author: PER CURIAM.

text:
    Dennis Wayne MOSLEY, Appellant, v. COMMANDING OFFICER, ELLS-WORTH AIR FORCE BASE, et al., Appellee.
    No. 72-1720.
    United States Court of Appeals, Eighth Circuit.
    Submitted April 13, 1973.
    Decided June 20, 1973.
    Marvin M. Karpatkin, New York City, Curry First, Milwaukee, Wis., for appellant and American Civil Liberties Union.
    Richard Hurd, Asst. U. S. Atty., Sioux Falls, S. D., for appellee.
    Before LAY and STEPHENSON, Circuit Judges, and TALBOT SMITH, District Judge.

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

   PER CURIAM.

The issue before us is a narrow one. The appellant, Petitioner Mosley, enlisted in the United States Air Force on September 1, 1968. Following basic training at Lackland Air Force Base he spent three months in Officer Training School, followed by one year of Flight School at Reese Air Force Base and three months of B-52 School at Castle Air Force Base prior to arrival at Ells-worth Air Force Base, South Dakota, where he was assigned at the time of filing the petition before us.

On February 25, 1971, petitioner made application for discharge from the Air Force on the ground that he was a conscientious objector. The officer appointed (under appropriate regulations) to hear the case concluded that “Lt. Mosley fully understands the import of his request and is sincere in his statements.” His immediate Commanding Officer concurred, as did other officers called upon for endorsements. The Air Force Personnel Board, however, denied appellant’s request, giving no reasons for its decision, subsequent to which petitioner sought relief by petitioning for a writ of habeas corpus in the federal district court.

It was the finding of the district court that “there is no basis in fact for the action of the Air Force Personnel Board in denying petitioner’s request for discharge as a conscientious objector” and, accordingly, the petition for the writ of habeas corpus was granted and the writ issued. There has been no appeal from the portion of the judgment below that the Air Force had unlawfully denied petitioner’s discharge.

The issue before us arises from the fact that the court sua sponte conditioned the issuance of the writ as follows:

“The court concludes that the petition for writ of habeas corpus be granted and the writ issued. However, in view of the time and expense incurred by the government in training petitioner, the writ shall be conditioned on the provision that he serve in the civilian work program administered by the Selective Service for a period of time equal to that of his remaining active duty obligation.”

It is the contention of the appellant that such a condition is violative of the Department of Defense Directive 1300.6 and an unpermissible and unconstitutional burden on the First Amendment rights of conscientious objectors.

We find no warrant in the Department of Defense Directive 1300.6 for the imposition of such a condition on a conscientious objector of Mosley’s service. The Directive, captioned “Conscientious Objectors,” provides as follows in Section VI(C)2:

“When a determination has been made on the merits of the application, the following actions will be taken: persons with less than 180 days’ service who are determined to be bona fide conscientious objectors and whose request for separation is made early enough so that discharge will occur prior to completion of 180 days’ active duty will be separated early enough to permit the remaining service in the eivilian work program administered by Selective Service. In such cases, the Selective Service System will be promptly notified of the date of discharge from the military service, the fact that the individual has not completed 180 days’ active duty, and will be requested to induct the individuals for the alternative service provided by the MSS Act.”

It is clear on the record that the above provision respecting the work program administered by Selective Service, applicable to “persons with less than 180 days’ service” has no application to petitioner Mosley, whose service exceeded such limitation. In fact the respondent’s concession in this regard brings the issue before us into sharp focus, stating (respondent’s Brief, p. 5):

“The Air Force recognizes that Mosley has served in excess of the 180 days that exempt him from the authority of the Selective Service call-up and, therefore, would be required to perform alternate service solely on the basis of the trial court’s condition contained in the granting of the Writ of Habeas Corpus.”

The district court, in imposing the condition, relied upon considerations of equity, namely, that petitioner should recompense the Government by services rendered, for the time and expense incurred in his training. However equitable such recompense may be on a theoretical basis (as to which we express no opinion) it is our judgment that such considerations are more properly addressed to the legislature than the courts. We take judicial notice of discharges based upon medical and hardship considerations, as well as conscientious objectors, and the computation by the courts of a proper quid pro quo in such cases, without appropriate legislative standards, might well lead in individual cases to severe injustice. In this general area see Miller v. Chafee, 324 F.Supp. 1344 (D.Hawaii, 1971), rev. 462 F.2d 335 (9th Cir. 1972); McCullough v. Seamans, 348 F.Supp. 511 (E.D.Cal. 1972).

In reviewing the appropriate Air Force Regulation and Directive (cited above) we do not find, nor are we cited to any requirement therein that a serviceman, with 180 or more days of service, need express his willingness of lack thereof to perform civilian work. The matter was examined in Moore v. Connell, 318 F.Supp. 884, 890 (fn. 3) (D. Md.1970), in the following terms.

“The application for discharge, contained in the official record of this case, includes a section (Z) which inquires into the applicant’s willingness to perform work under the Selective Service civilian work program. Lieutenant Moore stated in reply thereto that he was willing to perform such work. However, AR 635-20 provides that this question is to be directed to those who have served less than 180 days, so technically this question was not directed to Lieutenant Moore.
But see United States ex rel. Brooks v. Clifford, 409 F.2d 700, 702-703 (4th Cir. 1969), where Judge Winter indicates that an applicant who has served more than 180 days is asked to make such an indication.” (Emphasis in original)

We thus find no authority to support the assertion that a serviceman, serving 180 or more days, is required to state his willingness to perform civilian work, nor do we find support in the record for the position that petitioner did- in fact “consent” to the performance of civilian work. It is so stated on the summary sheet of the Department of Defense but the specific answers of the petitioner to relevant questions asked of him during the several interviews do not support the conclusion on the summary sheet.

Under the view we have taken of the case we do not reach the constitutional or other issues presented. Upon remand the District Court will amend its Order so as to grant Mosley’s petition for habeas corpus relief unconditionally.

Reversed and remanded.

      . See, also, Department of the Air Force, Regulation 35-24, particularly § 13 thereof, “Disposition of Conscientious Objectors,” paralleling the Department of Defense Directive.

      . Such cases as Moore v. Connell, supra, as well as other cases relied upon by respondent for conditioning the writ all involve either express willingness to serve on the part of the respective petitioners, or are based upon such cases. See United States ex rel. Brooks v. Clifford, 409 F.2d 700 (4th Cir. 1969) ; Packard v. Rollins, 307 F.Supp. 1388 (W.D.Mo.1969), aff’d 422 F.2d 525 (8th Cir. 1970) ; cf. Osborne v. Seaman, 318 F.Supp. 41 (D. Md.1970).

      . Pursuant to Air Force Regulation 35-24, 8C(2) the Chaplain, Lt. Col. Poormann, asked petitioner “What is [your] role as a citizen? Answer: “Once I am discharged from the Air Force, I intend to return to college to obtain a degree in sociology. After this, I am undecided as to which course I will take; either join the Peace Corps for two years, or visit some of the other nations of our world in an attempt to discover for myself what they presently think of the United States, and what could be clone to achieve world peace and harmony. After returning from abroad, I intend to return to college, and obtain a master’s degree and possibly a doctorate in sociology.”
      Returning to petitioner’s application, he was asked, under Air Force Regulation 35-24, 4e, to state: “Describe the actions and behavior in your life that in your opinion most conspicuously demonstrate the consistency and depth of your religious conviction that gave rise to your claim.” Petitioner in response stated: “In the future I intend to return to college and obtain a degree in sociology and eventually secure a position that will help eliminate many of the shortcomings of our society.”

      . Respondent advises this Court that the directives and regulations hereinabove considered “are now obsolete” due to extensive revisions. We have presented to us no issues as to such asserted changes and have not considered such.


source: Caselaw Access Project

author: SPRECHER, Circuit Judge.

license: Public Domain

text:
    UNITED STATES of America, Plaintiff-Appellee, v. CAHILL GRAIN COMPANY, Defendant-Appellant.
    No. 72-1834.
    . United States Court of Appeals, Seventh Circuit.
    Argued June 5, 1973.
    Decided July 2, 1973.
    John A. Berry, Streator, Ill., for defendant-appellant.
    Donald B. Mackay, U. S. Atty., Springfield, Ill., Max J. Lipkin, Asst. U. S. Atty., Peoria, Ill., for plaintiff-appellee.
    Before FAIRCHILD and SPRECHER, Circuit Judges and CAMPBELL, Senior District Judge.

         Senior District Judge William J. Campbell of the Northern District of Illinois is sitting by by designation.

   SPRECHER, Circuit Judge.

This appeal questions whether the purchaser of personal property covered by a security agreement to secure loans made by the Farmers Home Administration takes the risk that the mortgagor has complied with the requirements established by regulation to obtain the release of the property from the agreement.

The United States filed its complaint on December 28, 1971 in the federal district court in Peoria, Illinois, alleging that Jerome J. Phelan had obtained operating loans from the Farmers Home Administration during the years 1964 through 1970, which loans were evidenced by several promissory notes upon which a principal balance remained unpaid in excess of $12,000 plus accrued and accruing interest; that Phelan had executed and delivered to the United States a security agreement and a financing statement, the latter having been filed with the office of the Recorder of LaSalle County, Illinois, on March 19, 1970; that on or about January 18, 1971, the defendant Cahill Grain Company (“Cahill”) had purchased corn and beans from Phelan for $9,856, remitting $3,447 thereof to the United States; and the United States prayed for judgment against Cahill for the balance of $6,409 plus interest and costs.

The deposition was taken by Cahill of Gerald Gook, the County Supervisor in LaSalle County for Farmers Home Administration, who testified that about October 2, 1970 he personally stopped by the Cahill elevator and asked Ed Cahill whether he had received a letter from FHA naming all the borrowers from FHA. When Cahill said that he had received it, Gook advised him that for his protection he should make out any checks due to sellers of crops who were borrowers, jointly to the particular seller and to FHA.

The defendant Cahill, in opposing the United States’ motion for summary judgment, filed two affidavits. One was by the Cahill manager, Edward T. Cahill, who testified that in the early part of October, 1970, Phelan requested an advance on the sale of his crops of $3,000 to purchase a combine; that at Phelan’s request Cahill telephoned Ray Vogel at the International Harvester store, who told Cahill that Gook had consented to the making of the $3,000 advance, whereupon Cahill issued a check dated October 14, 1970 payable jointly to International Harvester Company and Phelan; that on or about December 31, 1970, Phelan stated to Cahill that he needed about $3,409 as an advance on the sale of his crops in order to pay various debts and that Gook had consented to the advance.

The second affidavit was by Ray Vogel who testified that he had been employed by International Harvester at Streator, Illinois, and that at Phelan’s request, Vogel had telephoned Gook in the early part of October, 1970 and that Gook had consented to Cahill advancing $3,000 on Phelan’s crops to International Harvester as a down payment on a combine.

In his deposition, Gook denied giving any consent for the $6,409 advances made by Cahill on Phelan’s behalf to Phelan’s other creditors. In an affidavit Gook also denied knowing about, and hence consenting or authorizing, Phelan’s transactions with Cahill until after Phelan’s crops were sold on January 18,1971.

The district court entered summary judgment in favor of the United States against Cahill for $6,409 plus interest, saying :

. . [I] t appears that the only disputed issues of fact relate to whether the P.H.A., through Mr. Gook, expressed to third parties a willingness to consent to these advances. The Court believes any such issues to be immaterial, because it is clear that no representative of defendant ever made an attempt to secure such consent from Mr. Gook, or from any other representative of the Government.”

The advances made by Cahill on behalf of Phelan took place on October 14 and December 31, 1970. The Code of Federal Regulations in effect during 1970 included the following provisions regarding Farmers Home Administration loans (7 CFR § 1871.3):

“County supervisors may furnish buyers within a trade area with lists of borrowers whose chattels or crops are subject to liens held by the Farmers Home Administration. When the County Supervisor considers it advisable, he should personally deliver the letter and list to the buyers and explain the purpose thereof.”

This is what Gook testified he did on or about October 2, 1970 and in addition that he expressly told Cahill that if any borrower on the list sold his crops to Cahill, Cahill should make the check payable jointly to the United States and the borrower.

Cahill asserted that a few days thereafter (some time between October 2 and 14, 1970), based on a telephone conversation with a salesman interested in selling a combine, he accepted the salesman’s assurance that Gook had consented to the making of a check for $3,000 out to International Harvester instead of to the United States despite Gook’s personally-delivered message to the contrary still ringing in his ears. Cahill did not contend that he tried to talk directly to Gook to confirm this purported change in Gook’s position. Nor did Cahill try to find out Gook’s attitude later in December, 1970, when he accepted the borrower Phelan’s statement that Gook had consented to additional pay-outs on Phelan’s behalf.

County supervisors have the authority to release all or part of chattel security under the Farmers Home Administration regulations but it is a closely-supervised and controlled authority. If a borrower seeks a release, he must submit written plans and budgets on forms provided by FHA (7 CFR § 1871.4 (1970)). Written releases will be furnished by the county supervisor upon the request of a borrower or “an interested third party” (§ 1871.6(b)).

The regulations provide (§ 1871.6(a)):
“Purchasers of mortgaged property who make inquiry will be informed that they should deliver any proceeds in cash to the County Supervisor or make checks payable jointly to the borrower and the Farmers Home Administration.”

The Supreme Court noted in Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384-385, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947) that

“Just as everyone is charged with knowledge of the United States Statutes at Large, Congress has provided that the appearance of rules and regulations in the Federal Register gives legal notice of their contents. 49 Stat. 502, 44 U.S.C. § 307.”

The Court held at page 384, 68 S.Ct. at page 3:

“Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority.”

In Cassidy Commission Co. v. United States, 387 F.2d 875, 880 (10th Cir. 1967), the Tenth Circuit, in a case where the United States sued, as here, to recover the value of five cows upon which it held a chattel mortgage, from the livestock commission house which had sold the cattle and turned the proceeds over to the farmer, said:

“It is our conclusion that where personal property is covered by a mortgage given to secure a loan made by the F.H.A., one who purchases such property from the mortgagor takes the risk that the mortgagor will meet the requirements laid down by the Regulation to obtain the release of the property from the mortgage.”

Here the county supervisor advised Cahill that if any FHA borrower sold his crops, FHA must be a joint party on the check; a few days later the precise question arose and Cahill did not seek FHA guidance; had it done so, it would have again been advised that FHA must be a joint party on the check; nevertheless Cahill was bound by the regulations setting forth the formalities for obtaining a release, which were not observed here, and the continuing requirement of joint payment of proceeds, which procedure Cahill did not follow; Cahill took the risk inherent in its failure to inquire or to ascertain the proper procedure; and whether or not Gook orally consented to Vogel, which was beyond Gook’s authority, is immaterial.

The judgment of July 5, 1972, is affirmed.


author: JAMES M. CARTER, Circuit Judge:

text:
    In the Matter of Ocean Air Tradeways, Inc., Bankrupt No. 90989. OCEAN AIR TRADEWAYS, INC., Appellant, v. ARRAY REALTY CORP. and Duncan, Korb & Trimble, Inc., Appellees.
    No. 26451.
    United States Court of Appeals, Ninth Circuit.
    June 19, 1973.
    Rehearing Denied July 19, 1973.

      Joseph Yovino-Young,. Oakland, Cal. (argued), Hyman R. Freidman, New York City, for appellant.
    Richard C. Lewis, Oakland, Cal. (argued), of Gilmore & Lewis, Oakland, Cal., for appellees.
    Before ELY and CARTER, Circuit Judges, and FERGUSON, District Judge.

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

   OPINION

JAMES M. CARTER, Circuit Judge:

This is an appeal from an order of the district court, affirming, without opinion, the order, findings and conclusions of the referee in bankruptcy. The referee allowed two claims in bankruptcy: (1) Arkay Realty Corp. (hereafter Arkay) claimed $150,517.00 for breach of a contract to buy real property from the bankrupt, Ocean Air Tradeways, Inc. (hereafter Ocean Air); and (2) Duncan, Korb & Trimble, Inc. (hereafter DKT), a licensed real estate broker, claimed broker’s fees in the same transaction of $17,500.00, plus interest. We affirm.

Facts

Ocean Air owned certain real property in San Leandro, California, including a building occupied by Airpower Overhaul, Inc. (hereafter Overhaul). Overhaul maintained airplanes for United States Overseas Airlines, Inc. (hereafter Airlines) and others.

Airlines owned all the stock of Overhaul. In turn, 75.5 percent of Airlines, and 70 percent of Ocean Air, were owned by Ralph Cox, Jr. The remaining stock of each was owned by members of Cox’s family. Cox was a director of all three corporations, the president of Ocean Air and of Airlines, and the vice president of Overhaul. The referee found that Cox “unilaterally directed and controlled” all three corporations, and did business without the usual corporate formalities.

The corporations had borrowed money from Walter Heller & Company, Inc. (hereafter Heller), in return for which all of Airlines’ stock in Overhaul, and all of Cox’s stock in Ocean Air and Airlines, was pledged as security. Heller also had a deed of trust on Ocean Air’s San Leandro property.

In late 1965, Heller was pressing for payment of the loan. Cox and one Steward Carter, Jr., an attorney, agreed that Carter would receive half of Airlines’ stock in return for seeking reinstatement of Airlines’ operating certificate, suspended in 1964 for insufficient capitalization, and for helping to obtain new financing. Michael Bennett, an employee of Carter’s, began negotiations with Heller to stave off an impending foreclosure sale of the San Leandro property. Bennett was told that the sale would be postponed if a buyer for the property could be found.

Bennett met with DKT to find a purchaser, and DKT located Arkay. On February 8, 1966, the parties executed a contract, denominated a “Deposit Receipt,” under which Arkay was to pay Ocean Air $367,000, in a somewhat complex transaction. For purposes of this opinion we need not detail these matters, which involved a 20-year lease of the property by Overhaul, an assignment to Arkay of part of Overhaul’s rents from Airlines, and an option to Arkay on one-third of Overhaul’s stock. Ocean Air was to cause Overhaul to execute the lease. Under terms of the contract, Carter and Bennett agreed in writing to guarantee Overhaul’s performance. They were to receive all of the Overhaul stock from Airlines, allegedly in return for $200,000. Ocean Air expressly agreed to deliver marketable title to the San Leandro property, free of certain encumbrances, including the Heller trust deed. Closing was to occur on or before March 10, 1966, which coincided with Heller’s date for the foreclosure sale.

The referee found that Ocean Air “never intended to perform the contract when Cox executed it, or at any time thereafter.” In essence, Cox was merely buying time to forestall the Heller foreclosure proceedings. The referee found that

“On March 8, 1966, the bankrupt [Ocean Air], without adequate reason or excuse, repudiated the contract by informing [DKT and Arkay] that the bankrupt would not perform under the contract. It was not impossible for the bankrupt to perform under the contract. The bankrupt breached the contract wilfully and in bad faith.”

Arkay had deposited $10,000 with DKT, to be later placed in the escrow. DKT returned Arkay’s deposit about two weeks after Ocean Air’s breach. The deposit had been held in DKT’s trust account; nothing had ever entered escrow. The referee further found that Arkay and DKT had fully performed insofar as Ocean Air and Cox had not, by their breach, excused such performance.

Return of Arkay’s Deposit

Ocean Air contends that when DKT returned Arkay’s deposit, after the time for performance had passed, Arkay could not thereafter recover damages for Ocean Air’s breach. DKT never placed the deposit into escrow, because Cox failed to attend meetings scheduled for finalization of escrow instructions. The deposit was held by DKT as evidence of good faith, and apparently was returned on DKT’s initiative. We cannot imply a demand and election of remedies in such a situation, as Ocean Air would have us do.

The measure of damages for breach of an agreement to convey real estate is the price paid, “but adding thereto, in the case of bad faith, the difference between the price agreed to be paid and the value of the estate agreed to be conveyed, at the time of the breach. . . .” Cal.Civ.Code §' 3306 (1954). The vendee is “entitled to the return of the principal paid,” Engasser v. Jones, 88 Cal.App.2d 171, 176, 198 P.2d 546, 549 (1948); and interest thereon, Rasmussen v. Moe, 138 Cal.App.2d 499, 504, 292 P.2d 226 (1956). Where the seller breaches in bad faith, as Ocean Air did here, the buyer is entitled to damages for the loss of his bargain plus payments and advances under the contract. Eastwood Homes, Inc. v. Hudson, 161 Cal.App.2d 532, 327 P.2d 29 (1958); Dempsey v. Stauffer (3 Cir. 1962), 312 F.2d 360, 363-364. A non-breaching buyer, such as Arkay here, may withdraw his deposit and still sue for damages arising from the seller’s breach. Jeppi v. Brockman Holding Co., 34 Cal. 2d 11, 18, 206 P.2d 847 851 (1949); Johnson v. Goldberg, 130 Cal.App.2d 571, 279 P.2d 131 (1955).

When Ocean Air Repudiated the contract on March 8, 1966, a cause of action for breach thereof arose. Under California law, it is clear that Ocean Air anticipatorily repudiated the contract, and that Arkay was thereafter excused from any further performance thereunder.

“A contract is totally breached and an anticipatory repudiation occurs when the promisor without justification and before he has committed a breach, makes a positive statement to the promisee indicating that he will not or cannot substantially perform his contractual duties.” Gold Mining & Water Co. v. Swinerton, 23 Cal.2d 19, 29, 142 P.2d 22, 27 (1943).
“If a party to an obligation gives notice to another, before the latter is in default, that he will not perform the same upon his part, and does not retract such notice before the time at which performance upon his part is due, such other party is entitled to enforce the obligation without previously performing or offering to perform any conditions upon his part in favor of the former party.” Calif.Civ.Code § 1440 (1954).

Refusal by the vendor to perform, excuses formal tender of the purchase price by the purchaser. Hunt v. Mahoney, 82 Cal.App.2d 540, 549, 187 P.2d 43 (1947). “Performance by the party not in fault is always excused by the wrongful refusal to perform by the other party.” Central Oil Co. v. Southern Ref. Co., 154 Cal. 165, 167, 97 P. 177 (1908).

Thus, Ocean Air’s repudiation excused Arkay from tendering the purchase price and from maintaining or increasing any monies advanced toward it, in escrow or otherwise.

Ocean Air also urges that a provision in the contract concerning its obligation to furnish marketable title, established the return of the deposit as Arkay’s exclusive remedy. There is no merit to this contention. The provision concerned only quality of title, not its very existence, and not whether Ocean Air was able to acquire title or to remove clouds upon it.

Therefore, under California law Arkay was entitled both to return of the deposit and to damages for Ocean Air’s breach. Arkay would have been so entitled even if the $10,000 had been on deposit in escrow, rather than in DKT’s trust account. Return of the deposit was not an exclusive remedy, as Ocean Air contends.

Failure to Buy Overhaul Stock

Ocean Air next urges that its performance was excused by reason of Carter’s and Bennett’s failure to perform their supposed guarantee to pay Ocean Air $200,000 for its stock in Overhaul, as a condition precedent to Ocean Air’s performance.

There are three problems with this theory. First, if there did exist an obligation by Carter and Bennett to pay $200,000 for the Overhaul stock, that agreement was not proved below. No writing to that effect was introduced. If such an agreement existed, Cox could easily have protected himself by expressly requiring such payment as a condition precedent to the Arkay transaction.

Second, Cox controlled all three corporations. To the extent that any of them or their or his employees, failed to perform, he could have prevented that failure.

Moreover nothing prevents one party from contracting that he will obtain the performance of a third party. When a party so contracts, the rule is as stated in Restatement, Contracts, § 455 (1932):

“Impossibility of performing a promise that is not due to the nature of the performance, but wholly to the inability of the individual promisor, neither prevents the formation of a contract nor discharges a duty created by a contract.”

See also id., Comment a and Illus. 6; 6 Corbin, Contracts §§ 1332-33 (1962). The California courts follow this rule. Klauber v. San Diego Street-Car Co., 95 Cal. 353, 357-358, 30 P. 555 (1892); McCulloch v. Liguori, 88 Cal.App.2d 366, 370, 199 P.2d 25 (1948). See also B’s Co., Inc. v. B. P. Barber & Assoc., Inc. (4 Cir. 1968), 391 F.2d 130, 137.

Third, the referee specifically found that it was not impossible for Ocean Air to perform. The burden of proving such a defense was on Ocean Air. See Abrams v. Motter, 3 Cal.App. 3d 828, 839, 83 Cal.Rptr. 855 (1970). The party advancing the defense must prove that the events which he claims frustrated his performance were not reasonably foreseeable at the time of contracting. Gold v. Salem Lutheran Home Ass’n of the Bay Cities, 53 Cal.2d 289, 291, 1 Cal. Rptr. 343, 347 P.2d 687 (1959); Glenn R. Sewell Sheet Metal, Inc. v. Loverde, 70 Cal.2d 666, 676 & n. 13, 75 Cal.Rptr. 889, 451 P.2d 721 (1969).

Therefore, in this case, Ocean Air’s own inability to perform, even it it were assumed contrary to the referee’s findings, would not have excused Ocean Air’s performance.

The Referee’s Findings of Bad Faith

Ocean Air contends that there was insufficient evidence to support the referee’s finding that its breach was willful and in bad faith. The short answer is that the finding is amply supported by such evidence as Cox’s unexcused failure to attend meetings scheduled to finalize escrow; his attempt to sell the San Leandro property to third parties after he had signed the Arkay contract; and evidence that he felt that the Arkay contract was “meaningless and all it is is buying time; cannot be performed ; it didn’t mean anything.”

Ocean Air also argues that the failure of Carter and Bennett to perform removed any causative nexus between Cox’s original intent not to perform, and Ocean Air’s breach. We have dealt with Carter’s and Bennett’s nonperformance above; to attempt to so apply it here borders on the frivolous.

Arkay’s Ability to Perform

The next claim of Ocean Air is that Arkay did not adequately prove that it was able to perform up to and at the time of Ocean Air’s anticipatory breach. We have reviewed the record, and we believe it amply supports the referee’s findings that Arkay was at all material times ready and able to perform.

DKT’s Brokerage Commission

Ocean Air’s final contention is that DKT was not entitled to its brokerage commission under the contract because of alleged impossibility of Ocean Air’s performance, with which we have dealt, swpra, and because DKT’s return of Arkay’s deposit was allegedly in derogation of DKT’s fiduciary duty as broker to Ocean Air. This contention is also without merit.

The $10,000 deposit was not paid by Arkay to or for the account of Ocean Air as part performance under the deposit receipt. Arkay deposited it with DKT, with the intention that DKT would deposit it in escrow on Arkay’s behalf, and that Ocean Air would have no right to the deposit unless it fully performed or Arkay breached the contract. When Ocean Air repudiated the contract, DKT, as agent with respect to the deposit, had no reason to retain the funds beyond the time for performance. Return of the deposit was proper and DKT was fully entitled to its commission.

The judgment is affirmed.

      . The case was argued and submitted on May 11, 1972. It has been a troublesome one for the panel. Because of conflicting views, we have been unable earlier to arrive at a decision. The case was assigned to the writer on May 23, 1973.

      . The contract reads:
      “9. Title is to be free of liens and encumbrances other than those set forth herein. Evidence of title shall be a California Land Title Association standard coverage form policy of title insurance issued through Western Title Insurance and Guaranty Company to be paid for by seller [Ocean Air]. If seller is unable to convey a marketable title, except as herein provided, within one month after acceptance hereof by seller, or if the improvements on said property be destroyed or materially damaged prior to transfer of title, then, upon demand, of buyer [Arkay], said deposit and all other sums paid by buyer shall be returned to buyer, and this agreement as between buyer and seller shall be of no further effect, and seller thereupon shall become obligated to pay all expenses incurred in connection with examination of title.”
      The first sentence establishes that Section 9 concerns freeing title of liens and encumbrances. The second sentence prescribes a form for evidence of title. The third and last sentence, upon which Ocean Air would rely, describes what is to occur in the event that “seller is unable to convey a marketable title.
      . ” The third sentence does not say, in effect, “if seller is unable to convey title.” If that were the language, then the seller’s inability to convey, in terms of economic “impossibility,” would perhaps be material. But such is not the case. The sentence concerns only the capability of seller to convey something that is well-defined in law, “a marketable title,” meaning a title which is free of certain defects and no other sort of title. See note 3 infra. It concerns only marketability, not all aspects of title such as whether seller is financially able to acquire any title whatsoever. In the context of the first two sentences concerning encumbrances and evidence of title, any other interpretation is beyond reason.
      It is apparent from a full reading of the section that the words “upon demand of buyer” modify all three clauses that follow. After the words “upon demand of buyer” appears the provision for return of the deposit, and then a comma. The section must be read so that the material following the comma, to wit, “and this agreement shall be of no further effect,” is predicated by the words “upon demand of buyer.” Therefore, Section 9 does not say, “and upon the return of the funds to the buyer the agreement shall be of no further effect.”

      . “Marketable title” is a term of art in real property law.
      “' [M] arketable title,’ to which the vendee ... is entitled, means. a title which a reasonable purchaser, well informed as to the facts and their legal bearings, willing and anxious to perform his contract, would, in the exercise of that prudence which business men ordinarily bring to bear on such transactions, be willing and ought to accept.” Staton v. Buster, 79 Cal. App. 428, 432, 249 P. 878, 880 (1926) (quoting); George v. Colvin, 98 Cal.App.2d 57, 62, 219 P.2d 64 (1950); Hocking v. Title Ins. & Trust Co., 37 Cal.2d 644, 649, 234 P.2d 625 (1951).

      . Appellant’s brief lumps together the doctrines of impossibility, impracticability, and frustration of contract purpose. We have discussed impossibility in the text. This is not a proper case in which to apply the doctrine of frustration, wherein performance remains possible but its expected value to one of the parties has been destroyed by an intervening and fortuitous event. See Gold v. Salem Lutheran Home Ass’n of the Bay Cities, 53 Cal.2d 289, 1 Cal.Rptr. 343, 347 P.2d 687 (1959); Lloyd v. Murphy, 25 Cal.2d 48, 153 P.2d 47 (1944). Nor is it claimed that one party acted to prevent the performance of another, as appears in Carlson v. Sheehan, 157 Cal. 692, 109 P.2d 29 (1910). Finally, this is not a case of impracticability, which involves conditions approaching impossibility. See Transatlantic Fin. Corp. v. United States (1966), 124 U.S.App.D.C. 183, 363 F.2d 312, 319. Merely a somewhat greater expense of performance than anticipated, is insufficient. Restatement, Contracts 467 (1932) ; Kennedy v. Reece, 225 Cal.App. 2d 717, 724-727, 37 Cal.Rptr. 708 (1964) ; Klauber v. San Diego Street-Car Co., 95 Cal. 353, 358, 30 P. 555 (1892) ; Carlson v. Sheehan, supra-, Mineral Park Land Co. v. Howard, 172 Cal. 289, 156 P. 458 (1916). See also City of Vernon v. City of Los Angeles, 45 Cal.2d 710, 717-721, 290 P.2d 841 (1955) (extreme hardship) ; Foster v. Atlantic Ref. Co. (5 Cir. 1964), 329 F.2d 485, 489.


author: LEWIS, Chief Judge.

text:
    TIPTON AND KALMBACH, INC., Appellant, v. UNITED STATES of America, Appellee.
    No. 72-1563.
    United States Court of Appeals, Tenth Circuit.
    July 9, 1973.

      James H. Turner, Denver, Colo. (Stephen A. Weinstein, Denver, Colo., with him on the brief), for appellant.
    Richard S. Halberstein, Dept, of Justice, Washington, D. C. (Scott P. Cramp-ton, Asst. Atty. Gen., Meyer Rothwacks, and Thomas L. Stapleton, Dept, of Justice, Washington, D. C., with him on the brief), of counsel, James L. Treece, U. S. Atty., for appellee.
    Before LEWIS, Chief Judge, DURFEE , Judge, Court of Claims, and HOLLOWAY, Circuit Judge.

       Sitting by designation.

   LEWIS, Chief Judge.

Tipton and Kalmbach, Inc. (taxpayer) appeals from a judgment denying its claim for refund of federal income taxes paid for the fiscal years ending April 30, 1964, 1965 and 1966.

In 1960 and 1962 taxpayer, a Colorado corporation, entered into agreements with the West Pakistan Water and Power Development Authority (WAPDA). Pursuant to the first of these agreements, taxpayer was to perform engineering services incident to the design and construction of certain canals in West Pakistan. Under the second agreement, taxpayer was to perform engineering services incident to reclamation and ground water projects in West Pakistan. Three categories of payments constituted taxpayer’s compensation under the two contracts: (1) a fixed monthly fee; (2) reimbursement for certain specified costs including the salaries paid to taxpayer’s employees; (3) an allowance for indirect and overhead expenses in the amount of 50 percent of the reimbursable salaries. Taxpayer’s services under WAPDA contracts were performed by expatriate personnel in Pakistan, Pakistani nationals, employees in taxpayer’s Denver office and its two principals, Messrs. Tipton and Kalmbach. Tipton and Kalmbach devoted approximately 20 to 40 percent of their professional time in Pakistan. The remainder of their time was substantially dedicated to work on the WAPDA projects in the Denver office. During the tax years in issue, approximately 95 per cent of taxpayer’s income was from the two WAPDA contracts.

The Internal Revenue Service conducted two audits of taxpayer’s returns for the years in issue and determined that the claimed foreign tax credits were excessive because taxpayer’s income included compensation for services rendered within the United States as Well as within Pakistan. Taxpayer paid the alleged deficiencies and this refund litigation ensued.

Section 901 of the Internal Revenue Code, 26 U.S.C. § 901, permits an annual election to credit United States tax liability by the amount of foreign taxes accrued or paid. This foreign tax credit is limited by section 904(a)(2) of the Code to the same proportion of the total United States tax as the foreign taxable income bears to total taxable income. This limitation is best expressed in the following formula:

foreign tax credit _ foreign taxable income

total United States tax total taxable income

In the instant case the only disputed variables in this formula are the foreign taxable income and the resultant foreign tax credit.

The foreign taxable income in this case is determined by the source of income rule in sections 861(a)(3) and 862(a)(3) of the Code. These sections provide that the source of income is the place where the services are performed. Relying on Commissioner v. Piedras Negras Broadcasting Co., 5 Cir., 127 F.2d 260, taxpayer contends that the services performed in its Denver office were merely incidental to the predominant services rendered in Pakistan and that all of its income was thus from sources outside the United States. Taxpayer’s reliance on Piedras Negras is misplaced. That case did not involve any services performed in the United States. “[A] 11 of the services [the company] rendered in connection with its business were performed in Mexico.” Commissioner v. Piedras Negras Broadcasting Co., supra at 261. Furthermore, Code sections 861 (a)(3) and 862(a)(3) do not attribute all of a taxpayer’s income to the country where most of its services are performed. The undisputed evidence in the instant case demonstrates that taxpayer’s services under the WAPDA contracts were partially performed in its Denver office. Consequently, income attributable to such services is treated as income from sources within the United States, I.R.C. § 861(a)(3), and does not constitute foreign taxable income in computing the foreign tax credit limitation in section 904(a)(2) of the Code.

Since taxpayer’s services under the WAPDA contracts were rendered in the United States as well as in Pakistan, it is necessary to allocate its income between the domestic and foreign sources. The Internal Revenue Service utilized a payroll cost method of allocation, i. e., apportioning taxpayer’s total income between income from sources within the United States and income from sources in Pakistan in the same respective proportions as its payroll costs for services rendered in the United States and its payroll costs for services performed in Pakistan bear to total payroll costs. The district court concluded that the taxpayer failed to establish its right to a method of allocation other than this payroll cost basis. We disagree.

Taxpayer is entitled to an allocation on a time basis as provided in Treas.Reg. § 1.861-4 (b):

Amount includible in gross income. If a specific amount is paid for labor or personal services performed in the United States, that amount (if income from sources within the United States) shall be included in the gross income. If no accurate allocation or segregation of compensation for labor or personal services performed in the United States can be made, or when such labor or service is performed partly within and partly without the United States, the amount to be included in the gross income shall be determined by an apportionment on the time basis; that is, there shall be included in the gross income an amount which bears the same relation to the total compensation as the number of days of performance of the labor or services within the United States bears to the total number of days of performance of labor or services for which the payment is made.

Since taxpayer’s services were performed partly within the United States and partly within Pakistan, the second sentence of this regulation specifically directs an allocation on the time basis. Additionally, taxpayer’s exhibits 19 and 19A contain sufficient uncontroverted figures to utilize the time basis allocation formula recited in Treas.Reg. § 1.-861-4(b).

The government contends that the peculiar facts of this ease, while literally within the ambit of Treas.Reg. § 1.861-4(b), render the regulation inapplicable. Similar arguments have been made by the government with respect to the applicability of Treasury regulations in other tax cases and rejected by the courts. See McCord v. Granger, 3 Cir., 201 F.2d 103, 106; Petroleum Heat & Power Co. v. United States, 186 Ct.Cl. 486, 405 F.2d 1300, 1303; Weyerhaeuser Co. v. United States, 184 Ct.Cl. 492, 395 F.2d 1005, 1008. The government further contends that utilization of the payroll cost method more accurately reflects the allocation of income between foreign and domestic sources in this case than would the application of the time basis apportionment in Treas.Reg. § 1.861-4(b). The validity of this claim is debatable. Neither system of allocation can reflect with complete exactness the amount of taxable income and consequently we hold that the Internal Revenue Service should abide by its own regulations when they are not in conflict with an express statutory provision. See Coors Porcelain Co. v. Commissioner, 10 Cir., 429 F.2d 1, 5; Brafman v. United States, 5 Cir., 384 F.2d 863, 866; Miller v. Commissioner, 8 Cir., 333 F.2d 400, 403. Treas.Reg. § 1.861-4(b) provides for a reasonable, convenient and expeditious method of allocating income between foreign and domestic sources and does not conflict with sections 861 (a)(3) and 862(a)(3) of the Code. The Internal Revenue Service is thus not free to apply an ad hoc method of allocation when Treas.Reg. § 1.861-4(b) does not abuse the allocation issue in this case.

The judgment is reversed and remanded with directions that the district court enter a judgment consistent with this opinion.


author: WEIS, Circuit Judge.

text:
    SECURITIES AND EXCHANGE COMMISSION v. ABERDEEN SECURITIES CO., INC., et al. Appeal of Sherwin SELIGSOHN et al.
    No. 72-1708.
    United States Court of Appeals, Third Circuit.
    Argued April 30, 1973.
    Decided June 28, 1973.

      Theodore H. Focht, Gen. Counsel, Washington, D. C., SIPC, for appellees. Wilfred R. Caron, Asst. Gen. Counsel, Washington, D. C., for SIPC, of counsel.
    John Biggs, III, Wilmington, Del., for Claude P. Hudston, Trustee.
    Jerry E. Bogutz, Warren L. Soffian, David S. Rasner, Philadelphia, Pa., for appellants.
    Before HUNTER and WEIS, Circuit Judges, and NEWCOMER, District Judge.
   OPINION OF THE COURT

WEIS, Circuit Judge.

We are confronted in this case by the intricacies of the Securities Investor Protection Act of 1970 which seeks to provide assistance to those investors unfortunate enough to have selected a stockbroker, who perhaps is able to give sound financial advice to others but is unable to stay solvent himself. The intent of Congress to protect customers of financially distressed security dealers is clear, but the specifics of precise resolution of individual situations are clouded by the provisions of a statute which range far from the clarity of blue sky one might expect in this area of the law.

While the Securities and Exchange Commission has been given authority to enact appropriate regulations, it has not done so, and we therefore are left with the task of filling in rather large interstices in the Act resulting in part from engraftment of insurance provisions upon the preexisting Section 60(e) bankruptcy provisions applicable to stockbrokers, 11 U.S.C. § 96(e).

The Securities Investor Protection Act was passed by Congress in 1970 in response to demands that it provide some assurance to investors that they would not suffer financial loss as a consequence of bankruptcy of their stockbrokers. While the theory of the statute was that it was to provide a type of protection for security purchasers somewhat similar to that enjoyed by bank depositors under the FDIC, the complexities of the securities market obviously required some major differentiations.

In broad outline the legislation contemplates the appointment of a Receiver in the event of the insolvency of a broker who is covered by the terms of the statute. A liquidation, rather than a reorganization, is to be conducted and the claims of the debtor’s customers are to be paid promptly. To the extent that the insolvent broker’s assets are insufficient to satisfy obligations to his clientele, the Securities Investor Protection Corporation (SIPC), an entity established by the Act, will advance funds to pay claims up to $50,000 per customer, of which no more than $20,000 represents reimbursement of cash.

The account of a customer is to be valued as of the day when proceedings are instituted against the broker — the “filing date”— in order to determine his “net equity”. A computation is made to arrive at the dollar amount of the customer’s account by excluding from it, specifically identifiable property which is returned to him; by deducting indebtedness and other obligations, if any, to the insolvent broker; and by giving effect to certain open contractual commitments.

All property held by the debtor for the account of his patrons, other than that specifically identifiable, forms a single and separate fund in which all customers are entitled to share pro rata.

The Trustee may satisfy customer claims from the single and separate fund or from the monies advanced by SIPC or by a combination from the two sources. To the extent that a claim is satisfied by advances from SIPC, it is subrogated to the customer’s rights to a pro rata share of the single and separate fund.

We must deal with two distinct types of claims in this case which require more detailed analysis of specific portions of the Act and in the interest of clarity, we will treat each claim separately.

THE SELIGSOHN CLAIM

One Sherman Seligsohn placed an order with his broker, Aberdeen Securities Company, Inc., on July 28, 1971 for 400 units of Oratronics Corporation and remitted the full price of $2,000. He received a notice from Aberdeen advising that “as agent for the underwriter we have sold to you” 400 Oratronics and acknowledging receipt of payment. Seligsohn never received the certificates from Aberdeen or any indication that they were being held for his account by the broker.

On September 15, 1971 an application was made to the United States District Court for the District of Delaware for the issuance of a temporary restraining order against Aberdeen to enjoin violations of. the Securities Act. Later a Trustee was appointed under the provisions of the Securities Investor Protection Act.

The Trustee found that Aberdeen had in its possession only 100 units of Oratronics and that three other customers had claims for 900 units in addition to Seligsohn’s 400. In due course the Trustee submitted to the Court a proposal to pay Seligsohn $1,245.38 in cash plus 31 units of Oratronics which was his pro rata share of the securities which had been found in the debtor’s office.

Seligsohn protested this method of satisfying his claim and since the securities had risen in value, understandably demanded that the Trustee provide him with 400 units instead. Additionally, Seligsohn asked permission to appear in a class action as a representative of those similarly situated.

After hearing, the District Court approved the Trustee’s proposed disposition of Seligsohn’s claim and rejected the motion to treat the proceeding as a class action.

Section 6(g) of the Act requires the Trustee to discharge promptly:

“ . . . all obligations of the debt- or to each of its customers relating to, or net equities based upon, securities or cash by the delivery of securities or the effecting of payments to such customer . . . insofar as such obligations are ascertainable from the books and records of the debtor or are otherwise established to the satisfaction of the trustee . . . For that purpose the court among other things shall — •
(1) In respect of claims relating to securities or cash, authorize the trustee to make payment out of moneys made available to the trustee by SIPC
(2) in respect of claims relating to, or net equities based upon, securities of a class and series of an issuer
. authorize the trustee to deliver securities of such class and series if and to the extent available to satisfy such claims in wholé or in part, with partial deliveries to be made pro rata to the greatest extent considered practicable by the trustee.”

Section 6(c) (2) (A) (iv) defines the “net equity” of a customer’s account as:

“the dollar amount thereof determined by giving effect to open contractual commitments completed as provided in subsection (d) of this section, by excluding any specifically identifiable property reclaimable by the customer, and by subtracting the indebtedness, if any, of the customer to the debtor from the sum which would have been owing by the debtor to the customer had the debtor liquidated, by sale or purchase on the filing date, all other securities and contractual commitments of the customer . . . ”

The Trustee claimed that his action complied with these provisions of the Act. However, the claimant asserts that the duty of Aberdeen to deliver the certificates is an “open contractual commitment” as contemplated by subsection (d), which should be completed by the Trustee through the purchase of Oratronics units in the open market and delivery to Seligsohn.

Section 6(d) reads in part:
“Completion of open contractual commitments. The trustee shall complete those contractual commitments of the debtor relating to transactions in securities which were made in the ordinary course of debtor’s business and which were outstanding on the filing date—
(1) in which a customer had an interest, . . . For purposes of this subsection . . . (i) the term ‘customer’ means any person other than a broker or dealer, and (ii) a customer shall be deemed to have had an interest in a transaction if a broker participating in the transaction was acting as agent for a customer, or if a dealer participating in the transaction held a customer’s order which was to be executed as a part of the transaction . . . ”

The District Court ruled that undertakings involving only the debtor and his customers are not the contractual commitments contemplated by subsection (d), and therefore the Trustee could not be forced to satisfy this claim in kind. We agree with the conclusion of the learned Court below.

Our review of the legislative history of the Act and the testimony by various witnesses before committees of both the Senate and the House convinces us that the open contractual commitments covered by § 6(d) are those between the debtor and another broker-dealer.

The securities industry was concerned with the “domino effect” of the financial difficulties of one broker extending to others with whom he dealt and wished to isolate problems to the one who was insolvent if at all possible. However, there was considerable sentiment in Congress to limit the protection of the Act to customers and not to extend it to transactions between brokers. The compromise ultimately agreed upon was to provide for completion of inter-broker or interdealer transactions only when the interest of a customer on either side was involved. However, discretion was granted to the SEC to promulgate rules which would allow completion of transactions in which customers did not have an interest if this was determined to be in the public interest.

Only by limiting § 6(d) to open inter-dealer contractual agreements is it possible to arrive at a harmonious relationship with other portions of the Act, such as the definition of “net equity,” § 6(c)(2)(A)(iv), and a special provision for advancement of funds by the SIPC in addition to customers’ claims provided by § 6(f) (2).

If the order by a customer for the purchase or sale of a specific security has been placed by the debtor with another broker and remains uncompleted on the filing date, then the Trustee is required to complete the transaction. Similarly, if an order has been placed with the debtor by another broker on behalf of his customer, then performance would be required. Even in these situations the securities may not be specifically identifiable property, but of course the transactions would be “given effect” in computing the dollar value of the “net equity” of the customer.

We conclude, therefore, that the District Court was correct in refusing to order the Trustee to purchase the Oratronics units in the open market and that it did not err in approving the settlement proposed by the Trustee.

THE RAIZES CLAIM

In February, 1970, petitioner Raizes placed an order with Aberdeen to purchase 100 shares of Boatland, Inc., a prospective new issue. This purchase was confirmed by Aberdeen as principal within a few days and was paid for by the Raizes in the form of a credit of $500 from their account. No certificates were ever received from Aberdeen although funds were transmitted by it to Charter Securities, Inc., a broker-dealer in New York City, which was underwriting the Boatland offering. The transaction was not completed because the stock was never issued, and Boatland and Charter Securities both went into bankruptcy. The Raizes filed a claim against Charter as a general unsecured creditor in that bankruptcy proceeding. All of these events occurred before the filing date of September 15, 1971.

In the Court below, the Trustee determined that the net equity as to the Boatland transaction on the date of filing was zero and therefore proposed to make no payment to the Raizes. The District Court reluctantly agreed with this action, stating that it was unfortunate that the Raizes would receive no compensation for their loss but that the wording of the statute mandated that result.

We feel that the Court below did not correctly consider the definition of net equity in the context of this fact situation and remand for further proceedings.

We need not consider whether the transaction might fall in the category of a subsection (d) uncompleted commitment because the facts demonstrate that since this particular stock was not in existence, the purchase never could be made. The Raizes, therefore, do not have a claim for the stock itself.

At the hearing, the Court properly posited the possibility of the existence of a claim by these customers against Aberdeen but was diverted by argument on the applicability of open contractual commitment or single and separate fund theories rather than being aided by an analysis of the term “net equity.”

The record is silent on the point but, for purpose of discussion, we assume that the Raizes’ total claim was less than $50,000 and that the cash portion thereof less than the $20,000 coverage provided by the Act. In such a situation the single and separate fund concept is of academic, if any at all, interest to the customers. Their prime concern must be to insist upon payment of the “net equity” valuation with funds advanced by the SIPC as necessary.

The definition of “net equity” was taken in part from § 60(e) of the Bankruptcy Act but was modified somewhat in the drafting of the Securities Investor Protection Act of 1970. Unfortunately, some clarity was lost in the process. Thus the particular section does not make it crystal clear that the customer’s net equity consists of both his cash balance and the securities account valued as of the filing date. We have no doubt, however, that the “dollar amount” of a customer’s account includes his cash which the broker has, or should have, been holding. Indeed, the SIPC says in its brief:

“In short, the 1970 Act contemplates (as did § 60(e)) that a customer’s cash and securities position will be netted out as of the filing date "

Furthermore, subsection (g) recites the duty of the Trustee:

“To discharge promptly ... all obligations of the debtor to each of its customers relating to, or net equities based upon securities or cash "

Thus, if under local law, or by virtue of regulations under which it operated, the debtor was obligated to refund the $500 to the Raizes because of inability to deliver thé Boatland stock, then there would be a claim for cash properly included in the term “net equity.”

Since the record does not contain sufficient facts upon which we can rule, we remand to the District Court for appropriate findings in order to determine if there was, on the filing date, a legally sufficient claim by the Raizes against the debtor because of an obligation to return the money which had been made available to Aberdeen for purchase of a nonexistent stock.

THE CLASS ACTION ISSUE

Both Seligsohn and Raizes petitioned the Court to treat their claims as part of a class action. The District Court declined to so order contending that the procedures in the bankruptcy proceeding were adequate to protect the interest of all prospective members of the class. We find no error in the District Court ruling.

While there may be some question whether the order of the lower Court in this respect is appealable, we prefer to deal with it on the merits at this time. See 2 Collier on Bankruptcy, 14th Ed., pp. 792, 794, 789.

This Court has already decided that Fed.R.Civ.P. 23, the class action provision, is not an appropriate vehicle in a railroad reorganization. See In Re: Penn Central Transportation Company, 328 F.Supp. 1273 (E.D.Pa.1971), aff’d 455 F.2d 976 (3rd Cir. 1972). Much the same considerations which apply to the reorganization of a railroad apply also in this proceeding which is to be conducted under those provisions of Chapter X of the Bankruptcy Act not inconsistent with the Investor Protection statute. See §§ 78eee(b)(2) and 78fff(b)(1).

All creditors were given notice of the insolvency proceedings, and they were given the opportunity to file claims. A ruling by the Court as to one category of creditors certainly would apply to all in that group. Furthermore, this is not a plenary suit but a liquidation proceeding which should be concluded as expeditiously as possible. We see no indication that a class action designation would have such a result. The petitioners failed to show that the method they advocated was superior to the procedures being followed by the Bankruptcy Court. The determination made by the District Court on this point is amply supported by the record and well within its discretion.

The orders as to the Seligsohn claim and the denial of applications to proceed as class actions will be affirmed. The order as to the Raizes’ claim will be reversed and remanded for further proceedings not inconsistent with this opinion.

      . 15 U.S.C.A. § 78aaa et seq.

      . These “units” were a combination of stock shares and warrants.

      . The practical problem presented in this claim involves time. As we read the act, a customer’s position is frozen as of the date a brokerage house goes into liquidation. From that date until his claims are paid, a customer is at the mercy of the market. If the market rises, he “loses”; if it falls, he “wins”. To read the act as appellant contends would help the customer in a rising market, but it would leave open the problem of a falling market. The change of values between filing date and the time when the claim is paid is a problem for legislative, not judicial, solution. It should be remembered that before SIPC, customers of troubled brokerage houses might not have realized anything at all on their claims.

      . 15 U.S.C. § 78fff (g).

      . 15 U.S.O. § 78fff(c) (2) (A) (iv).

      . 15 U.S.O. § 78fff(d).

      . 1970 U.S. Code Congressional and Administrative News, p. 5254.

      . Hearings before the Subcommittee on Commerce and Finance of the Committee on Interstate and Foreign Commerce, House of Representatives on H.R. 13308, I-I.R. 17585, H.R. 18081, H.R. 18109, H.R. 18458, Ninety-first Congress, Second Session 1970.
      Page 226, Mr. Budge [Chairman of the SEC] : “Yes, sir; the industry’s proposal, if I recall it correctly, would permit the SEC to make the determination in this area. This language restricts the obligations to transactions on behalf of customers as distinguished from transactions between broker-dealers for the accounts of broker-dealers.
      “Mr. Focht: Open transactions between broker-dealers for those accounts?
      “Mr. Budge: Yes, sir.
      * * * * *

      “Mr. Loomis [General Counsel for the SEC]” The thought here is where there is an open, uncompleted transaction for the account of public customers, whether it results in a profit or a loss to the debtor, it should be closed and completed in order to avoid uncertainties and the creation of various problems within the industry — people owing money and having money coming to them, owing securities, having securities coming to them .
      * * * *
      Page 329 :
      “Mr. Budge: There also is a recognition of the fact that many interdealer transactions and bank transactions may be for the account of customers. Where this is so, the coverage also applies. The bill would require completion of securities transactions of the debtor broker-dealer made in the ordinary course of its business and outstanding on the date the Corporation petitions the court for the appointment of a trustee, if such transaction involves a customer of the debtor of another broker or dealer who entered into such transaction on behalf of a customer. Open transactions between the debtor and other brokers or dealers where neither was acting on behalf of a customer could not be completed by the trustee unless the Commission, by rule or regulation, determined that the completion of such commitments are in the public interest.”

      . 15 U.S.C. § 78fff(f)(2).

      . A similar interpretation of § 6(d) contractual commitments was reached by the district court for the District of Massachusetts in an unreported memorandum, Securities and Exchange Commission v. Security Planners Ltd., et al., Civil Action No. 71-656-M, June 23, 1972.

      . 11 U.S.C. § 96(e).


author: NICHOL, District Judge.

text:
    Fernando F. MONTES, Appellee, v. Lauren BETCHER and Evelyn Betcher, d/b/a The Hagen Resort, Appellants.
    No. 72-1527.
    United States Court of Appeals, Eighth Circuit.
    Submitted Feb. 14, 1973.
    Decided July 11, 1973.

      O. C. Adamson, II., Minneapolis, Minn., for appellants.
    John T. Chapman, Minneapolis, Minn., for appellee.
    Before LAY and BRIGHT, Circuit Judges, and NICHOL, District Judge.

       Chief Judge, District of South Dakota, sitting by designation.

   NICHOL, District Judge.

On the warm Sunday afternoon of July 13, 1968, 35 year old Fernando Montes, a citizen of Nebraska, took a running dive off a short dock which served the Appellants’ resort, one of the many enhancing Minnesota’s beautiful lakes. He surfaced with a severely lacerated scalp and a vertebral fracture. Shortly after the incident, a jagged piece of concrete was recovered from the lake floor in the general area where plaintiff had entered the water. The concrete piece resembled the home-made boat anchors constructed by Appellants to use in the boats which frequented the boat dock.

Plaintiff, Montes, a proficient swimmer and diver, claims that he executed a flat, “racing” dive because he knew he was plunging into shallow water. The water depth was variously described to be from 27 in. to waist level. Montes testified, however, that his ultimate purpose was to grab the ankles of a friend who was standing in the water 15 feet from the end of the dock, a purpose which would require either a deep dive or a subsequent submergence.

Montes was very familiar with the swimming area, and had executed dives from the boat dock on numerous previous occasions. Never before had he encountered rocks or blocks in the water. He admitted to having imbibed two or three drinks on the afternoon of the accident.

The Appellants, Mr. and Mrs. Bétcher, citizens of Minnesota, had owned the resort since 1963. They charged $10 per day for cabin accommodations. Although the area surrounding the boat dock was perennially in use by Appellants’ swimmer-patrons and although Mr. Betcher had seen swimmers jump off the boat dock, he testified that he had never made any special attempt to inspect the lake bottom for debris nor had he ever “raked” the shoreline lake bottom. Never had he erected signs warning of the dangers of diving in the shallow water or the possible presence of debris in the swimming area. Never had he placed floats in the water to discourage the intrusion of boats into the swimming and diving area; in fact there was no segregation whatsoever of swimming waters from boating waters.

The case went to the jury on a comparative negligence instruction. The jury adjudged defendants 90% negligent and the plaintiff 10% negligent. The Appellants-defendants challenge the sufficiency of the evidence to support submission to the jury and the Trial Court’s refusal to instruct on assumption of risk.

A jury must not be denied the right to make reasonable inferences from the evidence. Hanson v. Christensen, 275 Minn. 204, 145 N.W.2d 868, 874 (1966). Given that premise, we conclude that the jury could have reasonably inferred that the Appellee came into contact with the concrete block rather than with the bottom of the lake.

Appellants’ challenge to the submission of the case to the jury is based upon a contention that the Trial Court was mistaken in the formulation of Appellants’ duty to their guests. They first contend that a riparian owner is not responsible for the safe maintenance of property beyond the meander line of a lake, which line marks the boundary between Appellants’ shoreline land and submerged land which belongs to the state. But even if Appellants are held responsible for the maintenance of submerged lands, Appellants contend, that responsibility extends only to the remedy of dangerous conditions known to Appellants or of which they could have acquired knowledge had they been in the exercise of reasonable care. Since there was no evidence that Appellants knew of the presence of the cement block nor that it had been there long enough to mandate an invocation of constructive knowledge, Appellants contend the case should not have gone to the jury.

The Trial Court correctly rejected these formulations of duty (or lack thereof). Relying upon the case of Hanson v. Christensen, 275 Minn. 204, 145 N.W.2d 868 (1966), the Court held a resort owner who avails himself of the advantages of riparian ownership for resort purposes owes to his patrons a duty of reasonable care which includes “active vigilance” in their protection from foreseeable risks. See also, Diker v. City of St. Louis Park, 268 Minn. 461, 130 N.W.2d 113, 116 (1964) (and cases cited therein); Lindgren v. Voge, 260 Minn. 262, 109 N.W.2d 754, 758 (1961). The Court thus rejected the necessity of showing actual knowledge of the existence of the dangerous condition or of showing that the condition was of sufficient duration to afford constructive notice, which are the ordinary standards of care in the business invitee situation.

The jury was perfectly justified in determining that Appellants had violated this duty in any one or more of three respects: (1) their failure to warn of the dangers of diving off the boat dock; (2) their failure to periodically “rake” the swimming-diving area in search of dangerous obstructions; (3) their failure to segregate swimming areas from boating areas. In the absence of any evidence of an intervening-superseding cause, the jury was also justified in concluding that the Appellants’ omissions were the cause of Appellee’s injuries. The jury’s allocation of negligence between the Appellants and the Appellee pursuant to Minnesota’s comparative negligence statute, Minn.Stats. Ann. Sec. 604.01 (1969), is determinative absent a showing that there was no evidence to support it. Donovan v. Dixon, 261 Minn. 455, 113 N.W.2d 432, 435 (1962); Karis v. Kroger Co., 26 Wis.2d 277, 132 N.W.2d 595, 599 (1965). That clearly is not the ease.

Appellants ’ also contend that the Trial Court’s failure to instruct on assumption of risk warrants reversal and a new trial. Marshalled against this position are Appellee’s arguments that, first, Appellants failed to submit a timely request for the instruction and, second, the merger of the defense of assumption of risk into the defense of contributory negligence, declared by the case of Springrose v. Willmore, 292 Minn. 23, 192 N.W.2d 826 (1971), applies to abrogate the necessity of instructing on assumption of risk. We find it unnecessary to treat these arguments because we cannot find sufficient evidence in the record to support an instruction on assumption of risk. To justify an instruction on assumption of risk, there must be evidence to support three jury findings: (1) that plaintiff had knowledge of the risk; (2) that he appreciated the risk; (3) that he had a choice to avoid the risk or chance it and voluntarily chose to chance it. Tatro v. Carlson, 271 Minn. 536, 137 N.W.2d 187, 193 (1965). The risk of which we speak is the risk of coming into contact with the cement block and not the risk of hitting the lake bottom. “The fact that the plaintiff is fully aware of one risk, as for example that of the speed at which a car is being driven, does not mean that he assumes another of which he is unaware, such as the failure of the driver to watch the road.” W. Prosser, The Law of Torts 464 (3rd ed. 1964) (and cases cited therein). There is no evi dence in the record that Appellee was aware of, appreciated, or voluntarily assumed the risk of hitting the cement block. He had executed many dives from the boat dock and never had he encountered obstructions. One witness testified that it was the usual practice for experienced swimmers to dive off the boat dock and swim to the diving dock anchored off-shore. Appellee testified that he had been vacationing at the resort every summer since 1963 and never had he encountered stones or blocks in the water. Appellee could hardly have assumed a risk of which he was not aware.

We therefore find that there was sufficient evidence to support a plaintiff’s verdict and that the defense of assumption of risk is inapplicable to this fact situation.

Affirmed.


author: KAUFMAN, Chief Judge:

text:
    UNITED STATES of America, Appellee, v. AMERICAN CYANAMID COMPANY, Defendant-Appellant.
    No. 951, Docket 73-1458.
    United States Court of Appeals, Second Circuit.
    Argued June 11, 1973.
    Decided June 27, 1973.
    Ronald J. Cracas, New York City (Eard F. Malone, New York City, on the brief), for defendant-appellant.
    Anne S. Eristoff, Asst. U. S. Atty. (Paul J. Curran, U. S. Atty., S. D. N. Y., and Daniel Riesel and John W. Nields, Jr., Asst. U. S. Attys., on the brief), for appellee.
    Before KAUFMAN, Chief Judge, SMITH, Circuit Judge, and BRYAN, District Judge.

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

   KAUFMAN, Chief Judge:

We are called upon to decide a narrow, but important, issue of statutory construction under section 13 of the Rivers and Harbors Appropriations Act of 1899 (Refuse Act of 1899), 33 U. S.C. § 407 (1970). The question presented is whether the Government sustained its burden of proving a violation of that provision when it established a likelihood that refuse discharged into a tributary reached navigable water or whether it was required to prove that the discharge actually had reached navigable water. In the district court, Judge Gurfein adopted the first view and, in a trial without a jury, found the American Cyanamid Company guilty of violating the Act. We concur in that reading of section 13 and, accordingly, affirm the conviction.

A brief overview of the Refuse Act of 1899 will help place the issue on appeal in the proper context. The 1899 Act, which has recently attained prominence in the ongoing battle to save our natural resources, see Rodgers, Industrial Water Pollution and the Refuse Act: A Second Chance for Water Quality, 119 U.Pa.L.Rev. 761, 761-69 (1971), represented an early -effort by Congress to protect our waterways from the discharge of pollutants resulting from the onward march of an industrialized society. In essence, section 13 prohibits the discharge of refuse, other than liquid sewage, into the navigable waters of the United States and forbids the depositing of all material on the banks of navigable waters into which such matter is “liable to be washed.” 33 U. S.C. § 407. The Supreme Court, in tracing the sparse legislative history of this provision, has noted that “[sjeetion 13 codified pre-existing statutes . . . .” United States v. Standard Oil Co., 384 U.S. 224, 226, 86 S.Ct. 1427, 1428, 16 L.Ed.2d 492 (1966). From a study of the antecedent statutes and the legislative history of the 1899 Act, the Court concluded that “the ‘serious injury’ to our watercourses . . . sought to be remedied was caused in part by obstacles that impeded navigation and in part by pollution . . . .’’Id. at 228-229, 86 S.Ct. at 1429. The thrust of the Standard Oil opinion is that courts must be mindful of their responsibility to give full effect to an overriding societal interest in the preservation of a clean, healthy environment when called upon to interpret the Act and that the history and legislative background forbid a narrow, cramped reading of the section. Id. at 226, 86 S.Ct. 1427, citing United States v. Republic Steel Corp., 362 U.S. 482, 491, 80 S.Ct. 884, 4 L.Ed.2d 903 (1960).

I.

The facts before us are quite straightforward. American Cyanamid operates its Standard Coated Products plant in Buchanan, New York, on the bank of Dickey Brook, one mile from where the brook flows into the Hudson River. The brook is a tributary of the Hudson, part of the navigable waters of the United States. One-half mile from the plant, Dickey Brook widens into an inlet-cove characterized by tidal marshes and mud flats. A road, Broadway, has been built across the cove., The stretch of water between Broadway and the river is known to local residents as Lents Cove.

On Saturday, August 12, 1972, a Cyanamid employee, in the course of his regular duties, neglected to close a water valve in the plant. As a result, a storage tank in the basement of the plant overflowed, releasing a mixture of titanium dioxide and calcium carbonate through a storm drain into Dickey Brook. The accident was discovered on Monday morning, August 14, by passersby who noticed that the flowing brook had turned a milky white. Upon learning of the accident, Cyanamid shut off the open spigot and plugged the drain, which, however, Cyanamid later flushed into the brook. Approximately four cubic feet of chemical solids were discharged into Dickey Brook.

The district court concluded that on this evidence, Cyanamid had violated section 13 of the Refuse Act which provides in the portion relevant to our consideration that:

It shall not be lawful to . . . discharge . . . from . . . manufacturing establishment ... of any kind, any refuse . . . into any navigable water of the United States, or into any tributary of any navigable water from, which the same shall float or be washed into such navigable water . . . (emphasis added).

Although there was evidence at trial that polluting chemicals entered the inlet-cove flowing at least as far as Broadway and that, in addition, water flowed freely through large « culverts under Broadway, the district judge decided that “[t]he Government has failed to establish beyond a reasonable doubt that the particular refuse discharged on August 12-14, 1972 actually was washed into navigable water.” (emphasis added). He, nevertheless, found as a fact that “[t]he discharge of refuse was extensive enough so it would be likely to be washed into the navigable water,” and that proof of such conduct was sufficient to make out a violation of the statute.

II.

The sole question on appeal is whether the district judge erred in his construction of the Act. Cyanamid argues that inclusion in the statute of the phrase “shall float or be washed” compels this Court to require proof that the refuse discharged into a tributary actually reached navigable water before a violation of section 13 can be established. We find the argument unpersuasive both as a matter of linguistics and common sense.

Although the legislative history of the 1899 Act, meager as it is, hardly illuminates the Congressional intent embodied in the phrase “shall float or be washed,” this Court is not without guidance in interpreting the Refuse Act. The Supreme Court has stated that section 13 is to be read “charitably.” United States v. Standard Oil Co., supra, 384 U.S. at 230, 86 S.Ct. 1427. Standard Oil was concerned with the accidental dumping of aviation gasoline into the St. Johns River and the language of the majority opinion is significant. The Court admonished that a broad reading of section 13 was appropriate and “in keeping with the teaching of Mr. Justice Holmes that a ‘river is more than an amenity, it is a treasure’ . . . .” Id. at 230, 86 S.Ct. at 1430. See also United States v. Republic Steel Corp., 362 U.S. 482, 80 S.Ct. 884, 4 L.Ed.2d 903 (1960). This clear mandate of the Supreme Court, which, at least here, qualifies the maxim that criminal statutes are to be narrowly construed, justifies, if indeed it does not compel, a liberal reading of the statute.

As indicated above, section 13 prohibits the discharge of refuse into “any tributary of any navigable water from which the same shall float or be washed into such navigable water . . . The phrase “shall float or be washed” allows for possibility or likelihood. The language “shall float” clearly anticipates a future occurrence. If Congress had intended to require a showing that refuse actually had floated into navigable water before section 13 had been violated, it would have said so explicitly by using the language “shall have floated or washed.”

Indeed, were we to adopt Cyanamid’s reading of the statute, we would be led to an illogical result. The second clause of section 13 makes unlawful the mere piling of material on a tributary’s bank, from “where the same shall be liable to be washed” into the water, (emphasis added). That being so, it seems fatuous to attribute to Congress an intention not to punish discharges of similar matter directly into the tributary unless the Government affirmatively proved that the refuse had actually reached navigable water. It serves no discernible purpose and taxes common sense to establish a stricter standard of proof for cases in which pollutants are definitely being discharged into a tributary than for those where the material is piled on the tributary’s bank and it is, in the language of the statute, merely “liable to be washed” into the water.

The interpretation which appellant urges upon this Court is precisely the type of “cramped” reading that the Supreme Court has cautioned against. United States v. Republic Steel Corp., supra at 491, 80 S.Ct. 884. Semantic gymnastics must not be allowed to undermine a Congressional purpose to preserve the purity of our waterways. Conservation of our once formidable natural resources is a matter of profound national concern. Congress has acted to accommodate the diverse, often conflicting, needs of our highly industrialized society through legislation, such as the Refuse Act of 1899. Moreover, in arriving at our conclusion we are not unmindful of Learned Hand’s eloquent guide to statutory construction, that we must “remember that statutes always have some purpose or object to accomplish, whose sympathic and imaginative discovery is the surest guide to their meaning.” Ca-bell v. Markham, 148 F.2d 737, 739 (2d Cir. 1945).

Affirmed.

      . It shall not be lawful to throw, discharge, or deposit, or cause, suffer, or procure to be thrown, discharged, or deposited either from or out of any ship, barge, or other floating craft of any kind, or from the shore, wharf, manufacturing establishment, or mill of any kind, any refuse matter of any kind or description whatever other than that flowing from streets and sewers and passing therefrom in a liquid state, into any navigable water of the United States, or into any tributary of any navigable water from which the same shall float or be washed into such navigable water; and it shall not be lawful to deposit, or cause, suffer, or procure to be deposited material of any kind in any place on the bank of any navigable water, or on the bank of any tributary of any navigable water, where the same shall be liable to be washed into such navigable water, either by ordinary or high tides, or by storms or floods, or otherwise, whereby navigation shall or may be impeded or obstructed: Provided, That nothing herein contained shall extend to, apply to, or prohibit the operations in connection with the improvement of navigable waters or construction of public works, considered necessary and proper by the United States officers supervising such improvement or public work: And provided further, That the Secretary of the Army, whenever in the judgment of the Chief of Engineers anchorage and navigation will not be injured thereby, may permit the deposit of any material above mentioned in navigable waters, within limits to be defined and under conditions to be prescribed by him, provided application is made to him prior to depositing such material; and whenever any permit is so granted the conditions thereof shall be strictly complied with, and any violation thereof shall be unlawful.
      Act of March 3, 1899, eh. 425, § 13, 30 Stat. 1152; 33 U.S.C. § 407.

      . The Court examined the following statutes : Act of August 5, 1886, ch. 929, § 3, 24 Stat. 310, 329; Act of June 29, 1888, ch. 496, 25 Stat. 209; Act of September 19, 1890, ch. 907, § 6, 26 Stat. 426, 453; Act of August 18, 1894, ch. 299, § 6, 28 Stat. 338, 363.

      . Although we are told that neither of these chemicals is toxic, section 13 prohibits the discharge of “any refuse matter of any kind or description.” Accordingly, Standard Oil teaches that a substance, however useful it may earlier have been, is “refuse” within the meaning of the Act when discharged into a waterway. 384 U.S. 224, 229, 86 S.Ct. 1427, 16 L.Ed.2d 492 (1966).

      . In view of our disposition of this ease, we need not decide whether the inland portion of Dickey Brook, (that is, the water between the plant and Broadway), is a “navigable water” within the meaning of section 13.


author: JAMESON, District Judge:

text:
    UNITED STATES of America, Appellee, v. Arthur JONES and Preston M. Jeter, Appellants.
    Nos. 819, 823, Dockets 73-1070, 73-1260.
    United States Court of Appeals, Second Circuit.
    Submitted April 30, 1973.
    Decided June 11, 1973.

      Thomas F. Maxwell, Jr., Asst. U. S. Atty. (Stewart H. Jones, U. S. Atty., for the District of Connecticut, of counsel), for appellee.
    Hubert J. Santos, Asst. Public Defender, Hartford, Conn., for appellant Jones.
    J. Daniel Sagarin, Bridgeport, Conn., for appellant Jeter.
    Before FRIENDLY and HAYS, Circuit Judges, and JAMESON, District Judge.

       Of the District Court for the District of Montana, sitting by designation.

   JAMESON, District Judge:

These consolidated appeals are from convictions for taking and carrying away with intent to steal a coat and purse belonging to Ethel Ford at the Veterans Administration Hospital at West Haven, Connecticut. We affirm.

Appellants contend that (1) the evidence was insufficient to support the convictions; (2) the Government failed to prove that the United States accepted jurisdiction of the Veterans Administration Hospital, an issue improperly taken from the jury; and (3) the court erred in denying appellants’ motions to strike the jury panel.

Sufficiency of Evidence

On April 8, 1972 appellants, with Frank Lyon, visited Joseph Miller, a patient on the sixth floor of the Veterans Hospital. Lyons testified that he left Jones and Jeter at the elevator on the sixth floor, took the elevator to the ground floor, and went to his car on the parking lot to wait for Jones and Jeter, and that Jones returned to the ear about a half hour later. Lyons and Jones drove away, but returned later for Jeter.

Leroy Bailey, also a sixth floor patient, testified that he saw Jones “peek” toward a coat and purse on a chair near a water fountain in the sixth floor television and conference room where Bailey was watching television, when Jones and Jeter entered the room and went to the drinking fountain. According to Bailey, Jones and Jeter left the room together and Jones returned alone five to ten minutes later, went directly to the chair, picked up the coat and purse and proceeded to the elevator, where he met Jeter. Bailey immediately notified Ethel Ford, the owner of the coat and purse.

Mrs. Ford, accompanied by James Bronson, another hospital employee, took another elevator to the ground floor, where they met appellants. Mrs. Ford testified that she observed Jeter “carrying his trench coat, with my coat wrapped in it.” She “yanked” at an exposed portion of her coat, causing Jeter’s coat and her coat and pocketbook to fall to floor. Bronson corroborated this testimony.

Bronson took Jeter back to the sixth floor. Jeter told Bronson “he was leaving and said that he made a mistake.” Bronson observed Jones running out of the front door of the building.

No evidence was offered on behalf of the appellants. The evidence presented by the Government was ample to sustain both convictions.

Proof of Jurisdiction

The lands on which West Haven Veterans Administration Hospital are located were acquired by deed on April 12, 1948. The Government, pursuant to 40 U.S.C. § 255, was required to prove that the United States had accepted the exclusive jurisdiction ceded by the State of Connecticut with respect to these lands. To do so, the Government presented the testimony of a local law enforcement officer that the West Haven Police Department did not enforce state laws or local ordinances on the hospital grounds.

After resting, and following appellants’ motion for acquittal, the Government was permitted to reopen its case to introduce in evidence a copy of a letter from the Executive Assistant Administrator of the Veterans Administration, signed “(For and in the absence of the Administrator)” accepting exclusive jurisdiction of the lands acquired as a site for the West Haven Veterans Administration Hospital. Receipt of the letter was acknowledged by the Governor of Connecticut on November 12, 1948.

The court did not abuse its discretion in permitting the Government to reopen for the purpose of introducing this letter in evidence.

While the letter was not authenticated in compliance with Rule 44(a)(1) of the Federal Rules of Civil Procedure, counsel for appellants expressly waived any “objection to the certification of this * * * exhibit according to” this rule.

Appellants now argue that the “acceptance of jurisdiction over the land on which the hospital was located” was a factual issue which should have been submitted to the jury. We do not agree and hold that the district court properly determined this question as a matter of law and submitted to.the jury the question of whether the offense was committed on land determined by the court to be within the special territorial jurisdiction of the United States. The court charged the jury:

“Now, in order to find either, or both of the defendants guilty of the crime charged, the government must prove, beyond á reasonable doubt, each of the following elements with reference to each defendant. First, that the acts charged were committed within the special territorial jurisdiction of the United States, and this connection I charge you as a matter of law, if you accept the defendants governments witnesses, Mrs. Ford, Mr. Bailey, and Mr. Bronson with reference to the locale of the acts charged, namely this one of the Veterans Administration Hospital building in West Haven, and this is a case within the special territorial jurisdiction of the United States.”

It is recognized that there is frequently a dispute as to whether an offense is committed within or without a jurisdictional boundary. This is a factual issue which should be submitted to the jury, as the court did in this case.

Counsel have not cited, nor have we found, a case where it has been contended that the question of acceptance of jurisdiction or the location of territorial boundaries should be determined by a jury. There are many cases in which it is clear that these questions have been determined by the court. For example in United States v. Lewis, 111 F. 630, 631 (C.C.W.D.Tex.1901), the court charged the jury as a matter of law that the United States had exclusive jurisdiction over the ceded lands, but that the question of whether the act was committed within the territory so ceded was for the jury. And in Walsh v. Archer, 73 F.2d 197, 198 (9th Cir. 1934) the district court had charged the jury that the determination of boundaries was a matter for the court and the question of whether the offense was committed within these boundaries a question for the jury. Other cases which impliedly support our conclusion that questions of acceptance of jurisdiction or territorial boundaries should be determined by the court (without, however, any claim that the issue should be submitted to a jury having been asserted) include Rodman v. Pothier, 264 U.S. 399, 44 S.Ct. 360, 68 L.Ed. 759 (1924); United States v. Johnson, 426 F.2d 1112 (7 Cir. 1970), cert. denied, 400 U.S. 842, 91 S.Ct. 86, 27 L. Ed.2d 78; United States ex rel. Greer v. Pate, 393 F.2d 44 (7 Cir. 1968), cert. denied, 393 U.S. 890, 89 S.Ct. 209, 21 L.Ed.2d 168; United States v. Holt, 168 F. 141 (Cir.Ct.W.D.Wash.1909), affirmed, 218 U.S. 245, 31 S.Ct. 2, 54 L.Ed. 1021 (1910).

The eases relied upon by appellants involve factual elements in determining jurisdiction, as the locus of the crime in Louie v. United States, 254 U.S. 548, 41 S.Ct. 188, 65 L.Ed. 399 (1921); ownership and registry of a vessel in United States v. Ross, 439 F.2d 1355 (9 Cir. 1971), cert. denied, 404 U.S. 1015, 92 S. Ct. 686, 30 L.Ed.2d 661; determination of maximum price and whether it had been exceeded under the Emergency Price Control Act of 1942 in Carothers v. United States, 161 F.2d 718 (5 Cir. 1947); and whether stolen goods had traveled in interstate commerce in United States v. Manuszak, 234 F.2d 421 (3 Cir. 1956).

Here, the court’s instruction correctly left the factual element — the locus of the crime — to the jury, while reserving the question of law — whether the federal government had accepted jurisdiction — to itself.

Challenge to Jury Panel

Juries in the District of Connecticut are selected at random from voter registration lists under a plan adopted by the district court and approved by the reviewing panel of this court, pursuant to 28 U.S.C. § 1863, a part of the Jury Selection and Service Act of 1968. The use of voter registration lists as the sole source of names for jury service was approved by this court in United States v. Guzman, 468 F.2d 1245, 1248 (2 Cir. 1972) in the absence of “systematic discrimination sufficient to require the use of alternative sources . . ."

Prior to the selection of the jury appellants moved to strike the jury panel “on the grounds that blacks and other minority members of the population were not adequately represented on the jury panels, and that * * * the method of selection of jurors in this district is inadequate to accomplish the goals of the Federal Jury Service and Selection Act of 1968 * * They made an offer of proof and requested permission to subpoena witnesses, but did not file a motion “containing a sworn statement of facts which, if true, would constitute a substantial failure to comply with the provisions of this title”, as required by 28 U.S.C. § 1867(d). Section 1867(e) provides that, “The procedures prescribed by this section shall be the exclusive means by which a person accused of a Federal crime * * * may challenge any jury on the ground that such jury was not selected in conformity with the provisions of this title.” Compliance with these express statutory requirements is necessary to question the validity of a plan adopted and approved pursuant to the Jury Selection and Service Act.

Affirmed.

      . Appellants were charged by indictment with the theft of property of a value in excess of $100.00, in violation of 18 U.S.C. §§ 661 and 2(a) and 2(b). The court denied motions for acquittal at the close of the Government’s ease, but held that the Government had failed to prove that the property had a value in excess of $100.00, and appellants were convicted of the lesser included offense. Jones was sentenced to imprisonment for one year, with execution suspended, and probation for three years. Jeter was sentenced for a term of six months, with execution suspended, and probation for two years.

      . In contending that the Government’s evidence was insufficient to establish an intent to steal, counsel argue that if appellants had “intended to steal the coat and pocketbook, it is unlikely they would have followed the course of conduct they did”, particularly in taking an elevator which required passing a reception desk at which there was usually a guard, when they could have taken a stairway to a different exit and avoided the guard. While appellants may have used poor judgment, the evidence was clearly sufficient to permit the jury to find the requisite intent to steal.

      . 40 U.S.C. § 255 provides, in pertinent part:
      “ * * * Notwithstanding any other provision of law, the obtaining of exclusive jurisdiction in the United States over lands or interests therein which have been or shall hereafter be acquired by it shall not be required; but the head or other authorized officer of any department or independent establishment or agency of the Government may, in such cases and at such times as he may deem desirable, accept or secure from the State in which any lands or interests therein under his immediate jurisdiction, custody, or control are situated, consent to or cession of such jurisdiction, exclusive or partial, not theretofore obtained, over any such lands or interests as he may deem desirable and indicate acceptance of such jurisdiction on behalf of the United States by filing a notice of such acceptance with the Governor of such State or in such other manner as may be prescribed by the laws of the State where such lands are situated. Unless and until the United States has accepted jurisdiction over lands hereafter to be acquired as aforesaid, it shall be conclusively presumed that no such jurisdiction has been accepted. K.S. § 355; June 28, 1930, c. 710, 40 Stat. 828; Feb. 1, 1940, c. 18, 54 Stat. 19; Oct. 9, 1940, c. 793, 54 Stat. 1083; Sept. 1, 1970, P.L. 91-393, § 1, 84 Stat. 835.”

      . Actually in this case there was no factual dispute with respect to the locale of the offense.

      . Moreover, there was no factual dispute regaining the acceptance of jurisdiction by the United States. The sole question raised below was the admissibility of the letter of acceptance.

      . See 28 U.S.C. § 1863(b) (2).

      . Appellants renewed their motion after the jury was selected, and the court called attention to the fact that there was no sworn statement of facts as required by 28 U.S.C. 1867(d).

      . See United States v. James, 453 F.2d 27, 29 (9 Cir. 1971).