, that Whitaker had committed an offense — or on a hunch or mere speculation. Lathers v. United States, 5 Cir. 1968, 396 F.2d 524, 531.

We conclude there was probable cause for the arrest. First, based on information supplied by the victim, the police were aware of a time and location where there was a substantial possibility that the victim’s attackers might appear. Indeed, it was because of this information that they were able to place themselves in a position to apprehend Whitaker. Secondly, from the same source they also possessed a general physical description of the assailants and knowledge that the second man, who had asked the victim if she wished to see him again, had been wearing a “long brown coat.” When Whitaker arrived, Detective Jones saw that he not only fit the physical description furnished by the victim but was clad in a three-quarter length brown coat. Finally, these facts were corroborated by the officer’s personal observation of Whitaker walking back and forth in the area for several minutes in such a way - as to keep the restaurant and the victim’s car in view. The totality of these circumstances was sufficient in our view to give Detective Jones reasonable cause to believe that a felony had been committed and that Whitaker was one of its perpetrators. Hence, he had probable cause to effect Whitaker’s arrest without a warrant. Thornton v. Beto, 5 Cir. 1972, 470 F.2d 657, cert. denied, 1973, 411 U.S. 920, 93 S.Ct. 1560, 36 L.Ed.2d 313; Conley v. Beto, 5 Cir. 1972, 460 F.2d 210; Delespine v. Beto, 5 Cir. 1969, 418 F.2d 871, cert. denied, 1970, 397 U.S. 1030, 90 S.Ct. 1281, 25 L.Ed.2d 541.

It does appear that Whitaker was not taken promptly before a magistrate following his warrantless arrest as required by Texas law. Vernon’s Ann.C. C.P., art. 14.06 (Supp.1974). However, it is well settled that such a defect rises to the level of constitutional error only when it can be shown that the accused’s defense has been prejudiced in some manner. Adkins v. Beto, 5 Cir. 1972, 462 F.2d 802, 804; Perry v. Texas, 5 Cir. 1972, 456 F.2d 879, 880. Here, the only intimation of prejudice is that Whitaker’s confession was in fact obtained during the period of his detention. However, Whitaker does not make, nor would the record support, any claim of a causal connection between the two. The record shows that Whitaker was arrested at approximately 11:00 P. M. on December 10, and made his confession at 10:40 the following morning; moreover, the record further reflects that Whitaker was fully warned of his constitutional rights prior to making the statement.

Whitaker’s next contention consists of a broadside attack on the voluntariness of his confession. In addition to his argument that it was the product of an illegal arrest, a claim we reject because of our conclusion that his arrest was valid, he also contends that, notwithstanding his Miranda warnings and apparent waiver of these- rights, the confession was not voluntarily made. Without reciting in detail the circumstances alleged to support this claim, it is enough to say that they were presented to the trial court and, following a Jackson v. Denno type hearing, resolved against Whitaker. Since it affirmatively appears that the state trial court applied appropriate legal standards in determining the admissibility of Whitaker’s confession, we are constrained by the dictates of 28 U.S.C.A. § 2254(d) to respect that court’s findings unless Whitaker can establish by convincing evidence that its determinations were erroneous. La Vallee v. Delle Rose, 1973, 410 U.S. 690, 695, 93 S.Ct. 1203, 35 L.Ed.2d 637. He has not met that burden.

Whitaker’s final asserted ground for relief is that the Texas adult courts lacked jurisdiction to try him. The essence of Whitaker’s argument is that because the crime was committed approximately a month before his seventeenth birthday, the juvenile court had exclusive jurisdiction over his offense; and further that because the juvenile court never waived its jurisdiction, it continued unabated with the effect of precluding his trial as an adult. Broadway v. Beto, N.D.Tex.1971, 338 F.Supp. 827, aff’d, 5 Cir. 1972, 459 F.2d 483, cert. denied, 409 U.S. 1012, 93 S.Ct. 454, 34 L.Ed.2d 307, squarely meets this argument. In a thoroughly documented opinion, the district court in that case pointed out that, under Texas law, the defendant’s age at the time of trial, rather than his age when the offense was committed, is controlling for the purpose of juvenile or adult jurisdiction. Moreover, loss of jurisdiction by the juvenile court when a defendant reaches the age of majority specified in the statute (17 for a male) is deemed automatic and in no way dependent upon a waiver by the juvenile court. Id. at 835. Since Whitaker was neither indicted nor tried until he had achieved his seventeenth birthday, he was properly within the jurisdiction of the adult criminal court system.

Affirmed.